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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-SB
General Form For Registration of Securities
of Small Business Issuers Under Section 12(b)
or 12(g) of the Securities Act of 1934
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SUPERIOR HOLDINGS, INC.
(Name of Small Business Issuer in Its Charter)
COLORADO 05-0485847
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
360 Thames Street
Newport, Rhode Island 02840
(Address of Principal
Executive Office) (Zip Code)
(401) 841-9444(800) 428-6768
(401) 841-9060: telecopier
(Issuer's Telephone Number, Including Area Code)
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Securities to be registered under Section 12(b) of the Act: None
Securities to be registered under Section 12(g) of the Act:
Common Stock, $5.00 par value
(Title of Class)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
The Company's principal executive offices are located at 360 Thames
Street, Newport, Rhode Island 02840, and its telephone number is (401)
841-9444, (800) 428-6768, telecopier (401) 841-9060.
HISTORICAL
Superior Holdings, Inc. (hereinafter referred to as "Superior") was
incorporated in 1994 as a business consulting company to assist in the
purchase of franchise rights of independent operating food companies.
The Company remains in the early developmental and promotional stages.
To date the Company's only activities have been organizational ones,
directed at developing its business plan and raising its initial capital.
The Company has not commenced any commercial operations. The
Company has no full-time employees and owns no real estate.
Subsequent to its acquisition of franchise rights, the Company has engaged
in an extensive process of analyzing, standardizing and documenting all
aspects of its franchise rights, preparing franchise materials and
developing its franchise system and program. In addition, it retrofitted one
operating location to serve as a prototype store for purposes of
marketing franchises and training personnel.
FRANCHISING
Neither the following discussion, nor the other information contained in
this Registration Statement, constitutes, and neither shall be construed as,
an offer to sell a franchise. Such offers may be made only by an Offering
Circular in compliance with applicable state law and the Federal Trade
Commission Disclosure Rule. The description of the franchises set forth in
this Registration Statement is not intended to be a complete description of
any of the franchised businesses.
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The Company will offer single-unit franchises, as well as Area Development
Agreements covering a number of stores to be opened in a designated area within
a specified period of time. The Company has entered into an Area Development
Agreement for the United States Territory of Puerto Rico, covering 12 retail
stores and an Area Development Agreement for the State of Texas.
The Company seeks franchisees committed to the Company's high standards of
product quality and customer service. All franchised stores must operate in
strict compliance with the standards and procedures set out in the Company's
operation manuals. Each store will be under the management of a manager who
has completed the Company's training program, although franchisees are not
required to participate in the day-to-day management of their stores. The
Company will conduct regular inspections (both scheduled and unannounced) to
ensure that franchises are operating in accordance with Company standards and
procedures. The Company will provide support to its franchisees covering
equipment and technical issues 24 hours a day and seven days a week through a
toll-free hotline.
Exclusivity
Each franchise agreement provides the franchisee with an exclusive area, within
which the Company is not permitted to sell another franchise. Such exclusive
areas, which are determined on a unit-by-unit basis based on population
density, traffic patterns and other relevant considerations, generally range
from a radius of four blocks in densely populated urban areas to one mile or
more in suburban locations.
Area Development Agreements provide that, if the franchisee meets his
store opening schedule, the Company will not sell other franchises within the
developer's territory. Development territories typically range from a radius of
ten blocks to certain extensive market areas ("Designated Market Areas").
Real Estate and Local Regulation
Franchisees are obligated to purchase or lease (for a term of at least ten
years) the sites for their units. Franchisees may designate a specific
location or a locality in which they wish to operate, subject to the
exclusivity rights of other franchisees.
The Company will provide assistance and guidance in site selection and lease
negotiation, and must approve all sites prior to lease execution. In addition,
the Company will provide plans and specifications for a prototype store, as
well as assistance in obtaining financing, permits and licenses, and with
construction
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of leasehold improvements. Franchisees will be expected to bear the expense of
any modification of the prototype plans and specifications required to meet
local building, fire or health codes and lease and other similar requirements,
as well as the costs of remodeling, fireproofing or other leasehold
improvements. Franchises also are responsible for, and expected to bear the
expense of, local licensing matters related to occupancy and operation of the
business.
Financing
The Company does not offer direct or indirect financing in connection with
its franchises. Similarly, it does not guarantee the debt, lease or other
obligations of any franchisee. The Company will, however, render assistance
in arranging financing and negotiating leases.
Training and Field Support
Prior to opening, each franchisee (or an owner thereof) and at least one
manager of each franchised restaurant must complete a 13-day training program
including approximately 35 and 70 hours of classroom and on-the-job training,
respectively, covering areas essential to the management and operation of a
retail business, including food and beverage preparation and production; store
operating procedures; accounting and cost control; employee matters; in-and
out-of-store marketing; ordering; catering; equipment maintenance; and
sanitation matters. All training will be conducted by personnel at the
franchised businesses' corporate headquarters in either Newport, Rhode Island
or Scottsdale, Arizona. As of the date of this Registration Statement, the
Company had not established a permanent schedule for its training courses,
but instead schedules such courses as needed to meet the opening schedules of
new stores. The Company will not charge for this training and provides all
participants with their midday meal, but franchisees are expected to defray
living expenses for themselves and their employees during the training
sessions. Similar training is required of all new managers subsequently hired
and is provided by the Company.
Refresher and ongoing training will be available to franchisees on an
individualized basis, through consultative meetings at franchise sites, at
corporate stores and at corporate headquarters.
The Company will provide on-site and other supervisory guidance and assistance
in connection with the opening of each franchised store. Once open, the Company
will conduct regular operational visits and provide ongoing guidance and
assistance based upon the results of such visits and review of reports
submitted to it. Such guidance and assistance may relate to standards, methods
and operating procedures; preparation of authorized food, beverages and other
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products and services; selection, purchase and preparation of food, beverage and
other products, as well as fixtures, equipment, signs, materials and supplies;
formulation and implementation of advertising and promotional programs; and
establishment and operation of administrative, bookkeeping, accounting,
inventory control, sales and general operating procedures.
The Company will periodically distribute operational bulletins and newsletters
to its franchisees and provide ongoing assistance with technical and equipment
problems through its 24-hour hotline, as well as personal consultations either
at the franchise site or at the Company's executive offices.
Pricing
Prices are set by individual franchisees, pursuant to guidelines
provided by the Company, in light of local competitive and market conditions.
Purchasing
Franchisees will be required to purchase certain equipment from the Company
and/or franchised business. Management believes that purchase of these items
from the Company will be essential to maintaining the Company's quality
control standards, and to ensuring the consistent high quality of products
offered at all of its franchised business stores.
With respect to other items used in the operation of its stores, the Company
will designate approved types and brands of products. In certain instances
the Company may designate a single supplier or a limited group of suppliers
for a product or brand of product, in order to increase the volume of purchases
from suppliers and permit the Company's franchisees as a whole to benefit from
discounts associated with quantity purchasing.
In the event that a franchisee proposes to purchase any brand or type of
product not previously approved for purchase by the Company or to purchase
approved items from a supplier not previously approved, the franchisee is
required to submit to the Company information regarding the manufacturer's or
supplier's business reputation, delivery and service performance, reliability,
financial condition and credit worthiness. In addition, in the case of
previously unapproved products, the franchisee must submit samples for review
by the Company to determine compliance with the Company's specifications and
standards. The Company then reviews the submission and, within 30 days, makes
a determination whether or not to approve the supplier or product.
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The Company will provide its franchisees with operational and accounting forms
for use in the operation of their stores. The Company also will provide its
franchisees with promotional and advertising materials and other marketing
tools.
Start-Up Time and Costs
Franchisees will be required to enter into a lease within 60 days of execution
of a franchise agreement and to open within 120 days following first possession
of the leased premises. Subject to such factors as the time to obtain a lease,
financing or building permits, zoning and local ordinances, weather conditions
and availability of materials and equipment, franchise stores generally can be
expected to open within four to six months following execution of a franchise
agreement.
While costs vary based on location and type of store, the Company currently
estimates that the cost to a new franchisee to open a typical franchised
business store, including initial franchise fees, equipment, signs, opening
inventory and other start-up costs, but exclusive of real estate costs (purchase
price, lease payments and/or improvements) generally is in the range of
$80,000 to $377,500. In addition, the Company estimates that rent for a typical
franchised business store currently is between $12,000 and $45,000 annually
and that a new franchisee will incur between $30,000 and $80,000 in real
estate related expenses with respect to each store.
Term and Termination
Each franchise agreement runs for an initial term of ten years, subject to
renewal for up to two additional five-year terms upon agreement of the
franchisee to refurbish and redecorate or secure new premises.
The Company has the right to terminate franchise agreements for a variety of
reasons, including failure to open a restaurant or complete training; loss or
surrender of restaurant premises; material misrepresentation; conviction of a
felony; failure to attend required training programs; unauthorized assignment
of a restaurant; unauthorized use of trademarks or confidential information;
failure to comply with Company specifications or procedures; failure to make
payments due to third parties; failure to make payments due to the Company or
to submit required reports; and sanitation problems.
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Franchise Agreements and Commissions
Each client and franchisee situation will be unique, based upon the size
of the territory awarded to the franchisee or the area developer.
Area Developer Franchisee
The Area Developer franchisee is a person or company having an exclusive
franchise contract with Superior to market its franchised businesses to
prospects in a specifically defined geographic territory and/or market.
The Area Developer is principally involved in sales and relationship
development. The Area Developer will be the primary entity to recruit the
unit franchisee into the Superior franchising program. The Area Developer
may not be principally involved in daily operations and, after the initial
sale will have little involvement in the day-to-day business for the unit
franchisee. They will call on the unit franchisee sporadically to keep a
communication channel open for additional services and will identify
needs and develop opportunities for quality control, compliance
activities, management, additional or altered services, financial services,
equipment changes and referrals for new customer development. The Area
Developer also has primary responsibility for quality control in his
or her territory.
FRANCHISE RIGHTS ACQUISITION
In April of 1995, the company was introduced to a successful fast food concept,
Sakura of Japan, Inc., that is one of many like operating chains growing
substantially throughout the Phoenix Metropolitan area. The Japanese fast
food market is virtually non-existent in other U.S. Metropolitan markets. The
discovery of this concept lead management to the conclusion that there may
be other undiscovered or under-marketed concepts capable of being utilized
side by side ("kiosk") with one another under the same operating company.
The company launched a franchise rights acquisition program in August of 1995.
The focus of this program was to find several successful fast food companies
that possessed developing franchise potential.
The company searched for a variety of complimentary concepts that fit two or
more of the following location requirements:
1. In-Line and/or Set-Off Strip Mall;
2. High-Scale Food Court or Kiosk;
3. Free Standing and/or Dual-Tenant Building.
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Sakura of Japan
Superior acquired the franchise rights to Sakura of Japan, Inc., May 24, 1996.
This quick-service concept is Japanese style "fast- food" that is healthy, and
evolving as an untapped domestic/international quick-service restaurant
market opportunity.
Tito's Cantina
Superior acquired the rights to Tito's Cantina, April 14, 1996. The authentic
hand-made, healthy Mexican food market is gaining popularity throughout
America as well. Tito's presently is distributing their name brand chips and
salsa in grocery and health food stores throughout the northeast. The name
recognition in the northeast may allow Tito's to expand through franchising.
Superior intends to assist Tito's in arranging their food products in other
markets across America giving further name recognition to the potential
franchise arena.
Roasters Coffee and Tea Company
Superior acquired the franchise rights for Roasters Coffee and Tea Company of
Boston, Massachusetts and Amarillo, Texas on May 31, 1996. The concept
revolves around the idea of freshly "roasting" coffee beans, on the premises,
in the seating area, through the use of novel and effective coffee roasting
equipment available for small, private, commercial use. Roasters sets
itself apart from retail coffee competitors by "roasting" on the premises
and producing a product superior in taste and quality. This franchise
opportunity requires little prior business or retail experience and is geared
to the beginner business person/franchisee. Training is also easier to
implement and support.
Pick Pockets
Superior negotiated and acquired the franchise rights to Pick Pockets in
November, 1995. This acquisition of franchise rights continued Superior's
development of a franchising "niche" within the fast food industry for
healthy fast food concepts. The mediterranean style "wrap" sandwiches
and salads are not only unique and popular, but are also healthy.
The New England Cookie Jar
The franchise rights to Cookie Jar, Inc., except those sold to a public
company, were acquired in September of 1995. The Cookie Jar sells "all-natural"
cookies, muffins and baked items at the retail level in Newport, Rhode Island.
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FRANCHISING GOVERNMENT REGULATION
The Company and its franchisees are required to comply with federal, state,
and local government regulations applicable to consumer food service businesses
generally, including those relating to the preparation and sale of food, minimum
wage requirements, overtime, working and safety conditions, and citizenship
requirements, as well as regulations relating to zoning, construction, health,
business licensing and employment. The Company believes that it and its
franchisees are in material compliance with these provisions. Continued
compliance with this broad federal, state and local regulatory network is
essential and costly and the failure to comply with such regulations may have
an adverse effect on the Company and its franchisees.
See "Risk Factors -- Government Regulation."
The Company's franchise operations are subject to regulation by the Federal
Trade Commission ("FTC") in compliance with the FTC's rule entitled "Disclosure
Requirements and Prohibitions Concerning Franchising and Business Opportunity
Ventures," which requires, among other things, that the Company prepare and
update periodically a comprehensive disclosure document, known as the Uniform
Franchise Offering Circular ("UFOC"), in connection with the sale and operation
of its franchises. In addition, some states require a franchiser to register
its franchise with the state before it may offer the franchise. The Company
believes that its UFOC, together with any applicable state versions or
supplements, complies with both the FTC guidelines and all applicable state
laws regulating franchising in those states in which it offers franchises.
In addition to the rules governing the offer and sale of franchises, the
Company is also subject to a number of state laws, as well as foreign laws (to
the extent it offers franchises outside of the United States), that regulate
substantive aspects of the franchiser-franchisee relationship, including, but
not limited to, those concerning termination and non-renewal. Currently, 18
states, the District of Columbia, Puerto Rico and the Virgin Islands, have
franchise termination and non-renewal laws. These laws govern the termination
and/or non-renewal of the franchise agreement and, by and large, require the
franchiser to have good cause, reasonable cause or just cause in order to
terminate the franchise agreement or not to renew the franchise agreement. In
addition, some of these laws provide for longer cure periods than currently
contemplated by the Company's franchise agreements.
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Each store will be subject to regulation by federal agencies and to licensing
and regulation by state and local health, sanitation, safety, fire and
other departments. Difficulties in obtaining or the failure to obtain required
licenses or approvals could delay or prevent the opening of a new store. The
Company believes that it is in substantial compliance with the applicable laws
and regulations governing its operations.
While the Company intends to comply with all federal, state and foreign laws
and regulations, there can be no assurance that it will continue to meet the
requirements of such laws and regulations, which, in turn, could result in a
withdrawal of approval to franchise in one or more jurisdictions. Any such loss
of approval would have a material adverse effect upon the Company's ability to
successfully market its franchises. Violations of franchising laws and/or state
laws and regulations regulating substantive aspects of doing business in a
particular state could subject the Company and its affiliates to rescission
offers, monetary damages, penalties, imprisonment and/or injunctive
proceedings.
The state laws and regulations concerning termination and non-renewal of
franchisees are not expected to have a material impact on the Company's
operations. In addition, under court decisions in certain states absolute
vicarious liability may be imposed upon franchisers based upon claims made
against franchisees. The Company currently does not carry insurance against
such claims although it intends to obtain coverage in the future. However,
there can be no assurance that the Company will be able to obtain such coverage
or that such coverage will be sufficient to cover claims against the Company.
Further, there can be no assurance that existing or future franchise regulations
will not have an adverse effect on the Company's ability to expand its
franchise program.
COMPANY LOCATION
Superior Holdings, Inc. is presently headquartered at 360 Thames Street,
Newport, Rhode Island 02840. Its telephone numbers are (401) 846-3700 (800)
428-6768 (401) 841-9444 and its telecopier is (401) 841-9060.
COMPANY OBJECTIVES
The company's first priority is to expand Sakura of Japan through company-owned
development and establish a marketing and sales system for the purpose of
selling franchises and encouraging the area-development of territories
throughout the United States and abroad. To accomplish the company's marketing
objectives, Superior will establish an operating office in the Dallas/Ft.
Worth area and continue to consult a knowledgeable staff of restaurant
operators to assist in the company-owned expansion of Sakura of Japan and sales
personnel to sell franchises.
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COMPANY STATUS
The Company is at a start-up level and shall be financed with private
resources from its initial organizers, directors, and shareholders. It's
activities since inception have been involved with the due diligence which
included, in part, extensive travel and investigation of the parent companies
and direct examination/review of existing restaurants throughout each region
of operation. Extensive research has been amassed from the parent companies
and evaluated in order to ascertain the likelihood of the success of the
Company.
LOANS
The Company intends to utilize trade and other commercial credit, if
available. Working capital and lines of credit, secured by orders and
accounts receivable, will be used during the routine course of its business.
PROPRIETARY FEATURES
Superior intends to protect all patents, trademarks and other proprietary
rights of the parent companies to the extent such action is feasible. The
packaged goods, advertising, local promotions and other products, services
and/or ideas will be protected and deemed proprietary to the appropriate
party. The intent is to preserve the integrity of the concept and to hold the
protected property to certain standards and monitor use of these trademarks as
they are supposed to apply to certain promotions and products as directed by
the parent companies. The Company and parent companies rely upon certain
recipes and proprietary products to present a unique atmosphere, ambiance,
food taste and overall consistent presentation to the customer. Any
representation of these items or trademarks should only be as directed by the
parent companies and Superior, as a master franchiser, will use these only
with parent company approval. The Company primarily relies upon the laws of
unfair competition and confidentiality agreements to protect its designs and
other proprietary information.
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THE PRODUCT
The primary product that Superior will be marketing and selling will be
company-owned concepts and franchises of the parent companies in a given area
and/or given specific location. The franchises will be operated with
assistance from the parent company operators, for a designated time period, as
outlined in a uniform area agreement. Superior will attempt to capitalize on
opportunities to engage the services of other developers with the intention
that the Company will receive compensation for these referrals if and when the
person or persons referred do in fact sign an agreement to build and operate
a store.
COMPETITION
Superior agrees with the parent companies that any quick service food
operation is a competitor. However, the "healthy" segment is becoming one
of the fastest growing segments in the food industry. Other food operators
in this category are showing impressive results and our parent companies
are no exception.
MARKET DEFINITION
Key points in defining the market segment for products/services are by product
feature, by lifestyle of target consumers, by geographical location and by
season.
The Company has many common characteristics with companies that have grown
rapidly over the last 5 years. Models for comparison are Domino's Pizza,
Little Caesar's and Subway Sandwiches (all privately held). Public companies
with similarities are Sonic Industries (recent IPO) and International Dairy
Queen. These companies are predominantly franchised (i.e. limited number of
company-owned restaurants).
SALES AND ADVERTISING PROGRAMS
The company will engineer a two phase sales program. Subsequent to the
company-owned expansion of Sakura of Japan, the company will offer both the
sale of individual franchise units and also the sale of territorial rights.
Management believes that the majority of future revenue will come from the
sale of territories also known as Area Development Rights (ADR's). However,
there presently appears to be a significant amount of interest and demand
from the public for the sale of individual franchises. Each of the operating
companies has a list of prospective Franchisees (leads). Advertising in the
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operating stores will create additional leads. The national sales campaign
will be geared for ADR sales, but will also generate interest for individual
franchise sales. Management will attempt to close those sales prior to
launching the national sales campaign.
The most successful recent franchise companies (Subway, Schlotzsky) have
adopted their respective A.D.R. selling programs based on a territorial
division of rights. The company has divided the United States into 90
territories with population centers large enough to support the concepts on a
large scale; 24 or more units. The Area Development Rights (Territory) will
be sold to companies and/or individuals who will be able to divide and resell
the rights within the boundary of the existing ADR agreement, or will develop
the territory themselves.
The Company has a proprietary data-base of companies and agents interested in
buying Area Developer Rights from franchise companies. These agents will pay
Superior a non-refundable fee for the right to market and sell the franchise
concept or concepts in their territory. They will be contractually obligated
to open franchises or forfeit the right to develop. The projections included
with this corporate overview include revenue from the sales of individual
franchises as well as Area Development Rights sales.
Superior will use several methods of obtaining leads for the expansion
potential of stores. The methods will include but not be limited to Franchise
and Business Trade Shows, seminars, in-direct and direct marketing to
existing consumers and contracts with minority business development
organizations. In addition, economic development groups will be contracted.
Media may be used and periodicals are under consideration.
Advertising and Promotion
Superior recognizes that the key to success at this time requires extensive
promotion. This must be done aggressively and on a wide scale. To accomplish
our sales goals, we will require an aggressive advertising and public relations
strategy. Superior plans to advertise in major regional trade magazines such
as "The Dallas Weekly Living/Entertainment Journal", "Atlanta Restaurant/Dining
Guide", and "Boston Business Weekly". If necessary, and upon funding, an
advertising agency selection shall be made and, with their assistance, a
comprehensive advertising and promotion plan will be drafted.
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Promotion
In addition to standard advertising practices, Superior will seek
recognition through:
1. Trade programs that are advantageous;
2. Consumer programs that are advantageous;
3. Press releases.
4. In-Direct and Direct Marketing
The Mailer's Guide contains abridged information on bulk mailing permits,
mail classification items, customer service programs, and other facts basic
to mailing needs.
5. American Yellow Pages Software - look for all the possible outlets for
our product.
6. Internet Classified Advertising under "Company Profiles".
7. Proprietary Databases, Dun and Bradstreet Databases, Standard and Poors.
8. Restaurant, Hospitality and Franchisee Association CD ROM Databases.
Promotional Strategies
Superior will develop a regular and consistent product/service update program
for the major target medias, keeping key customers abreast of enhancements and
new product/service introductions.
Superior will develop an internal newsletter which can cover key sales
successes, significant marketing and manufacturing events, technical support
and product development stories. Internally, the newsletter would be targeted
to "blocks" of customers and potential customers.
Superior will develop a minimum of two technical articles written by key
executives to be placed in Restaurant/Dining publications within the first year.
Establish contact with editorial staffs for the purpose of being included in
product "round-ups" - product/service comparisons vis-a-vis Consumer Reports
where competing products/services are compared. This exposure may build
credibility and market acceptance.
Press Releases
Superior will develop a series of press releases on the entire product line.
Superior will also prepare press releases for each new product/service
introduction, technical development, participation in a major event,
awards/recognition for product/personnel excellence/performance, etc.
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Trade Shows
Superior will use trade shows as another method for maintaining a high profile
with the editors of key target media. If a major product/service announcement
is feasible at one of the shows, care should be taken to plan the announcement
well in advance. However, since the major publications send their editors to
the major shows, an opportunity exists to schedule, in advance, key personnel
with selected reporters and editors. These mini-interviews can be used in
lieu of the above described editorial visit, or as opportunities to give
editors a company or product update from a chief executive's point of view.
Internal/External Newsletter
Superior will produce a four-page, black-and-white (2-color/4-color)
newsletter to serve as an informational piece for internal personnel and key
customers. Superior will include sections covering each major department or
organization within parent company franchises. The Companywill highlight major
developments such as key sales stories, successful customer applications,
significant marketing events, and product development news.
MANAGEMENT DUTIES AND RESPONSIBILITIES
Initially, the Company will utilize four (4) consultants. These consultants
are Mr. Christopher O. Werner, Mr. Mark T. Thatcher, Mr. Robert B. Johnson and
Mr. James W. Johnson, who also represent Management of the Company. The
functions of management will be structured according to the operating
requirements for the successful execution of the business. These functions
include but are not limited to corporate planning and strategies, company-owned
development, franchise implementation and updates, advertising, promotion and
sales. Additionally, management will be required to deal with the daily
start-up and support of franchises for each parent company. Superior will add
additional staff as it is deemed necessary to do so as outlined in the financial
estimates. Also, professional services will be allocated in-house, based upon
Superior's management holding accredited licenses in accounting, law, finance,
investment banking, commercial real estate, advertising/public relations and
insurance.
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Management Team
Christopher O. Werner, President, Director of Marketing/Sales
Mr. Werner recently concluded his tenure as Senior Partner of Newport Capital
Partners, Newport, Rhode Island, where he specialized in the comprehensive
roles of investment banker, venture capitalist and financial engineer. During
the past three years he has been responsible for raising capital to assist
numerous projects and has earned the reputation as one of the premier capital
raising "financiers" throughout the Northeast. Mr. Werner is President and
Chairman of the Board of the publicly registered company, Waterford
International, Inc., and provides comprehensive financial and corporate
management consulting services to preeminent public and privately held
companies throughout the world.
Mr. Werner has also served as Senior Vice-President of Finance for Rightfit
Sports, Chief Financial Officer and Director of the publicly held Aqua Buoy
Corporation, Account Executive for Neidiger, Tucker, Bruner Securities, Inc.,
Denver, Colorado, Internal Auditor for First Trust Corporation and Tax Auditor
for CCH Computax.
Mr. Werner holds a B.S. in Accounting and a B.S. in Business Administration
from Regis University in Denver, Colorado. He also earned a Minor in
Communications from Regis subsequent to holding the position of Reconciliation
Specialist with the First Wisconsin Bank.
Mark Thatcher, Director of Area Development, Franchising and Legal Compliance
During the past eight years, Mr. Thatcher has participated as a business and
legal advisor for a variety of "quick service" restaurants and franchises.
His responsibilities included the management of franchise activities,
comprehensive legal compliance for restaurant operations, substantial
area-development for Franchisors across the United States and the design,
implementation, monitoring and integration of multi-vehicle financing
arrangements for a wide variety of businesses and "Restaurateurs". He
accomplished many of these activities while employed with Daniel P. Edwards,
P.C., an "AV" rated Colorado, Arizona and Hawaii law firm with unparalleled
listings for "preeminence" in the Martindale Hubbell Directory, and Apex
Marketing, an international marketing firm specializing in area-development
for franchises.
Mr. Thatcher attended the University of Denver where he earned a Juris
Doctorate with corporate, international and securities accreditation. He also
earned a Masters in Business Administration with an emphasis in domestic/
international marketing. He received a B.S./B.A. from Arizona State University
and is presently a member of the State Bar of Colorado and Court of Appeals of
Washington D.C., Member of the American Bar Association, Colorado Bar
Association, El Paso County Bar Association, American Management Association,
American Society of International Law, Franchising Forum of the A.B.A. and
Business Forums.
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Bruce Kannard, Director of Operations
A professional in the food and beverage industry for over twenty five years,
Mr. Kannard is presently Director of Operations for Kyoto Bowl, Inc., where he
doubled the expansion of the Phoenix Metropolitan Area operations in his first
year, while increasing controls and establishing consistency in the products.
His additional responsibilities include real estate analysis and negotiation,
marketing coordination, accounting compliance, vendor selection, price
comparison, sales tracking, menu development, writing and editing of all
operational manuals, initial preparation of franchise circulars and franchise
agreements and negotiation of area-development agreements.
Prior to arriving at Kyoto Bowl, Inc., Mr. Kannard was employed as Area
Supervisor for Pizza Hut of America (PepsiCo) where he increased positive
sales growth 70% and profit development 900% over a three year period. He was
a member of the national task force that developed the highly successful
world-wide delivery program.
Mr. Kannard has a national reputation as one of the most innovative
"restaurateurs", achieving this status during his tenures as General Manager
of Chives Concepts, Regional Vice President of Sambo's, District Manager of
Colony Foods and Area Supervisor of Village Inn Parlors.
Robert B. Johnson, Director of Finance, Accounting and Personnel Management
For the past 14 years, Mr. Johnson enjoyed a successful career in the
financial and restaurant industries. During his tenure in the Phoenix,
Arizona restaurant market, he enjoyed substantial success while engaging in
operations for Stockyard's, Inc., a multi-recipient of "The Best of Phoenix"
awards for restaurant excellence. Mr. Johnson also engages as Financial
Manager for Apex Marketing and was a manager of real estate operations for
Equity Development, Inc. and Del Webb, which have holdings across the United
States and abroad.
Mr. Johnson completed his education at Arizona State University where he
obtained a B.S. in Finance and Economics, while contemporaneously studying
advanced finance and accounting at Grand Canyon College. He studied
extensively at the University of Heidelberg in Germany and presently possesses
an Arizona Real Estate License, Series 7 Brokerage License and Series 63
License.
James W. Johnson, Director of Unit Management
Mr. Johnson has enjoyed an extensive career in the restaurant industry on both
a unit basis and a national chain basis. Kyoto Bowl, Inc. awarded significant
additional territories to J&T Ventures, LLC for area-development, due to Mr.
Johnson's restaurant management experience. He presently serves as Manager of
Sfuzzi, Inc. Concepts, a publicly held corporation operating multi-unit
franchise restaurants for several restaurant chain operations. He has also
served as Manager with the parent company of Rusty Pelican Restaurants, Inc.
in a managerial and advisory capacity.
<PAGE> 18
Mr. Johnson attended Arizona State University where he completed his studies
in Business Management and Engineering. He is a member of the American
Restaurant Management Association and serves as Committee Director of internal
restaurant operations for Apex Marketing.
Dwight W. Mathiasen, Area Supervisor, Selected Segment
Mr. Mathiasen recently concluded his tenure with Colorado Restaurant
Management. During this assignment, he served five years as Manager of the
Black Eyed Pea location in Englewood, Colorado, where he set unprecedented
levels of profitability increases for the location. He was recognized
nationally by Black Eyed Pea for achieving excellence in the areas of hiring,
training and scheduling a staff of over 80 employees, ordering and inventory
controls of meats, produce and dry goods, controlling of labor, food and
liquor costs, enforcement of company quality standards, compliance with
Tri-County health regulations and resolution of customer concerns. Prior to
this assignment, Mr. Mathiasen was employed by Sullivan-Hayes of Denver,
Colorado as an expert consultant in site selection and commercial leasing for
restaurant concepts throughout the Greater Denver Area.
While obtaining his B.S. and B.A. in Finance and Real Estate from the
University of Denver, Mr. Mathiasen managed to Captain the Hockey Team and was
selected in the First Round of the N.H.L. Entry Draft of 1986. He went on to
play three seasons with the Pittsburgh Penguins of the National Hockey League,
maintaining significant contacts in over thirty-two major metropolitan areas
throughout the United States and Canada. He maintains a Colorado Real Estate
License and is a Member of the Franchising Forum of the American Business
Society of Restaurant Development.
Jeffrey J. Revious, Area Supervisor, Selected Segment
Widely recognized throughout the Boulder, Colorado as one of the premier
restaurant managers, Mr. Revious recently concluded his tenure as Manager of
Laudisio Restaurant, Inc., rated the "Top Italian Restaurant" in Colorado.
During this tenure he was solely responsible for the training of new staff,
scheduling of all restaurant personnel, and performance of general restaurant
management tasks associated with the day-to-day operations. Prior to this,
Mr. Revious served as General Manager of Taylor's Restaurant, Inc. where he
designed and implemented new strategies that increased Sales by over 600%. In
addition to performing all levels of responsibility at the G.M. level, he
received state recognition by the Colorado Restaurant Association in the area
of advertising, purchasing, ordering and scheduling of employees.
Mr. Revious received a B.S. from the University of Colorado with a minor in
international business affairs. He also studied advanced hotel/restaurant
management at the University of Northern Colorado, while simultaneously
serving as campaign assistant to United States Senator, Hank Brown.
<PAGE> 19
Corey Houthan, Area Supervisor, Selected Segment
A multi-faceted professional offering a strong culmination of both financial
and operations management experience, Mr. Houthan has enjoyed a tremendous ten
year success in Portfolio Development and Administration, Risk and Asset
Management and Operation Management, while completing assignments with ITT
Consumer Financial Corporation, Farm Credit Services and Wal-Mart. During this
time he maintained personal portfolios of over $3,000,000 each and managed
Arbitration Tracking Departments for all three employers with over $30,000,000
in outstanding dollars.
Mr. Houthan received his B.S. in Business Administration with Honors from
Regis University and continues to act in a consulting capacity, providing
expertise in development of multi-county marketing plans for business
development.
Richard D. Marks, Area Supervisor, Selected Segment
A seasoned manager in the restaurant industry for over nine years, Mr. Marks
has received national recognition as an employee of Sfuzzi Concepts, Inc. in
Scottsdale, Arizona. During his employment campaign he has received the
corporate award of "National Employee of the Month" six times for designing
and implementing strategies in training and promotions that helped the
restaurant eclipse previous sales marks repeatedly. He is regionally regarded
in the restaurant industry as an expert in maximizing the skills of employees
and has been responsible for formulating and writing employee training
manuals.
Mr. Marks has been extensively educated in the computer industry and has
mastered an accumulated programming ability in networking and platforming at
the micro level, while mastering operating system platforming at the D.O.S.
and Microsoft Windows levels.
JoDee J. Ailshie, CPS, Administration Coordinator
Ms. Ailshie brings over nine years of comprehensive office administration
experience to the venture, along with substantial expertise in catering to
large institutional functions and organizational activities. While holding
the positions of Principal Secretary, Program Resource Specialist and Data
Integrity Clerk at the University of Tennessee, Knoxville, she has been
responsible for issuing requisition forms and purchase orders, verifying and
paying invoices, maintaining individual account balances for faculty,
reconciling bank statements, supervising inventory of equipment and supplies,
initiating Alpha 4/Quattro programs capable of retaining and utilizing data to
meet OSHA standards and receiving, batching and depositing gifts and managing
related reporting requirements.
Also during this time, Ms. Ailshie was solely responsible for organizing,
planning and implementing multi-level catering activities for various
functions including university and political association meetings, seminars,
conferences and banquets. She simultaneously approved and verified qualified
applicants using USDA Food and Nutrition Service eligibility guidelines.
<PAGE> 20
Ms. Ailshie obtained a B.A. from Colorado State University, an A.S., Judicial
Legal Secretary from Aims Community College and successfully completed the
Legal Assistant's Program at the University of Tennessee while attaining
membership in the Phi Theta Kappa Honorary. She attained the CPS rating, July
1992.
MAJOR MANAGEMENT OBJECTIVES
Superior has outlined as its major objective for the next year to obtain
adequate financing for the establishment and execution of its strategic goals
efficiently and effectively.
In order to implement the business plan, management shall concentrate its
efforts on:
1.Obtaining financing to meet the immediate company-owned expansion
objectives for Sakura of Japan;
2.Creating a large franchisee owner network, while penetrating our market
areas;
3.Designing ways to accomplish goals for expediting franchise and
area-development sales;
4.Generating revenues in order to assure the success of the corporation.
MERGERS AND ACQUISITIONS
It is impossible to predict the manner in which the Company may participate
in a business opportunity. Specific business opportunities will be reviewed
as well as the respective needs and desires of the Company and the promoters
of the opportunity and, upon the basis of that review and the relative
negotiating strength of the Company and such promoters, the legal structure
or method deemedby management to be suitable will be selected. Such structure
may include, but is not limited to leases, purchase and sale agreements,
licenses, joint ventures and other contractual arrangements. The
Company may act directly or indirectly through an interest in a
partnership, corporation or other form of organization. Implementing
such structure may require the merger, consolidation or reorganization
of the Company with other corporations or forms of business
organization, and although it is likely, there is no assurance that the
Company would be the surviving entity. In addition, the present
management and stockholders of the Company most likely will not
have control of a majority of the voting shares of the Company
following a reorganization transaction. As part of such a transaction,
the Company's existing directors may resign and new directors may
be appointed without any vote by stockholders.
<PAGE> 21
It is likely that the Company will acquire its participation in
a business opportunity through the issuance of Common Stock or
other securities of the Company. Although the terms of any such
transaction cannot be predicted, it should be noted that in certain
circumstances the criteria for determining whether or not an acquisi-
tion is a so-called "tax free" reorganization under the Internal Revenue
Code of 1986, depends upon the issuance to the stockholders of the
acquired company of a controlling interest (i.e. 80% or more) of the
common stock of the combined entities immediately following the
reorganization. If a transaction were structured to take advantage of
these provisions rather than other "tax free" provisions provided under
the Internal Revenue Code, the Company's current stockholders would
retain in the aggregate 20% or less of the total issued and outstanding
shares. This could result in substantial additional dilution in the
equity of those who were stockholders of the Company prior to such
reorganization. Any such issuance of additional shares might also be
done simultaneously with a sale or transfer of shares representing a
controlling interest in the Company by the current officers, directors
and principal shareholders.
It is anticipated that any new securities issued in any
reorganization would be issued in reliance upon exemptions, if any are
available, from registration under applicable federal and state securities
laws. In some circumstances, however, as a negotiated element of the
transaction, the Company may agree to register such securities either
at the time the transaction is consummated, or under certain conditions
or at specified times thereafter. The issuance of substantial additional
securities and their potential sale into any trading market that might
develop in the Company's securities may have a depressive effect
upon such market.
The Company will participate in a business opportunity only
after the negotiation and execution of a written agreement. Although
the terms of such agreement cannot be predicted, generally such an
agreement would require specific representations and warranties by all
of the parties thereto, specify certain events of default, detail the terms
of closing and the conditions which must be satisfied by each of the
parties thereto prior to such closing, outline the manner of bearing
costs if the transaction is not closed, set forth remedies upon default,
and include miscellaneous other terms.
<PAGE> 22
As a general matter, the Company anticipates that it, and/or its
officers and principal shareholders will enter into a letter of intent
with the management, principals or owners of a prospective business
opportunity prior to signing a binding agreement. Such a letter of
intent will set forth the terms of the proposed acquisition but will not
bind any of the parties to consummate the transaction. Execution of
a letter of intent will by no means indicate that consummation of an
acquisition is probable. Neither the Company nor any of the other
parties to the letter of intent will be bound to consummate the
acquisition unless and until a definitive agreement concerning the ac-
quisition as described in the preceding paragraph is executed. Even
after a definitive agreement is executed, it is possible that the
acquisition would not be consummated should any party elect to
exercise any right provided in the agreement to terminate it on
specified grounds.
It is anticipated that the investigation of specific business
opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require
substantial management time and attention and substantial costs for
accountants, attorneys and others. If a decision is made not to
participate in a specific business opportunity, the costs theretofore
incurred in the related investigation would not be recoverable.
Moreover, because many providers of goods and services require
compensation at the time or soon after the goods and services are
provided, the inability of the Company to pay until an indeterminate
future time may make it impossible to procure goods and services.
RISK FACTORS
At this time, Superior is in a highly competitive market with brand name
companies. It's success, therefore, must rely solely on the effective and
efficient promotion, operational support of company-owned units and sales of
its franchises. The company is engaged in a business with a high public
profile and is directly competitive with restaurant chain operations as well
as independent operators.
<PAGE> 23
Potential Fluctuations in Quarterly Operating Results
There can be no assurance that the Company will be able to
generate revenue or maintain quarterly profitability in the future. The
Company's quarterly and annual results may vary significantly in the future
due to a number of factors, including: changes in revenue and
product mix; variations in average selling prices; timing of
announcement and introduction of new products by the Company and
its competitors; market acceptance of the Company's and its
customer's products; gain or loss of significant customers; and
competitive factors. Any unfavorable changes in such factors or
others could have a material adverse effect on the Company's
operating results.
Dependence on Franchisees
The Company will realize a substantial portion of its revenues from initial
franchise fees, ongoing royalty payments from its franchisees and the sale of
foodstuffs and equipment to its franchisees. The Company is therefore
substantially dependent upon its ability to attract, retain and contract with
suitable franchisees, and the ability of these franchisees to open and operate
their stores successfully. Should the Company experience difficulty in
attracting suitable franchisees, or should the Company's franchisees encounter
business or operational difficulties, the Company's revenues will be adversely
affected. Such a reduction in revenues may also have an adverse effect on the
Company's ability to sell new franchises and on its financial results and
prospects. Consequently, the Company's financial prospects are directly related
to the success of its franchisees, over which the Company has no direct control.
There can be no assurance that either the Company or its franchisees will be
able to develop new franchises, or operate the Company's bagel stores,
successfully.
Expansion
The opening and success of the Company's franchised business stores will depend
on various factors, including the availability of suitable sites; the ability of
franchisees to negotiate acceptable lease terms for new locations, to obtain
construction and any other necessary permits in a timely manner, and to meet
construction and opening schedules; the Company's ability to manage its
anticipated expansion and to hire and train personnel; and general and local
economic and business conditions. The foregoing factors are not within the
control of the Company.
<PAGE> 24
The Company's proposed expansion will also require the implementation of
enhanced operational and financial systems and will require additional
management, operational and financial resources. Failure to implement these
systems and add these resources could have a material adverse effect on the
Company's results of operations and financial condition. There can be no
assurance that the Company will be able to manage its expanding operations
effectively or that it will be able to maintain or accelerate its growth. In
addition, there can be no assurance of the viability of the Company's concepts
in new geographic regions or particular local markets.
Competition; Ease of Entry Into Business
The food service industry, in general, and the fast-food and take-out sectors,
in particular, are intensely competitive. The Company competes, and can be
anticipated to compete, against well established food service companies with
greater product and name recognition and with substantially greater financial,
marketing and distribution capabilities than the Company's, as well as against
a large number of local food establishments that offer similar or competitive
products. In addition, management believes that the start-up costs associated
with opening a retail food establishment offering similar products on a
stand-alone basis are comparable to the start-up costs of the Company's
franchised business stores and, accordingly, such start-up costs are not an
impediment to entry into the retail business. Further, as the demand for
franchised business products increases and consumers become more familiar with
the product, they also may be expected to become increasingly discriminating
in selecting products based on quality and value. There can be no assurance
that the Company can compete successfully in this complex and changing market.
Food Service Industry
Food service businesses are often affected by changes in consumer and
competitive conditions, including changes in consumer tastes; national,
regional, and local economic conditions and demographic trends; traffic
patterns, and the type, number, and location of competing businesses. Adverse
publicity resulting from food quality, illness, injury, or other health concerns
or operating issues stemming from one store or a limited number of stores also
may adversely affect multi-unit chains such as the Company. In addition, factors
such as inflation, increased food, labor, and employee benefit costs, regional
weather conditions and the unavailability of experienced management and hourly
employees may also adversely affect the food service industry in general, and
the Company's operations, financial results and prospects in particular.
<PAGE> 25
Government Regulation
The Company's franchise operations are subject to regulation by the Federal
Trade Commission (the "FTC") in compliance with the Uniform Franchise Act which
requires, among other things, that the Company prepare and update a
comprehensive disclosure document in connection with the sale and operation of
its franchises. The Company and its franchisees must also comply with state
franchising laws and a wide range of other state and local rules and regulations
applicable to their businesses. See "Business -- Government Regulation."
Continued compliance with this broad federal, state and local regulatory network
is essential and costly, and the failure to comply could have a material adverse
effect on the Company and its franchisees. Violations of franchising laws and/or
state laws and regulations governing substantive aspects of doing business in a
particular state could subject the Company and its affiliates to rescission
offers, monetary damages, penalties, imprisonment and/or injunctive
proceedings.
In addition, under court decisions in certain states, absolute vicarious
liability may be imposed upon franchisers based upon claims made against
franchisees. The Company currently does not carry insurance against such claims
although it intends to obtain such coverage in the future. However, there can
be no assurance that the Company will be able to obtain such coverage or that
such coverage will be sufficient to cover potential claims against the Company.
This Registration Statement does not constitute, and shall not be construed as,
an offer to sell a franchise. Such offers may be made only by an Offering
Circular in compliance with applicable state law and the Federal Trade
Commission Disclosure Rule. The description of the franchises set forth in
this Registration Statement is not intended to be a complete description of a
Sakura of Japan, Tito's Cantina, Pick Pockets, Roasters Coffee and Tea Company
or New England Cookie Jar franchise business.
Dependence on Key Personnel
The Company's future success depends in large on part of the continued service
of its key marketing and management personnel and on its ability to continue
to attract an retain qualified employees. The competition for such personnel
is intense, and the loss of key employees could have a material effect on the
Company's financial condition and results of operations.
<PAGE> 26
Control by Principal Shareholders, Officers and Directors
The Company's principal shareholders, officers and directors will
beneficially own approximately ninety percent (90%) of the
Company's Common Stock. As a result, such persons may have the
ability to control the Company and direct its affairs and
business. Such concentration of ownership may also have the
effect of delaying, deferring or preventing change in control of
the Company. See "Principal Stockholders."
Issuance of Preferred Stock may adversely Affect Holders of
Common Stock or Delay or Prevent Corporate Take-Over
The Company's Articles of Incorporation provide that preferred
stock may be issued by the Company from time to time in one or
more series. The Board of Directors of the Company is authorized
to determine the rights, preferences, privileges and restrictions
granted to and imposed upon any wholly unissued series of
preferred stock and the designation of any such shares, without
any vote or action by the Company's shareholders. The Board of
Directors may authorize and issue Preferred stock with voting
power or other rights that could adversely affect the voting
power or other rights of the holders of Common Stock. In
addition, the issuance of preferred stock could have the effect
of delaying, deferring or preventing a change in control of the
Company, because the terms of preferred stock that might be
issued could potentially prohibit the Company's consummation of
any merger, reorganization, sale of substantially all of its
assets, liquidation or other extraordinary corporate transaction
without the approval of the holders of the outstanding shares of
the preferred stock.
No prior Trading Market; Potential Volatility of Stock Price
There has been no public market for the Common Stock, and there
can be no assurance that an active trading market will develop or
be sustained. At a future date, provided a public market for the
stock does develop, the market price of the shares of Common
Stock is likely to be highly volatile and may be significantly
affected by factors such as fluctuations in the Company's
operating results, announcements of technological innovations or
new products and/or services by the Company or its competitors,
governmental regulatory action, developments with respect to
<PAGE> 27
patents or proprietary rights and general market conditions. In
addition, the stock market has from time-to-time experienced
significant price and volume fluctuations that are unrelated to
the operating performance of particular companies.
Possible Need for Additional Financing
The Company has very limited funds, and such funds may not be adequate
to take advantage of any available business opportunities. Even if the
Company's funds prove to be sufficient to acquire an interest in, or complete
a transaction with, a business opportunity, the Company may not have
enough capital to exploit the opportunity. The ultimate success of the
Company may depend upon its ability to raise additional capital. The
Company has not investigated the availability, source, or terms that
might govern the acquisition of additional capital and will not do so
until it determines a need for additional financing. If additional
capital is needed, there is no assurance that funds will be available
from any source or, if available, that they can be obtained on terms
acceptable to the Company. If not available, the Company's opera-
tions will be limited to those that can be financed with its modest
capital.
No Operating History
The Company was formed in January of 1995. The Company has little operating
history and no revenues from operations. The Company faces all of the risks
of a new business and the special risks inherent in the investigation,
acquisition, or involvement of new business opportunities. The
Company must be regarded as a new or "start-up" venture with all of
the unforeseen costs, expenses, problems, and difficulties to which
such ventures are subject.
Lack of Diversification.
Because of the limited financial resources that the Company has, it is
unlikely that the Company will be able to diversify its operations. The
Company's probable inability to diversify its activities into more than one
area will subject the Company to economic fluctuations within a particular
business or industry and therefore increase the risks associated with
the Company's operations.
<PAGE> 28
Dependence upon Management; Limited Participation of Management
The Company currently has two single individuals who are serving as
its sole officers and directors. The Company will be heavily
dependent upon their skills, talents, and abilities to implement its
business plan, and may, from time to time, find that the inability of
them to devote their full time attention to the business of the Company
results in a delay in progress toward implementing its business plan.
Indemnification of Officers and Directors.
The Company's Articles of Incorporation provide for the indemnification of its
directors, officers, employees, and agents, under certain circumstances,
against attorney's fees and other expenses incurred by them in any
litigation to which they become a party arising from their association
with or activities on behalf of the Company. The Company will also
bear the expenses of such litigation for any of its directors, officers,
employees, or agents, upon such person's promise to repay the
Company therefor if it is ultimately determined that any such person
shall not have been entitled to indemnification. This indemnification
policy could result in substantial expenditures by the Company which
it will be unable to recoup.
Dependence upon Outside Advisors
To supplement the business experience of its officers and directors, the
Company may be required to employ consultants or advisors. It is
anticipated that such persons may be engaged on an "as needed" basis
without a continuing fiduciary or other obligation to the Company.
Rule 144 Sales
All of the outstanding shares of Common Stock held by present
stockholders are "restricted securities" within the meaning of Rule 144
under the Securities Act of 1933, as amended.
As restricted shares, these shares may be resold only pursuant to an
effective registration statement or under the requirements of Rule 144
or other applicable exemptions from registration under the Act and as
required under applicable state securities laws. Rule 144 provides in
essence that a person who has held restricted securities for a
prescribed period may, under certain conditions, sell every three
months, in brokerage transactions, a number of shares that does not
<PAGE> 29
exceed the greater of 1.0% of a company's outstanding common stock
or the average weekly trading volume during the four calendar weeks
prior to the sale. As a result of revisions to Rule 144 which
became effective on or about April 29, 1997, there will be no limit on
the amount of restricted securities that may be sold by a nonaffiliate
after the restricted securities have been held by the owner for a period
of two years. A sale under Rule 144 or under any other exemption
from the Act, if available, or pursuant to subsequent registrations of
shares of Common Stock of present stockholders, may have a
depressive effect upon the price of the Common Stock in any market
that may develop.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL PLAN
Superior has improved its infrastructure, and is now at the threshold to
pro-actively grow the company. By improving sales and exhibiting financial
stability, Superior will then be in a position to acquire others in the
franchising industry, or be acquired as an adjunct to a successful
competitor's line. The financial plan, once breakeven has been achieved, is to
regularly pay down it's financial obligations, finance a reasonable marketing
and sales program, become a viable acquirer or merger candidate, and provide
a fair return to it's investors.
Financing Activities
The original loans from affiliates of the Company in the amounts of $219,804
is still carried on the books with a five year payback. The principal balance
due at the end of FY 1997 is $219,804.
The company carries no other long term debt, has no line of credit, and will
entertain a capital raise, publicly or in the private sector in its merger and
acquisition activities, if payments cannot be made from cashflow.
Balance Sheet Items
Obsolete items are written off yearly. All fees associated with any merger and
acquisition activity will be paid from cashflow, or included in the capital
raise amounts.
<PAGE> 30
During the next six months, Superior will seek a one hundred thousand
dollar ($100,000) bridge financing loan. These funds will be used primarily
to provide working capital needed for increased sales and marketing expense
and finance an acquisition program.
RESULTS OF OPERATIONS
During the period from Novembert 1, 1996 (inception) through
April 30, 1998, the Company has engaged in no significant
operations other than organizational activities, acquisition of capital
and preparation for registration of its securities under the Securities
Exchange Act of 1934, as amended. No revenues were received by
the Company during this period.
For the current fiscal year, the Company anticipates incurring
a loss as a result of organizational expenses, expenses associated with
registration under the Securities Exchange Act of 1934, and expenses
associated with locating and evaluating acquisition candidates.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $0.00 for the year ended
October 31, 1997 and $0.00 for the six months ended April 30, 1998.
Net cash used by operating activities was $0.00 for the year ended October 31,
1997 and $0.00 for the six months ended April 30, 1998.
Since its inception, the Company has financed its operations and
growth with personal loans from existing officers, directors and affiliates,
advances from shareholders.
Although the Company is not engaged in any acquisition discussions at this
time, the Company will consider acquiring domestic and international
businesses offering products and/or services similar or complementary to those
offered by the Company. Any such acquisitions may require additional external
financings, and in such event, the Company may from time to time seek to
obtain funds from public or private issuances of equity or debt securities.
There can be no assurances that the Company will pursue acquisitions or that
such financings for any such acquisitions will be available on terms
acceptable to the Company.
<PAGE> 31
The Company remains in the development stage and, since
inception, has experienced no significant change in liquidity or capital
resources or stockholder's equity. The Company's balance sheets as of
October 31, 1997 and the six months ended April 30, 1998, reflect a current
asset value of $203,340, and a total asset value of $317,040 in the form
of cash, marketable securities, notes receivable and franchise rights.
The Company will carry out its plan of business as discussed
above. The Company cannot predict to what extent its liquidity and
capital resources will be diminished prior to the consummation of a
sales of franchises or business combination.
NEED FOR ADDITIONAL FINANCING
No commitments to provide additional funds have been made
by management or other stockholders. Accordingly, there can be no
assurance that any additional funds will be available to the Company
to allow it to cover its expenses.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109") issued by the Financial Accounting Standards Board ("FASB"), under which
deferred tax assets and liabilities are provided on differences between the
carrying amounts for financial reporting and the tax basis of assets and
liabilities for income tax purposes using the enacted tax rates.
Under SFAS 109, deferred tax assets may be recognized for temporary
differences that will result in deductible amounts in future periods. A
valuation allowance is recognized, if on the weight of available evidence, it
is more likely than not that some portion or all of the deferred tax asset
will not be realized.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS 121") issued by the FASB, is effective for financial statements for
fiscal years beginning after December 15, 1995. The standard establishes new
guidelines regarding when impairment losses on long-lived assets, which
include plant and equipment, certain identifiable intangible assets, and
goodwill, should be recognized and how impairment losses should be measured.
<PAGE> 32
The Company does not expect adoption to have a material effect on its
financial position or results of operations.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123") issued by the FASB, is effective for
specific transactions entered into after December 15, 1995. The disclosure
requirements of SFAS 123 are effective for financial statements for fiscal
years beginning no later than December 15, 1995. The new standard established
a fair value method of accounting for stock-based compensation plans and for
transactions in which an entity acquires goods or services from non-employees
in exchange for equity instruments. The Company does not expect adoption to
have a material effect on its financial position or results of operations.
Federal Income Tax Aspects of Investment in the Company
The discussion contained herein has been prepared by the
Company and is based on existing law as contained in the Code,
amended United States Treasury Regulations ("Treasury
Regulations"), administrative rulings and court decisions as of the
date of this Registration Statement. No assurance can be given
that future legislative enactments, administrative rulings or court
decisions will not modify the legal basis for statements contained
in this discussion. Any such development may be applied
retroactively to transactions completed prior to the date thereof,
and could contain provisions having an adverse affect upon the
Company and the holders of the Common Stock. In addition, several
of the issues dealt with in this summary are the subject of
proposed and temporary Treasury Regulations. No assurance can be
given that these regulations will be finally adopted in their
present form.
Basis in Common Stock
The tax basis that a Shareholder will have in his Common Stock
will equal his cost in acquiring his Common Stock. If a
Shareholder acquires Common Stock at different times or at
different prices, he must maintain records of those transactions so
that he can accurately report gain or loss realized upon
disposition of the Common Stock.
<PAGE> 33
Dividends on Common Stock
Distributions made by the Company with respect to the Common
Stock will be characterized as dividends that are taxable as
ordinary income to the extent of the Company's current or
accumulated earnings and profits ("earnings and profits"), if any,
as determined for U.S. federal income tax purposes. To the extent
that a distribution on the Common Stock exceeds the holder's
allocable share of the Company's earnings and profits, such
distribution will be treated first as a return of capital that will
reduce the holder's adjusted tax basis in such Common Stock, and
then as taxable gain to the extent the distribution exceeds the
holder's adjusted tax basis in such Common Stock. The gain will
generally be taxed as a long-term capital gain if the holder's
holding period for the Common Stock is more than one year.
The availability of earnings and profits in future years will
depend on future profits and losses which cannot be accurately
predicted. Thus, there can be no assurance that all or any portion
of a distribution on the Common Stock will be characterized as a
dividend for general income tax purposes. Corporate shareholders
will not be entitled to claim the dividends received deduction with
respect to distributions that do not qualify as dividends. See the
discussion regarding the dividends received deduction below.
Redemption of Common Stock
The Company does not have the right to redeem any Common
Stock. However, any redemption of Common Stock, with the consent
of the holder, will be a taxable event to the redeemed holder.
The Company does not believe that the Common Stock will be
treated as debt for federal income tax purposes. However, in the
event that the Common Stock is treated as debt for federal tax
purposes, a holder generally will recognize gain or loss upon the
redemption of the Common Stock measured by the difference between
the amount of cash or the fair market value of property received
and the holder's tax basis in the redeemed Common Stock. To the
extent the cash or property received are attributable to accrued
interest, the holder may recognize ordinary income rather than
capital gain. Characterization of the Common Stock as debt would
also cause a variety of other tax implications, some of which may
be detrimental to either the holders, the Company, or both
<PAGE> 34
(including, for example, original issue discount treatment to the
Investors). Potential Investors should consult their tax advisors
as to the various ramifications of debt characterization for
federal income tax purposes.
Other Disposition of the Common Stock
Upon the sale or exchange of shares of Common Stock, to or
with a person other than the Company, a holder will recognize
capital gain or loss equal to the difference between the amount
realized on such sale or exchange and the holder's adjusted basis
in such stock. Any capital gain or loss recognized will generally
be treated as a long-term capital gain or loss if the holder held
such stock for more than one year. For this purpose, the period
for which the Common Stock was held would be included in the
holding period of the Common Stock received upon a conversion.
State, Local and Foreign Taxes
In addition to the federal income tax consequences described
above, prospective investors should consider potential state, local
and foreign tax consequences of an investment in the Common Stock.
ERISA CONSIDERATIONS FOR TAX-EXEMPT INVESTORS/SHAREHOLDERS
General Fiduciary Requirements
Title I of ERISA includes provisions governing the
responsibility of fiduciaries to their Qualified Plans. Qualified
Plans must be administered according to these rules. Keogh plans
that cover only partners of a partnership or self-employed owners
of a business are not subject to the fiduciary duty rules of ERISA,
but are subject to the prohibited transaction rules of the Code.
Under ERISA, any person who exercises any authority or control
respecting the management or disposition of the assets of a
Qualified Plan is considered to be a fiduciary of such Qualified
Plan (subject to certain exceptions not here relevant).
ERISA Section 404(a)(1) requires a fiduciary of a Qualified
Plan to "discharge his duties with respect to a plan solely in the
interest of the participants and beneficiaries and (A) for the
exclusive purpose of: (i) providing benefits to participants and
<PAGE> 35
their beneficiaries, and (ii) defraying reasonable expenses of
administering the plan; (B) with the care, skill, prudence, and
diligence under the circumstances then prevailing that a prudent
man acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with
like aims; (C) by diversifying the investments of a plan so as to
minimize the risk of large losses, unless under the circumstances
it is clearly prudent not to do so; and (D) in accordance with the
documents and instruments governing the plan."
FIDUCIARIES WHO BREACH THE DUTIES THAT ERISA IMPOSES MAY
SUFFER A WIDE VARIETY OF LEGAL AND EQUITABLE REMEDIES, INCLUDING
(i) THE REQUIREMENT TO RESTORE QUALIFIED PLAN LOSSES AND TO PAY
OVER ANY FIDUCIARY'S PROFITS TO THE QUALIFIED PLAN; (ii) REMOVAL AS
FIDUCIARY OF THE QUALIFIED PLAN; AND (iii) LIABILITY FOR EXCISE
TAXES THAT SECTION 4975 OF THE CODE IMPOSES.
ITEM 3. DESCRIPTION OF PROPERTY
The Company currently maintains an office at 360 Thames Street, Newport,
Rhode Island 02840, which is the office address of its legal counsel. The
Company pays no rent for the use of this office and mailing address. The
Company's telephone number is (401-841-9444) (800-428-6768).
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of May 1, 1998, information with
respect to the beneficial ownership of the Company's outstanding Common Stock
by (i) each director and executive officer of the Company, (ii) all directors
and executive officers of the Company as a group, and (iii) each shareholder
who was known by the Company to be the beneficial owner of more than 5% of the
Company's outstanding Common Stock. Pursuant to the beneficial ownership
rules under the Securities Exchange Act of 1934, as amended, each named person
and all directors and executive officers as a group are deemed to be the
beneficial owners of securities that may be acquired within 60 days of May
1, 1998 through the exercise of options or warrants. Accordingly, the number
of shares and percentages set forth opposite each shareholder's name in the
table below assumes the exercise of all such options and warrants. However,
the number of shares of Common Stock issuable upon exercise by any given
shareholder are not included in calculating the percentage of Common Stock
<PAGE> 36
beneficially owned by any other shareholder. Except as otherwise indicated,
the persons or entities listed below have sole voting and investment power
with respect to all shares of Common Stock beneficially owned by them.
<TABLE>
<CAPTION>
Number of Shares Percent of
Name and Address Beneficially Owned Class Owned
- ---------------- ------------------ ----------------
<S> <C> <C>
Mark T. Thatcher, Esq. 900,000 43.27
Mark T. Thatcher, P.C.
360 Thames Street
Newport, RI 02840
Christopher O. Werner 900,000 43.27
ESG, Inc.
360 Thames Street
Newport, RI 02840
All Officers and 1,800,000 86.54
Directors as a Group
Superior Holdings
</TABLE>
____________________________
In any election of directors, the holders of the Preferred Stock, voting
separately as a class, are entitled to elect that number of directors as is
proportionate to their ownership interest in the Company, determined on an
as-converted basis. On an as-converted basis, the holders of the Preferred
Stock currently have a 0% interest in the Company, which interest may increase
over time as mandatory in-kind dividends are paid with respect to the
Preferred Stock. Upon any default in the payment of dividends on the
Preferred Stock, each director who has been elected by the holders of the
Preferred Stock will be entitled to two votes on all matters on which the
directors are entitled to vote, while each director elected by the holders of
Common Stock shall continue to have the right to cast one vote. Accordingly,
a default in the payment of dividends on the Preferred Stock could result in
the directors who have been elected by the holders of the Preferred Stock
having voting control with respect to matters presented to the Board.
<PAGE> 37
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
EXECUTIVE OFFICERS AND BOARD OF DIRECTORS
The following members of the Board of Directors provide expertise in capital
acquisition, sales and marketing, mergers and acquisitions, and corporate law.
Their technical acumen, along with their wish to see Superior successful has
made their presence on the Board a resource to the management team. The
following biographical data on the members of the Board of Directors reflects
their skills, experience, and complement to Superior.
The following table sets forth certain information regarding the
directors
and executive officers of the Company.
<TABLE>
<CAPTION>
Name Age Position
- --------------------- --------- ----------------------
<S> <C> <C>
Christopher O. Werner 34 Chairman of the Board
360 Thames Street President
Newport, RI 02840
Mark T. Thatcher 33 General Counsel
Mark T. Thatcher, P.C Board of Directors
360 Thames Street
Newport, RI 02840
</TABLE>
All current directors hold office until the 1999 annual meeting of the
Company's shareholders and until their successors are duly elected and
qualified; thereafter, directors will be elected annually. The executive
officers are appointed annually by the Board of Directors and serve at the
discretion of the Board. No family relationships exist among any of the
directors and executive officers of the Company.
CERTAIN LEGAL PROCEEDINGS
None
<PAGE> 38
ITEM 6.EXECUTIVE COMPENSATION
No executive compensation was paid for the year ended October 31, 1997,
to and of the Company's Directors, Officers or Affiliates or other persons
who were executive officers of the Company in 1997 (the "named executive
officers").
<TABLE>
<CAPTION>
Long Term
Annual Compensation
Compensation Awards
--------------- ------------- ------------- ----------------
Securities
Other Annual Underlying All Other
Salary Compensation Options/(1)/ Compensation
Name and Principal Position ($) ($) (#) ($)-
- --------------------------- --------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Christopher O. Werner...... $0.00
Chairman of the Board
Mark T. Thatcher........... $0.00
General Counsel
</TABLE>
____________________________
DIRECTOR COMPENSATION
The Company does not reimburse directors for expenses incurred, if any, in
attending meetings of the Board of Directors. The Company does not pay
director fees to directors for their service on the Board.
<PAGE> 39
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN FACTORS
There is no public market for Superior Common Stock. The Superior Common
Stock may be traded in the over-the-counter market in the near future,
however, there can be no assurance as to the price at which trading in
Superior Common Stock will occur.
With respect to financial and other information relating to Superior,
Mark T. Thatcher, P.C., whose address is 360 Thames Street, Newport,
Rhode Island 02840 will file annual and periodic reports
with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934. Copies of such reports may be
inspected by anyone without charge at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington D.C. 20549, and copies may be obtained from
the Commission at prescribed rates. In addition, Superior will
provide without charge, upon the request of any stockholder, a copy
of its Annual Report on Form 10-KSB for the fiscal year ended
October 31, 1998, to be filed with the Commission. Any such
requests should be directed to the Secretary of Superior Holdings,
Inc., address 360 Thames Street, Newport, RI 02840.
ITEM 8. DESCRIPTION OF SECURITIES
The authorized capital stock of Superior consists of fifty million
(50,000,000) shares of Common Stock, $5.00 par value, of which
two million eighty thousand (2,080,000) shares will be outstanding on the
Distribution Record Date.
Holders of Superior Common Stock will be entitled to one vote
per share on all matters submitted to any vote of stockholders.
Cumulative voting for the election of directors is not permitted
and therefore the holders of a majority of the shares of Superior
Common Stock will be able to elect all of the directors. The
Superior Common Stock does not have preemptive rights and is not
convertible, redeemable or assessable. The holders of Superior
Common Stock are entitled to receive dividends as may be declared
by the Board of Directors out of funds legally available therefor.
See Dividends on Superior Common Stock below. Upon liquidation or
<PAGE> 40
dissolution, holders of Superior Common Stock are entitled to share ratably
in all net assets available for distribution to stockholders.
Restrictions of Transfer
Shares of Superior Common Stock distributed to Superior's stockholders
will be freely transferable, except for shares received by persons who may
be deemed to be "affiliates" of Superior under the Securities Act of 1933,
as amended (the "Securities Act"). Persons who may be deemed to be affiliates
of Superior after the Distribution generally include individuals or entities
that control, are controlled by, or are under common control with Superior and
may include certain officers and directors of Superior as well as principal
stockholders of Superior. Persons who are affiliates of Superior will be
permitted to sell their shares of Superior only pursuant to an effective
registration statement under the Securities Act or an exemption from the
registration requirements of the Securities Act, such exemptions afforded by
Section 4(1) or 4(2) of the Securities Act or Rule 144 thereunder.
Approximately two million (2,000,000) shares of Superior Common Stock
could be sold pursuant to Rule 144 under the Securities Act.
Dividends on Superior Common Stock
Superior does not intend to pay any dividends in the foreseeable
future and will follow a policy of retaining its earnings for use
in its operations. In addition, under its proposed loan agreement,
Superior will be prohibited from paying cash dividends without prior
approval of its lender banks.
Transfer Agents
The transfer agents for Superior Holdings, Inc. Common Stock are
American Securities Transfer, Inc., whose address is 1825 Lawrence Street,
Suite 444, Denver, Colorado 80202-1817 and whose telephone number is (303)
298-5370.
<PAGE> 41
Part II
ITEM 1. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
There has been no public market for Superior Common Stock. The Superior
Common Sock will be traded in the over-the-counter market in the near future,
however, there can be no assurance as to the price at which trading in
Superior Common Stock will occur.
With respect to financial and other information relating to Superior,
Mark T. Thatcher, P.C., whose address is 360 Thames Street, Newport,
Rhode Island 02840 will file annual and periodic reports
with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934. Copies of such reports may be
inspected by anyone without charge at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington D.C. 20549, and copies may be obtained from
the Commission at prescribed rates. In addition, Superior will
provide without charge, upon the request of any stockholder, a copy
of its Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997, to be filed with the Commission. Any such requests
should be directed to the Secretary of Superior Holdings, Inc., address is
360 Thames Street, Newport, Rhode Island 02840.
The Company has never paid dividends on its Common Stock and does not
anticipate that it will do so in the foreseeable future. The Company is
prohibited from paying dividends on its Common Stock without the consent of
the holders of at least two-thirds of the Company's Preferred Stock.
ITEM 2. LEGAL PROCEEDINGS
None
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
<PAGE> 42
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The Company has made the following sales of its Common Stock and Preferred
Stock since April 1996. None of the sales have involved the use of
underwriters.
<TABLE>
<CAPTION>
Amount of Total
Date of Sale Class of Securities Securities (Shares) Purchasers Consideration
- ----------------- ------------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C>
1. December 1996 Common 1,800,000 2 individuals services rendered
2. December 1996 Common 240,000 2 individuals $ 219,804
</TABLE>
Sales pursuant to items 1 and 2 above were made in reliance upon Section
4(2) of the Securities Act of 1933. The two individuals who purchased shares
included two persons who were officers and directors of the issuer in
connection with the issuer's organization. Sales pursuant to items 1 and 2
were in consideration of services rendered, which were valued by the Board of
Directors at $219,804 in the aggregate. Sales pursuant to items 1 and 2 were
also made in reliance upon Section 4(2) of the Securities Act of 1933.
Purchasers included two individuals, both of who were officers and directors
of the issuer.
The sales pursuant to items 1 and 2 above was made in reliance upon Section
4(2) of the Securities Act of 1933. Based upon representations made by
the purchaser of the stock, the Company believes that such purchaser has
sufficient knowledge and experience in financial and business matters to
evaluate the merits and risks of an investment in the Company. The purchaser
received a stock certificate legended in the manner described above.
<PAGE> 43
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Articles 7-109-101 through 7-109-109 of the Colorado Business
Corporation Act provides that any director or officer of a Colorado
corporation may be indemnified against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by him in
connection with or in defending any action, suit or proceeding in
which he is a party by reason of his position, so long as it shall
be determined that he conducted himself in good faith and that he
reasonably believed that his conduct was in the corporation's best
interest. If a director or officer is wholly successful, on the
merits or otherwise, in connection with such proceeding, such
indemnification is mandatory.
The Company's articles of incorporation and bylaws contain
provisions which provide, among other things, that the Company
shall indemnify certain persons, including officers and directors,
against judgments, fines and amounts paid in settlement actually
and reasonably incurred by such person in connection with any
action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interest of the Company, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was
unlawful. As to any action brought by or in the right of the
Company, such indemnification is limited to expenses (including
attorney's fees) actually and reasonably incurred in connection
with the defense or settlement of the case, and shall not be made,
absent court approval, if it was determined that such person was
liable for negligence or misconduct in the performance of his duty
to the Company.
<PAGE> 44
PART F/S
FINANCIAL STATEMENTS
The index to the Company's Financial Statements appears under Item 15 of
the Form 10-SB.
FINANCIAL STATEMENTS AND EXHIBITS
(a) The following financial statements of the Company
are filed as part of this report:
Page
Report of Michael D. Corrado,
Independent Certified Public Accountant F-1
Balance Sheet - October 31, 1997 F-2
Notes to Financial Statements F-3
Balance Sheet (Unaudited)- F-4
Six Months Ended April 30, 1998
Notes to Financial Statements F-5
Six Months Ended April 30, 1998
PART III
ITEM I. INDEX TO EXHIBITS
(b) Exhibits
3.1 Articles of Incorporation, as amended
3.2 Amended and Restated Bylaws
4.1 Agreements Defining Certain Rights of Shareholders
7 Not applicable
9 Not applicable
<PAGE> 45
10.1 Area Developer Agreement between the registrant and
Tito's Cantina, Inc.
11 Not applicable
14 Not applicable
16 Not applicable
21 Not applicable
23.1 Consent of Counsel, Mark T. Thatcher, P.C.
23.2 Consent of Michael D. Corrado, Certified Public Accountant
24 Not applicable
27 Financial Data Schedule
28 Not applicable
99 Not applicable
ITEM 2. DESCRIPTION OF EXHIBITS
See Item I above.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this amendment to registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
SUPERIOR HOLDINGS, INC.
Date May 11, 1998 By /s/ Mark T. Thatcher
_________________________
Mark T. Thatcher
Vice President and
General Counsel
<PAGE>
SUPERIOR HOLDINGS, INC.
BALANCE SHEET
OCTOBER 31, 1997
CONTENTS
Page
Independent auditor's report 1
Balance Sheet 2
Notes to balance sheet 3-4
<PAGE> F-1
Michael D. Corrado
Certified Public Accountant
Independent Auditor's Report
The Board of Directors
Superior Holdings, Inc.
Newport, RI
I have audited the accompanying balance sheet of Superior
Holdings, Inc. as of October 31, 1997. This balance sheet is
the responsibility of the Company's management. My respon-
sibility is to express an opinion on this balance sheet based
upon my audit.
I conducted my audit in accordance with generally accepted
auditing standards. Those standards require that I plan and
perform the audit to obtain reasonable assurance about
whether the balance sheet is free of material misstatement.
An audit of a balance sheet includes examining, on a test
basis, evidence supporting the amounts and disclosures in
that balance sheet. An audit of a balance sheet also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall balance sheet presentation. I believe
that my audit of the balance sheet provides a reasonable
basis for my opinion.
In my opinion, the balance sheet referred to above presents
fairly, in all material respects, the financial position of
Supeior Holdings, |Inc. as of October 31, 1997 in conformity
with generally accepted accounting principles.
/s/ Michael D. Corrado
December 16, 1997
(1)
2399 Pawtucket Avenue
E. Providence, RI 02914
(401) 431-4084
1317 South Main Street
Fall River, MA 02724
(508) 672-1295
<PAGE> F-2
SUPERIOR HOLDINGS, INC.
BALANCE SHEET
OCTOBER 31, 1997
ASSETS
Current assets:
Cash $ 80
Marketable Securities 2,960
Note receivable 200,000
203,040
Other assets:
Franchise rights 114,000
$ 317,040
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 610
Long-term debt:
Note payable, stockholder 114,000
Notes payable, affiliate 105,804
219,804
Stockholders equity:
Common stock, $5 par value
50,000,000 shares authorized,
2,080,000 issued and outstanding 30,000
Paid in capital 163,944
Accumulated deficit (97,318)
96,626
$ 317,040
See Independent Auditor's Report and Accompanying Notes
(2)
<PAGE> F-3
SUPERIOR HOLDINGS, INC.
NOTES TO BALANCE SHEET
OCTOBER, 31, 1997
1. Summary of Significant Accounting Policies:
Nature of Business:
Superior Holdings, Inc. was formed on December 22, 1994
under the laws of the State of Colorado. The
Corporation was formed primarily for the purpose of
acquiring and selling franchise rights in the food
industry.
Management Estimates:
The preparation of a balance sheet in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the
date of the balance sheet. Actual results could differ
from those estimates.
Franchise Rights:
Franchise rights have been capitalized at cost and will
be amortized on a straight-line basis over 15 years.
2. Marketable Securities:
Marketable securities are stated at cost and consist of
the following at October 31, 1997:
1400 shares of Acadia National
Health Systems, Inc.
$ 2,960
3. Note Receivable:
Note receivable at October 31, 1997 consists of the
following:
Note receivable from National
Quotes, Inc. (A publicly traded
corporation) dated April 17, 1995
which, together with accrued interest
at 10% per year, was due on April 17,
1997. Although the Note is now past
due, it is management's beleif that
the Note is collectable.
$ 200,000
(3)
<PAGE>
SUPERIOR HOLDINGS, INC.
NOTES TO BALANCE SHEET (CONTINUED)
OCTOBER 31, 1997
4. Long-Term Debt:
Long-term debt at October 31, 1997 consists of a note
payable to a stockholder owning 48% of the outstanding
stock and notes payable to a corporation affiliated by
common ownership.
Note payable, stockholder dated
January 7, 1997 which, together
with accfued interest of 7.5%,
is due on January 7, 1999. The
Note is secured by the Franchise
Rights. $ 114,000
Notes payable to an affiliated
corporation, Zenith Holdings, Ltd.,
With varying maturities and interest
charged at 8%. The notes are
unsecured. None of the notes are
scheduled to mature within the next
twelve months. $ 105,804
(4)
<PAGE> F-4
SUPERIOR HOLDINGS, INC.
BALANCE SHEET
(UNAUDITED)
APRIL 30, 1998
ASSETS
Current assets:
Cash $ 80
Marketable Securities 2,960
Note receivable 200,000
203,040
Other assets:
Franchise rights 114,000
$ 317,040
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 610
Long-term debt:
Note payable, stockholder 114,000
Notes payable, affiliate 105,804
219,804
Stockholders equity:
Common stock, $5 par value
50,000,000 shares authorized,
2,080,000 issued and outstanding 30,000
Paid in capital 163,944
Accumulated deficit (97,318)
96,626
$ 317,040
(2)
<PAGE> F-5
SUPERIOR HOLDINGS, INC.
NOTES TO BALANCE SHEET
(UNAUDITED)
APRIL 30, 1998
1. Summary of Significant Accounting Policies:
Nature of Business:
Superior Holdings, Inc. was formed on December 22, 1994
under the laws of the State of Colorado. The
Corporation was formed primarily for the purpose of
acquiring and selling franchise rights in the food
industry.
Management Estimates:
The preparation of a balance sheet in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the
date of the balance sheet. Actual results could differ
from those estimates.
Franchise Rights:
Franchise rights have been capitalized at cost and will
be amortized on a straight-line basis over 15 years.
2. Marketable Securities:
Marketable securities are stated at cost and consist of
the following at April 30, 1998:
1400 shares of Acadia National
Health Systems, Inc.
$ 2,960
3. Note Receivable:
Note receivable at April 30, 1998 consists of the
following:
Note receivable from National
Quotes, Inc. (A publicly traded
corporation) dated April 17, 1995
which, together with accrued interest
at 10% per year, was due on April 17,
1997. Although the Note is now past
due, it is management's beleif that
the Note is collectable.
$ 200,000
(3)
<PAGE>
SUPERIOR HOLDINGS, INC.
NOTES TO BALANCE SHEET (CONTINUED)
(UNAUDITED)
APRIL 30, 1998
4. Long-Term Debt:
Long-term debt at April 30, 1998 consists of a note
payable to a stockholder owning 48% of the outstanding
stock and notes payable to a corporation affiliated by
common ownership.
Note payable, stockholder dated
January 7, 1997 which, together
with accfued interest of 7.5%,
is due on January 7, 1999. The
Note is secured by the Franchise
Rights. $ 114,000
Notes payable to an affiliated
corporation, Zenith Holdings, Ltd.,
With varying maturities and interest
charged at 8%. The notes are
unsecured. None of the notes are
scheduled to mature within the next
twelve months. $ 105,804
(4)
ARTICLES OF INCORPORATION
OF
SUPERIOR HOLDINGS, INC.
(AMENDED AND RESTATED AS OF APRIL 24, 1998)
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned incorporator, being a natural person of the age of
eighteen (18) years or more, and desiring to form a corporation under the laws
of the State of Colorado, does hereby sign, verify and deliver in duplicate to
the Secretary of State of the State of Colorado these Articles of
Incorporation.
ARTICLE I
NAME
The name of the corporation shall be SUPERIOR HOLDINGS, INC.
The principal office and address is 460 Thames Street, Newport, Rhode
Island 02840.
ARTICLE II
PERIOD OF DURATION
This corporation shall exist perpetually unless dissolved according to
law.
ARTICLE III
PURPOSE
To engage in the business of hospitality, restaurant and services
franchising; and to transact any lawful business or businesses for which
corporations may be incorporated pursuant to the Colorado Business
Corporation Act.
ARTICLE IV
POWERS
In furtherance of the foregoing purposes the corporation shall have and
may exercise all of the rights, powers and privileges now or hereafter
conferred upon corporations organized under the Colorado Business Corporation
Act, as amended, or by law. In addition, it may do everything necessary,
suitable or proper for the accomplishment of any corporate purpose.
ARTICLE V
CAPITAL
The total number of shares of the capital stock which the Corporation has
authority to issue is one hundred million (100,000,000) shares, divided into
fifty million (50,000,000) shares of common stock with no par value per share
(the "Common Stock"), and fifty million (50,000,000) shares of Series A
Convertible Preferred Stock with a par value of $100 per share (hereinafter
sometimes referred to as the "Series A Convertible Preferred Stock" or the
"Preferred Stock").
The aggregate number of common shares which this corporation shall have
the authority to issue is fifty million (50,000,000), each without par value
which shares shall be designated common stock. No share shall be issued
without consideration being exchanged, and it shall thereafter be
nonassessable. The Board of Directors may determine by a majority vote if
gifts of shares will be allowed under certain circumstances.
Shares of the corporation not having a par value shall be issued for such
consideration expressed in dollars as may be fixed from time to time by the
vote of the director(s).
The following is a description of each class of stock of the Corporation
with the preferences, conversion and other rights, restrictions, voting
powers, limitations as to distributions, qualifications, and terms and
conditions of redemption of each class:
FIRST: In the event of any voluntary or involuntary liquidation,
dissolution, or winding-up of the Corporation, the holders of any Preferred
Stock then outstanding shall be paid out of the assets of the Corporation
available for distribution to its stockholders an amount equal to One Dollar
($1.00) per share plus an amount equal to all unpaid declared distributions
thereon, without interest, and no more, before any amount shall be paid or any
assets of the Corporation shall be distributed among the holders of the Common
Stock and, if the assets of the Corporation available for distribution to its
stockholders shall be insufficient to permit the payment in full to the
holders of the Preferred Stock, as aforesaid, then the entire assets of the
Corporation available for distribution to its stockholders shall be
distributed ratably among the holders of the Preferred Stock; then and
thereafter, the remaining assets of the Corporation available for distribution
to its stockholders shall be distributed among and paid to the holders of the
Preferred Stock and the Common Stock, share and share alike and without any
distinction as to class, in proportion to their respective stockholdings.
A merger of the Corporation with or into any other corporation, a share
exchange involving the Corporation, or a sale, lease, exchange, or transfer of
all or any part of the assets of the Corporation which shall not in fact
result in the liquidation of the Corporation and the distribution of its
assets to its stockholders shall not be deemed to be a voluntary or
involuntary liquidation, dissolution or winding-up of the Corporation within
the meaning of this Article SIXTH, paragraph 1.
SECOND: Except as hereinabove provided in paragraph 1 of this Article
SIXTH, the Preferred Stock and the Common Stock of the Corporation shall be
identical in all respects and for all purposes and the holders of the
Preferred Stock and the holders of the Common Stock voting together and
without distinction as to class shall be entitled to one vote per share in all
proceedings in which actions shall be taken by the stockholders of the
Corporation.
THIRD: The following provisions are hereby adopted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the
directors and stockholders:
(1) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of its stock of any class,
whether now or hereafter authorized, or securities convertible into shares of
its stock of any class or classes, whether now or hereafter authorized.
(2) The Board of Directors of the Corporation may classify or reclassify
any unissued stock by setting or changing in any one or more respects, from
time to time before issuance of such stock, the preferences, conversion or
other rights, voting powers, restrictions, limitations as to distributions,
qualifications, and terms or conditions of redemption of such stock.
(3) The Board of Directors shall have power, if authorized by the Bylaws,
to designate by resolution or resolutions adopted by a majority of the whole
Board of Directors, one or more committees, each committee to consist of two
or more of the directors of the Corporation, which, to the extent provided in
said resolutions or in the Bylaws of the Corporation and permitted by the
Colorado Business Corporation Act, shall have and may exercise any or all of
the powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of the
Corporation to be affixed to all instruments and documents which may require
it.
(4) If the Bylaws so provide, the Board of Directors of the Corporation
shall have power to hold its meetings, to have an office or offices and,
subject to the provisions of the Colorado Business Corporation Act, to keep
the books of the Corporation, outside of said State at such place or places
as may from time to time be designated by it.
(5) The Board of Directors shall have power to borrow or raise money,
from time to time and without limit, and upon any terms, for any corporate
purposes; and, subject to the Colorado Business Corporation Act, to authorize
the creation, issue, assumption or guaranty of bonds, notes or other evidences
of indebtedness for moneys so borrowed, to include therein such provisions as
to redeemability, convertibility or otherwise, as the Board of Directors, in
its sole discretion, may determine and to secure the payment of principal,
interest or sinking fund in respect thereof by mortgage upon, or the pledge
of, or the conveyance or assignment in trust of, the whole or any part of the
properties, assets and goodwill of the Corporation then owned or thereafter
acquired.
The enumeration and definition of a particular power of the Board of
Directors included in the foregoing shall in no way be limited or restricted
by reference to or inference from the terms of any other clause of this or any
other article of these Articles of Incorporation, or construed as or deemed by
inference or otherwise in any manner to exclude or limit any powers conferred
upon the Board of Directors under the laws of the State of Colorado now or
hereafter in force.
FOURTH: Notwithstanding any provision of law to the contrary, the
affirmative vote of a majority of all the votes entitled to be cast on the
matter shall be sufficient, valid and effective, after due authorization,
approval or advice of such action by the Board of Directors, as required by
law, to approve and authorize the following acts of the Corporation:
(i) the amendment of these Articles of Incorporation;
(ii) the merger of the Corporation into another corporation or the merger
of one or more other corporations into the Corporation;
(iii) the sale, lease, exchange or other transfer of all, or
substantially all, of the property and assets of the Corporation, including
its goodwill and franchises;
(iv) the participation by the Corporation in a share exchange (as defined
in the Colorado Business Corporation Act) as the corporation the stock of
which is to be acquired; and
(v) the voluntary or involuntary liquidation, dissolution or winding-up
of or the revocation of any such proceedings relating to the Corporation.
ARTICLE VI
AUTHORIZATION OF SERIES A CONVERTIBLE PREFERRED STOCK
The total number of shares of the capital stock which the Corporation has
authority to issue is one hundred million (100,000,000) shares, divided into
fifty million (50,000,000) shares of common stock with no par value per share
(the "Common Stock"), and fifty million (50,000,000) shares of Series A
Convertible Preferred Stock with a par value of $100 per share (hereinafter
sometimes referred to as the "Series A Convertible Preferred Stock" or the
"Preferred Stock").
A description of the "Series A Convertible Preferred Stock", including
the preferences, conversion and other rights, voting powers, restrictions,
limitations as to distributions, qualifications, and terms and conditions for
redemption, all as set by the Board of Directors of the Corporation, is as
follows:
1. Designation and Initial Number. The class of shares of Preferred Stock
hereby classified shall be designated the "Series A Convertible Preferred
Stock." The initial number of authorized shares of the Preferred Stock shall
be fifty million (50,000,000).
2. Distributions. Commencing on January 1, 1999, the holders of the
Preferred Stock shall be entitled to receive, out of funds at the time legally
available for payment of distributions in the State of Colorado, a
non-cumulative distribution at the rate of $1.00 per share per annum, payable
semi-annually in equal installments on the first days of January and July in
each year, if, as and when determined by the Board of Directors, before any
distribution shall be set apart or paid on any other capital stock for such
year.
3. Redemption. The Corporation, at the option of the Board of Directors,
may redeem the whole or any part of the Preferred Stock at any time
outstanding, at any time or from time to time after January 1, 1999, provided
that the Corporation, at any such time, shall have consummated a sale of its
securities pursuant to an effective registration statement (a "Public
Offering") filed with the Securities and Exchange Commission (the "SEC"), upon
at least 30 days' prior written notice to the holders of record of the
Preferred Stock to be redeemed, by paying a redemption price per share equal
to 150% of the par value thereof, plus all accrued and unpaid distributions
declared thereon, at the date fixed for redemption, without interest, in cash,
for each share of Preferred Stock so redeemed. The Board of Directors shall
have full power and authority, subject to the limitations and provisions
herein contained, to prescribe the manner in which and the terms and
conditions upon which the Preferred Stock shall be redeemed at any time and
from time to time. The notice of redemption to each stockholder whose shares
of Preferred Stock are to be redeemed shall specify the number of shares of
Preferred Stock of such stockholder to be redeemed, the date fixed for
redemption and the redemption price at which the shares of Preferred Stock are
to be redeemed, and shall specify where payment of the redemption price is to
be made upon surrender of such shares, shall state the conversion rate then in
effect, and that conversion rights of such shares shall terminate at the
closing of business on the date fixed for redemption. None of the Preferred
Stock acquired by the Corporation by redemption or otherwise shall be reissued
or disposed of but shall, from time to time, be retired in the manner
provided by law.
4. Liquidation or Dissolution. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the affairs of the
Corporation, the holders of the issued and outstanding Preferred Stock shall
be entitled to receive for each share of Preferred Stock, before any
distribution of the assets of the Corporation shall be made to the holders of
any other capital stock, a dollar amount equal to the par value thereof plus
all accrued and unpaid distributions declared thereon, without interest. After
such payment shall have been made in full to the holders of the issued and
outstanding Preferred Stock, or funds necessary for such payment shall have
been set aside in trust for the account of the holders of the issued and
outstanding Preferred Stock so as to be and continue to be available therefor,
then, before any further distribution of the assets of the Corporation shall
be made, a dollar amount equal to that already distributed to the holders of
the Preferred Stock shall be distributed pro-rata to the holders of the other
issued and outstanding capital stock of the Corporation, subject to the rights
of any other class of capital stock set forth in the Articles of Incorporation
of the Corporation or Amendments to the Articles of Incorporation to State
Terms of Series Shares filed by the Corporation. After such payment shall have
been made in full to the holders of such other issued and outstanding capital
stock, or funds necessary for such payment shall have been set aside in trust
for the account of the holders of such other issued and outstanding capital
stock so as to be and continue to be available therefor, the holders of the
issued and outstanding Preferred Stock shall be entitled to participate with
the holders of all other classes of issued and outstanding capital stock in
the final distribution of the remaining assets of the Corporation, and,
subject to any rights of any other class of capital stock set forth in the
Articles of Incorporation of the Corporation or any Amendments to the Articles
of Incorporation to State Terms of Series Shares filed by the Corporation, the
remaining assets of the Corporation shall be divided and distributed ratably
among the holders of both the Preferred Stock and the other capital stock then
issued and outstanding according to the proportion by which their respective
record ownership of shares of the Preferred Stock and such capital stock bears
to the total number of shares of the Preferred Stock and such capital stock
then issued and outstanding. If, upon such liquidation, dissolution, or
winding up, the assets of the Corporation distributable, as aforesaid, among
the holders of the Preferred Stock shall be insufficient to permit the payment
to them of said amount, the entire assets shall be distributed ratably among
the holders of the Preferred Stock. A consolidation or merger of the
Corporation, a share exchange, a sale, lease, exchange or transfer of all or
substantially all of its assets as an entirety, or any purchase or redemption
of stock of the Corporation of any class, shall not be regarded as a
"liquidation, dissolution, or winding up of the affairs of the Corporation"
within the meaning of this paragraph 4.
5. Conversion Privilege. Preferred Stock shall be convertible into Common
Stock as hereinafter provided and, when so converted, shall be canceled and
retired and shall not be reissued as such:
(A) Any holder of the Preferred Stock may at any time or from time
to time convert such stock into the Common Stock of the Corporation, on
presentation and surrender to the Corporation, of the certificates of the
Preferred Stock to be so converted.
(B) Each holder of Preferred Stock shall have the right to convert
such Preferred Stock on and subject to the following terms and conditions:
(i) The Preferred Stock shall be converted into Common Stock at
the conversion rate, determined as hereinafter provided, in effect at the time
of conversion. Unless such conversion rate shall be adjusted as hereinafter
provided, the conversion rate shall be one share of Common Stock for each
share of Preferred Stock so converted.
(ii) In order to convert Preferred Stock into Common Stock, the
holder thereof shall on any business day surrender at the executive offices of
the Company at 460 Main Street, Lewiston, Maine 04240 the certificate or
certificates representing such shares, duly endorsed to the Corporation or in
blank, and give written notice to the Corporation at said office of the number
of said shares which such holder elects to convert. Preferred Stock shall be
deemed to have been converted immediately prior to the close of business on
the day of such surrender for conversion, and the person or persons entitled
to receive the Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such Common Stock at such
time. As promptly as practicable on or after the date of any conversion, the
Corporation shall issue and deliver a certificate or certificates representing
the number of shares of Common Stock issuable upon such conversion, together
with cash in lieu of any fraction of a share, as provided in subparagraph (H)
of this paragraph 5, to the person or persons entitled to receive same. In
case of the conversion of only a part of the shares of any holder of Preferred
Stock, the Corporation shall also issue and deliver to such holder a new
certificate of Preferred Stock representing the number of shares of such
Preferred Stock not converted by such holder.
(C) The conversion rate as hereinabove provided shall be subject to
adjustment as follows:
(i) In case the Corporation shall (a) pay a distribution in
shares of its capital stock, (b) subdivide its outstanding shares of Common
Stock into a greater number of shares, (c) combine its outstanding shares of
Common Stock into a smaller number of shares, or (d) issue by reclassification
of its shares of Common Stock any shares of its capital stock, the conversion
rate in effect immediately prior thereto shall be adjusted so that the holder
of a share of Preferred Stock surrendered for conversion after the record date
fixing stockholders to be affected by such event shall be entitled to receive,
upon conversion, the number of shares of Common Stock which such holder would
have owned or have been entitled to receive after the happening of such event
had such share of Preferred Stock been converted immediately prior to the
record date in the case of such dividend or the effective date in the case of
any such subdivision, combination or reclassification. An adjustment made
pursuant to this subparagraph 5(C)(i) shall be made whenever any of such
events shall happen, but shall become effective retroactively after such
record date or such effective date, as the case may be, as to shares of
Preferred Stock converted between such record date or effective date and the
date of happening of any such event.
(ii) In case the Corporation shall issue rights or warrants to
all holders of its Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share, which, when added to the amount
of consideration received or receivable by the Corporation for such right or
warrant, is less than the current market price (as hereinafter defined) per
share of Common Stock at the record date mentioned below, the conversion rate
shall be adjusted so that thereafter, until further adjusted, each share of
Preferred Stock shall be convertible into that number of shares of Common
Stock determined by multiplying the number of shares of Common Stock into
which such share of Preferred Stock was theretofore convertible by a fraction,
the numerator of which shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of additional shares of Common Stock issuable upon the exercise of such rights
or warrants, and the denominator of which shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights or warrants
plus the number of shares which an amount equal to the sum of (a) the
aggregate exercise price of the total number of shares of Common Stock
issuable upon the exercise of such rights or warrants, plus (b) the aggregate
amount of consideration, if any, received, or receivable by the Corporation
for any such rights or warrants, would purchase at such current market price.
Such adjustment shall be made whenever such rights or warrants are issued, but
shall also be effective retroactively as to shares of Preferred Stock
converted between the record date for the determination of stockholders
entitled to receive such rights or warrants and the date such rights or
warrants are exercised.
(iii) In case the Corporation shall distribute to all holders
of its Common Stock any one or more of the following: (a) evidence of its
indebtedness, (b) assets (excluding cash distributions, distributions made out
of current or retained earnings and distributions of the stock of any
subsidiary), or (c) rights or warrants to subscribe for or purchase securities
issued by, or property of, the Corporation (excluding those referred to in
subparagraph 5(C)(ii) above), then in each such case the conversion rate shall
be adjusted as provided below so that thereafter, until further adjusted, the
number of shares of Common Stock into which each share of Preferred Stock
shall be convertible shall be determined by multiplying the number of shares
of Common Stock into which such share of Preferred Stock was theretofore
convertible by a fraction, the numerator of which shall be the current market
price per share of Common Stock on the date of such distribution, and the
denominator of which shall be such current market price per share of the
Common Stock, less the then fair market value (as determined by the Board of
Directors of the Corporation, whose determination shall be conclusive) of the
portion of the assets or evidence of indebtedness so distributed or of such
rights or warrants applicable to one share of the Common Stock. Such
adjustment shall be made whenever any such distribution is made, but shall
also be effective retroactively as to shares of Preferred Stock converted
between the record date for the determination of stockholders entitled to
receive such distribution and the date such distribution is made.
(iv) For the purpose of any computation under subparagraphs
5(C)(ii) and (iii) above, the current market price per share of Common Stock
at any date shall be (a) if the Common Stock is listed on any national
securities exchange, the average of the daily closing prices for the 15
consecutive business days commencing 20 business days before the day in
question (the "Trading Period"); (b) if the Common Stock is not listed on any
national securities exchange but is quoted on the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ"), the average of
the high and low bids as reported on NASDAQ for the Trading Period; and (c) if
the Common Stock is neither listed on any national securities exchange nor
quoted on NASDAQ, the higher of (x) the conversion price then in effect, or
(y) the tangible book value per share as of the end of the Corporation's
immediately preceding fiscal year.
(v) No adjustment in the conversion rate shall be required
unless such adjustment would require an increase or decrease of at least 1% in
such rate; provided, however, that any adjustments which by reason of this
subparagraph 5(C)(v) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
subparagraph 5(C) shall be made to the nearest one-hundredth of a share.
(D) No adjustment of the conversion rate shall be made in any of the
following cases:
(i) upon the grant or exercise of stock options hereafter
granted, or under any employee stock option plan now or hereafter authorized,
to the extent that the aggregate of the number of shares which may be
purchased under such options and the number of shares issued under such
employee stock purchase plan is less than or equal to ten percent (10%) of the
number of shares of Common Stock outstanding on January 1 of the year of the
grant or exercise;
(ii) shares of Common Stock issued upon the conversion of
Preferred Stock;
(iii) shares issued in connection with the acquisition by the
Corporation or by any subsidiary of the Corporation of 80% or more of the
assets of another corporation, and shares issued in connection with the
acquisition by the Corporation or by any subsidiary of the Corporation of 80%
or more of the voting shares of another corporation (including shares issued
in connection with such acquisition of voting shares of such other corporation
subsequent to the acquisition of an aggregate of 80% of such voting shares),
shares issued in a merger of the Corporation or a subsidiary of the
Corporation with another corporation in which the Corporation or the
Corporation's subsidiary is the surviving corporation, and shares issued upon
the conversion of other securities issued in connection with any such
acquisition or in any such merger;
(iv) shares issued by way of dividend or other distribution on
Common Stock excluded from the calculation of the adjustment under this
subparagraph 5(D) or on Common Stock resulting from any subdivision or
combination of Common Stock so excluded; or
(v) shares issued pursuant to all stock options and warrants
outstanding on the date of the filing of these Articles.
(E) Whenever the conversion rate is adjusted as herein provided, the
Corporation shall prepare a certificate signed by the Treasurer of the
Corporation setting forth the adjusted conversion rate and showing in
reasonable detail the facts upon which such adjustment is based. As promptly
as practicable, the Corporation shall cause a copy of the certificate referred
to in this subparagraph 5(E) to be mailed to each holder of record of issued
and outstanding Preferred Stock at the address of such holder appearing on
the Corporation's books.
(F) The Corporation shall pay all taxes that may be payable in
respect of the issue or delivery of Common Stock on conversion of Preferred
Stock pursuant hereto, but shall not pay any tax which may be payable with
respect to income or gains of the holder of any Preferred Stock or Common
Stock or any tax which may be payable in respect of any transfer involved in
the issue and delivery of the Common Stock in a name other than that in which
the Preferred Stock so converted was registered, and no such issue or delivery
shall be made unless and until the person requesting such issue has paid to
the Corporation the amount of any such tax, or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(G) Upon conversion of any shares of Preferred Stock, the holders of
the shares of Preferred Stock so converted shall not be entitled to receive
any distributions declared with respect to such shares of Preferred Stock
unless such distributions shall have been declared by the Board of Directors
and the record date for such distributions shall have been on or before the
date such shares shall have been converted. No payment or adjustment shall be
made on account of distributions declared and payable to holders of Common
Stock of record on a date prior to the date of conversion.
(H) No fractional shares or scrip representing fractional shares
shall be issued upon the conversion of any shares of Preferred Stock. If more
than one share of Preferred Stock shall be surrendered for conversion at one
time by the same holder, the number of full shares issuable upon conversion
thereof shall be computed on the basis of the aggregate number of such shares
so surrendered. If the conversion of any share of Preferred Stock results in a
fraction, an amount equal to such fraction multiplied by the current market
price (determined as provided in subparagraph 5(C)(iv) above) of the Common
Stock on the day of conversion shall be paid to such holder in cash by the
Corporation.
(I) The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of its authorized Common Stock, for the
purpose of effecting the conversion of the issued and outstanding Preferred
Stock, the full number of shares of Common Stock then deliverable in the
event and upon the conversion of all of the Preferred Stock then issued and
outstanding.
6. Voting Rights. Except as otherwise provided in this paragraph 6, each
share of Preferred Stock is entitled to one vote, voting together with the
holders of shares of Common Stock and not as a class, on each matter submitted
to a vote at a meeting of stockholders of the Corporation. In the event that
at any time two consecutive semi-annual distributions payable on the Preferred
Stock shall be in default (a "Two Dividend Default"), then immediately upon
the happening of a Two Dividend Default and until the Two Dividend Default and
all defaults in the payment of semi-annual distributions subsequent to the Two
Dividend Default shall be cured, the holders of Preferred Stock shall have the
right, voting separately as a class, to elect one-third of the Directors of
the Corporation. In the event that at any time four consecutive semi-annual
distributions payable on the Preferred Stock shall be in default (a "Four
Dividend Default"), then immediately upon the happening of such Four Dividend
Default and until such Four Dividend Default and all defaults in the payment
of semi-annual distributions subsequent to the Four Dividend Default shall be
cured, the holders of Preferred Stock shall have the right, voting separately
as a class, to elect a majority of the Directors of the Corporation. The
foregoing voting rights are hereinafter collectively referred to as the
"Special Voting Rights." The Special Voting Rights shall be exercised only at
annual meetings of the stockholders of the Corporation, and only if the
holders of a majority of the outstanding shares of Preferred Stock entitled to
such Special Voting Rights are present in person or by proxy. Notwithstanding
the foregoing provisions of this paragraph 6, upon payment in full of all
defaults in the payment of semi-annual distributions subsequent to a Four
Dividend Default and of the distribution which resulted in the Four Dividend
Default, so that no more than three consecutive semi-annual distributions
remain in default, the Special Voting Rights of the holders of Preferred Stock
shall be reduced so that they shall have the right, voting separately as a
class, to elect one-third of the Directors of the Corporation. Notwithstanding
the foregoing provisions of this Paragraph 6, upon payment in full of (i) all
defaults in the payment of semi-annual distributions subsequent to a Two
Dividend Default and of the distribution which resulted in the Two Dividend
Default, or (ii) upon payment in full of all semi-annual distributions
subsequent to a Four Dividend Default and three of the distributions which
resulted in a Four Dividend Default, so that, in each such case, no more than
one semi-annual distribution remains in default, the Special Voting Rights
shall terminate, and the voting power in the election of Directors shall again
be vested equally in the holders of the Preferred Stock and the Common Stock,
who shall each be entitled to one vote per share. Each Director elected by the
holders of shares of Preferred Stock as a result of the Special Voting Rights
set forth above shall serve only until the next annual meeting of
stockholders, or until the date the Special Voting Rights shall have
terminated as provided in this paragraph 6, whichever event first occurs.
7. Registration Rights.
(A) "Piggy-Back" Registration Rights:
(i) If, at any time and from time to time after the
Corporation's first Public Offering, the Corporation proposes to register any
of its securities on Forms S-1, S-2, S-3, SB-1 or SB-2, or any successor
forms, under the Securities Act of 1933 (the "Act") and applicable state
securities laws (the "State Acts"), the Corporation shall give prompt written
notice to each holder of Preferred Stock (or Common Stock into which it has
been converted) of its intention to do so, and, upon the written request of
any such stockholder made within 30 days after the receipt of any such notice,
which written request shall specify the number of shares such stockholder
desires to be registered, the Corporation shall use its reasonable efforts to
cause all such shares of such stockholder to be registered under the Act and
State Acts to permit the sale of such shares. Notwithstanding anything
contained herein to the contrary, the Corporation shall have the right to
discontinue any registration of such shares of such stockholder at any time
prior to the effective date of such registration if the registration of other
securities giving rise to such registration is discontinued.
(ii) If any stockholder shall request inclusion of any shares
held by such stockholder in the registration of other securities of the
Corporation and such proposed registration by the Corporation is, in whole or
in part, an underwritten Public Offering, and if the managing underwriter
determines and advises the Corporation in writing that inclusion in such
registration of all proposed securities (including securities being offered by
or on behalf of the Corporation and securities covered by requests for
registration) would adversely affect the marketability of the offering of the
securities proposed to be registered by the Corporation, then such stockholder
shall be entitled to participate pro-rata with the other stockholders having
similar incidental registration rights with respect to such registration to
the extent the managing underwriter determines that such shares may be
included without such adverse effect.
(iii) The rights of such stockholders to have their shares
included in such registration shall expire on the first to occur of January 1,
2010, or that date which is 10 years after the Corporation's first Public
Offering.
(B) Demand Registration Rights: At any time after the Corporation's
first Public Offering of its stock, the Corporation shall, upon receipt of a
written request from the holders of at least 25% of the aggregate issued and
outstanding Preferred Stock and the Common Stock into which it has been
converted, prepare and file under the Act a registration statement in respect
of such shares. In the event that not all of such shares have been registered
as herein set forth, the Corporation shall, upon receipt of a written request
from the holders of at least 25% of the aggregate remaining unregistered
Preferred Stock and the Common Stock into which it has been converted, prepare
and file under the Act no more than one additional registration statement to
register the remaining balance of the shares not so registered.
(C) Expenses: The Corporation shall pay all expenses incident to its
performance of or compliance with the provisions of subparagraphs 7(A) and
7(B) hereof, including, without limitation, all registration and filing fees,
fees and expenses of compliance with the Act and State Acts, printing
expenses, messenger and delivery expenses, fees and disbursements of counsel
for the Corporation (but not the legal fees of any such stockholder) and all
independent public accountants and other persons retained by the Corporation,
and any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities (excluding underwriting commissions and discounts).
(D) Obligations of the Corporation: If and whenever the Corporation
is required to use its reasonable efforts to effect or cause the registration
of any shares under the Act as provided in this paragraph 7, the Corporation
shall, as expeditiously as possible:
(i) prepare and file with the SEC a registration statement with
respect to such shares and use its reasonable efforts to cause such
registration statement to become effective;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and such prospectus current for a period not in excess of nine
months as may be necessary in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement;
(iii) furnish to each seller of such shares such number of
copies of such registration statement and each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of the
prospectus included in such registration statement (including each preliminary
prospectus), in conformity with the requirements of the Act, and such other
documents as such seller may reasonably request in order to facilitate the
disposition of the shares owned by such seller;
(iv) use its reasonable efforts to register or qualify such
shares covered by such registration statement under such State Acts as each
seller reasonably requests, and do any and all other acts and things which may
be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the shares owned by such seller, except
that the Corporation shall not for any such purpose be required to qualify to
do business as a foreign corporation in any jurisdiction wherein it is not so
qualified, to subject itself to taxation in any such jurisdiction, or to
consent to general service of process in any such jurisdiction; and
(v) notify each seller of any such securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Act or upon the happening of any event as a
result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and at the request of any such seller prepare and furnish to such
seller a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing.
(E) Indemnification and Notification:
(i) The Corporation shall indemnify and hold harmless each
holder of any shares included in the Corporation's registration statement
pursuant to this paragraph 7, and each person, if any, who controls such
holder within the meaning of Section 15 of the Act, from and against any and
all losses, claims, damages, expenses and liabilities (including reasonable
attorneys' fees) caused by any untrue statement of a material fact contained
in any such registration statement, or contained in a prospectus furnished
thereunder, or in any amendment or supplement thereto or caused by any
omission to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading (provided, however, that the foregoing
indemnification and agreement to hold harmless shall not apply insofar as such
losses, claims, damages, expenses, and liabilities are caused by any such
untrue statement or omission is based upon information furnished in writing to
the Corporation by any such holder expressly for use in any registration
statement or prospectus).
(ii) Promptly after receipt by any holder of any shares
included in the Corporation's registration statement pursuant to this
paragraph 7 of notice of the commencement of any action, said holder shall, if
a claim in respect thereof is to be made against the Corporation under this
paragraph 7, notify the Corporation in writing of the commencement thereof,
but the omission so to notify the Corporation shall not relieve it from any
liability which it may have to them under this paragraph 7. In case any such
action is brought against any holder of any shares registered pursuant to this
paragraph 7 and the Corporation is notified of the commencement thereof as
provided herein, the Corporation shall be entitled to participate in, and, to
the extent that it may wish, to assume the defense thereof, with counsel
reasonably satisfactory to such holder, and after notice from the Corporation
to such holder of the Corporation's election so to assume the defense thereof,
the Corporation shall not be liable under this paragraph 7 for any legal or
other expense subsequently incurred by such holder in connection with the
defense thereof other than reasonable costs of investigation.
(iii) Each holder of any shares registered pursuant to this
paragraph 7 agrees to cooperate fully with the Corporation in effecting
registration and qualification of the Preferred Stock (or the Common Stock
into which it has been converted) and of such distribution, and shall
indemnify and hold harmless the Corporation and each person who may control
the Corporation within the meaning of Section 15 of the Act, each director of
the Corporation, and each officer who signed any registration statement from
and against any and all losses, claims, damages, expenses, and liabilities
(including reasonable attorneys' fees) caused by any untrue statement of a
material fact contained in any such registration statement, or contained in a
prospectus furnished thereunder, or any amendment or supplement thereto, or
caused by any omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, to the extent that
such untrue statement or omission was made in reliance upon information
furnished to the Corporation by any such holder for inclusion therein.
8. Changes In Terms of Preferred Stock. The terms of the Preferred Stock
may not be amended, altered or repealed, and no class of capital stock or
securities convertible into capital stock shall be authorized which has
superior rights to the Preferred Stock as to distributions, liquidation or
vote, without the consent of the holders of at least two-thirds of the
outstanding shares of Preferred Stock.
9. No Implied Limitations. Except as otherwise provided by express
provisions of these Articles of Incorporation, nothing herein shall limit, by
inference or otherwise, the discretionary right of the Board of Directors to
classify and reclassify and issue any shares of Preferred Stock and to fix or
alter all terms thereof to the full extent provided in the Articles of
Incorporation of the Corporation.
10. General Provisions. In addition to the above provisions with respect
to the Preferred Stock, such Preferred Stock shall be subject to, and entitled
to the benefits Of, the provisions set forth in the Corporation's Articles of
Incorporation with respect to Preferred Stock generally.
11. Notices. All notices required or permitted to be given by the
Corporation with respect to the Preferred Stock shall be in writing, and if
delivered by first class United States mail, postage prepaid, to the holders
of the Preferred Stock at their last addresses as they shall appear upon the
books of the Corporation, shall be conclusively presumed to have been duly
given, whether or not the stockholder actually receives such notice; provided,
however, that failure to duly give such notice by mail, or any defect in such
notice, to the holders of any stock designated for redemption, shall not
affect the validity of the proceedings for the redemption of any other shares
of Preferred Stock.
ARTICLE VII
"SHARK REPELLANT" PROVISIONS DILUTING THE VOTING POWER OF BENEFICIAL OWNERS OF
MORE THAN 10 PERCENT OF OUTSTANDING SHARES
The total number of shares of all classes of common stock which the
Corporation has authority to issue is 50,000,000 shares, consisting of forty
million (40,000,000) shares of common stock ("Common Stock") and ten million
(10,000,000) shares of common stock nonvoting ("Common Stock Nonvoting").
The following is a description of each class of stock of the Corporation,
including the preferences, conversion and other rights, voting powers,
qualifications, limitations as to distributions, restrictions and terms and
conditions of redemption, in respect to each class:
(a) The Common Stock shall have exclusive voting rights and powers except
as set forth in Subparagraph (c) of this Article; and subject, however, to the
provisions set forth in Subparagraph (b) of this Article.
(b)(1) From and after the date any person first becomes a Substantial
Stockholder (as defined in clause (2)(H) of this Subparagraph) until such time
as such person shall cease to be a Substantial Stockholder, the shares of
Common Stock beneficially owned by the Substantial Stockholder shall have
limited voting rights on any matter requiring their vote or consent. The
voting rights shall be limited as follows:
(A) The Substantial Stockholder (or the record owner(s)
thereof) shall be entitled to one vote for each share beneficially owned by
the Substantial Stockholder not in excess of 20% of the then issued and
outstanding shares of Common Stock.
(B) For all shares of Common Stock beneficially owned by the
Substantial Stockholder in excess of 20% of the then issued and outstanding
shares of Common Stock, the Substantial Stockholder (or the record owner(s)
thereof) shall not be entitled to cast any votes in respect of such shares and
such shares shall be deducted from the total number of shares of Common Stock
outstanding for purposes of determining the proportion of Common Stock
required to approve a matter submitted for stockholder approval or to
constitute a quorum. To the extent that the Substantial Stockholder is
comprised of more than one record owner, the aggregate voting power of the
Substantial Stockholder (or such record owners) so limited for all shares of
Common Stock beneficially owned by the Substantial Stockholder shall be
allocated proportionately among such record owners. For each such record
owner, this allocation shall be accomplished by multiplying the aggregate
voting power of the then outstanding shares of Common Stock owned by the
Substantial Stockholder by a fraction whose numerator is the number of shares
of Common Stock owned of record by such record owner and whose denominator is
the total number of shares of Common Stock beneficially owned by the
Substantial Stockholder. A person who is record owner of shares of Common
Stock that are beneficially owned simultaneously by more than one person shall
have, with respect to such shares, the right to cast the least number of votes
that such person would be entitled to cast under this Subparagraph (b) by
virtue of such shares being so beneficially owned by any of such persons.
(2) For purposes of this Subparagraph (b), the following
words have the meanings indicated:
(A) "Affiliate," including the term "Affiliated Person," means
a person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, a specified
person, and includes all Associates of such person.
(B) "Associate," when used to indicate a relationship with any
person, means:
(1) Any corporation or organization (other than the
Corporation or a Subsidiary of the Corporation) of which such person is an
officer, director, or partner or is, directly or indirectly, the beneficial
owner of 10% or more of any class of equity securities;
(2) Any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee
or in a similar fiduciary capacity; and
(3) Any relative or spouse of such person, or any relative
of such spouse, who has the same home as such person or who is a director or
officer of any corporation controlling, under common control with or
controlled by such person or of any of its Affiliates.
(C) "Beneficial Owner," when used with respect to any Common
Stock, means a person:
(1) That, individually or with any of its Affiliates,
beneficially owns Common Stock, directly or indirectly; or
(2) That, individually or with any of its Affiliates, has:
(i) The right to acquire Common Stock (whether such
right is exercisable immediately or only after the passage of time), pursuant
to any agreement, arrangement, or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise; or
(ii) The right to vote Common Stock pursuant to any
agreement, arrangement, or understanding; or
(3) That has any agreement, arrangement, or understanding
for the purpose of acquiring, holding, voting, or disposing of Common Stock
with any other person that beneficially owns, or whose Affiliates beneficially
own, directly or indirectly, such shares of Common Stock; provided, however,
that for purposes of the definition of Beneficial Owner and beneficial
ownership, (i) no director, officer or employee of the Corporation or any
Subsidiary (nor any Affiliate of any such director, officer or employee) shall
solely by reason of any or all of such directors, officers or employees acting
in their capacities as such (including, without limitation, communicating with
a stockholder by reason of the Board of Directors) be deemed, for any purposes
hereof, to beneficially own any shares of Common Stock beneficially owned by
any other such director, officer, employee or stockholder (or any Affiliate
thereof); (ii) in the case of any employee stock ownership of similar plan of
the Corporation or of any Subsidiary heretofore or hereafter adopted in which
the beneficiaries thereof possess the right to vote or to direct the voting of
shares of Common Stock held by such plan, no such plan, any entity organized,
appointed or established by the Corporation or any Subsidiary for or pursuant
to any plan, nor any trustee or any member of an administrative committee or
any other representative with respect thereto (nor any Affiliate of such
trustee, administrative committee member or other such representative), solely
by reason of such capacity of such trustee, administrative committee member or
other such representative, shall be deemed, for any purposes hereof, to
beneficially own any shares of Common Stock held under any such plan; (iii) a
person shall not be deemed a beneficial owner of Common Stock solely by reason
of a revocable proxy granted for a particular meeting of stockholders,
pursuant to a public solicitation of proxies for such meeting complying with
applicable rules of the Securities and Exchange Commission or any successor
administrative body, with respect to shares of which neither such person nor
any Affiliate of such person is otherwise deemed the beneficial owner; and
(iv) a person shall not be deemed a beneficial owner of Common Stock solely by
reason of Common Stock being tendered pursuant to a tender or exchange offer
made by such person or such person's Affiliates until such tendered Common
Stock is accepted for purchase or exchange.
(D) "Common Stock" means the authorized shares of capital stock
of the Corporation entitled to vote generally in the election of directors and
does not mean the authorized shares of Common Stock Nonvoting.
(E) "Control," including the terms "Controlling," "controlled
by" and "under common control with," means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of voting securities,
by contract, or otherwise, and the beneficial ownership of 10% or more of the
votes entitled to be cast by a corporation's voting stock creates a
presumption of control.
(F) "Person" shall mean any individual, firm, partnership,
corporation or other entity.
(G) "Subsidiary" means any corporation of which voting stock
having a majority of the votes entitled to be cast is owned, directly or
indirectly, by the Corporation.
(H) "Substantial Stockholder" shall mean any person, other than
the Corporation or any Subsidiary, who or which is the Beneficial Owner,
directly or indirectly, of 20% or more of the outstanding shares of Common
Stock (determined solely on the basis of the total number of shares so
beneficially owned and without giving effect to the number of percentage of
votes entitled to be cast in respect of such shares) in relation to the total
number of shares of Common Stock issued and outstanding.
(4) For purposes of computing the percentage beneficial
ownership of shares of Common Stock of a person in order to determine whether
such person is a Substantial Stockholder, the outstanding shares of Common
Stock shall be deemed to include shares of Common Stock which may be issuable
(except pursuant to clause (7) of this Subparagraph (b)) by the Corporation
pursuant to any agreement, or upon the exercise of conversion rights,
warrants, or options or otherwise and which are deemed owned by such person
through application of the definition of Beneficial Owner but shall not
include any other shares of Common Stock which may be issuable by the
Corporation to others pursuant to any agreement, or upon exercise of
conversion rights, warrants or options, or otherwise. For all other purposes,
the outstanding shares of Common Stock shall include such shares then
outstanding and shall not include any shares of Common Stock which may be
issuable by the Corporation pursuant to any agreement, or upon the exercise of
conversion rights, warrants or options, or otherwise.
(5) The Board of Directors shall have the power to
determine for the purposes of this Subparagraph (b) on the basis of
information known to them (i) the number of shares of Common Stock
beneficially owned by any person; (ii) whether a person is an Affiliate or
Associate of another; (iii) whether a person has an agreement, arrangement or
understanding with another; (iv) the redemption price as provided for in
clause (8) below; and (v) any other factual matter relating to the
applicability or effect of this Subparagraph (b).
(6) The Corporation shall have the right to demand that
any person who it reasonably believes is a Substantial Stockholder (or holds
record shares of Common Stock beneficially owned by a person reasonably
believed to be a Substantial Stockholder) supply the Corporation with complete
information as to: (i) the record owner(s) of all shares of Common Stock and
Common Stock Nonvoting beneficially owned by such persons; (ii) the number of,
and class of, shares beneficially owned by such person and held of record by
each such record owner and the number(s) of the stock certificate(s)
evidencing such shares; (iii) each date or dates on which such person or the
record owner(s) of such shares purchased the shares; and (iv) any other
factual matter relating to the applicability or effect of this Subparagraph
(b) as may reasonably be requested of such person, and such person shall
furnish such information within 10 days after the receipt of such demand.
(7) Except as otherwise provided by law or as expressly
provided in this clause (7), the presence, in person or by proxy, of the
holders of record of shares of capital stock of the Corporation entitling the
holders thereof to cast a majority of the votes (after giving effect, if any,
to the provisions of this Subparagraph (b)) entitled to be cast by the holders
of shares of capital stock of the Corporation entitled to vote shall
constitute a quorum at all meetings of the shareholders, and every reference
in these Articles of Incorporation to a majority or other proportion of
capital stock (or the holders thereof) for purposes of determining any quorum
requirement or any requirement for shareholders' consent or approval shall be
deemed to refer to such majority or other proportion of the votes (or the
holders thereof) then entitled to be cast in respect of such capital stock.
(8) All outstanding shares of Common Stock Nonvoting shall
automatically, without any further act or deed on the part of the Corporation
or any other person, be converted into shares of Common Stock on a
share-for-share basis at such time (the "Conversion Date") as any Substantial
Stockholder beneficially owns shares of Common Stock which entitle such
Substantial Stockholder (after giving effect to the provisions of this
Subparagraph (b) other than the conversion contemplated by this clause (7)) to
cast more than 50% of the votes entitled to be cast by the holders of the then
outstanding shares of Common Stock. In the event of an automatic conversion of
Common Stock Nonvoting pursuant to this clause (7), certificates formerly
representing shares of Common Stock Nonvoting will thereafter be deemed to
represent a like number of shares of Common Stock. Effective as of the
Conversion Date, the provisions of these Articles of Incorporation which
provide for the establishment and terms and rights of the Common Stock
Nonvoting shall, without any further action of the Board of Directors or
stockholders of the Corporation or any other person, be of no further force
or effect.
(9) At any time after the Board of Directors determines
that a person is a Substantial Stockholder (the "Determination Date") until
the date on which (i) such person is no longer a Substantial Stockholder; or
(ii) such person beneficially owns more than 90% of the then outstanding
shares of each class of Common Stock of the Corporation, the Corporation shall
have the right to redeem from the record owner or owners, at any time or from
time to time, all or a portion of the shares of Common Stock and Common Stock
Nonvoting beneficially owned by the Substantial Stockholder. The Corporation
shall exercise the right of redemption by written notice (the "Redemption
Notice") to the Substantial Stockholder, which notice shall be signed by the
Chairman of the Board, the President or any Vice President of the Corporation.
During the one-year period commencing on the Determination Date, the
redemption price shall be the lesser of: (i) the average "market price" of
shares of Common Stock Nonvoting for each of the 30 trading days in which
shares of Common Stock Nonvoting shall have been traded immediately preceding
the date of the Redemption Notice; and (ii) the average "market price" of
shares of Common Stock Nonvoting for each of the 30 trading days in which
shares of Common Stock Nonvoting shall have been traded immediately preceding
the date on which the Substantial Stockholder first beneficially owned 5% or
more of the outstanding shares of Common Stock, such price to be adjusted for
any stock splits, stock distributions, recapitalizations or the like which
occurred between such date and the date of the Redemption Notice. Subsequent
to the expiration of the one-year period commencing on the Determination Date,
the redemption price shall equal the price determined under clause (i) of the
immediately preceding sentence. The "market price" of shares of Common Stock
(whether Common Stock or Common Stock Nonvoting) shall mean the closing bid
price of the shares of Common Stock Nonvoting, as published by the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), (or
such other quotation system of a national securities association then being
used), or if the shares are then traded on a national securities exchange, the
last sale price regular way thereafter as reported in the consolidated
transaction reporting system for the shares listed or traded on such exchange.
All rights of the Substantial Stockholder as the beneficial owner of shares of
Common Stock (and all rights of the record owners) shall cease as to the
shares which are the subject of a Redemption Notice. Closing for the purchase
of the shares to be redeemed shall be made within 45 days of the date of the
Redemption Notice. If there is more than one record owner of the shares of
Common Stock beneficially owned by the Substantial Stockholder, the
Corporation shall, to the extent the Board of Directors deems it practicable,
redeem the shares of each such class to be redeemed from each of the record
owners on a pro rata basis based on the total number of shares of the class to
be redeemed owned by each such record owner.
(10) Any determinations made by the Board of Directors
pursuant to this Subparagraph (b), in good faith on the basis of such
information and assistance as was then reasonably available for such purpose,
shall be conclusive and binding upon the Corporation and its shareholders,
including any Substantial Stockholder.
(11) Nothing contained in this Subparagraph (b) shall be
construed to relieve any Substantial Stockholder from any fiduciary
obligation imposed by law.
(12) Any amendment, alteration, change or repeal of this
Subparagraph (b) shall, in addition to any other vote or approval required by
law or these Articles of Incorporation, require (i) the affirmative vote of
the holders of at least 80% of the total number of votes entitled to be cast
by the holders of all of the then outstanding shares of Common Stock (as
determined in accordance with the provisions of this Subparagraph (b)), voting
as a single class; and (ii) the affirmative vote of the holders of at least
80% of the then outstanding shares of Common Stock Nonvoting, voting as a
separate class.
(13) Notwithstanding anything to the contrary in these
Articles of Incorporation, in the event that, as a result of the enactment in
the future of any law, rule or regulation binding upon the Corporation, the
shares of Common Stock Nonvoting will become ineligible to be quoted and will
cease to be quoted by NASDAQ or any successor entity and upon such quote
cessation will not be listed or admitted to trading on any national securities
exchange solely due to the vote limitations contained in clause (1) of this
Subparagraph (b), such determination to be made by the Board of Directors of
the Corporation, the provisions of these Articles of Incorporation providing
for the vote limitation on the votes entitled to be cast by a Substantial
Stockholder shall, without further action or deed by the Corporation, its
directors or stockholders or any other person, be of no further force or
effect, effective as of the latest date on which such law, rule or regulation
permits or requires such a provision to become ineffective, to the extent
necessary in order for the Common Stock Nonvoting to remain eligible for
quotation on NASDAQ or any successor entity or be eligible for listing on any
national securities exchange.
(c) Each share of the Common Stock Nonvoting shall have exactly the same
rights, terms and conditions as each share of Common Stock, except that the
shares of Common Stock Nonvoting shall have no voting rights, except the
Common Stock Nonvoting shall have the right to vote on: (1) a consolidation of
the Corporation with another corporation, (2) a merger of the Corporation into
another corporation, (3) a merger of the Corporation where the Corporation is
the surviving corporation but the capital stock of the Corporation is
converted into other securities or property, (4) a participation by the
Corporation in a statutory share exchange whereby the capital stock of the
Corporation is converted into other securities or property, (5) a dissolution
of the Corporation, (6) a sale of all or substantially all of the assets of
the Corporation not in the ordinary course of business, and (7) any amendment
of these Articles of Incorporation repealing the right of the Common Stock
Nonvoting to vote on any of the matters specified in this Subparagraph. As to
all matters on which the Common Stock Nonvoting is entitled to vote, the
Common Stock Nonvoting shall vote separately as one class, and the Common
Stock shall vote separately as another class. The right of the Common Stock
Nonvoting to vote cannot be repealed except by (a) the affirmative vote of the
holders of a majority of the outstanding shares of the Common Stock Nonvoting,
voting separately as one class; and (b) the affirmative vote of the holders of
a majority of the total number of votes entitled to be cast by the holders of
all the outstanding shares of the Common Stock (after taking into account the
provisions of Subparagraph (b) immediately preceding this Subparagraph(c)),
voting separately as another class. The provisions of this Subparagraph (c)
providing that the Common Stock and the Common Stock Nonvoting vote as
separate classes cannot be amended, altered, changed or repealed except by (i)
the affirmative vote of the holders of at least 80% of the total number of
votes entitled to be cast by the holders of all the then outstanding shares of
Common Stock (after taking into account the provisions of Subparagraph (b)
immediately preceding this Subparagraph (c)), voting separately as one class;
and (ii) the affirmative vote of the holders of at least 80% of the total
number of votes entitled to be cast by the holders of all of the then
outstanding shares of Common Stock Nonvoting, voting separately as another
class. The rights granted to Common Stock Nonvoting are not a limitation of
any kind upon the sole and exclusive voting rights and powers of the Common
Stock except in the limitations before set forth.
ARTICLE VIII
SPECIAL PROVISIONS WHEN TWO CLASSES OF COMMON STOCK ARE AUTHORIZED IN THE
ARTICLES OF INCORPORATION
Election and Filling of Vacancies. With respect to the election of the
Board of Directors of the Corporation:
(1) the holders of Class A Common Stock (a) shall nominate and elect one
(1) director who shall be known as the Class A Director, and (b) in the event
of the death, disability, removal, resignation or refusal to act of the Class
A Director, the holders of Class A Common Stock, to the exclusion of the
holders of all other classes of stock of the Corporation, shall nominate and
elect a director to fill the vacancy so created by such death, disability,
removal, resignation or refusal to act; and
(2) the holders of Class B Common Stock (a) shall nominate and elect two
(2) directors who shall be known as the Class B Directors, and (b) in the
event of the death, disability, removal, resignation or refusal to act of any
or all of the Class B Directors, the holders of the Class B Common Stock, to
the exclusion of the holders of all other classes of stock of the Corporation,
shall nominate and elect one or more directors to fill the vacancy or
vacancies so created by such death, disability, removal, resignation or
refusal to act.
ARTICLE IX
HIGH QUORUM PROTECTIVE PROVISIONS
Quorum. The presence in person or by proxy of the holders of record of
all of the shares of the capital stock of the Corporation issued and
outstanding and entitled to vote thereat shall constitute a quorum at all
meetings of the stockholders, except as otherwise provided by the Colorado
Business Corporation Act, by the Articles of Incorporation or by these Bylaws.
If less than a quorum shall be in attendance at the time for which the meeting
shall have been called, the meeting may be adjourned from time to time by a
majority vote of the stockholders present or represented, without any notice
other than by announcement at the meeting, until a quorum shall attend. At any
adjourned meeting at which a quorum shall attend, any business may be
transacted which might have been transacted if the meeting had been held as
originally called.
ARTICLE X
PREEMPTIVE RIGHTS
A shareholder of the corporation shall not be entitled to a preemptive
or preferential right to purchase, subscribe for, or otherwise acquire any
unissued or treasury shares of stock of the corporation, or any options or
warrants to purchase, subscribe for or otherwise acquire any such unissued or
treasury shares, or any shares, bonds, notes, debentures, or other securities
convertible into or carrying options or warrants to purchase, subscribe for or
otherwise acquire any such unissued or treasury shares.
ARTICLE XI
CUMULATIVE VOTING
The shareholders shall not be entitled to cumulative voting.
ARTICLE XII
SHARE TRANSFER RESTRICTIONS
The corporation shall have the right to impose restrictions upon the
transfer of any of its authorized shares or any interest therein. The board
of directors is hereby authorized on behalf of the corporation to exercise the
corporation's right to so impose such restrictions.
ARTICLE XIII
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the corporation shall be
17 West Cheyenne Mountain Boulevard, Colorado Springs, CO 80906, and the name
of the initial registered agent at such address is Mark T. Thatcher, Esq.
Either the registered office or the registered agent may be changed in the
manner provided by law.
THE UNDERSIGNED CONSENTS TO THE APPOINTMENT AS THE
INITIAL REGISTERED AGENT
/s/ Mark T. Thatcher
______________________________
REGISTERED AGENT
ARTICLE XIV
BOARD OF DIRECTORS
The board of directors of the corporation shall consist of no more than
nine (9) directors, and the names and addresses of the persons who are serving
as directors until their successors are elected and shall qualify are as
follows:
Name Title Address
Mark T. Thatcher, Esq. General Counsel, 360 Thames Street
Director Newport, RI 02840
Secretary
Christopher O. Werner Chairman, 360 Thames Street
President Newport, RI 02840
The number of directors shall be fixed in accordance with the bylaws.
ARTICLE XV
INDEMNIFICATION
The corporation may:
(A) Indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative (other
than an action by or in the right of the corporation), by reason of the fact
that he is or was a director, officer, employee, fiduciary or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against expenses
(including attorney fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit,
or proceeding, if he acted in good faith and in a manner he reasonably
believed to be in the best interests of the corporation and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit, or proceeding by
judgment, order, settlement, or conviction or upon a plea of nolo contendere
or its equivalent shall not of itself create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in
the best interests of the corporation and, with respect to any criminal action
or proceeding, had reasonable cause to believe his conduct was unlawful.
(B) The corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending, or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation or is or was serving at the request of
the corporation as a director, officer, employee, fiduciary or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorney fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in the best
interests of the corporation; but no indemnification shall be made in respect
of any claim, issue, or matter as to which such person has been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which such action
or suit was brought determines upon application that, despite the adjudication
of liability, but in view of all circumstances of the case, such person is
fairly and reasonably entitled to indemnification for such expenses which
such court deems proper.
(C) To the extent that a director, officer, employee, fiduciary or
agent of a corporation has been successful on the merits in defense of any
action, suit, or proceeding referred to in (A) or (B) of this Article XI or in
defense of any claim, issue, or matter therein, he shall be indemnified
against expenses (including attorney fees) actually and reasonably incurred
by him in connection therewith.
(D) Any indemnification under (A) or (B) of this Article XI (unless
ordered by a court) and as distinguished from (C) of this Article shall be
made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee,
fiduciary or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in (A) or (B) above. Such
determination shall be made by the board of directors by a majority vote of a
quorum consisting of directors who were not parties to such action, suit, or
proceeding, or, if such a quorum is not obtainable or, even if obtainable, if
a quorum of disinterested directors so directs, by independent legal counsel
in a written opinion, or by the shareholders.
(E) Expenses (including attorney fees) incurred in defending a civil or
criminal action, suit, or proceeding may be paid by the corporation in advance
of the final disposition of such action, suit, or proceeding as authorized in
(C) or (D) of this Article XI upon receipt of an undertaking by or on behalf
of the director, officer, employee, fiduciary or agent to repay such amount
unless it is ultimately determined that he is entitled to be indemnified by
the corporation as authorized in this Article XI.
(F) The indemnification provided by this Article XI shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement, vote of shareholders or disinterested directors, or
otherwise, and any procedure provided for by any of the foregoing, 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, fiduciary or agent and shall inure to the
benefit of heirs, executors, and administrators of such a person.
(G) The corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee, fiduciary or agent of
the corporation or who is or was serving at the request of the corporation as
a director, officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity or arising out
of his status as such, whether or not the corporation would have the power to
indemnify him against such liability under provisions of this Article XI.
ARTICLE XVI
TRANSACTIONS WITH INTERESTED DIRECTORS
No contract or other transaction between the corporation and one (1) or
more of its directors or any other corporation, firm, association, or entity
in which one (1) or more of its directors are directors or officers or are
financially interested shall be either void or voidable solely because of such
relationship or interest, or solely because such directors are present at the
meeting of the board of directors or a committee thereof which authorizes,
approves, or ratifies such contract or transaction, or solely because their
votes are counted for such purpose if:
(A) The fact of such relationship or interest is disclosed or known to
the board of directors or committee which authorizes, approves, or ratifies
the contract or transaction by a vote or consent sufficient for the purpose
without counting the votes or consents of such interested directors;
(B) The fact of such relationship or interest is disclosed or known to
the shareholders entitled to vote and they authorize, approve, or ratify such
contract or transaction by vote or written consent; or
(C) The contract or transaction is fair and reasonable to the
corporation.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or a committee
thereof which authorizes, approves, or ratifies such contract or
transaction.
ARTICLE XVII
VOTING OF SHAREHOLDERS
If a quorum is present, the affirmative vote of a majority of the
outstanding shares represented at the meeting and entitled to vote thereon, or
of any class or series, shall be the act of the shareholders.
ARTICLE XVIII
INCORPORATOR
The name and address of the incorporator is as follows:
Name Address
Mark T. Thatcher, Esq. 360 Thames Street
Newport, RI 02840
IN WITNESS WHEREOF, the above named incorporator signed these Articles
of Incorporation on April 28, 1998.
/s/ Mark T. Thatcher
______________________________
MARK T. THATCHER,
Incorporator
BYLAWS
OF
SUPERIOR HOLDINGS, INC.
(AMENDED AS OF APRIL 25, 1998)
ARTICLE I
OFFICES
Section 1.1 PRINCIPAL OFFICE. The principal office of the corporation in
the State of Colorado shall be located in the City of Newport, Rhode Island.
The corporation may have such other offices, either within or outside of the
State of Colorado, as the Board of Directors may designate, or as the
business of the corporation may require from time to time.
Section 1.2 REGISTERED OFFICE. The registered office of the corporation,
required by the Colorado Business Corporation Act to be maintained in the
State of Colorado, may be, but need not be, identical with the principal
office in the State of Colorado, and the address of the registered office may
be changed from time to time by the Board of Directors.
ARTICLE II
SHAREHOLDERS
Section 2.1 ANNUAL MEETING. The annual meeting of the shareholders shall
be held on the last Tuesday of April in each year, commencing with the year
1998, at the hour of 10:00 A.M., or at such other time on such other day as
shall be fixed by the Board of Directors, for the purpose of electing
directors and for the transaction of such other business as may come before
the meeting. If the day fixed for the annual meeting shall be a legal holiday
in the State of Colorado, such meeting shall be held on the next succeeding
business day. If the election of directors shall not be held on the day
designated herein for any annual meeting of the shareholders, or at any
adjournment thereof, the Board of Directors shall cause the election to be
held at a special meeting of the shareholders as soon thereafter as may be
convenient.
A shareholder may apply to the district court in the county in Colorado
where the corporation's principal office is located or, if the corporation has
no principal office in Colorado, to the district court of the county in which
the corporation's registered office is located to seek an order that a
shareholder meeting be held (i) if an annual meeting was not held within six
months after the close of the corporation's most recently ended fiscal year or
fifteen months after its last annual meeting, whichever is earlier, or (ii) if
the shareholder participated in a proper call or of proper demand for a
special meeting and notice of the special meeting was not given within thirty
days after the date of the call or the date the last of the demands necessary
to require calling of the meeting was received by the corporation pursuant to
C.R.S. § 7-107-102(1)(b), or the special meeting was not held in
accordance with the notice.
Section 2.2 SPECIAL MEETINGS. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the President or by the Board of Directors, and shall be called by the
President upon the receipt of one or more written demands for a special
meeting, stating the purpose or purposes for which it is to be held, signed
and dated by the holders of shares representing at least ten percent of all
the votes entitled to be cast on any issue proposed to be considered at the
meeting.
Section 2.3 PLACE OF MEETINGS. The Board of Directors may designate any
place, either within or outside of the State of Colorado, as the place of
meeting for any annual meeting or for any special meeting called by the Board
of Directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal office of the corporation
in the State of Colorado.
Section 2.4 NOTICE OF MEETING. Written notice stating the place, day and
hour of the meeting of shareholders and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall, unless otherwise
prescribed by statute, be delivered not less than ten nor more than sixty days
before the date of the meeting, either personally or by mail, by or at the
direction of the President, or the Secretary, or the officer or other persons
calling the meeting, to each shareholder of record entitled to vote at such
meeting; provided, however, that if the number of authorized shares is to be
increased, at least thirty days' notice shall be given.
Notice of a special meeting shall include a description of the purpose or
purposes of the meeting. Notice of an annual meeting need not include a
description of the purpose or purposes of the meeting except the purpose or
purposes shall be stated with respect to (i) an amendment to the articles of
incorporation of the corporation, (ii) a merger or share exchange in which the
corporation is a party and, with respect to a share exchange, in which the
corporation's shares will be acquired, (iii) a sale, lease, exchange or other
disposition, other than in the usual and regular course of business, of all or
substantially all of the property of the corporation or of another entity
which this corporation controls, in each case with or without the goodwill,
(iv) a dissolution of the corporation, or (v) any other purpose for which a
statement of purpose is required by the Colorado Business Corporation Act.
Notice shall be given personally or by mail, private carrier, telegraph,
teletype, electronically transmitted facsimile or other form of wire or
wireless communication by or at the direction of the president, the secretary,
or the officer or persons calling the meeting, to each shareholder of record
entitled to vote at such meeting. If mailed and if in a comprehensible form,
such notice shall be deemed to be given and effective when deposited in the
United States mail, addressed to the shareholder at his address as it appears
in the corporation's current record of shareholders, with postage prepaid. If
notice is given other than by mail, and provided that such notice is in a
comprehensible form, the notice is given and effective on the date received
by the shareholder.
If requested by the person or persons lawfully calling such meeting, the
notice shall be given at corporate expense.
When a meeting is adjourned to another date, time or place, notice need
not be given of the new date, time or place if the new date, time or place of
such meeting is announced before adjournment at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact
any business which may have been transacted at the original meeting. If the
adjournment is for more than 120 days, or if a new record date is fixed for
the adjourned meeting, a new notice of the adjourned meeting shall be given
to each shareholder of record entitled to vote at the meeting as of the new
record date.
A shareholder may waive notice of a meeting before or after the time and
date of the meeting by a writing signed by such shareholder. Such waiver shall
be delivered to the corporation for filing with the corporate records.
Further, by attending a meeting either in person or by proxy, a shareholder
waives objection to lack of notice or defective notice of the meeting unless
the shareholder objects at the beginning of the meeting to the holding of the
meeting or the transaction of business at the meeting because of lack of
notice or defective notice. By attending the meeting, the shareholder also
waives any objection to consideration in the meeting of a particular matter
not within the purpose or purposes described in the meeting notice unless the
shareholder objects to considering the matter when it is presented.
No notice need be sent to any shareholder if three successive notices
mailed to the last known address of such shareholder have been returned as
undeliverable until such time as another address for such shareholder is made
known to the corporation by such shareholder. In order to be entitled to
receive notice of any meeting, a shareholder shall advise the corporation in
writing of any change in such shareholder's mailing address as shown on the
corporation's books and records.
Section 2.5 MEETING OF ALL SHAREHOLDERS. If all of the shareholders shall
meet at any time and place, either within or outside of the State of Colorado,
and consent to the holding of a meeting at such time and place, such meeting
shall be valid without call or notice, and at such meeting any corporate
action may be taken.
Section 2.6 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled
to receive payment of any distribution, or in order to make a determination of
shareholders for any other purpose, the Board of Directors of the corporation
may provide that the share transfer books shall be closed for a stated period
but not to exceed, in any case, seventy days. If the share transfer books
shall be closed for the purpose of determining shareholders entitled to notice
of or to vote at a meeting of shareholders, such books shall be closed for at
least ten days immediately preceding such meeting. In lieu of closing the
share transfer books, the Board of Directors may fix in advance a date as the
record date for any such determination of shareholders, such date in any case
to be not more than seventy days and, in case of a meeting of shareholders,
not less than ten days prior to the date on which the particular action,
requiring such determination of shareholders, is to be taken. If the share
transfer books are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a distribution,
the date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such distribution is adopted,
as the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof unless the meeting is
adjourned to a date more than one hundred twenty days after the date fixed for
the original meeting, in which case the Board of Directors shall make a new
determination as provided in this section.
Section 2.7 VOTING RECORD. The officer or agent having charge of the
stock transfer books for shares of the corporation shall make, at least ten
days before such meeting of shareholders, a complete record of the
shareholders entitled to vote at each meeting of shareholders or any
adjournment thereof, arranged by voting groups and within each voting group by
class or series of shares, in alphabetical order within each class or series,
with the address of and the number of shares held by each shareholder in each
class or series. For a period beginning the earlier of ten days before the
meeting for which the record was prepared or two business days after notice of
the meeting is given and continuing through the meeting, the record shall be
kept on file at the principal office of the corporation or at a place
identified in the notice of the meeting in the city where the meeting will be
held, whether within or outside of the State of Colorado, and shall be subject
to inspection by any shareholder upon written demand at any time during usual
business hours. Such record shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting for the purposes thereof.
The original stock transfer books shall be the prima facie evidence as to
who are the shareholders entitled to examine the record or transfer books or
to vote at any meeting of shareholders.
Section 2.8 QUORUM. A majority of the votes entitled to be cast on the
matter by a voting group, represented in person or by proxy, constitutes a
quorum of that voting group for action on that matter. If no specific voting
group is designated in the Articles of Incorporation or under the Colorado
Business Corporation Act for a particular matter, all outstanding shares of
the corporation entitled to vote, represented in person or by proxy, shall
constitute a voting group. In the absence of a quorum at any such meeting, a
majority of the shares so represented may adjourn the meeting from time to
time for a period not to exceed one hundred twenty days without further
notice. However, if the adjournment is for more than one hundred twenty days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each shareholder
of record entitled to vote at the meeting.
At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. The shareholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal during such meeting of that number of
shareholders whose absence would cause there to be less than a quorum.
Section 2.9 MANNER OF ACTING. If a quorum is present, an action is
approved if the votes cast favoring the action exceed the votes cast within
the voting group opposing the action and such action shall be the act of the
shareholders, unless the vote of a greater proportion or number or voting by
groups is otherwise required by the Colorado Business Corporation Act, the
Articles of Incorporation or these Bylaws.
Section 2.10 PROXIES. At all meetings of shareholders a shareholder may
vote by proxy by signing an appointment form or similar writing, either
personally or by his or her duly authorized attorney-in-fact. A shareholder
may also appoint a proxy by transmitting or authorizing the transmission of a
telegram, teletype, or other electronic transmission providing a written
statement of the appointment to the proxy, a proxy solicitor, proxy support
service organization, or other person duly authorized by the proxy to receive
appointments as agent for the proxy, or to the corporation. The transmitted
appointment shall set forth or be transmitted with written evidence from which
it can be determined that the shareholder transmitted or authorized the
transmission of the appointment. The proxy appointment form or similar writing
shall be filed with the secretary of the corporation before or at the time of
the meeting. The appointment of a proxy is effective when received by the
corporation and is valid for eleven months unless a different period is
expressly provided in the appointment form or similar writing.
Any complete copy, including an electronically transmitted facsimile, of
an appointment of a proxy may be substituted for or used in lieu of the
original appointment for any purpose for which the original appointment could
be used.
Revocation of a proxy does not affect the right of the corporation to
accept the proxy's authority unless (i) the corporation had notice that the
appointment was coupled with an interest and notice that such interest is
extinguished is received by the secretary or other officer or agent authorized
to tabulate votes before the proxy exercises his or her authority under the
appointment, or (ii) other notice of the revocation of the appointment is
received by the secretary or other officer or agent authorized to tabulate
votes before the proxy exercises his or her authority under the appointment.
Other notice of revocation may, in the discretion of the corporation, be
deemed to include the appearance at a shareholders' meeting of the shareholder
who granted the proxy and his or her voting in person on any matter subject
to a vote at such meeting.
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other
officer or agent authorized to tabulate votes before the proxy exercises his
or her authority under the appointment.
The corporation shall not be required to recognize an appointment made
irrevocable if it has received a writing revoking the appointment signed by
the shareholder (including a shareholder who is a successor to the shareholder
who granted the proxy) either personally or by his or her attorney-in-fact,
notwithstanding that the revocation may be a breach of an obligation of the
shareholder to another person not to revoke the appointment.
Section 2.11 VOTING OF SHARES. Unless otherwise provided by these Bylaws
or the Articles of Incorporation, each outstanding share entitled to vote
shall be entitled to one vote upon each matter submitted to a vote at a
meeting of shareholders, and each fractional share shall be entitled to a
corresponding fractional vote on each such matter. Only shares are entitled
to vote.
Section 2.12 VOTING OF SHARES BY CERTAIN SHAREHOLDERS. If the name on a
vote, consent, waiver, proxy appointment, or proxy appointment revocation
corresponds to the name of a shareholder, the corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, proxy appointment or
proxy appointment revocation and give it effect as the act of the shareholder.
If the name signed on a vote, consent, waiver, proxy appointment or proxy
appointment revocation does not correspond to the name of a shareholder, the
corporation, if acting in good faith, is nevertheless entitled to accept the
vote, consent, waiver, proxy appointment or proxy appointment revocation and
to give it effect as the act of the shareholder if:
(i) the shareholder is an entity and the name signed purports to be that
of an officer or agent of the entity;
(ii) the name signed purports to be that of an administrator, executor,
guardian or conservator representing the shareholder and, if the corporation
requests, evidence of fiduciary status acceptable to the corporation has been
presented with respect to the vote, consent, waiver, proxy appointment or
proxy appointment revocation;
(iii) the name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the corporation requests, evidence of
this status acceptable to the corporation has been presented with respect to
the vote, consent, waiver, proxy appointment or proxy appointment revocation;
(iv) the name signed purports to be that of a pledgee, beneficial owner
or attorney-in-fact of the shareholder and, if the corporation requests,
evidence acceptable to the corporation of the signatory's authority to sign
for the shareholder has been presented with respect to the vote, consent,
waiver, proxy appointment or proxy appointment revocation;
(v) two or more persons are the shareholder as co-tenants or fiduciaries
and the name signed purports to be the name of at least one of the co-tenants
or fiduciaries, and the person signing appears to be acting on behalf of all
the co-tenants or fiduciaries; or
(vi) the acceptance of the vote, consent, waiver, proxy appointment or
proxy appointment revocation is otherwise proper under rules established by
the corporation that are not inconsistent with this Section 2.12.
The corporation is entitled to reject a vote, consent, waiver, proxy
appointment or proxy appointment revocation if the secretary or other officer
or agent authorized to tabulate votes, acting in good faith, has reasonable
basis for doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder.
Neither the corporation nor any of its directors, officers employees, or
agents who accepts or rejects a vote, consent, waiver, proxy appointment or
proxy appointment revocation in good faith and in accordance with the
standards of this Section is liable in damages for the consequences of the
acceptance or rejection.
Redeemable shares are not entitled to be voted after notice of redemption
is mailed to the holders and a sum sufficient to redeem the shares has been
deposited with a bank, trust company or other financial institution under an
irrevocable obligation to pay the holders of the redemption price on
surrender of the shares.
Section 2.13 ACTION BY SHAREHOLDERS WITHOUT A MEETING. Unless the
Articles of Incorporation or these Bylaws provide otherwise, action required
or permitted to be taken at a meeting of shareholders may be taken without a
meeting if the action is evidenced by one or more written consents describing
the action taken, signed by each shareholder entitled to vote and delivered to
the Secretary of the corporation for inclusion in the minutes or for filing
with the corporate records. Action taken under this section is effective when
all shareholders entitled to vote have signed the consent, unless the consent
specifies a different effective date.
Any such writing may be received by the corporation by electronically
transmitted facsimile or other form of wire or wireless communication
providing the corporation with a complete copy thereof, including a copy of
the signature thereto. The shareholder so transmitting such a writing shall
furnish an original of such writing to the corporation, but the failure of the
corporation to receive or record such original writing shall not affect the
action so taken.
The record date for determining shareholders entitled to take action
without a meeting shall be the date the written consent is first received by
the corporation.
Section 2.14 VOTING BY BALLOT. Voting on any question or in any election
may be by voice vote unless the presiding officer shall order or any
shareholder shall demand that voting be by ballot.
Section 2.15 NO CUMULATIVE VOTING. No shareholder shall be permitted to
cumulate his or her votes.
Section 2.16 WAIVER OF NOTICE. When any notice is required to be given to
any shareholder, a waiver thereof in writing signed by the person entitled to
such notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such notice.
The attendance of a shareholder at any meeting shall constitute a waiver
of notice, waiver of objection to defective notice of such meeting, or a
waiver of objection to the consideration of a particular matter at the
shareholder meeting unless the shareholder, at the beginning of the meeting,
objects to the holding of the meeting, the transaction of business at the
meeting, or the consideration of a particular matter at the time it is
presented at the meeting.
Section 2.17 PARTICIPATION BY ELECTRONIC MEANS. Any shareholder may
participate in any meeting of the shareholders by means of telephone
conference or similar communications equipment by which all persons
participating in the meeting can hear each other at the same time. Such
participation shall constitute presence in person at the meeting.
ARTICLE III
BOARD OF DIRECTORS
Section 3.1 GENERAL POWERS. The business and affairs of the corporation
shall be managed by its Board of Directors.
Section 3.2 PERFORMANCE OF DUTIES. A director of the corporation shall
perform his or her duties as a director, including his or her duties as a
member of any committee of the board upon which he or she may serve, in good
faith, in a manner he or she reasonably believes to be in the best interests
of the corporation, and with such care as an ordinarily prudent person in a
like position would use under similar circumstances. In performing his duties,
a director shall be entitled to rely on information, opinions, reports, or
statements, including financial statements and other financial data, in each
case prepared or presented by persons and groups listed in paragraphs (a),
(b), and (c) of this Section 3.2; but he or she shall not be considered to be
acting in good faith if he or she has knowledge concerning the matter in
question that would cause such reliance to be unwarranted. A person who so
performs his or her other duties shall not have any liability by reason of
being or having been a director of the corporation. Those persons and groups
on whose information, opinions, reports, and statements a director is
entitled to rely are:
(a) One or more officers or employees of the corporation whom the
director reasonably believes to be reliable and competent in the matters
presented;
(b) Legal counsel, public accountants, or other persons as to matters
which the director reasonably believes to be within such persons'
professional or expert competence; or
(c) A committee of the board upon which he or she does not serve, duly
designated in accordance with the provision of the Articles of Incorporation
or the Bylaws, as to matters within its designated authority, which committee
the director reasonably believes to merit confidence.
Section 3.3 NUMBER, TENURE AND QUALIFICATIONS. The number of directors
of the corporation shall be fixed from time to time by resolution of the Board
of Directors, but in no instance shall there be less than one director. Each
director shall hold office as prescribed by written agreement, or until the
next annual meeting of shareholders, or until his or her successor shall have
been elected and qualified. Directors need not be residents of the State of
Colorado or shareholders of the corporation.
There shall be a Chairman of the Board, who has been elected from among
the directors. He or she shall preside at all meetings of the stockholders and
of the Board of Directors. He or she shall have such other powers and duties
as may be prescribed by the Board of Directors.
There shall be at least two (2) independent directors as defined by the
Colorado Business Corporation Act of 1994, as amended.
Section 3.4 REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held without other notice than this Bylaw immediately after, and at
the same place as, the annual meeting of shareholders. The Board of Directors
may provide, by resolution, the time and place, either within or without the
State of Colorado, for the holding of additional regular meetings without
other notice than such resolution.
Section 3.5 SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the President or any two directors. The
person or persons authorized to call special meetings of the Board of
Directors may fix any place, either within or without the State of Colorado,
as the place for holding any special meeting of the Board of Directors called
by them.
Section 3.6 NOTICE. Written notice of any special meeting of directors
shall be given as follows:
By mail to each director at his or her business address at least two
days prior to the meeting; or
By personal delivery, facsimile or telegram at least twenty-four hours
prior to the meeting to the business address of each director, or in the event
such notice is given on a Saturday, Sunday or holiday, to the residence
address of each director. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, so addressed, with postage
thereon prepaid. If notice is given by facsimile, such notice shall be deemed
to be delivered when a confirmation of the transmission of the facsimile has
been received by the sender. If notice be given by telegram, such notice shall
be deemed to be delivered when the telegram is delivered to the telegraph
company.
Any director may waive notice of any meeting.
The attendance of a director at any meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any regular
or special meeting of the Board of Directors need be specified in the notice
or waiver of notice of such meeting.
When any notice is required to be given to a director, a waiver thereof
in writing signed by such director, whether before, at or after the time
stated therein, shall constitute the giving of such notice.
Section 3.7 QUORUM. A majority of the number of directors fixed by or
pursuant to Section 3.2 of this Article III, or if no such number is fixed, a
majority of the number of directors in office immediately before the meeting
begins, shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, but if less than such majority is present
at a meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice.
Section 3.8 MANNER OF ACTING. Except as otherwise required by law or by
the Articles of Incorporation, the affirmative vote of the majority of the
directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors.
Section 3.9 INFORMAL ACTION BY DIRECTORS OR COMMITTEE MEMBERS. Unless the
Articles of Incorporation or these By-laws provide otherwise, any action
required or permitted to be taken at a meeting of the board of directors or
any committee designated by said board may be taken without a meeting if the
action is evidenced by one or more written consents describing the action
taken, signed by each director or committee member, and delivered to the
Secretary for inclusion in the minutes or for filing with the corporate
records. Action taken under this section is effective when all directors or
committee members have signed the consent, unless the consent specifies a
different effective date. Such consent has the same force and effect as a
unanimous vote of the directors or committee members and may be stated as
such in any document.
Section 3.10 PARTICIPATION BY ELECTRONIC MEANS. Any members of the Board
of Directors or any committee designated by such Board may participate in a
meeting of the Board of Directors or committee by means of telephone
conference or similar communications equipment by which all persons
participating in the meeting can hear each other at the same time. Such
participation shall constitute presence in person at the meeting.
Section 3.11 VACANCIES. Any vacancy on the Board of Directors may be
filled by the affirmative vote of a majority of the shareholders or the Board
of Directors. If the directors remaining in office constitute fewer than a
quorum of the board, the directors may fill the vacancy by the affirmative
vote of a majority of all the directors remaining in office.
If elected by the directors, the director shall hold office until the
next annual shareholders' meeting at which directors are elected. If elected
by the shareholders, the director shall hold office for the unexpired term of
his or her predecessor in office; except that, if the director's predecessor
was elected by the directors to fill a vacancy, the director elected by the
shareholders shall hold the office for the unexpired term of the last
predecessor elected by the shareholders.
If the vacant office was held by a director elected by a voting group of
shareholders, only the holders of shares of that voting group are entitled to
vote to fill the vacancy if it is filled by the shareholders, and, if one or
more of the remaining directors were elected by the same voting group, only
such directors are entitled to vote to fill the vacancy if it is filled by
the directors.
Section 3.12 RESIGNATION. Any director of the corporation may resign at
any time by giving written notice to the Secretary of the corporation. The
resignation of any director shall take effect upon receipt of notice thereof
or at such later time as shall be specified in such notice; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective. When one or more directors shall resign from
the board, effective at a future date, a majority of the directors then in
office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation
or resignations shall become effective.
Section 3.13 REMOVAL. Subject to any limitations contained in the
Articles of Incorporation, any director or directors of the corporation may be
removed at any time, with or without cause, in the manner provided in the
Colorado Business Corporation Act.
Section 3.14 COMMITTEES. By resolution adopted by a majority of the Board
of Directors, the directors may designate two or more directors to constitute
a committee, any of which shall have such authority in the management of the
corporation as the Board of Directors shall designate and as shall be
prescribed by the Colorado Business Corporation Act and Article XI of these
Bylaws.
Section 3.15 COMPENSATION. By resolution of the Board of Directors and
irrespective of any personal interest of any of the members, or the Board of
Directors, each director may be paid his or her expenses, if any, of
attendance at each meeting of the Board of Directors, and may be paid a stated
salary as director or a fixed sum for attendance at each meeting of the Board
of Directors or both. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Section 3.16 PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the Board of Directors or committee of the board at
which action on any corporate matter is taken shall be presumed to have
assented to the action taken unless (i) the director objects at the beginning
of the meeting, or promptly upon his or her arrival, to the holding of the
meeting or the transaction of business at the meeting and does not thereafter
vote for or assent to any action taken at the meeting, (ii) the director
contemporaneously requests that his or her dissent or abstention as to any
specific action taken be entered in the minutes of the meeting, or (iii) the
director causes written notice of his or her dissent or abstention as to any
specific action to be received by the presiding officer or the meeting before
its adjournment or by the corporation promptly after the adjournment of the
meeting. A director may dissent to a specific action at a meeting, while
assenting to others. The right to dissent to a specific action taken at a
meeting of the Board of Directors or a committee of the board shall not be
available to a director who voted in favor of such action.
ARTICLE IV
OFFICERS
Section 4.1 NUMBER. The officers of the corporation shall be a President,
a Secretary, and a Treasurer, each of whom must be a natural person who is
eighteen years or older and shall be elected by the Board of Directors. Such
other officers and assistant officers as may be deemed necessary may be
elected or appointed by the Board of Directors. Any two or more offices may
be held by the same person.
Section 4.2 ELECTION AND TERM OF OFFICE. The officers of the corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the first meeting of the Board of Directors held after the
annual meeting of the shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
practicable. Each officer shall hold office until his successor shall have
been duly elected and shall have qualified or until his or her death or until
he shall resign or shall have been removed in the manner hereinafter provided.
Section 4.3 REMOVAL AND RESIGNATION. Any officer or agent may be removed
by the Board of Directors at any time, with or without cause, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall not of itself
create contract rights.
An officer or agent may resign at any time by giving written notice of
resignation to the Secretary of the corporation. The resignation is effective
when the notice is received by the corporation unless the notice specifies a
later effective date.
Section 4.4 VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the
Board of Directors for the unexpired portion of the term.
Section 4.5 PRESIDENT. The President shall be the chief executive officer
of the corporation and, subject to the control of the Board of Directors,
shall, in general, supervise and control all of the business and affairs of
the corporation. He or she shall, when present, and in the absence of a Chair
of the Board, preside at all meetings of the shareholders and of the Board of
Directors. He or she may sign, with the Secretary or any other proper officer
of the corporation thereunto authorized by the Board of Directors,
certificates for shares of the corporation and deeds, mortgages, bonds,
contracts, or other instruments which the Board of Directors has authorized to
be executed, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the corporation, or shall be required by law to be
otherwise signed or executed; and in general shall perform all duties incident
to the office of President and such other duties as may be prescribed by the
Board of Directors from time to time.
Section 4.6 VICE PRESIDENT. If elected or appointed by the Board of
Directors, the Vice President (or in the event there be more than one vice
president, the vice presidents in the order designated at the time of their
election, or in the absence of any designation, then in the order of their
election) shall, in the absence of the President or in the event of his or her
death, inability or refusal to act, perform all duties of the President, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice President may sign, with the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary, certificates for shares of the corporation; and shall perform such
other duties as from time to time may be assigned to him by the President or
by the Board of Directors.
Section 4.7 SECRETARY. The Secretary shall: (a) prepare and maintain as
permanent records the minutes of the proceedings of the shareholders and the
Board of Directors, a record of all actions taken by the shareholders or Board
of Directors without a meeting, a record of all actions taken by a committee
of the Board of Directors in place of the Board of Directors on behalf of the
corporation, and a record of all waivers of notice and meetings of
shareholders and of the Board of Directors or any committee thereof (b) ensure
that all notices are duly given in accordance with the provisions of these
Bylaws and as required by law, (c) serve as custodian of the corporate records
and of the seal of the corporation and affix the seal to all documents when
authorized by the Board of Directors, (d) keep at the corporation's registered
office or principal place of business a record containing the names and
addresses of all shareholders in a form that permits preparation of a list of
shareholders arranged by voting group and by class or series of shares within
each voting group, that is alphabetical within each class or series and that
shows the address of, and the number of shares of each class or series held
by, each shareholder, unless such a record shall be kept at the office of the
corporation's transfer agent or registrar, (e) maintain at the corporation's
principal office the originals or copies of the corporation's Articles of
Incorporation, Bylaws, minutes of all shareholders' meetings and records of
all action taken by shareholders without a meeting for the past three years,
all written communications within the past three years to shareholders as a
group or to the holders of any class or series of shares as a group, a list of
the names and business addresses of the current directors and officers, a copy
of the corporation's most recent corporate report filed with the Secretary of
State, and financial statements showing in reasonable detail the corporation's
assets and liabilities and results of operations for the last three years, (f)
have general charge of the stock transfer books of the corporation, unless the
corporation has a transfer agent, (g) authenticate records of the corporation,
and (h) in general, perform all duties incident to the office of secretary and
such other duties as from time to time may be assigned to him by the president
or by the board of the Board of Directors. Assistant Secretaries, if any,
shall have the same duties and powers, subject to supervision by the
Secretary. The directors and/or shareholders may however respectively
designate a person other than the Secretary or Assistant Secretary to keep the
minutes of their respective meetings.
Any books, records, or minutes of the corporation may be in written form
or in any form capable of being converted into written form within a
reasonable time.
Section 4.8 TREASURER. The Treasurer shall: (a) have charge and custody
of and be responsible for all funds and securities of the corporation; (b)
receive and give receipts for moneys due and payable to the corporation from
any source whatsoever, and deposit all such moneys in the name of the
corporation in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of Article V of these Bylaws; and
(c) in general perform all of the duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him or her by
the President or by the Board of Directors.
Section 4.9 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The Assistant
Secretaries, when authorized by the Board of Directors, may sign with the
Chair or Vice Chair of the Board of Directors or the President or a Vice
President certificates for shares of the corporation the issuance of which
shall have been authorized by a resolution of the Board of Directors. The
Assistant Secretaries and Assistant Treasurers, in general, shall perform such
duties as shall be assigned to them by the Secretary or the Treasurer,
respectively, or by the President or the Board of Directors.
Section 4.10 BONDS. If the Board of Directors by resolution shall so
require, any officer or agent of the corporation shall give bond to the
corporation in such amount and with such surety as the Board of Directors may
deem sufficient, conditioned upon the faithful performance of their
respective duties and offices.
Section 4.11 SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 5.1 CONTRACTS. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the corporation, and
such authority may be general or confined to specific instances.
Section 5.2 LOANS. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the Board of Directors. Such authority
may be general or confined to specific instances.
Section 5.3 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
Section 5.4 DEPOSITS. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as the Board of Directors may
select.
ARTICLE VI
SHARES, CERTIFICATES FOR SHARES
AND TRANSFER OF SHARES
Section 6.1 REGULATION. The Board of Directors may make such rules and
regulations as it may deem appropriate concerning the issuance, transfer and
registration of certificates for shares of the corporation, including the
appointment of transfer agents and registrars.
Section 6.2 SHARES WITHOUT CERTIFICATES. Unless otherwise provided by the
Articles of Incorporation or these Bylaws, the board of directors may
authorize the issuance of any of its classes or series of shares without
certificates. Such authorization shall not affect shares already represented
by certificates until they are surrendered to the corporation.
Within a reasonable time following the issue or transfer of shares
without certificates, the corporation shall send the shareholder a complete
written statement of the information required on certificates by the Colorado
Business Corporation Act.
Section 6.3 CERTIFICATES FOR SHARES. If shares of the corporation are
represented by certificates, the certificates shall be respectively numbered
serially for each class of shares, or series thereof, as they are issued,
shall be impressed with the corporate seal or a facsimile thereof, and shall
be signed by the Chair or Vice Chair of the Board of Directors or by the
President or a Vice President and by the Treasurer or an Assistant Treasurer
or by the Secretary or an Assistant Secretary; provided that such signatures
may be facsimile if the certificate is countersigned by a transfer agent, or
registered by a registrar other than the corporation itself or its employee.
Each certificate shall state the name of the corporation, the fact that the
corporation is organized or incorporated under the laws of the State of
Colorado, the name of the person to whom issued, the date of issue, the class
(or series of any class), and the number of shares represented thereby. A
statement of the designations, preferences, qualifications, limitations,
restrictions and special or relative rights of the shares of each class shall
be set forth in full or summarized on the face or back of the certificates
which the corporation shall issue, or in lieu thereof, the certificate may set
forth that such a statement or summary will be furnished to any shareholder
upon request without charge. Each certificate shall be otherwise in such form
as may be prescribed by the Board of Directors and as shall conform to the
rules of any stock exchange on which the shares may be listed.
The corporation shall not issue certificates representing fractional
shares and shall not be obligated to make any transfers creating a fractional
interest in a share of stock. The corporation may, but shall not be obligated
to, issue scrip in lieu of any fractional shares, such scrip to have terms and
conditions specified by the Board of Directors.
Section 6.4 CANCELLATION OF CERTIFICATES. All certificates surrendered to
the corporation for transfer shall be canceled and no new certificates shall
be issued in lieu thereof until the former certificate for a like number of
shares shall have been surrendered and canceled, except as herein provided
with respect to lost, stolen or destroyed certificates.
Section 6.5 LOST, STOLEN OR DESTROYED CERTIFICATES. Any shareholder
claiming that his certificate for shares is lost, stolen or destroyed may make
an affidavit or affirmation of that fact and lodge the same with the
Secretary of the corporation, accompanied by a signed application for a new
certificate.
Thereupon, and upon the giving of a satisfactory bond of indemnity to the
corporation not exceeding an amount double the value of the shares as
represented by such certificate (the necessity for such bond and the amount
required to be determined by the President and Treasurer of the corporation),
a new certificate may be issued of the same tenor and representing the same
number, class and series of shares as were represented by the certificate
alleged to be lost, stolen or destroyed.
Section 6.6 TRANSFER OF SHARES. Subject to the terms of any shareholder
agreement relating to the transfer of shares or other transfer restrictions
contained in the Articles of Incorporation or authorized therein, shares of
the corporation shall be transferable on the books of the corporation by the
holder thereof in person or by his duly authorized attorney, upon the
surrender and cancellation of a certificate or certificates for a like number
of shares. Upon presentation and surrender of a certificate for shares
properly endorsed and payment of all taxes therefor, the transferee shall be
entitled to a new certificate or certificates in lieu thereof. As against the
corporation, a transfer of shares can be made only on the books of the
corporation and in the manner hereinabove provided, and the corporation shall
be entitled to treat the holder of record of any share as the owner thereof
and shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person, whether or not it
shall have express or other notice thereof, save as expressly provided by the
statutes of the State of Colorado.
ARTICLE VII
FISCAL YEAR
The fiscal year of the corporation shall end on the 31st day of October
in each calendar year.
ARTICLE VIII
DISTRIBUTIONS
The Board of Directors may from time to time declare, and the corporation
may pay, distributions on its outstanding shares in the manner and upon the
terms and conditions provided by the Colorado Business Corporation Act and
its Articles of Incorporation.
ARTICLE IX
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words "CORPORATE SEAL."
ARTICLE X
The Board of Directors shall have power, to the maximum extent permitted
by the Colorado Business Corporation Act, to make, amend and repeal the Bylaws
of the corporation at any regular or special meeting of the board unless the
shareholders, in making, amending or repealing a particular Bylaw, expressly
provide that the directors may not amend or repeal such Bylaw. The
shareholders also shall have the power to make, amend or repeal the Bylaws of
the corporation at any annual meeting or at any special meeting called for
that purpose.
AMENDMENTS
ARTICLE XI
EXECUTIVE COMMITTEE
Section 11.1 APPOINTMENT. The Board of Directors by resolution adopted by
a majority of the full Board, may designate two or more of its members to
constitute an Executive Committee. The designation of such Committee and the
delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law.
Section 11.2 AUTHORITY. The Executive Committee, when the Board of
Directors is not in session, shall have and may exercise all of the authority
of the Board of Directors except to the extent, if any, that such authority
shall be limited by the resolution appointing the Executive Committee and
except also that the Executive Committee shall not have the authority of the
Board of Directors in reference to authorizing distributions, filling
vacancies on the Board of Directors, authorizing reacquisition of shares,
authorizing and determining rights for shares, amending the Articles of
Incorporation, adopting a plan of merger or consolidation, recommending to the
shareholders the sale, lease or other disposition of all or substantially all
of the property and assets of the corporation otherwise than in the usual and
regular course of its business, recommending to the shareholders a voluntary
dissolution of the corporation or a revocation thereof, or amending the
Bylaws of the corporation.
Section 11.3 TENURE AND QUALIFICATIONS. Each member of the Executive
Committee shall hold office until the next regular annual meeting of the Board
of Directors following his or her designation and until his or her successor
is designated as a member of the Executive Committee and is elected and
qualified.
Section 11.4 MEETINGS. Regular meetings of the Executive Committee may be
held without notice at such time and places as the Executive Committee may fix
from time to time by resolution. Special meetings of the Executive Committee
may be called by any member thereof upon not less than one day's notice
stating the place, date and hour of the meeting, which notice may be written
or oral, and if mailed, shall be deemed to be delivered when deposited in the
United States mail addressed to the member of the Executive Committee at his
or her business address. Any member of the Executive Committee may waive
notice of any meeting and no notice of any meeting need be given to any member
thereof who attends in person. The notice of a meeting of the Executive
Committee need not state the business proposed to be transacted at the
meeting.
Section 11.5 QUORUM. A majority of the members of the Executive Committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the Executive Committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 11.6 INFORMAL ACTION BY EXECUTIVE COMMITTEE. Any action required
or permitted to be taken by the Executive Committee at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the members of the Executive Committee entitled to
vote with respect to the subject matter thereof.
Section 11.7 VACANCIES. Any vacancy in the Executive Committee may be
filled by a resolution adopted by a majority of the full Board of Directors.
Section 11.8 RESIGNATIONS AND REMOVAL. Any member of the Executive
Committee may be removed at any time with or without cause by resolution
adopted by a majority of the full Board of Directors. Any member of the
Executive Committee may resign from the Executive Committee at any time by
giving written notice to the President or Secretary of the corporation, and
unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
Section 11.9 PROCEDURE. The Executive Committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall
not be inconsistent with these Bylaws. It shall keep regular minutes of its
proceedings and report the same to the Board of Directors for its information
at the meeting thereof held next after the proceedings shall have been taken.
ARTICLE XII
EMERGENCY BY-LAWS
The Emergency Bylaws provided in this Article XII shall be operative
during any emergency in the conduct of the business of the corporation
resulting from a catastrophic event that prevents the normal functioning of
the offices of the Corporation, notwithstanding any different provision in the
preceding articles of the Bylaws or in the Articles of Incorporation of the
corporation or in the Colorado Business Corporation Act. To the extent not
inconsistent with the provisions of this Article, the Bylaws provided in the
preceding articles shall remain in effect during such emergency and upon its
termination the Emergency Bylaws shall cease to be operative.
During any such emergency:
(a) A meeting of the Board of Directors may be called by any officer or
director of the corporation. Notice of the time and place of the meeting shall
be given by the person calling the meeting to such of the directors as it may
be feasible to reach by any available means of communication. Such notice
shall be given at such time in advance of the meeting as circumstances permit
in the judgment of the person calling the meeting.
(b) At any such meeting of the Board of Directors, a quorum shall consist
of the number of directors in attendance at such meeting.
(c) The Board of Directors, either before or during any such emergency,
may, effective in the emergency, change the principal office or designate
several alternative principal offices or regional offices, or authorize the
officers so to do.
(d) The Board of Directors, either before or during any such emergency,
may provide, and from time to time modify, lines of succession in the event
that during such an emergency any or all officers or agents of the corporation
shall for any reason be rendered incapable of discharging their duties.
(e) No officer, director or employee acting in accordance with these
Emergency Bylaws shall be liable except for willful misconduct.
(f) These Emergency Bylaws shall be subject to repeal or change by
further action of the Board of Directors or by action of the shareholders, but
no such repeal or change shall modify the provisions of the next preceding
paragraph with regard to action taken prior to the time of such repeal or
change. Any amendment of these Emergency Bylaws may make any further or
different provision that may be practical and necessary for the circumstances
of the emergency.
CERTIFICATE
I hereby certify that the foregoing Amended Bylaws, consisting of twenty
(20) pages, including this page, constitute the Bylaws of Superior Holdings,
Inc., adopted by the Board of Directors and Shareholders of the corporation
as of March 28, 1998.
/S/ Mark T. Thatcher, Esq.
_______________________________
MARK T. THATCHER,
Secretary
UNANIMOUS CONSENT MINUTES OF
THE BOARD OF DIRECTORS OF
SUPERIOR HOLDINGS, INC.
September 1, 1996
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned, being all of the Directors of SUPERIOR HOLDINGS, INC. do hereby
waive any and all notice that may be required to be given with respect to a
meeting of the Directors of the Corporation and do hereby unanimously take,
ratify, confirm and approve the following actions, as of September 1, 1996:
1.RESOLVED, that these Minutes of action shall constitute the record of an
Annual Meeting of the Board of Directors of SUPERIOR HOLDINGS, INC., and when
signed by all of the Directors, the Secretary of the Corporation, or any other
proper officer, is hereby authorized to certify any of the actions hereinafter
taken of this Corporation, on the date hereof, in accordance with the
requirements established by law.
2.RESOLVED, that the following provision is hereby adopted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the
directors and stockholders:
The Board of Directors of the Corporation is hereby empowered to fix the value
of and to authorize the issuance from time to time of shares of its stock of
any class, whether now or hereafter authorized, or securities convertible into
shares of its stock of any class or classes, whether now or hereafter
authorized.
3.RESOLVED, that all other actions taken by the officers of the Corporation
since the date of the last Annual Minutes of the Board of Directors are hereby
ratified, approved and confirmed.
IN WITNESS WHEREOF, the undersigned Directors have evidenced their
approval of the above proceedings as of the date first above mentioned.
_____________________________
MARK T. THATCHER
_____________________________
CHRISTOPHER O. WERNER
UNANIMOUS CONSENT MINUTES OF
THE BOARD OF DIRECTORS OF
SUPERIOR HOLDINGS, INC.
September 1, 1996
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned, being all of the Directors of SUPERIOR HOLDINGS, INC. do hereby
waive any and all notice that may be required to be given with respect to a
meeting of the Directors of the Corporation and do hereby unanimously take,
ratify, confirm and approve the following actions, as of September 1, 1996:
1.RESOLVED, that these Minutes of action shall constitute the record of an
Annual Meeting of the Board of Directors of SUPERIOR HOLDINGS, INC., and when
signed by all of the Directors, the Secretary of the Corporation, or any other
proper officer, is hereby authorized to certify any of the actions hereinafter
taken of this Corporation, on the date hereof, in accordance with the
requirements established by law.
2.RESOLVED, that the following provision is hereby adopted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the
directors and stockholders:
The Board of Directors may classify or reclassify any unissued stock by
setting or changing in any one or more respects, from time to time before
issuance of such stock, the preferences, conversion or other rights, voting
powers, restrictions, limitations as to distributions, qualifications, and
terms or conditions of redemption of such stock.
3.RESOLVED, that all other actions taken by the officers of the Corporation
since the date of the last Annual Minutes of the Board of Directors are hereby
ratified, approved and confirmed.
IN WITNESS WHEREOF, the undersigned Directors have evidenced their
approval of the above proceedings as of the date first above mentioned.
____________________________
MARK T. THATCHER
____________________________
CHRISTOPHER O. WERNER
UNANIMOUS CONSENT MINUTES OF
THE BOARD OF DIRECTORS OF
SUPERIOR HOLDINGS, INC.
September 1, 1996
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned, being all of the Directors of SUPERIOR HOLDINGS, INC. do hereby
waive any and all notice that may be required to be given with respect to a
meeting of the Directors of the Corporation and do hereby unanimously take,
ratify, confirm and approve the following actions, as of September 1, 1996:
1.RESOLVED, that these Minutes of action shall constitute the record of an
Annual Meeting of the Board of Directors of SUPERIOR HOLDINGS, INC., and
when signed by all of the Directors, the Secretary of the Corporation, or any
other proper officer, is hereby authorized to certify any of the actions
hereinafter taken of this Corporation, on the date hereof, in accordance with
the requirements established by law.
2.RESOLVED, that the following provision is hereby adopted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the
directors and stockholders:
The Corporation shall issue shares of stock of any class now or hereafter
authorized, or any securities exchangeable for, or convertible into such
shares, or warrants or other instruments evidencing rights or options to
subscribe for, or otherwise acquire such shares, only if the issuance of such
shares or such securities exchangeable for, or convertible into such shares,
or such warrants or any other instruments evidencing rights or options to
subscribe for, purchase or otherwise acquire such shares, shall be authorized
by the unanimous vote of all of the directors comprising the Board of
Directors of the Corporation.
In the event that the issuance of such shares, or such securities exchangeable
for, or convertible into such shares, or such warrants or any other
instruments evidencing rights or options to subscribe for, purchase or
otherwise acquire such shares, shall be authorized by the unanimous vote of
all of the directors comprising the Board of Directors of the Corporation, the
issuance of such shares or such securities exchangeable for, or convertible
into such shares, or such warrants or, any other instruments evidencing rights
or options to subscribe for, purchase or otherwise acquire such shares, shall
be made for such consideration as the Board of Directors of the Corporation by
the unanimous vote of all of the directors thereof shall deem advisable.
3.RESOLVED, that all other actions taken by the officers of the Corporation
since the date of the last Annual Minutes of the Board of Directors are hereby
ratified, approved and confirmed.
IN WITNESS WHEREOF, the undersigned Directors have evidenced their
approval of the above proceedings as of the date first above mentioned.
____________________________
MARK T. THATCHER
____________________________
CHRISTOPHER O. WERNER
UNANIMOUS CONSENT MINUTES OF
THE BOARD OF DIRECTORS OF
SUPERIOR HOLDINGS, INC.
September 1, 1996
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned, being all of the Directors of SUPERIOR HOLDINGS, INC. do hereby
waive any and all notice that may be required to be given with respect to a
meeting of the Directors of the Corporation and do hereby unanimously take,
ratify, confirm and approve the following actions, as of September 1, 1996:
1.RESOLVED, that these Minutes of action shall constitute the record of an
Annual Meeting of the Board of Directors of SUPERIOR HOLDINGS, INC., and when
signed by all of the Directors, the Secretary of the Corporation, or any other
proper officer, is hereby authorized to certify any of the actions hereinafter
taken of this Corporation, on the date hereof, in accordance with the
requirements established by law.
2.RESOLVED, that newly created directorships resulting from any increase of
the authorized number of Directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause shall be filled by a majority vote of the remaining
Directors, though less than a quorum, and the Directors so chosen shall hold
office for a term expiring at the next annual meeting of shareholders at which
a successor shall be elected and shall qualify. The shareholders shall not be
entitled to fill a vacancy created on the Board of Directors.
3.RESOLVED, that all other actions taken by the officers of the Corporation
since the date of the last Annual Minutes of the Board of Directors are hereby
ratified, approved and confirmed.
IN WITNESS WHEREOF, the undersigned Directors have evidenced their
approval of the above proceedings as of the date first above mentioned.
_________________________
MARK T. THATCHER
_________________________
CHRISTOPHER O. WERNER
UNANIMOUS CONSENT MINUTES OF
THE BOARD OF DIRECTORS OF
SUPERIOR HOLDINGS, INC.
September 1, 1996
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned, being all of the Directors of SUPERIOR HOLDINGS, INC. do hereby
waive any and all notice that may be required to be given with respect to a
meeting of the Directors of the Corporation and do hereby unanimously take,
ratify, confirm and approve the following actions, as of September 1, 1996:
1.RESOLVED, that these Minutes of action shall constitute the record of an
Annual Meeting of the Board of Directors of SUPERIOR HOLDINGS, INC., and when
signed by all of the Directors, the Secretary of the Corporation, or any other
proper officer, is hereby authorized to certify any of the actions hereinafter
taken of this Corporation, on the date hereof, in accordance with the
requirements established by law.
2.RESOLVED, that the officers shall be elected annually by the Board of
Directors at its first meeting following the annual meeting of stockholders,
except where a longer term is expressly provided in an employment contract
duly authorized and approved by the Board of Directors. In any such employment
contract, an officer may be employed for a term in excess of one year and for
so long a term as shall be determined by the Board of Directors otherwise in
accordance with the Colorado Business Corporation Act.
3.RESOLVED, that all other actions taken by the officers of the Corporation
since the date of the last Annual Minutes of the Board of Directors are
hereby ratified, approved and confirmed.
IN WITNESS WHEREOF, the undersigned Directors have evidenced their
approval of the above proceedings as of the date first above mentioned.
_________________________
MARK T. THATCHER
_________________________
CHRISTOPHER O. WERNER
UNANIMOUS CONSENT MINUTES OF
THE BOARD OF DIRECTORS OF
SUPERIOR HOLDINGS, INC.
September 1, 1996
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned, being all of the Directors of SUPERIOR HOLDINGS, INC. do hereby
waive any and all notice that may be required to be given with respect to a
meeting of the Directors of the Corporation and do hereby unanimously take,
ratify, confirm and approve the following actions, as of September 1, 1996:
1.RESOLVED, that these Minutes of action shall constitute the record of an
Annual Meeting of the Board of Directors of SUPERIOR HOLDINGS, INC., and when
signed by all of the Directors, the Secretary of the Corporation, or any other
proper officer, is hereby authorized to certify any of the actions hereinafter
taken of this Corporation, on the date hereof, in accordance with the
requirements established by law.
2.RESOLVED, that Members of the Board of Directors and the shareholders at any
annual or special meeting may participate in a meeting by means of a
conference telephone, videolink or similar communications equipment if all
persons participating in the meeting can hear and speak to each other at the
same time. Participation in a meeting by these means constitutes presence in
person at a meeting.
3.RESOLVED, that all other actions taken by the officers of the Corporation
since the date of the last Annual Minutes of the Board of Directors are hereby
ratified, approved and confirmed.
IN WITNESS WHEREOF, the undersigned Directors have evidenced their
approval of the above proceedings as of the date first above mentioned.
_________________________
MARK T. THATCHER
_________________________
CHRISTOPHER O. WERNER
UNANIMOUS CONSENT MINUTES OF
THE BOARD OF DIRECTORS OF
SUPERIOR HOLDINGS, INC.
September 15, 1996
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned, being all of the Directors of SUPERIOR HOLDINGS, INC. do hereby
waive any and all notice that may be required to be given with respect to a
meeting of the Directors of the Corporation and do hereby unanimously take,
ratify, confirm and approve the following actions, as of September 15, 1996:
WHEREAS, certain individuals have performed useful and valuable services
for and on behalf of the Corporation without remuneration, and the Board of
Directors has determined that it is in the best interest of the Corporation to
issue stock to the individuals who have performed such services for and on
behalf of the Corporation in payment for such services.
1.RESOLVED: That the Corporation issue the following number of shares of
Common Stock to the following named persons, in consideration for past
services performed by such persons for and on behalf of the Corporation, as
described below, which services are deemed by the Board of Directors to have
values of not less than the amounts shown below:
Name Number of Shares Consideration Value
Christopher O. Werner Nine Hundred Thousand Services Rendered
(900,000)
Mark T. Thatcher Nine Hundred Thousand Services Rendered
(900,000)
2.RESOLVED, that these Minutes of action shall constitute the record of an
Annual Meeting of the Board of Directors of SUPERIOR HOLDINGS, INC., and when
signed by all of the Directors, the Secretary of the Corporation, or any other
proper officer, is hereby authorized to certify any of the actions hereinafter
taken of this Corporation, on the date hereof, in accordance with the
requirements established by law.
3.RESOLVED, that all other actions taken by the officers of the Corporation
since the date of the last Annual Minutes of the Board of Directors are hereby
ratified, approved and confirmed.
IN WITNESS WHEREOF, the undersigned Directors have evidenced their
approval of the above proceedings as of the date first above mentioned.
_________________________
MARK T. THATCHER
_________________________
CHRISTOPHER O. WERNER
1997
SUPERIOR HOLDINGS, INC.
(Tito's Cantina)
AREA DEVELOPER AGREEMENT
This Agreement is entered into by and between the GRANTOR and
DEVELOPER named herein to be effective on the EFFECTIVE DATE set forth below.
ARTICLE I
FUNDAMENTAL PROVISIONS
1.1 EFFECTIVE DATE: The date below the signature of the last party to
sign on Page 37 below.
1.2 GRANTOR:
Superior Holdings, Inc., a Colorado corporation.
1.3 GRANTOR'S ADDRESS:
360 Thames Street
Newport, RI 02840
1.4 DEVELOPER:
1.5 DEVELOPER'S ADDRESS:
1.6 OTHER OWNERS:
1.7 OTHER OWNERS' ADDRESSES:
1.8 GUARANTORS: Intentionally Omitted
1.9 GUARANTORS' ADDRESSES: Intentionally Omitted
1.10 DEVELOPMENT AREA: A geographical area consisting of the
counties/territories listed on Exhibit "A" (see Section 3.2 for exclusions
and reservations) referred to by GRANTOR as:
PUERTO RICO DEVELOPMENT AREA.
1.11 TERM: Twenty (20) years from the EFFECTIVE DATE.
1.12 MINIMUM DEVELOPMENT SCHEDULE:
NUMBER OF YEARS FROM MINIMUM NUMBER OF
EFFECTIVE DATE RESTAURANTS OPEN
AND IN OPERATION
1 __
2 __
3 __
4 __
5 __
1.13 RESTAURANT: A restaurant located within the DEVELOPMENT
AREA, using the TITO'S CANTINA SYSTEM (the "SYSTEM") to establish TITO'S
CANTINA franchises and distribution of allied food and beverage products, for
which a UNIT FRANCHISE AGREEMENT has been fully executed between DEVELOPER or
any successor thereto and a FRANCHISEE (sometimes also referred to in this
Agreement as a TITO'S CANTINA restaurant).
1.14 UNIT DEVELOPMENT AGREEMENT ("UDA"): The then current form of
agreement between GRANTOR or any predecessor or successor thereto and an
individual or entity ("DEVELOPER") which grants the DEVELOPER the exclusive
right to establish one (1) or more restaurant(s) within a specified
geographical area.
1.15 UNIT FRANCHISE AGREEMENT ("UFA"): The then current
agreement between DEVELOPER or any predecessor or successor thereto and a
FRANCHISEE which establishes, operates and expands a Tito'S Cantina restaurant
at a specific location. Each UFA shall provide for the following payments:
TYPE OF PAYMENT RATE IN EFFECT AS OF
EFFECTIVE DATE
(a) Royalty Payment 6% of Gross Sales
(b) Transfer Fee $3,000.00
(c) Franchise Fee $
THESE RATES/AMOUNTS MAY BE CHANGED BY GRANTOR AT ANY TIME AND FROM TIME TO
TIME IN GRANTOR'S SOLE DISCRETION; PROVIDED, HOWEVER, THAT NO CHANGES TO THE
FEES SHALL AFFECT THE SHARING RATIO BETWEEN THE GRANTOR AND THE DEVELOPER.
1.17 MANUAL(S): The compilation of operating data, standards,
specifications, operating procedures, checklists and other information used in
connection with the establishment (as outlined in the Restaurant Development
Manual), operations (as outlined in the Operations Manual), and marketing (as
outlined in the Marketing Manual) of a Tito's Cantina restaurant, training of
personnel (as outlined in the Training Manual), and activities of DEVELOPER
(as outlined in the Area Developer Manual), as promulgated, amended or
supplemented by GRANTOR from time to time whether now or hereafter. This
compilation and any other embodiment thereof written, printed or
electronically stored, whether bound together separately in one or more books,
binders, video cassettes, or other electronic storage media, together with all
amendments, additions, and/or supplements thereto shall be collectively
referred to as the MANUAL(S) and individually referred to as the Restaurant
Development manual, Marketing Manual, Training Manual or Area Developer
Manual. By this reference the MANUAL(S) and any other specifications,
standards, policies or operating procedures communicated to DEVELOPER in
writing as the same may now exist or may hereafter be promulgated,
supplemented, modified or amended by GRANTOR, are incorporated by reference
herein as if set forth in full at this point.
1.18 SYSTEM: MARKS an other proprietary information, know-how
and trade secrets compiled as promulgated, amended or supplemented by GRANTOR
from time to time whether now or hereafter, for use in connection with the
production, sales and marketing of Tito's Cantina Mexican food and allied food
and beverage products, and the operation and marketing aspects of Tito's
Cantina restaurants, including, without limitation, the MANUAL, formulas,
recipes, processes, formats and procedures.
1.19 MARKS: Trademarks, trade name and service marks listed on
Schedule "1" and any other marks or names registered or unregistered, adopted,
used by GRANTOR and incorporated into Schedule "1" from time to time whether
now or hereafter in the SYSTEM including, without limitation, the service
marks and name "Tito's Cantina" and the Tito's Cantina logo which form part
of the SYSTEM.
1.20 TITO'S CANTINA NETWORK: GRANTOR, all Tito's Cantina
restaurants, and all DEVELOPERS.
1.21 ADI: Area of Dominant Influence, as determined by the
Arbitron Company, a division of Controlled date, 1350 Avenue of the Americas,
New York, New York 10019 from time to time.
1.22 EFFECT OF REFERENCE TO FUNDAMENTAL PROVISIONS: Each of
the foregoing definitions and fundamental provisions shall be construed in
conjunction with and limited by the references thereto in other provisions of
this Agreement.
ARTICLE II
WARRANTIES AND REPRESENTATIONS
2.1 WARRANTIES AND REPRESENTATIONS BY DEVELOPER: DEVELOPER,
GUARANTOR and OTHER OWNERS jointly and severally hereby warrant, represent,
covenant and acknowledge to GRANTOR that:
(a) they have had no part in the creation or development of the
SYSTEM, the MARKS, the MANUAL and other proprietary information provided by
GRANTOR;
(b) adherence to the high quality standards, as set forth in the
MANUAL, is reasonable and is necessary and essential to the overall success of
the restaurants licensed hereunder, and to the image and success of each other
Tito's Cantina restaurant in the Tito's Cantina NETWORK;
(c) they have had the opportunity to examine relevant data
concerning other restaurants or outlets that may be licensed or owned by the
GRANTOR;
(d) ventures in the fast-food industry, including the business
venture contemplated by DEVELOPER under this Agreement, involve a high degree
of financial risk and depend to a large extent upon the abilities of
DEVELOPER AND OTHER OWNERS;
(e) they have not relied upon, nor has GRANTOR made, any warranties,
expressed or implied, as to the potential success of the business venture,
contemplated herein, except for information concerning the financial results
of GRANTOR;
(f) they understand GRANTOR'S policy requiring all persons and
entities having any interest in DEVELOPER to be bound by the provisions of
this Agreement regarding confidentiality of proprietary information and
unfair competition;
(g) DEVELOPER understands that GRANTOR'S business plan and
restaurant development philosophy call for the establishment of sufficient
restaurants within the DEVELOPMENT AREA to attain a ratio of approximately one
(1) restaurant for each thirty thousand (30,000) persons residing therein;
(h) except as to the contracts listed on Exhibit "D", they have no
relationship contractual or otherwise, with GRANTOR other than as exists
pursuant to the terms of this Agreement;
(i) they have the full right and authority to enter into this
Agreement without joinder of any other person; and
(j) all information and materials, including without limitation all
financial statements and business plans, provided to GRANTOR by them
individually or collectively is true and correct and complete to the best of
their knowledge, information, and belief.
(k) they understand that the SYSTEM and MANUAL are continually
evolving and that, subject to the provisions of this Agreement, GRANTOR has
the right in its sole and absolute discretion to make changes therein from
time to time whether now or hereafter.
(l) they acknowledge that the solicitation of INVESTORS (if
necessary) is a strictly regulated activity which must be conducted in strict
accordance with applicable federal and state laws; and
2.2 EFFECT OF DEVELOPER'S WARRANTIES AND REPRESENTATIONS.
GRANTOR's obligations and DEVELOPER's rights pursuant to this Agreement are
expressly conditioned upon the continued truth of the warranties and
representations set forth in Section 2.1 above at the time of execution hereof
and throughout the term hereof and any renewals or extensions thereof.
2.3 WARRANTIES AND REPRESENTATIONS BY GRANTOR: GRANTOR represents and
warrants to DEVELOPER that:
(a) GRANTOR owns the MARKS and has all rights necessary to use the
SYSTEM and to grant DEVELOPER the right to use the SYSTEM; and
(b) GRANTOR has all requisite power to execute, deliver and perform
its undertakings under this Agreement, its execution, delivery and performance
of this Agreement have been duly authorized by all necessary action on its
part, and this Agreement constitutes the valid and binding agreement of it,
enforceable in accordance with its terms.
ARTICLE III
GRANT
3.1 GRANT: For in consideration of payment of the ROYALTY,
TRANSFER AND FRANCHISE FEES and other good and valuable consideration
including, without limitation, the personal skill and qualifications of
DEVELOPER (and/or OTHER OWNERS, as appropriate) and the other promises and
covenants of DEVELOPER contained herein, the receipt and sufficiency of which
are hereby acknowledged, GRANTOR hereby grants to DEVELOPER, subject to the
Exclusions and Reservations set forth in Section 3.2 below:
(a) The exclusive right to act as Tito's Cantina Area Developer
within the DEVELOPMENT AREA for the TERM, as the obligations and
privileges thereof are set forth in this Agreement.
(b) The non-exclusive right to approve sites within the DEVELOPMENT
AREA for the purpose of establishing Tito's Cantina restaurants.
3.2 EXCLUSIONS AND RESERVATIONS FROM GRANT:
(a) Exhibit "B" attached hereto and made a part hereof sets forth a
list of DEVELOPERS licensed by GRANTOR prior to the EFFECTIVE DATE and with
regard to each DEVELOPER the location of said DEVELOPER'S restaurants.
Exhibit "C" attached hereto and made a part hereof sets forth a list of the
DEVELOPERS granted AREA DEVELOPER AGREEMENTS prior to the EFFECTIVE DATE and
with regard to each DEVELOPER the development area described in such AREA
DEVELOPMENT AGREEMENT.
3.3 SUBJECT TO OTHER PROVISIONS: The grant of the rights set
forth above and the duties, rights and privileges of DEVELOPER therein shall
be subject to all of the other terms and provisions of this Agreement.
3.4 CHARACTER OF GRANT: Except as expressly provided herein
in Section 9.1(d) (right to produce business cards, stationery, and
advertising), the grant is territorial only and does not in any way grant or
imply any license to use the MARKS, SYSTEM, or other proprietary rights by
DEVELOPER.
3.5 LIMITATION ON AREA: It is expressly understood and agreed
that neither this Agreement nor any UNIT FRANCHISE AGREEMENT entered into
pursuant to this Agreement shall create any rights of DEVELOPER or obligations
to GRANTOR with respect to territory outside boundaries of the DEVELOPMENT
AREA.
3.6 CHANGES IN ADI'S: ADI boundaries are determined from time
to time by the Arbitron Company based upon its evaluation of factors it
considers relevant. No change in the ADI definition shall have any effect on
the DEVELOPMENT AREA as described in Section 1.10, provided however, that such
changes may affect Co-op membership of DEVELOPERS pursuant to the provisions
of Section 8.4 below.
ARTICLE IV
PAYMENTS
4.1 PAYMENTS BY DEVELOPER:
(a)Consideration for Grant. Contemporaneously with
the execution of this Agreement, the grant of rights hereby and the
reservation of the DEVELOPMENT AREA during the term hereof, DEVELOPER shall
pay to GRANTOR:
(i) $___________.00
(non-refundable Area Development Fee)
(ii)fifty percent (50%) of Tito's Cantina ROYALTY, TRANSFER
and FRANCHISE fees received by the DEVELOPER
for the duration of this Agreement.
(b)Other Developer Expenses. In addition to the
payments set forth above, DEVELOPER shall be responsible for payment of his
expenses relating to training, travel, advertising, and all other costs or
expenses in connection with is duties as set forth herein.
ARTICLE V
DUTIES OF DEVELOPER
5.1 GENERAL DUTIES OF DEVELOPER: Developer shall:
(a) Acquire sufficient knowledge and experience involving the Tito's
Cantina SYSTEM so as to be able to provide service to all restaurants within
the territory and in accordance with the provisions of this Agreement
("Developer Services").
(b) Cause appropriate DEVELOPER personnel to attend all of GRANTOR'S
mandatory training programs for DEVELOPERS.
(c) Cause appropriate DEVELOPER personnel to attend each of the
restaurant openings administered by GRANTOR'S personnel.
5.2 SALES DUTIES: DEVELOPER shall:
(a) Conduct regular periodic advertising and marketing programs for
the solicitation of store products in the DEVELOPMENT AREA in accordance with
the DEVELOPER'S business plan submitted pursuant to Section 5.6(a) of this
Agreement and in accordance with the minimum advertising expenditure
guidelines set forth in the Area Developer Manual;
(b) Interview prospects referred by GRANTOR;
(c) DEVELOPER shall comply with all applicable laws and regulations.
5.3 DEVELOPMENT DUTIES: DEVELOPER shall be responsible for
the following activities:
(a) Provide restaurants with advice and consultation regarding the
establishment, construction, equipping and opening of restaurants;
(b) Provide a restaurant opening team as specified in the Area
Developer Manual from DEVELOPER'S personnel after the first two (2) openings.
5.4 FRANCHISE SERVICE DUTIES: DEVELOPER shall provide
restaurants with ongoing consultation concerning the operations of Tito's
Cantina restaurants consistent with the requirements of the Area Developer
Manual ("Services") which shall include:
(a) Visit the premises of each restaurant at least twice a week;
(b) Provide at least semi-annual evaluations of
restaurant premises, operations, and compliance with operating standards as
set forth in the MANUAL (referred to in the MANUAL AS Quality, Service,
Cleanliness and Compliance, or ("QSCC"). DEVELOPER shall report the results
of such inspections to the GRANTOR in writing on a timely basis in order that
appropriate action may be taken, if necessary;
(c) Act as liaison with restaurants for the purpose of communicating
all programs established by GRANTOR;
(d) Coordinate the activities of restaurant local advertising
Co-ops, as designated or created by GRANTOR in the DEVELOPMENT AREA in
accordance with the By-Laws of such Co-ops and the Area Developer Manual.
5.5 REPORTING: DEVELOPER shall maintain in accordance with
the standards, forms, methods, and procedures set forth from time to time in
the Area Developer Manual and in other communications from GRANTOR to
DEVELOPER, the following information:
(a) Sales activity reporting, including number of advertisements,
responses, repeat customer base and prospects;
(b) Evaluation reports;
(c) Quarterly and annual RESTAURANT income statements, balance
sheets and cash flow statements, as GRANTOR may request under the terms of
the UFA's;
(d) Periodic RESTAURANT state and federal tax returns; and
(e) Other Information. GRANTOR may require DEVELOPER to submit
other information relating to the operation of the restaurants established
pursuant to this Agreement or to DEVELOPER'S business, as set forth from time
to time in the Area Developer Manual. Such reports will be derived from data
developed and maintained by DEVELOPER in the ordinary course of business or as
defined and redefined from time to time in the Area Developer Manual.
All reports based upon such information shall be prepared in accordance
with all applicable laws and regulations, generally accepted accounting
principles ("GAAP") or cash method consistently applied, and the Area
Developer Manual and the annual reports shall be certified as true and
accurate by DEVELOPER or its authorized representative to the best knowledge
of DEVELOPER or such representative. With respect to financial statements
which include information received from RESTAURANTS, DEVELOPER shall only be
responsible for providing such statements to GRANTOR after DEVELOPER has
received the information from the restaurant and DEVELOPER shall not be in
default of its obligations hereunder because of delays caused by delays on the
part of the restaurant. Additionally, DEVELOPER'S certification of
information received from the restaurants shall be limited to certifying that
such information is a true and correct compilation of the information received
by DEVELOPER from the restaurants. DEVELOPER shall provide such reports to
GRANTOR as GRANTOR may from time to time request or as may be specified in
the Area Developer Manual.
5.6 MISCELLANEOUS DUTIES: In addition to the duties outlined
above, DEVELOPER shall assume responsibility for the following:
(a)Business Plan. DEVELOPER shall submit to GRANTOR a
business plan (the "Business Plan"), prepared in accordance with a mutually
agreed format and chart of accounts. The Business Plan shall be renewed
annually and shall be submitted to GRANTOR at least thirty (30) days before
the end of each calendar year.
(b)Taxes and Other Payments. DEVELOPER shall pay all
fees, taxes and other payments as specified in this Agreement.
(c)Tito's Cantina National programs. DEVELOPER shall
assist in the implementation of all Tito's Cantina National Programs
throughout the DEVELOPMENT AREA.
(d)Insurance and Indemnification.
(i)Mandatory Coverage. DEVELOPER shall maintain in full force and effect the
following insurance during the term of this Agreement:
(1)comprehensive general liability insurance including food products liability
insurance of not less than Five Hundred Thousand and No/100 Dollars ($500,000)
per person and One Million and No/100 Dollars ($1,000,000) per occurrence and
not less than One Hundred Thousand and No/100 Dollars ($100,000) property
damage;
(2)worker's compensation insurance as required by applicable law; and
(3)all other insurance required by law (including applicable alcoholic
beverage law) or by GRANTOR as set forth in the Area Developer Manual.
(Note: the Area Developer Manual may provide for or recommend certain
operational insurance coverages.)
(ii)Additional Insured. Each policy shall be issued by an insurer
satisfactory to GRANTOR, shall name GRANTOR as additional insured and shall
not be canceled without thirty (30) days prior written notice to GRANTOR. The
general liability insurance shall insure GRANTOR, DEVELOPER, and the officers
and employees of each of them against any liability for personal injury,
death, or property damage arising or occurring upon or in connection with any
DEVELOPER'S business whether the injury occurs or the cause arises on or off
the premises of DEVELOPER's business.
(iii)Certificate of Insurance. At least thirty (30) days after the date
hereof, and upon any change, and is applicable not less than annually
thereafter, DEVELOPER shall deliver to GRANTOR a certificate with respect to
such insurance showing that all required insurance is in full force and
effect. If DEVELOPER fails to maintain any required insurance, GRANTOR may,
but shall not be required to, obtain such insurance and DEVELOPER shall
reimburse GRANTOR for any premiums paid by him for any such insurance.
(f)Nondiscriminatory Activity. DEVELOPER shall not
discriminate in any manner in the provision of services to restaurants in the
DEVELOPMENT AREA. DEVELOPER shall treat all restaurant employees fairly and
equitably at all times, in strict accordance with this Agreement and
Manual(s).
(g)Brokers. DEVELOPER shall be permitted to utilize
brokers, agents, or other third parties in performance with its obligations,
subject to GRANTOR's right to veto any particular such person and subject to
DEVELOPER's obligation to indemnify GRANTOR, for any and all claims resulting
from DEVELOPER's use of such person in the performance of its obligations as
set forth in ARTICLE XV hereof. DEVELOPER shall comply promptly and
accurately with all requests for information, documents, and assistance from
GRANTOR's attorneys relating to compliance with applicable laws.
(h)Comply with Agreement. DEVELOPER shall fully
comply with all of the terms of this Agreement.
(i)DEVELOPER shall abide by and adhere to the
standards and operating procedures set forth in the MANUAL.
(j)DEVELOPER agrees to accept and comply with such
modifications, revisions, and additions to the MANUAL(S) on or before the
effective date specified by GRANTOR with respect to any changes which have
been approved as provided in Section 17.7 of this Agreement.
ARTICLE VI
DUTIES OF GRANTOR
6.1 THE TITO'S CANTINA SYSTEM: GRANTOR shall maintain,
update and refine the Tito's Cantina SYSTEM and the MANUALS, as may be
necessary, in the sole discretion of GRANTOR, to insure the continued
functionality thereof.
6.2 PROTECTION OF MARKS: GRANTOR shall, at GRANTOR's
expense, take reasonable measures to protect and defend the MARKS. DEVELOPER
shall cooperate fully with GRANTOR in GRANTOR's efforts and activities in
this regard.
6.3 DELIVER PROPRIETARY INFORMATION: GRANTOR shall provide
DEVELOPER with initial copies of the MANUALS. Periodically thereafter as
GRANTOR, in its sole discretion, deems necessary, GRANTOR shall provide to
DEVELOPER updates or additions to the MANUALS in order for DEVELOPER to remain
abreast of recent developments in matters relating to the operation of Tito's
Cantina restaurants, the conduct of Area Development Programs, and the
provision of Support Services to the restaurants. DEVELOPER hereby
acknowledges that such copies of the MANUALS and any updates or additions
thereto are the property of GRANTOR and are merely loaned to DEVELOPER during
the term of this Agreement.
6.4 SALES MATERIALS: GRANTOR shall, at GRANTOR's expense,
provide to DEVELOPER an initial supply of sales and prospecting materials.
GRANTOR shall make available at a reasonable cost additional copies of the
sales prospecting materials, and any supplements, or renewals thereof to
DEVELOPER at DEVELOPER's sole expense, upon DEVELOPER's request.
6.5 TRAINING PROGRAM:
(a)Developer Training. GRANTOR shall, at GRANTOR's
expense, provide each DEVELOPER with training regarding the Tito's Cantina
CONCEPT to enable DEVELOPER to perform its obligations under this Agreement.
6.6 OPENING ASSISTANCE: With respect to the opening of the
first two (2) restaurants which shall be opened within the DEVELOPMENT AREA by
DEVELOPER pursuant to this Agreement, GRANTOR shall provide GRANTOR personnel
and/or authorized representatives (whether one or more) to attend the opening
and assist in the pre-opening training of restaurant employees and in opening
day operations.
6.7 ONGOING CONSULTATION: Other ongoing consultation,
advice, and assistance as GRANTOR may deem appropriate, from time to time, to
assist DEVELOPER in the performance of its obligations under this Agreement,
to maintain the high standards and image of the Tito's Cantina NETWORK, and to
improve the Tito's Cantina SYSTEM.
ARTICLE VII
COMPLIANCE WITH GOVERNMENTAL REGULATIONS
7.1 LICENSING AND COMPLIANCE WITH LAWS:
(A) GRANTOR and DEVELOPER shall obtain and maintain in current
status all licenses and permits necessary for the performance of its duties as
set forth in this Agreement, provided, however, that nothing in this Section
7.1(b) shall be deemed to imply or require that GRANTOR is obligated to
qualify to do business in the DEVELOPMENT AREA.
ARTICLE VIII
ADVERTISING
8.1 REQUIRED DEVELOPER EXPENDITURES FOR MARKETING AND ADVERTISING: Each
UNIT FRANCHISE AGREEMENT provides that DEVELOPER shall on an annual basis
spend three percent (3%) of GROSS SALES for local and/or regional advertising.
8.2 COOPERATIVE ADVERTISING PROGRAMS:
(a) At such time as GRANTOR shall determine is appropriate,
DEVELOPER shall coordinate the establishment of a regional cooperative
advertising association (Co-op), and restaurants within each ADI shall be
required to become members of such Co-op.
(b) GRANTOR shall establish bylaws for such Co-ops, and DEVELOPER
shall abide by such bylaws and rules. GRANTOR shall have the right to make
amendments to the bylaws and rules as it deems necessary, in its sole
discretion, to facilitate the objectives of the Co-op. The bylaws and rules
may include, without limitation, the obligation the restaurant to pay all or
any portion of restaurant's required expenditures for marketing and
advertising [three percent (3%) of GROSS SALES] to the Co-op of which the
restaurant is a member, provided, however, that the required payment to the
Co-op shall not exceed three percent (3%) of GROSS SALES.
(c) DEVELOPER shall coordinate and review the administration of each
Co-op established within the DEVELOPMENT AREA.
ARTICLE IX
TRADE SECRETS AND TRADEMARKS
9.1 Trademarks.
(a)Ownership. DEVELOPER acknowledges and agrees that
GRANTOR owns the MARKS and the goodwill associated therewith, and that
DEVELOPER had no part in the creation or development of the MARKS.
(b)No Dispute by DEVELOPER. DEVELOPER shall not, at
any time, question, or attack the validity of the MARKS or GRANTOR's right,
title, or interest therein.
(c)Use Inures to GRANTOR. DEVELOPER agrees that all
use of the MARKS and the goodwill associated therewith shall inure to the
benefit of GRANTOR. DEVELOPER shall not adopt for use in connection with any
RESTAURANT any mark, product designation, or slogan without prior written
approval of GRANTOR.
(d)Guidelines for Use. Any display or use of the
MARKS by DEVELOPER shall be pursuant to GRANTOR's direction. DEVELOPER shall
neither make use or nor authorize another's use of the MARKS without the prior
written consent of GRANTOR, except DEVELOPER is hereby expressly authorized to
have the MARKS reproduced on the following items:
(i)business cards;
(ii)stationery;
(iii)prospect advertising.
In connection with any use or display by DEVELOPER or any MARKS, DEVELOPER
shall follow the guidelines for proper trademark usage established by GRANTOR
and set forth in the MANUAL.
9.2 TRADE SECRETS.
(a)GRANTOR Created System. DEVELOPER acknowledges
that he had no part in the creation or development of the SYSTEM, and
disclaims any right or interest therein, or to the goodwill derived therefrom.
(b)Obligation of Confidence. DEVELOPER acknowledges
that the SYSTEM is unique and not available to the general public and agrees
that its formats, recipes, procedures, and entire contents of all MANUALS
constitute trade secrets for the purpose of this Agreement. DEVELOPER further
agrees that information made available to him from time to time concerning the
SYSTEM will be received in confidence and will not be divulged to any person
other than employees who reasonably require access to such information for
purposes of fulfilling their employment responsibilities. All employees to
whom the information, or any part of it, is made available shall be informed
of his obligation of confidence before the information is disclosed.
(c)Secrecy Agreements. DEVELOPER shall, subject to
applicable law, obtain a written agreement in the form set forth in the MANUAL
or in such other form as may be satisfactory to GRANTOR imposing an obligation
of confidence from each employee having access to the MANUAL or other
confidential information.
9.3 NOTIFICATION OF INFRINGEMENTS:
(a)Notice. DEVELOPER shall immediately notify GRANTOR
of any and all infringements or imitations of the MARKS or any attempt to
misappropriate GRANTOR's trade secrets or other proprietary information.
(b)Cooperation. DEVELOPER shall cooperate in the
prosecution of any action to prevent the infringement, imitation, illegal use,
or misuse of the MARKS or misappropriation of trade secrets and agrees to be
named as a party in such action if so requested by GRANTOR. The costs and
expenses of such action (except DEVELOPER's personal legal counsel, if any)
shall be borne by GRANTOR, provided, however, that in the event said action is
required to be undertaken because of the conduct, acts or omissions of
DEVELOPER, then DEVELOPER shall reimburse GRANTOR for the costs and expenses
of such action.
ARTICLE X
UNFAIR COMPETITION AND
COVENANT NOT TO COMPETE
10.1 DEVELOPER'S OBLIGATIONS RESULTING FROM DISCLOSURE OF AND
USE OF THIS SYSTEM: As a result of this Agreement, DEVELOPER will receive
disclosure of and be permitted to use the SYSTEM in the operation of
DEVELOPER's business. DEVELOPER acknowledges and agrees that the right to
receive such disclosure and to use the SYSTEM has substantial value to
DEVELOPER. Unauthorized use of the SYSTEM, in whole or in part, would likely
result in substantial harm to the legitimate business interests of GRANTOR and
all licensees using the SYSTEM. For this reason, and in consideration of the
rights granted DEVELOPER in this Agreement, DEVELOPER agrees to the
limitations and restrictions as are provided in this Article X.
10.2 NO UNAUTHORIZED USE OF SYSTEM BY DEVELOPER. DEVELOPER
agrees that during the term of this Agreement, it will use its best and
continuing efforts to promote and develop the business of the Tito's Cantina
restaurants and that, during the term hereof, they will not directly or
indirectly engage in the establishment, operation, advertising or marketing of
any restaurant, other than a Tito's Cantina restaurant licensed by GRANTOR
which uses or duplicates the SYSTEM in whole or in part.
10.3 UNLIMITED COVENANT AGAINST COMPETITIVE ARRANGEMENTS.
(a) DEVELOPER agrees that during the term of this Agreement, and for
a period of eighteen (18) months following termination of this Agreement for
any reason, they will not, without the consent of GRANTOR, in any town, city,
borough or metropolitan area within GRANTOR's OPERATING TERRITORY [as defined
in Subsection 10.3(b) below], participate in the establishment or operation,
whether as an owner, officer, partner, consultant, financier, employee or
otherwise, of any restaurant or food service operation offering principal menu
entrees or items which are the same or confusingly similar to those then
offered at any Tito's Cantina restaurant or outlet nationwide.
(b) GRANTOR's OPERATING TERRITORY includes all towns, cities,
boroughs or metropolitan areas where, upon termination of this Agreement,
GRANTOR or its licensees, representatives or assigns (i) then operate Tito's
Cantina restaurants, or (ii) have then taken affirmative actions to develop,
operate or license others to develop or operate one (1) or more Tito's Cantina
restaurants. By way of example only and without limitation, affirmative
actions including (i) granting to others territorial rights for an area that
includes the location where DEVELOPER's restaurant or food service is or is
intended to be located, or (ii) applying to register MARKS with the
appropriate governmental office or agency in state, country or other
appropriate political subdivision in which such location is located.
(c) DEVELOPER shall not be precluded from engaging or participating
in a restaurant, or food service business offering food products so long as
the covenants of Section 10.1 and Subsection 10.3(a) and (b) above are not
violated and DEVELOPER's obligation to not infringe or misappropriate the
intellectual property rights of GRANTOR as provided by law under this
Agreement are not violated.
10.4 RESTRICTIONS AS TO EMPLOYEES. Neither GRANTOR nor
DEVELOPER, directly or indirectly, shall entice, induce or attempt to entice
or induce any employee of the other, or any employee of any other franchise,
to leave such employment for the purpose of working for the inducing party
without the express written consent of the affected employer. Neither GRANTOR
nor DEVELOPER shall knowingly employ or seek to employ any employee of the
other, or any person who is or has been during the previous six (6) months an
employee of a licensed Tito's Cantina restaurant, without the express written
consent of the employer.
10.5 INTENTIONS AND REFORMATION. The parties have agreed to
the restrictions contained in this Article X in a good faith effort to protect
the legitimate business interest of GRANTOR and all licensees using the
SYSTEM. The restrictions contained in this Article X have been carefully
tailored and agreed upon by the parties in a good faith attempt to not unduly
restrict or interfere with the rights of DEVELOPER. Both parties specifically
request that should a court of competent jurisdiction or any panel hearing a
dispute under this Agreement finally adjudicate that the restrictions provided
in this Article X are too broad as to area, activity or time, such
restrictions be narrowed to whatever extent the court deems reasonably
necessary and, thereafter, that such restrictions as narrowed be enforced.
10.6 REMEDIES. This Article shall be enforceable by specific
performance, injunctive relief, damages or any combination thereof. Each
section in this Article X shall be construed as a separate covenant
concerning competition.
ARTICLE XI
DEFAULTS
11.1 DEFAULTS BY DEVELOPER. In the event of a breach by
DEVELOPER with respect to any provision of this Agreement, GRANTOR shall give
written notice to DEVELOPER of such breach and DEVELOPER shall have thirty
(30) days after notification to correct said breach, provided, however, that
if this Agreement specifies a cure period other than thirty (30) days, the
specified cure period shall control. Thereafter, subject to applicable law,
if DEVELOPER fails to cure the breach within the cure period specified,
GRANTOR may, at its sole option, and without prejudice to any other rights or
remedies provided herein or by applicable law, terminate the rights of
DEVELOPER granted herein.
11.2 EFFECT OF CURE: In the event DEVELOPER cures the default
within the allowed period, then this Agreement shall continue in full force
and effect as if no notice of default had been made. In the event DEVELOPER
timely and in good faith commences corrective action and diligently pursues to
completion as soon as practical such corrective action and is successful in
correcting the deficiencies or defaults complained of, then DEVELOPER shall be
deemed to have timely cured said default.
11.3 OTHER GRANTOR RIGHTS NOT AFFECTED: The giving by GRANTOR
of any notice of any event of default as provided in this Article shall not
constitute an election of remedies and shall not affect any other rights or
remedies afforded GRANTOR pursuant to the terms of this Agreement.
11.4 GOOD CAUSE: It is expressly understood and agreed by
DEVELOPER that the occurrence of any one or more of the events of default set
forth in this Article which if susceptible to cure, remains uncured for the
time period specified, shall constitute good cause for GRANTOR to terminate
this Agreement.
11.5 DEFAULT BY GRANTOR: In the event DEVELOPER believes
GRANTOR to be in default with respect to any provisions of this Agreement,
DEVELOPER shall give notice to GRANTOR of said default, and GRANTOR shall have
thirty (30) days after notification to correct said default. In the event
that GRANTOR timely and in good faith commences corrective action and
diligently pursues to completion such corrective action and is successful in
correcting the deficiencies or defaults complained of, then GRANTOR shall be
deemed to have timely cured said default. The failure of DEVELOPER to give
notice of default and opportunity to cure to GRANTOR shall estop DEVELOPER
from alleging or complaining of such default for any purpose.
11.6 OTHER DEVELOPER RIGHTS NOT AFFECTED: The giving by
DEVELOPER of any notice of any event of default as provided in this Article
shall not constitute an election of remedies and shall not affect any other
rights or remedies afforded DEVELOPER pursuant to the terms of this Agreement.
11.7 NON-CURABLE DEFAULTS BY DEVELOPER: Subject to applicable
law, upon the occurrence of an event of default specified below, GRANTOR, at
his sole option, without prejudice to any other rights or remedies provided
herein or by applicable law, may terminate the license granted by this
Agreement. GRANTOR hereby agrees to give DEVELOPER written notice of the
occurrence of such events of default. No delay in the discovery of the
happenings of the event of default shall alter or affect GRANTOR's rights or
the giving of notice thereof.
(a)Failure to timely comply with the DEVELOPMENT
SCHEDULE. Provided, however, that so long as by the REQUIRED OPENING DATE, a
restaurant has obtained certification of a location, executed a UFA, paid all
monies required to be paid hereunder and thereafter proceeds to diligently
pursue the opening of the restaurant and is successful in opening said
restaurant, then DEVELOPER shall be deemed not to have been in default of
this provision;
(b)Voluntary abandonment of the relationship created
hereby. For the purpose of this Agreement, the failure to perform
substantially all of the DEVELOPER's obligations pursuant to this Agreement
for a duration of forty-five (45) days shall constitute voluntary
abandonment;
(c) Any transfer or attempt, in whole or in part, to transfer the
rights granted by this Agreement which is not in compliance with the
requirements of Article XIV without the express prior written consent of
GRANTOR, provided, however, that negotiation with third parties for the
potential sale or transfer of such rights conducted in compliance with the
requirements of paragraph 14.3 of this Agreement shall not constitute an
event of default; or
(d) Making false or misleading statements or omission of any
material adverse fact in the application, financial statements, business
plan, or any other information provided to GRANTOR.
(e) Conviction of DEVELOPER in a court of competent jurisdiction of
an indictable offense, punishable by a term of imprisonment of one (1) year or
more which is directly related to the business conducted pursuant to this
Agreement;
(f) Repeated material breaches or violations of the Agreement,
whether cured or not;
(g) Failure of any of the warranties and representations by
DEVELOPER in this Agreement to be true and correct in all material respects at
the time of execution hereof and at all times throughout the term hereof and
any renewals or extensions thereof; or
(h) Violation of the obligation of confidence set forth in this
Agreement.
ARTICLE XII
DISPUTE RESOLUTION
12.1 ARBITRATION OF DISPUTES: Any dispute between the parties
to this Agreement shall be submitted to binding arbitration according to the
provisions of this Article XII.
12.2 ARBITRATION PROCEDURES:
(a)Selection of Panel. Each party shall select one
(1) qualified arbitrator and the two (2) arbitrators shall select a third
qualified arbitrator. Failing selection of an arbitrator by either party, or
by two (2) selected by the parties, the additional arbitrator(s) shall be
selected by the American Arbitration Association or any successor thereof.
(b)Qualifications of Arbitrators. Each Arbitrator
must meet or exceed each of the following criteria:
(i)thirty-eight (38) years of age;
(ii)not less than three (3) years experience in a "Qualified Foodservice
Position;"
(iii)employed in a "qualified Foodservice Position" within last twelve (12)
months;
(iv)is not a current or former director, officer, partner, employee,
consultant or affiliate of either party or of the directors, officers or
partners of either party; and
(v)"Qualified Foodservice Position" shall mean: district (regional/area)
supervisor of operations or higher level operations management position for
multi-unit, quick service (fast food) restaurant or chain.
(c) Rules. The arbitration proceeding shall be
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association where such rules are not inconsistent with the
provisions of this Article and the following supplemental rules:
(i)location of arbitration:
San Juan, Puerto Rico
(ii)time periods:
- -appointment of arbitrators by parties:
twenty (20) days from Notice of Arbitration
- -appointment of third arbitrator:
fifteen (15) days from appointment of first two
arbitrators by the parties.
- -initial hearing:
twenty (20) days from
appointment of third (3rd) arbitrator.
- -deadline for decision of arbitrators:
ten (10) days from conclusion of hearing.
(d)Expenses. The expenses of the arbitration
proceeding shall be borne by the losing party.
(e)Binding Effect of Award. Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
(f)Specific Performance. The provisions of this
Agreement providing for arbitration may be specifically enforced by either
party.
(g)Federal Arbitration Act. The Federal Arbitration
Act, 9 U.S.C.A. Sections 1-14 shall apply to this Article.
12.3 EXCLUDE MATTERS: Notwithstanding any provision of this
Agreement to the contrary, GRANTOR shall have the right to determine at any
time, or from time to time, whether matters involving the MARKS, or the
provisions of Articles IX (Trade Secrets and Trademarks) and X (Unfair
Competition and Covenant Not to Compete) shall be determined judicially or by
arbitration as provided above.
ARTICLE XIII
TERMINATION
13.1 TERMINATION BY DEVELOPER. DEVELOPER shall have the right
to terminate this Agreement and the rights granted hereby upon ninety (90)
days prior written notice to GRANTOR. Such termination shall be effective only
upon execution by DEVELOPER of a general release of GRANTOR in form reasonably
acceptable to GRANTOR, and such other documentation as GRANTOR shall
reasonably require. DEVELOPER shall have no right to the return or refund of
any fees paid pursuant to this Agreement.
13.2 TERMINATION BY GRANTOR. Upon the occurrence of an event
of default, which, if applicable, is not timely cured according to the
provisions of this Agreement (including, without limitation, the provisions of
Article XI hereof), GRANTOR shall have the right to terminate this Agreement
and the rights granted hereby upon written notice to DEVELOPER. Except as
otherwise provided or required by applicable law, said notice shall be
immediately effective. DEVELOPER shall have no right to the return or refund
of any fees paid pursuant to this Agreement.
13.3 EXPIRATION: If not terminated earlier as provided above,
upon the expiration of the TERM, this Agreement and the rights granted hereby
shall terminate according to its terms, and no notice of any type shall be
required.
13.4 NOTICE OF TERMINATION: Any Notice of Termination
required or permitted shall be in writing and shall be given in accordance
with the Notice provisions set forth herein.
13.5 EFFECT OF TERMINATION--UNIT AGREEMENTS NOT AFFECTED:
Upon expiration or termination of this Agreement for any reason, all rights
and obligations between the parties under this Agreement shall terminate,
except those obligations which expressly or by their nature survive the
termination of this Agreement. It is expressly understood and agreed that,
absent a default under the terms thereof, UNIT AGREEMENTS executed pursuant to
this Agreement shall not be affected by termination of this Agreement.
13.6 WINDING UP OF DEVELOPER'S BUSINESS:
(a) In the event that upon termination of this Agreement DEVELOPER
has no currently effective UNIT FRANCHISE AGREEMENTS, then DEVELOPER shall:
(i)immediately discontinue the use of and shall not thereafter use the SYSTEM;
including, without limitation, the MARKS, trade secrets, proprietary
information, sauces, ingredients, secrete formulas, designs and printed
products which bear the MARKS;
(ii)return to GRANTOR the MANUAL, all advertising materials, and other written
materials furnished pursuant to this or any other Agreement with GRANTOR or
any successor thereto;
(iii)at the request of GRANTOR, and upon payment of the fair market value
thereof, return to GRANTOR all supplies and other materials that bear the
MARKS; and
(iv)settle all accounts with GRANTOR and any vendor or supplier; and
(v)execute documentation in form and substance reasonably acceptable to
GRANTOR releasing GRANTOR from any and all claims.
13.7 POST TERMINATION PROTECTION OF TRADE SECRETS AND
PROPRIETARY INFORMATION:
(a)Survival of Obligation of Confidence. The
obligations of confidence, secrecy, and non-disclosures with respect to
GRANTOR's trade secrets and proprietary information as set forth in this
Agreement, including without limitation the provisions of Article IX shall
survive the termination or expiration of this Agreement.
(b)Survival of Covenant Not to Compete: The Covenant
Not to Compete set forth in this Agreement, including without limitation the
provisions of Article X, shall survive the termination or expiration of this
Agreement.
(c)Survival of Other Provisions. Any other provisions
of this Agreement which are personal in nature or which by their terms may not
be completely performed during the term of this Agreement shall survive the
termination or expiration hereof.
13.8 NO RESIDUAL BENEFIT: Upon termination of this Agreement
for any reason, DEVELOPER shall have no residual interest in or to the MARKS,
the SYSTEM, the MANUALS, the use of the Tito's Cantina name, the signs,
recipes, formulae, trade secrets or other proprietary information made
available pursuant to this Agreement.
13.9 POST-TERM COMPENSATION OF DEVELOPER.
(a) Upon termination of this Agreement due to:
(i)expiration of the TERM;
(ii)the occurrence of any of the Non-Curable Defaults described in
Subsections 11.8(b), (c), (d), (e), (g), or (h).
(iii)transfer pursuant to Article XIV; or
(iv)any other reason not enumerated in Subsection 13.9)B) below,
DEVELOPER shall not be entitled to any compensation, consideration, or
adjustment from GRANTOR arising out of this Agreement or the operation of a
restaurant and accruing subsequent to the date of such termination.
(b) Upon termination of the Agreement for:
(i)failure to meet the MINIMUM DEVELOPMENT SCHEDULE; or
(ii)repeated breaches of this Agreement, whether cured or not, as specified
in Section 11.8(f),
DEVELOPER shall be entitled to receive fifty percent (50%) of the ROYALTY FEES
of each restaurant established pursuant to this Agreement for which an UNIT
FRANCHISE AGREEMENT is in effect on the date of such termination for a period
equal to the lesser of (i) the unexpired term of the UNIT FRANCHISE AGREEMENT
for such restaurant or (ii) five (5) years from the date of such termination.
Any amounts due to DEVELOPER under this provision shall be payable in monthly
installments, at the time and in the manner provided in this Agreement for the
making of similar payments to DEVELOPER during the TERM hereof.
ARTICLE XIV
TRANSFER
14.1 TRANSFER BY DEVELOPER:
(a)General Provisions. DEVELOPER understands and
acknowledges that GRANTOR has granted the rights set forth in this Agreement
in reliance on the business skill, financial capacity and personal character
of DEVELOPER and OTHER OWNERS. Accordingly, neither DEVELOPER nor any initial
or subsequent successor or permitted assignee to any part of DEVELOPER's
interest in this Agreement shall sell, assign, transfer, convey, give away,
pledge, mortgage or otherwise encumber ("Transfer") any interest in this
Agreement without the prior written consent of GRANTOR, which consent shall be
granted only upon the satisfaction of the conditions set forth in Section
14.1(c) below. Further, DEVELOPER shall not permit a Change in Control (as
defined below) of DEVELOPER without the prior written consent of GRANTOR,
which consent shall be granted upon the satisfaction of the conditions set
forth in Section 14.1(c) below. DEVELOPER may permit a Transfer of an
ownership interest in DEVELOPER that does not constitute a Change in Control
to occur after first complying with the provisions of Section 14.1(b) below.
Any purported assignment or transfer, by operation of law or otherwise not in
compliance with his Article XIV shall be null and void and shall constitute a
material breach of this Agreement. As used herein, the term "Change in
Control" shall mean the acquisition by any person or entity of shares of stock
or other ownership interests in DEVELOPER having ordinary voting power to
elect a majority of the board of directors or other governing body of
DEVELOPER.
(b)Transfers Not Involving Change of Control. In the
event the proposed Transfer would not result in a Change in Control of
DEVELOPER, then such Transfer shall be effective only upon GRANTOR's receipt
of:
(i)written notice of the identity, address, telephone and tax identification
number of the transferee; and
(ii)transferee's written agreement to be bound by and comply with all
obligations, covenants and agreements set forth in this Agreement regarding
trademarks, trade secrets or unfair competition; such agreement to be in the
standard form then currently in use in the SYSTEM.
(c)Transfers Involving Change of Control. GRANTOR
shall consent to a Transfer of an interest in this Agreement or to a Transfer
of an ownership interest in DEVELOPER that would result in a Change in
Control, provided that all of the following conditions precedent are
satisfied:
(i)The transferee shall demonstrate to GRANTOR that transferee meets the
criteria considered by GRANTOR when reviewing a prospective DEVELOPER's
application for development rights, including, but not limited to GRANTOR's
educational, managerial and business standards; transferee's good moral
character, business reputation and credit rating; transferee's aptitude and
ability to conduct the business contemplated under this Agreement (as may be
evidenced by prior related business experience or otherwise); transferee's
adequate financial resources and capital to perform its obligations under the
Agreement;
(ii)DEVELOPER is not in default of any provision of this Agreement, any
amendment or successor agreement, or any other agreement between DEVELOPER and
GRANTOR or its subsidiaries and affiliates executed pursuant to this
Agreement;
(iii)The transferor shall have executed a general release, in a form
satisfactory to GRANTOR, of any and all claims arising under this Agreement
and all applicable federal, state, provincial and local laws, rules and
ordinances pertaining hereto against GRANTOR, its partners, affiliates and
subsidiaries and their respective officers, directors, shareholders and
employees, in their corporate and individual capacities;
(iv)The transferee shall execute the then current form of this Agreement, and
the forms of such other ancillary agreements as shall have been executed
pursuant to this Agreement as GRANTOR may require, which agreements shall
supersede this Agreement and such ancillary documents in all respects; and, if
transferee is a corporation, partnership or similar entity or association,
transferee's shareholders, partners, equity participants or other investors,
as applicable, shall agree in writing to be bound by and comply with all
obligations, covenants and agreements set forth in this Agreement regarding
trademarks, trade secrets or unfair competition, such agreement to be in
standard form of same then currently in use in the SYSTEM;
(v)DEVELOPER shall pay for Developer Transfer Fees referred to in Subsection
4.1(d) above;
(vi)At the transferee's expense, the transferee's management personnel and
other personnel as reasonably requested by GRANTOR, shall complete GRANTOR's
initial training program then in effect for such personnel; and
(vii)All of the DEVELOPER's accrued monetary obligations and all other
outstanding obligations to GRANTOR, its subsidiaries and its affiliates
arising under this Agreement or any other agreement executed pursuant to this
Agreement shall have been satisfied.
(d) DEVELOPER acknowledges and agrees that each condition which must
be met by the transferee is reasonable and necessary to ensure such
transferee's full performance of its obligations under this Agreement.
14.2 VOLUNTARY TRANSFER BY DEVELOPER/RIGHT OF FIRST REFUSAL BY GRANTOR:
(a) In the event DEVELOPER receives a bona fide offer from a third
party to purchase DEVELOPER's business which DEVELOPER desires to accept,
DEVELOPER shall give GRANTOR written notice thereof setting forth:
(i)name and address of prospective purchaser;
(ii)price and terms of the offer;
(iii)a copy of the sales contract;
(iv)a DEVELOPER Application completed by the prospective purchaser; and
(v)any other information that GRANTOR may reasonably request in order to
evaluate the offer.
(b) GRANTOR shall have thirty (30) days from the receipt of the last
of the information set forth above to evaluate the offer and give DEVELOPER
notice of its intent to exercise its right of final refusal. Silence on the
part of GRANTOR shall constitute election not to exercise said right of first
refusal.
(c) If GRANTOR elects to exercise said right of first refusal then
GRANTOR shall purchase on the same terms as set forth in the offer provided,
however, that the losing shall be extended by the thirty (30) day evaluation
period and further provided:
(i)if the consideration provided in the offer is not money, the purchase price
shall be cash equal to the fair market value of the consideration;
(ii)if the proposed transfer involves assets of DEVELOPER not related to the
operation of the business of DEVELOPER, GRANTOR shall have the option to
purchase only the assets related to the operation of the business of DEVELOPER
or to purchase all assets included in the offer, and the purchase price shall
be allocated accordingly.
(d) The election by GRANTOR not to exercise its right of
first refusal as to any offer shall not affect its right of first refusal as
to any other offer. Moreover, such election not to exercise its right of
first refusal shall not constitute GRANTOR's consent to or approval of
Transfer of the rights created hereby or the business to the proposed
transferee or purchaser.
14.4 PROCEDURE UPON APPROVAL OF TRANSFER: Upon approval of a
proposed transfer by GRANTOR, the proposed transferee shall:
(a) Execute the then current form of AREA DEVELOPER AGREEMENT and
any other documents as reasonably required by GRANTOR, or as contemplated in
Subsection 14.1(b) and (c).
(b) Undertake and satisfactorily complete (at transferee's sole
expense) such training as GRANTOR may reasonably require.
14.5 TRANSFER BY GRANTOR. GRANTOR shall have the right to
assign its rights hereunder to any person or entity provided however, that
said assignee shall assume all obligations of GRANTOR hereunder. GRANTOR
shall provide notice of such assignment to DEVELOPER, but GRANTOR's failure to
provide such notice shall have no effect on the validity or effectiveness of
the assignment.
14.6 NONWAIVER OF CLAIMS: GRANTOR's consent to a transfer of
any interest in DEVELOPER or in this Agreement shall not constitute a waiver
of any claims it may have against the transferring party, nor shall it be
deemed a waiver of GRANTOR's right to demand exact compliance with any of the
terms of this Agreement by the transferee.
14.7 EFFECT OF FAILURE TO COMPLY: In the event DEVELOPER
attempts to transfer this Agreement or the rights granted pursuant hereto
without the prior express written approval of GRANTOR, said transfer shall be
void and of no effect and the said attempt to transfer shall constitute a
Non-curable Default as provided in Section 11.8 above.
(a) DEVELOPER shall have no right to sublicense or sub-franchise
any rights granted hereunder.
(b) Any Transfer not in accordance with the provisions of this
Article shall be void and of no effect.
(c) Any violation of or attempt to avoid the provisions of this
Article shall result in immediate termination of this Agreement and the
license granted hereby.
ARTICLE XV
INDEMNIFICATION
15.1 DEFINITIONS: For purposes of this Article XV, the
following terms are defined. These definitions incorporate terms defined in
other portions of this Agreement.
(a)Indemnify. To "Indemnify" means to protect,
defend, hold harmless, pay and be solely responsible for the "Indemnified
Liabilities" (as such term is herein defined).
(b)Liabilities. "Liabilities" shall include all
claims, damages, losses, liens, cause of action, suits, judgments and expenses
(including court costs, attorneys fees, and costs of investigation) of any
nature, kind or description by, through or of any person or entity, including
personal injury, death, or property loss or damage.
(c)Indemnified Liabilities. "Indemnified Liabilities"
shall be all Liabilities arising from the Indemnified Matters except solely
from Excluded Matters (as such terms are herein defined).
(d)Arise. The term "Arise" means directly or
indirectly, in whole or in part (i) to occur as a result of, (ii) to cause,
or (iii) to result in.
(e)Instrumentality. "Instrumentality" shall mean by,
through or of the DEVELOPER including: (i) the DEVELOPER itself, (ii) the
employees of the DEVELOPER and (iii) any person that the DEVELOPER controls
or exercises control over.
(f)Indemnified Persons. "Indemnified Persons" shall
include (i) the GRANTOR, GRANTOR's parents, affiliated companies of GRANTOR
or any partner of GRANTOR, (ii) as to each of the persons listed in (i) the
following persons: each such persons respective partners, partners of their
partners, and any successors, assigns, heirs, personal representatives,
devisees, agents, stockholders, officers, directors, employees, and
affiliates of any persons listed in (ii).
15.2DEVELOPER'S INDEMNITY: DEVELOPER agrees to indemnify the
Indemnified Persons for all Liabilities arising out of and of the following
matters (the "Indemnified Matters").
(a) any acts or omissions of the DEVELOPER, including Liabilities
caused by the DEVELOPER's of any Instrumentality's negligence or willful
misconduct, or
(b) the performance of its obligations under this Agreement, or
(c) DEVELOPER's user of brokers or other third parties in the
performance of its obligations, or
(d) any public or private offering or syndication undertaken by
DEVELOPER pursuant to the provisions of Section 14.2 hereof.
(e) any breach of warranty, express or implied, by DEVELOPER.
15.4 EXCLUDED MATTERS. The Indemnified Liabilities do not
include any Liabilities arising solely out of the following matters:
(a) the gross negligence or
(b) willful misconduct
of an Indemnified Person (the "Excluded Matters").
15.5 NOTICE: Each Party shall promptly advise the other Party
in writing of any action, administrative or legal proceeding or investigation
as to which this indemnification may apply.
15.6 DEFENSE: The Indemnifying Party, at its expense, shall
assume on behalf of the Indemnified Persons and conduct with due diligence and
in good faith the defense of all Indemnified Liabilities. The defense shall
be counsel satisfactory to the Indemnified Persons. Each Indemnified Person
shall have the right, at its option, to be represented by advisory counsel of
its own selection and at the expense of the Indemnifying Party. In the event
of the failure by the Indemnifying Party fully to perform in accordance with
this indemnification, each Indemnified Person at its option, and without
relieving the Indemnifying Party of its obligations hereunder, may perform or
attempt to perform, settle or satisfy the Indemnified Liability, and in such
case all costs and expenses so incurred by an Indemnified Person in that event
shall be reimbursed by the Indemnifying Party to the Indemnified Person,
together with interest. Interest shall accrue on the amount so expended by an
Indemnified Person from the date any such expense was paid by the Indemnified
Person until reimbursed by the Indemnifying Party, at the rate of interest
provided to be paid on judgments by the laws of the State of Colorado.
15.7 WORKER'S COMPENSATION AND SIMILAR LAWS: This
indemnification shall not be limited to damages, compensation or benefits
payable under insurance policies, worker's compensation acts, disability
benefit acts or other employee's benefit act.
15.8 SEVERABILITY: It is agreed with respect to any legal
limitations now or hereafter in effect and affecting the validity or
enforceability of this indemnity, such legal limitations are made a part of
the indemnity and shall operate to amend this indemnity to the minimum extent
necessary to bring the provision into conformity with the requirement of such
limitations, and as so modified, this indemnity shall continue in full force
and effect.
ARTICLE XVI
RELATIONSHIP OF THE PARTIES
16.1 INDEPENDENT CONTRACTOR-NO JOINT VENTURE: DEVELOPER is an
independent contractor and is not and shall not be considered to be an agent,
partner, joint venturer, or employee of GRANTOR, and no fiduciary relationship
between the parties exists. Except as specifically set forth in Subsection
3.1(d), DEVELOPER shall have no right to bind or obligate GRANTOR in any way
nor shall DEVELOPER represent that he has any right to do so. Except as
specifically set forth in this Agreement and the MANUAL, DEVELOPER shall have
the full and complete control of the day-to-day operation of his business and
the business policies and practices adopted and utilized in connection
therewith, including, without limitation, the terms and conditions of
employment of DEVELOPER's employees.
16.2 INDICIA OF RELATIONSHIP: In all public records and in
their relations, DEVELOPER shall indicate the independent ownership of
DEVELOPER's business and that he is an independent contractor. DEVELOPER
shall clearly reflect on all stationery, business forms, checks, etc., that
DEVELOPER is an independent contractor of GRANTOR and the DEVELOPER's business
is not being operated by GRANTOR. DEVELOPER shall not use the word "Tito's
Cantina" nor any word, name, mark or variation thereof confusingly similar
thereto, in his business or corporate name. If local laws or ordinances
require that DEVELOPER file an affidavit for doing business under an assumed
name or otherwise fictitious or assumed name, DEVELOPER shall include in such
filing or application therefor an indication that the same is made "as an
independent contractor of Tito's Cantina, Newport, Rhode Island 02840.
16.3 PERSONAL NATURE OF OBLIGATIONS: DEVELOPER acknowledges
and agrees that the personal qualifications, skills and abilities of DEVELOPER
(and/or OTHER OWNERS as individuals as appropriate for corporate restaurants)
are a material part of the consideration for this Agreement and that GRANTOR
has entered into this Agreement in reliance on said personal qualifications,
skills, and abilities and the continued involvement of said individuals in the
operation of DEVELOPER's business.
16.4 OBLIGATIONS OF GUARANTOR AND OTHER OWNERS:
(a)OTHER OWNERS. Each OTHER OWNER is executing this
Agreement for the express purpose of being bound by the provisions of Articles
II (Warranties and Representations), IX (Trade Secrets and Trademarks), X
(Unfair Competition and Covenant Not to Compete) and Subsections 13.7(a)
(Survival of Obligation of Confidence) and 13.7(b) (Survival of Covenant Not
to Compete) hereof.
16.5 OWNER/OPERATOR: DEVELOPER further agrees to designate at
least one (1) individual who will devote substantially all of his business
time to the operation of DEVELOPER's business as described in this Agreement.
16.6 IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING: It is
the intent of the parties hereto that this Agreement imposes, and this
Agreement does hereby impose on the parties a duty of good faith in their
performance hereunder and their enforcement hereof. Good Faith means honesty
in fact and the observance of reasonable commercial standards of fair dealing
in the trade.
ARTICLE XVII
MISCELLANEOUS
17.1 MERGER: This Agreement, including any addendum, contains
the entire agreement of the parties with respect to the subject matter of this
Agreement. No representation or promise between the parties relating to the
subject matter of this Agreement shall have any effect unless the
representation or promise is contained in this Agreement, including any
addenda.
17.2 SEVERABILITY. If any provision of this Agreement for any
reason is invalid or unenforceable because of any law or rule of law, such
invalidity or unenforceability shall not affect the validity of any remaining
provisions of this Agreement, which remaining provisions shall remain in full
force and effect as if this Agreement had been executed with the invalid or
unenforceable provision thereof eliminated. It is the intention of the
parties hereto that each of them would have executed the remaining provisions
of this Agreement without including therein any such provision which may be
invalid or unenforceable.
17.3 STATUTORY SAVINGS CLAUSE: If any provision of this
Agreement is contrary to any Federal statue or regulation, or any State
statute or local ordinance or regulation, the parties hereby declare that such
provision shall be amended to conform to any such statutory or regulatory
provision and in case of any such conflict this Agreement shall be interpreted
and construed as if the offending provision herein had been in conformity with
such statute, ordinance or regulation.
17.4 APPLICABLE LAW: Except where the provisions hereof are
expressly made "subject to applicable law" and said applicable law is
inconsistent or in conflict with Colorado law, the Agreement shall be
construed in accordance with the laws of the State of Colorado.
17.5 BINDING NATURE: Unless otherwise provided in this
Agreement, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto, their heirs, personal representatives, successors, and
assigns. The provisions of this Agreement shall apply to and are binding upon
the DEVELOPER regardless of whether DEVELOPER is sole proprietorship,
partnership, corporation, joint venture, or other type of entity or business
association.
17.6 PRICING: GRANTOR may, from time to time, suggest to
DEVELOPER prices for approved products or services, or communicate to
DEVELOPER suggested prices from other persons, such as product or service
vendors. DEVELOPER acknowledges that such communications are suggestions only
and are not mandatory. DEVELOPER may establish its own prices for any product
or service offered, subject to all other terms and conditions of this
Agreement and the AREA DEVELOPER MANUAL. Nothing in this Agreement or in any
such communication should be deemed a representation or warranty by any person
that such suggested prices will result in, increase, or maximize any profits
by DEVELOPER.
17.7 CHANGES TO MANUAL:
(a)Changes in General. DEVELOPER agrees that changes
in the standards, specifications, policies and procedure, as set forth in the
MANUAL(s), may be made or adopted by GRANTOR in GRANTOR's sole discretion from
time to time, provided, however, that notwithstanding anything in this
Agreement to the contrary, any change which significantly alter the services
the AREA DEVELOPERS are required to perform cannot be made without consent of
DEVELOPER, which consent shall not be unreasonably withheld.
(b)Conflicts Between the MANUALS and this Agreement.
To the maximum extent possible, the MANUALS and this Agreement are to be
construed so as to give effect to all of the provisions contained therein. In
the event of an irreconcilable conflict or inconsistency between the
provisions of the MANUALS and the provisions of this Agreement, the provisions
of this Agreement shall control.
(c) Any dispute between GRANTOR and DEVELOPER regarding such changes
shall be resolved by arbitration in accordance with the provisions of Article
XII below.
(d)Notice of Change--Opportunity to Comment.
(i)Notice of Change. GRANTOR agrees to provide DEVELOPER with reasonable
notice prior to the effective date of any change in procedures or
specifications. GRANTOR expressly reserves the right to adopt different
effective dates for changes for different franchises to accommodate local
market conditions.
(ii)DEVELOPER Comment. With respect to any change, DEVELOPER may comment to
GRANTOR on the effect of such change on DEVELOPER's operation and on the
timing of the effective date. GRANTOR may, but shall not be obligated to,
consider such comments in adopting and implementing such changes.
(e)Copying or Reproduction. No portion of the
MANUAL(S) may be copied or reproduced by DEVELOPER or any of its employees or
officers, directors, or shareholders in any way without first obtaining
express written permission from GRANTOR.
(f)Implementation of Changes. DEVELOPER shall perform
such acts as are reasonably necessary to facilitate the implementation of
changes to the MANUALS by restaurants within the DEVELOPMENT AREA within the
time limits specified by GRANTOR with regard to each change.
17.8 TIME IS OF THE ESSENCE: Time is of the essence in this
Agreement.
17.9 PRONOUNS: Where personal pronouns are used, the
masculine shall include the feminine or neuter where the context so requires.
17.10DESCRIPTIVE HEADINGS: Descriptive headings are for
convenience only and shall not control or affect the meaning or construction
of any provisions of this Agreement.
17.11WAIVER: The delay or failure of GRANTOR to
exercise any right or option given to him under the terms of this Agreement,
or to insist upon strict compliance by DEVELOPER with the terms hereof, shall
not constitute a waiver of any terms or conditions hereof with respect to any
other or subsequent breach, nor a waiver by GRANTOR of his right at any time
thereafter to require exact and strict compliance with the terms of this
Agreement. The rights and remedies set forth herein are in addition to any
other rights or remedies which may be granted by law.
17.2 NOTICE: Any notice, demand or request which may be
permitted, required, or desired to be given in connection herewith shall be in
writing and directed to the appropriate party by certified mail, postage
prepaid, at their respective addresses stated herein. In the event such
notice or other communication is effected by personal delivery, the date and
hour of actual delivery shall fix the time of notice. Absent a postal strike
or other stoppage of the mails, in the event of delivery of notice by
certified United States mail, the date and hour following forty-eight (48)
hours after the date and hour at which the sealed envelope containing the
notice is deposited in the United States mail, properly addressed and with
postage prepaid, shall fix the time of notice. Notwithstanding the foregoing,
each party hereto may change its address by written, oral, or telephonic
communication received by the other party.
17.13METHOD OF COUNTING DAYS: For the purpose of
counting days, the day of delivery of any notice, resolution, or other written
instrument shall be excluded and the last day of the period shall be included,
unless such last days is Saturday, Sunday, or legal holiday, in which event
the period shall be extended to midnight of the next day which is neither a
Saturday, Sunday, nor legal holiday.
17.14COOPERATION/OTHER AGREEMENTS: GRANTOR and
DEVELOPER shall execute such other or further Agreements, documents, or
instruments as may be necessary to carry out the intent of this Agreement.
Either party (the "Requesting Party") shall execute and deliver to the other,
at such times as the Requesting Party shall request a certificate stating:
(a) whether or not this Agreement is in full force and effect;
(b) whether or not this Agreement has been modified or amended in
any respect, and submitting copies of such modifications or amendments, if
any;
(c) whether or not there is any existing non-compliance or event of
default under this Agreement and specifying the nature of each non-compliance
or event of default, if any;
(d) acknowledging GRANTOR's right and consenting to any pledge of
GRANTOR's payments hereunder or under any UNIT FRANCHISE AGREEMENT granted
pursuant hereto, subject to the provisions of Section 4.4(b).
The certificate shall be delivered to the Requesting Party within
seven (7) days following receipt of such request. In the event such
certificate has not been delivered within fourteen (14) days following receipt
of such request, then the other party shall be constituted and appointed as
attorney-in-fact for the Requesting Party and shall have full power and
authority to execute the certificate. This limited power of attorney shall be
irrevocable once the fourteen (14) day period referred to above has expired.
17.5 PRODUCT DISTRIBUTION: Nothing in this Agreement shall
prevent GRANTOR, any of its subsidiaries or affiliates from selling food
products, supplies, equipment, parts, furniture, fixtures, or any other items
to FRANCHISEES, at prices including a reasonable profit margin.
17.6 PERIODIC ADJUSTMENTS: Any Transfer Fee (either a
Developer Transfer Fee or a Franchise Transfer Fee) shall be subject to
periodic adjustments after the completion of each five (5) year period during
the term of the Agreement at January 1, 2003 and thereafter on January 1 of
each new five (5) year period thereafter, for example, in the years 2008,
2013, etc. (the "Adjustment Date") as follows:
(a) The base for computing the adjustment in the Consumer Price
Index for the month of January 1997 (the index date) as shows in the Consumer
Price Index ("CPI") for all Urban Consumers for the United States based on the
year 1992-94 is equal to 100 as published by the U.S. Department of Labor's
Bureau of Labor Statistics.
(b) The index for the Adjustment Date shall be computed as a
percentage of the base figure. For example, assuming the base figure on the
index rate is 110 and the index figure on the Adjustment Date is 121, the
percentage to be applied is 121-110 = 1.10 = 110%. That percentage shall be
applied to the initial minimum monthly net rental for the period beginning on
the Adjustment Date and continuing until the next Adjustment Date.
(c) The index for the Adjustment Date shall be the one reported in
the U.S. Department of Labor's newest comprehensive official index then in use
and most nearly answering the foregoing description of the index to be used.
If it is calculated from a base different from the base year 1992-94 = 100
used for the base figure above, under a formula supplied by the Bureau.
If the described index shall no longer be published, another generally
recognized as authoritative shall be substituted by agreement of the parties.
If they are unable to agree within thirty (30) days after demand by either
party, a substitute index shall be selected by the chief officer of the Dallas
regional office of the Bureau of Labor Statistics or its successor.
17.7 GENERAL BUSINESS ENTITY PROVISIONS: If DEVELOPER
conducts business in any form other than that of "sole proprietorship," the
following shall apply:
(a) the business entity shall not engage in any business activity
other than that directly related to the establishment or operation of Tito's
Cantina restaurants within the DEVELOPMENT AREA, except with the prior
express written approval of GRANTOR;
(b) DEVELOPER shall provide, or cause the business entity to
provide, to GRANTOR, copies of all organizational documentation including,
without limitation, partnership agreements, certificates of limited
partnership, articles of incorporation, articles of organization for LLC,
bylaws, shareholder agreements, operating agreements, stock certificates
bearing appropriate legends as hereinafter set forth, and certificates
indicating identity of all members, partners, officers, directors, or
shareholders;
(c) the organizational documents shall reflect that the issuance and
transfer of ownership interests are restricted, and all certificates for
securities issued by the entity shall bear the following legend printed
legibly and conspicuously on the face thereof:
"The transfer of this security is subject to the terms and conditions of an
Agreement with Superior Holdings, Inc.. A copy of said Agreement is available
from the company by the holder of this certificate upon request made to its
principal place of business or registered office.";
(d) the business entity and its partners, officers, directors, and
shareholders shall execute such documentation as GRANTOR shall require.
17.9 CONFIDENTIALITY OF AGREEMENT: DEVELOPER hereby agrees to
maintain the confidentiality of this Agreement and its specific terms and
provisions according to the standards set forth in Section 9.2 above with
regard to Trade Secrets.
IN WITNESS WHEREOF, the parties hereto have executed this original of
this Agreement to be effective on the EFFECTIVE DATE.
GRANTOR: SUPERIOR HOLDINGS, INC.,
a Colorado Corporation
By:____________________________________
CHRISTOPHER O. WERNER,
President
Title:_________________________________
Date:__________________________________
DEVELOPER:
By:____________________________________
Date:__________________________________
OTHER OWNERS:
Signatures of persons or entities to be bound under Article II, VII, VIII, IX
and Subsections 13.7(a) (Survival of Obligation of Confidence), and 13.7(b)
(Survival of Covenant Not to Compete) of this Agreement.
_______________________ ______________________
_______________________ ______________________
ATTACHMENTS TO
AREA DEVELOPER AGREEMENT
EXHIBIT A..............LIST OF COUNTIES IN DEVELOPMENT AREA
EXHIBIT B..............LIST OF FRANCHISEES LICENSED BY GRANTOR
EXHIBIT C..............LIST OF DEVELOPERS GRANTED AREA
DEVELOPMENT AGREEMENTS
EXHIBIT D..............LIST OF EXISTING CONTRACTS BETWEEN
GRANTOR AND DEVELOPER
SCHEDULE 1.............LIST OF TRADEMARKS AND SERVICE MARKS USED
GRANTOR
EXHIBIT A
LIST OF COUNTIES IN DEVELOPMENT AREA
DEVELOPER:
DEVELOPMENT AREA:
ADI STATE COUNTY
- -------------------------------------------------------------------
EXHIBIT B
LIST OF FRANCHISEES
LICENSED BY GRANTOR
FRANCHISEE RESTAURANT PROTECTED AREA
- -------------------------------------------------------------------
EXHIBIT C
LIST OF DEVELOPERS GRANTED
AREA DEVELOPMENT AGREEMENTS
DEVELOPER DEVELOPMENT AREA
- -------------------------------------------------------------------
EXHIBIT D
LIST OF EXISTING CONTRACTS BETWEEN
GRANTOR AND DEVELOPER
1.
2.
3.
4.
5.
6.
7.
8.
9.
SCHEDULE 1
LIST OF TRADEMARKS AND SERVICE MARKS
USED BY GRANTOR
TRADEMARKS DESCRIPTION WHERE MARKS IS REGISTRATION DATE OF
SERVICE MARK REGISTERED NUMBER REGISTRATION
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
CONSENT OF COUNSEL
I hereby consent to the use of my name as legal counsel in the Form
10SB12G Registration Statement filed pursuant to Section 12 of the Securities
Exchange Act of 1934 by Superior Holdings, Inc.
MARK T. THATCHER, P.C.
/s/ Mark T. Thatcher
By:___________________
MARK T. THATCHER, ESQ.
Newport, RI
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use of our name as auditing firm in the
Form 10SB12G Registration Statement filed pursuant to Section 12 of the
Securities Exchange Act of 1934 by Superior Holdings, Inc.
MICHAEL D. CORRADO
/S/ Michael D. Corrado
December 16, 1997
East Providence, Rhode Island
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