SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 1998 Commission File #33-43423
LATIN AMERICAN CASINOS, INC.
A Delaware Corporation 65-0159115
(IRS Employer Identification Number)
2000 NE 164th Street (305) 945-9300
North Miami Beach, FL 33162 (Telephone Number)
Securities Registered Under Section 12(b) of the Exchange Act: None
Securities Registered Under Section 12(g) of the Exchange Act:
Common Stock, $0.00067 par value
Warrants, exercisable at $7.25 per share
Check whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes [X] No [ ]
Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year: $2,392,142.
Aggregate market value of the voting stock held by non-affiliates,
computed by reference to the average bid and asked prices of such stock, as of
March 31, 1999: $2,345,980.50.
Number of shares outstanding of the registrant's common stock, as of
March 31, 1999: 3,300,000 shares.
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LATIN AMERICAN CASINOS, INC.
FORM 10-KSB
TABLE OF CONTENTS
PAGE
PART I
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ITEM 1. BUSINESS................................................................................2
ITEM 2. PROPERTIES..............................................................................6
ITEM 3. LEGAL PROCEEDINGS.......................................................................6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.....................................6
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...................7
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION...............................8
ITEM 7. FINANCIAL STATEMENTS....................................................................10
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE....11
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS............................11
ITEM 10. EXECUTIVE COMPENSATION..................................................................12
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..........................14
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS/COMPLIANCE WITH SECTION 16(b)............16
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K .......................................................16
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PART I
ITEM 1. BUSINESS
GENERAL
Latin American Casinos, Inc. (the "Company") is the largest slot
machine rental and remanufacturing company in South America and is also involved
in the distribution and sale of its own premium brand cigars in the United
States. The Company was initially organized as Repossession Auction, Inc., a
Florida corporation, in 1989. The Company merged into a Delaware corporation
bearing the same name in 1991. In 1994, the Company changed its name to Latin
American Casinos, Inc. to reflect its entrance into the gaming and casino
business in South and Central America. The Company does business under the name
Latin American Industries, reflecting the diversification of the Company with
the introduction of a premium cigar business. The Company maintains its
principal place of business at 2000 NE 164th Street, North Miami Beach, Florida
33162. Its telephone number is (305) 945-9300.
SLOT MACHINE OPERATIONS
The Company concentrates its efforts on the rental of used five reel
slot machines. The Company purchases these machines at a fraction of the cost of
new machines which are then refurbished at facilities in Latin America for use
in South and Central America. Whereas a new slot machine costs approximately
$6,000, plus duty charges, the used slot machines purchased by the Company cost
approximately $500 each, including freight, duty, and limited refurbishing
expenses. The Company has determined that more extensive refurbishing extends
the working life of each slot machine for up to an additional five years. Such
additional refurbishing increases the cost of each machine by approximately
$100. The Company believes however, that the additional refurbishing results in
lower maintenance and future refurbishing costs and that these savings offset
the additional costs. The Company purchased approximately 2,000 machines in 1998
for refurbishment and to be used for spare parts.
The Company entered the gaming and casino industry in Peru in 1994.
Since January 1995, the Company has been engaged in the renting of slot machines
to licensed gaming establishments in various major cities through its
wholly-owned subsidiaries in South and Central America. In 1994, the Company
formed its Peruvian subsidiary, in late 1995, the Company formed its Colombian
subsidiary, and in 1997, the Company formed a subsidiary in Nicaragua.
In February 1997, the Company expanded into gaming route operations in
Colombia and Nicaragua on a participating basis with the owners of various
business establishments. Such arrangements benefit both the Company and those
establishments which want slot machines, but do not wish to enter into formal
long-term rental agreements. Participation also allows the Company to share in
the profits of slot machine operations while minimizing the risks associated
with the collection of accounts receivable pursuant to long-term leases. These
participation arrangements occur primarily in Colombia; however, the majority of
the Company's slot machines in Latin America are subject to leases.
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As of December 31, 1998, approximately 1,000 slot machines were in
operation in Peru and approximately 1,450 slot machines were in operation in
Colombia. These machines are installed in, among other establishments, drug
stores, pool halls, bars, restaurants and nightclubs. The entrance into gaming
route operations provides the Company a broader base as an operational gaming
company as well as a rental company. The Company is committed to enhancing its
position for further growth in both Central and South America.
The Company has offices in Lima, Peru; and Bogota, Barranquilla, and
Medellin, Colombia. Applications to do business have been filed in Argentina,
Paraguay, Brazil, and Honduras and are still pending. If approved, the Company
would then determine whether circumstances warrant the expansion of business
into these jurisdictions.
The Company's operations in Nicaragua, which were not substantial, were
adversely affected by Hurricane Mitch in October 1998. The Company is in the
process of recovering its machines and distributing them to other locations.
The Company competes with all the major gaming companies in Latin
America, including IGT, Novomatic and Admiral. Many of the companies are more
established and have greater resources.
SOURCE OF MACHINES
The Company purchases used slot machines from several vendors in
Australia, including Damlite Pty. Ltd. and Olympic Video Gaming, a subsidiary of
International Gaming Technology. The Company's principal vendor is AJ
Electronics Repairs Pty. Ltd., ("AJ"), an Australian company which services and
disposes of used slot machines. The loss of any of these suppliers, including
AJ, would not have a material adverse effect on the Company's business due to
the existence of other sources.
REFURBISHING PROCESS
All slot machines purchased are delivered to the Company's warehouses
in Lima, Peru or Bogota, Colombia and are refurbished by the Company's
technicians. Each slot machine is electronically tested for 30 minutes to assure
that it is in correct working order. Defective or worn parts are replaced or
repaired. Once the technician is satisfied that the machine is in proper working
order, the machine is thoroughly cleaned inside and out. At that time, a
computerized printed card that translates the rule of play from English to
Spanish is placed inside the machine in such a way that it can be seen and read
by the slot machine player. Refurbished machines are then placed in service in
the various locations.
RENTAL OF SLOT MACHINES
The slot machines are rented to licensed individual owner operators
under a rental contract usually for a term of one year or longer. The contract
provisions vary depending on, among other things, the number of slot machines
requested by the renter. All contracts are backed by a personal guarantee for
the first four installment payments from the renter to insure against
non-payment of rental fees in the contract's initial stage. The rental contracts
also provide insurance to cover any loss by fire, theft, vandalism or political
unrest.
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SLOT ROUTE OPERATIONS - PARTICIPATION
Under certain circumstances, slot machines are placed into various
business establishments under written agreements that provide for participation
between the Company and the owner of the business establishment. Under such an
agreement, an amount equal to the monthly tax imposed by the government is
deducted from the total winnings of the machine, along with all paid jackpots.
The remaining funds are divided on a weekly basis, 30% to the owner of the
business establishment and 70% to the Company. Although the machines are
calibrated to retain at least 15% of all coins played, at certain times, due to
paid jackpots, there may be no participation funds to be divided.
GOVERNMENT REGULATION
The governments of Peru, Colombia and Nicaragua have regulations
governing gaming activities. Essentially, these regulations establish licensing
requirements for slot machine operations. The Company takes appropriate steps to
verify the licenses of its customer, particularly those involved in joint
participation agreements.
The Peruvian government, in October 1996, imposed an excise tax of 200%
on lessees of gaming equipment, including slot machines. The excise tax caused
many of the Company's customers to return their slot machines to the Company
rather than pay the higher tax.
In January 1997, the Company obtained a temporary injunction against
the Peruvian government, prohibiting it from implementing the excise tax. The
case is now on review before a three judge panel. The Company is optimistic
about the outcome because two other gaming companies have succeeded in obtaining
an injunction against the government. If the panel rules against the Company, an
appeal to a higher court and eventually to the World Court could be taken.
The imposition of an excise tax in Peru could adversely effect future
earnings. Accordingly, if the Company is not successful in preventing the tax,
it would reevaluate its position in Peru.
PREMIUM CIGAR OPERATIONS
Beginning in September, 1997, the Company directed its efforts into
establishing a business of producing, distributing and selling premium cigars
throughout the United States.
World's Best Rated Cigar Company ("World's Best") was formed as a
subsidiary to distribute cigars produced by Claudio Norberto Mercado. Mr.
Mercado resides in Santiago, Dominican Republic, in the Villa Gonzalez region,
the heart of the tobacco growing valley. In a business arrangement, World's Best
advanced $75,000 to Mr. Mercado to build a cigar factory. World's Best also
advanced the sum of $15,000 to purchase all necessary fixtures to produce
cigars, such as molds, rolling tables, compressors, etc. World's Best holds a
mortgage on the factory to secure these advances. However, the Company
determined that the plan of selling one cigar from one manufacturer was too
limited. Therefore, during the summer of 1998, World's Best entered into
contractual arrangements with five other manufacturers in Nicaragua, Honduras
and
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the Dominican Republic. All of the manufacturers produce hand made 100% Cuban
seed, long leaf filler premium cigars. The manufacturers are world renown and
they manufacture cigars for over 20% of the brand name cigars currently on the
market.
These agreements allow the Company to acquire cigars at a fraction over
their cost and will enable them to be sold at a retail price significantly below
the retail price for brand name premium cigars. The agreements require that the
manufacturers use high grade long leaf tobacco, hand roll the cigars utilizing
high grade filler and parchment wrapping of a grade selected by the Company and
wrap the cigars individually in cellophane and box them for shipping. They also
require the manufacturers to retain a specified amount of inventory at all times
to satisfy the Company's cigar purchase orders. The cigars will be transported
to the Company's facilities in Miami to be placed in individual containers and
delivered to distributors.
The cigars are marketed in a smart looking display case suitable for
counter-top merchandising in a convenience store operation. The display case is
made of clear Lucite and has interior shelves made of mahogany or cedar. Each
display case holds 216 cigars, in six different sizes, in bundles of six, from
the six manufacturers. Each of the products of the six cigar manufacturers are
identified by a color coded cigar ring and matching colored row to display their
products. Beside each row will be a sign describing the manufacturer's history,
factories and plantations. Display cases may also be custom designed for a
distributor.
Each cigar will be in a clear plastic tube with the Universal Bar Code
label attached to the tube. The cigar tube caps are colored coded to the color
label assigned to each of the manufacturers. The blue label are cigars from
Carlos Oliva; green label are cigars from Tabaco Del Caribe; red label are
cigars from Pedro Ramos; black label are cigars from Claudio Mercado; silver
label are cigars from Tabaco de Oriente; and gold label are cigars from Medardo
Padron. The tubes are air tight to insure the freshness of the cigars for many
months and to protect the cigars from being crushed or broken.
Suggested retail pricing on the cigars range from $1.92 for the
panatella size to $2.49 for the large size presidente. The popular churchill
size has a suggested retail price of $2.25. These prices are 60% to 80% lower
than prices charged in tobacco shops for cigars of the same quality.
The Company is in the process of establishing relationships with
various distributors in the United States who supply convenience stores,
restaurants, bars and supermarkets with products. The Company is attempting to
place its products on display in these outlets initially on a consignment basis,
at no charge to the distributor or retailer. Only when the cigars are sold
and/or reordered, will payment for the cigars be required. In this manner, the
Company believes distributors and retail outlets will be more inclined to handle
and display the Company's cigar products, thereby gaining immediate access to
the public. Depending upon the relative success of this strategy and ultimately
the acceptance of the products by the public, the Company will develop the
necessary infrastructure to expand this business further.
EMPLOYEES
The Company currently has a total of 84 full-time employees. The
Company has 9 employees in the Miami office; 3 executives and 6 in clerical
positions. In Lima, Peru, the Company
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has 9 clerical employees in its business office, including a general manager and
16 service technicians in its warehouse and remanufacturing plant. In Managua,
Nicaragua, the Company has a total of 4 employees working in its business office
and warehouse; 2 clerical and 2 service technicians. In Colombia, the Company
employs a total of 15 clerical employees including a general manager in its
three business offices and 31 service technicians in its warehouse and
refurbishing facility.
The Company believes its relations with its employees are good.
ITEM 2. PROPERTIES
The Company's executive offices and operating facilities located at
2000 NE 164th Street, North Miami Beach, Florida 33162 are leased for a period
of three years until September 30, 2000, at a monthly rental of $2,200. The
premises consist of approximately 3,300 square feet. The property is in overall
good condition.
The Company leases a 2,000 square foot business office in Miraflores, a
municipality in Lima, Peru, for $1,100 per month. The lease terminates on April
1, 1999, with a two year renewal option. The Company also leases an 11,000
square foot main warehouse and refurbishing facility approximately five miles
from the business office, for $2,520 per month, which lease terminates on
October 1, 2000.
In Bogota, Colombia, the Company leases a two story 7,000 square foot
combined office, warehouse and refurbishing facility for $2,500 per month. This
lease terminates on January 2000 with a two year renewal option. The Company
also leases properties for office and warehouse space in Medellin (2,500 square
feet), Cali (5,000 square feet), and Barranquilla, Colombia (3,500 square feet)
for $500 per month, $700 per month and $700 per month, respectively. These
leases expire in June 1999 subject to two year renewal options.
The Company leased an office/warehouse (4,000 square feet) in Managua,
Nicaragua for $1,000 per month which expired on September 30, 1998.
Finally, the Company is the lessor of office space at 11337 NW 7th
Avenue in Miami pursuant to a four year lease terminating on February 14, 2002
for $1,500 per month, subject to annual increases of 12%.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant from time to time in claims and lawsuits
arising out of the normal course of its business, none of which have or are
expected to have a material adverse effect on its business or operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of 1998.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
From June 20, 1994 until October 30, 1998, the Company's Common Stock
and Warrants were listed on the NASDAQ Stock Market under the symbol "LACI" and
"LACIW", respectively. Beginning in October 31, 1998, the Company's Common Stock
and Warrants were listed on the NASDAQ Small Cap. The table below represents the
quarterly high and low bid prices for the Company's Common Stock and Warrants
for the last two fiscal years as reported by NASDAQ.
COMMON STOCK HIGH LOW
- ------------ ---- ---
1997
- ----
January 1 - March 31 3 1/4 2 3/8
April 1 - June 30 2 3/4 1 3/16
July 1 - September 30 2 5/16 1 5/8
October 1 - December 31 2 5/16 1 5/16
1998
- ----
January 1 - March 31 2 5/16 1 17/32
April 1 - June 30 2 9/16 1 3/4
July 1 - September 30 1 15/16 1 3/16
October 1 - December 31 1 11/32 1 3/32
WARRANTS HIGH LOW
- -------- ---- ---
1997
- ----
January 1 - March 31 13/32 5/32
April 1 - June 30 19/64 5/32
July 1 - September 30 1/4 3/16
October 1 - December 31 11/32 1/16
1998
January 1 - March 31 13/32 5/32
April 1 - June 30 3/8 11/32
July 1 - September 30 3//8 1/4
October 1 - December 31 11/32 7/32
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The closing prices for the Common Stock and Warrants on March 31, 1999
were $1.125 and $.25 respectively.
There were 46 registered owners and approximately 1,000 beneficial
owners of the Common Stock of the Company as of December 31, 1998. The Company
declared a dividend of $.05 per share for shareholders of record as of May 30,
1997 which was disbursed on September 1, 1997. The directors and officers of the
Company waived their rights to receive this dividend. A total of $87,189 was
disbursed pursuant to this dividend declaration. The Company did not declare a
dividend in 1998.
As of December 31, 1998, the Company has outstanding 1,500,000 five
year Warrants to purchase one share of the Company's Common Stock at an exercise
price of $7.25 through December 11, 1999.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS - 1998 COMPARED TO 1997
The Company revenues from the rental of slot machines in Peru, Colombia
and Nicaragua for the year ended December 31, 1998 increased $458,909 (23.7%) to
$2,392,142 from $1,933,233 for the year ended December 31, 1997. The increase in
revenues for the period described above is primarily due to a greater number of
slot machines on monthly leases in Peru and a 20% increase in rent for all slot
machines lessees in Colombia.
Selling, General and Administrative Expenses incurred in the operation
of the Company's gaming and casino business for the year ended December 31, 1998
decreased as a percentage of revenues from 87% in 1997 to 72% in 1998.
As a result of the decrease in Selling, General and Administrative
Expenses as a percentage of revenues and an increase in revenues, the Company's
net income increased approximately 100% or $269,297 from $261,826 or $.08 per
share, for the year ended December 31, 1997 to $531,123, or $.016 per share, for
the year ended December 31, 1998.
During 1998, the Company spent approximately $926,000 on the
establishment of a premium cigar business; additional expenditures for marketing
and personnel are expected in 1999. The Company anticipates that it will
generate significant revenues from this business in 1999, although the amount of
such revenues, is, at this time, impossible to forecast. Also, the effect that
this business will have on the overall profitability of the Company is, at this
time, unclear.
RESULTS OF OPERATIONS - 1997 COMPARED TO 1996
The Company's revenues from the rental of slot machines in Peru,
Colombia and Nicaragua for the year ended December 31, 1997 decreased $567,828
(22.7%) to $1,933,233 from $2,501,061 for the year ended December 31, 1996. The
decrease in revenues for the period described above is due to a combination of
factors, including the implementation by the Peruvian Government of an excise
tax on gaming machines which resulted in several of the Company's customers
returning machines. The Company had in Peru 2,350 slot machines under rental
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agreements on October 1, 1996. After the excise tax was implemented, the number
of machines decreased to 800, however, the number of machines has increased to
970 as of December 31, 1997. Additionally, rising inflation rates in Colombia
negatively affected the Company's revenues for the year ended December 31, 1997.
Selling, General and Administrative Expenses incurred in the operation
of the Company's gaming and casino business increased $311,428 (22.6%) over the
twelve month period ended December 31, 1997. This increase reflected the
continued start-up costs associated with the Company's expansion into Colombia
and Nicaragua, the increase in executive compensation and the considerable legal
fees the Company incurred in seeking to enjoin the Peruvian Government from
implementing an excise tax on lessees of gaming equipment.
As a result of the increase in Selling, General and Administrative
Expenses and the decrease in revenues, the Company's net income decreased
$706,534 from $968,360, or $.29 per share, in the year ended December 31, 1996
to $261,826, or $0.08 per share, in the year ended December 31, 1997.
INFORMATION SYSTEMS AND THE YEAR 2000
The year 2000 issue is the result of computer programs being written
using two digits rather than four to define the application year. Computer
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. As the year 2000 approaches, such
systems maybe unable to accurately process certain date-based information.
The Company has reviewed issues associated with its computer system and
its ability to operate effectively as the millennium (year 2000) approaches, as
well as the potential effect of year 2000 on key suppliers and customers. The
Company believes that its year 2000 transition will not have a material adverse
effect on its business, financial condition or results of operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its retail slot machine operations, as well as
the establishment of its premium cigar business, exclusively through internal
sources, including profits generated in 1998. The Company's cash position at
December 31, 1998 stood at approximately $1,568,000, down from approximately
$3,228,000 at December 31, 1997. The Company anticipates additional expenditures
in connection with the operation of its premium cigar business in 1999. However,
the Company believes that cash generated from operations, along with cash on
hand, will be sufficient to cover all liquidity needs over the next 12 months.
Thereafter, and depending upon the financial results of its cigar business, as
well as expansion plans, if any, the Company may seek to finance operations and
growth through the utilization of outside sources of financing, including
commercial lending or the sale of equity.
The Company does not have any material commitments for capital
expenditures for the upcoming year.
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FORWARD LOOKING STATEMENTS
From time to time, the Company may publish forward looking statements
relating to such matters as anticipated financial performance, business
prospects, new products and certain other matters. The words "may", "will",
"expect", "anticipate", "continue", "estimate", "project", "intend" and similar
expressions are intended to identify such forward looking statements. The
Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward looking statements. In order to comply with the terms of the safe
harbor, the Company notes that a variety of factors could cause its actual
results and experience to differ materially from anticipated results and other
expectations that may effect the operations, performance, development and
results of the Company's business, including the following:
1. Changes in government regulations of gaming, such as the
excise tax imposed by Peru, could have an effect on the Company's operations and
business.
2. Political factors affecting South and Central America,
particularly as they pertain to currency valuation, could affect the Company's
business in ways which are difficult to predict.
3. The agreements which the Company has with five of its cigar
manufacturers are cancelable upon 60 days written notice. One or more such
cancellations could have a material adverse effect on the Company's cigar
operations.
4. The Company's cigar operations are in its initial stages. This
business is subject to all the risks and uncertainties associated with the
commencement of a new enterprise. There can be no assurances that the Company
will be able to successfully penetrate the market, or that its cigar operations
will become profitable.
5. The Company may be required to raise additional funds to
expand its business operations, particularly the cigar business, if it proves
successful. There can be no assurances that the Company will be able to raise
such funds, either through the sale of equity or debt securities or through
commercial sources. The inability to acquire needed capital could have a
material adverse effect on the Company's ability to expand.
6. The Company may be required to expand its infrastructure,
including the hiring of additional personnel in its executive offices. There can
be no assurances that the Company will be able to attract and retain qualified
personnel who will be successful in managing the Company's operations.
ITEM 7. FINANCIAL STATEMENTS
Index to Consolidated Financial Statements FORM 10-KSB
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Independent Auditors' Report F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998 F-3
Consolidated Statements of Operations for the years ended December F-4
31, 1997 and 1998
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Consolidated Statements of Changes in Stockholders' Equity for years F-5
ended December 31, 1997 and 1998
Consolidated Statements of Cash Flows for the years ended December F-6
31, 1997 and 1998
Notes to the Consolidated Financial Statements F-7
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LATIN AMERICAN CASINOS, INC. AND SUBSIDIARIES
AUDIT REPORT
AS OF DECEMBER 31, 1998
<PAGE>
LATIN AMERICAN CASINOS, INC. AND SUBSIDIARIES
CONTENTS
Independent Auditor's Report 1
Consolidated Balance Sheets as of December 31, 1998
and 1997 2
Consolidated Statements of Changes in Stockholders'
Equity for the Years Ended December 31, 1998
and 1997 3
Consolidated Statements of Operations for the Years
Ended December 31, 1998 and 1997 4
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1998 and 1997 5
Notes to Consolidated Financial Statements as of December 31,
1998 and December 31, 1997 6-14
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of:
Latin American Casinos, Inc. and Subsidiaries
We have audited the consolidated balance sheets of Latin American Casinos, Inc.
and Subsidiaries as of December 31, 1998, and 1997 the related consolidated
statements of operations, changes in stockholders' equity and cash flows for the
years then ended. These consolidated financial statements are the
responsiblility on the Company's management. Our responsibility is to express an
opinion on these consolidated finanical statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Latin
American Casinos, Inc. and subsidiaries as of December 31, 1998 and 1997 the
results of their operations and there cash flows for the years then ended, in
conformity with generally accepted accounting principles.
Shubitz Rosenbloom & Co., P.A.
Miami, Florida
April 2, 1999
F-1
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LATIN AMERICAN CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
ASSETS
December 31, December 31,
1998 1997
----------- -----------
CURRENT ASSETS
Cash and Cash Equivalents $ 1,567,773 $ 3,224,665
Accounts Receivable, Less
$149,814 of Allowance for Doubtful Accounts
in 1998 and 1997 1,322,130 1,168,794
Inventory 725,609 --
Prepaid Expenses and Other Current Assets 189,513 162,008
----------- -----------
Total Current Assets 3,805,025 4,555,467
----------- -----------
PROPERTY AND EQUIPMENT - NET 5,497,734 4,428,109
----------- -----------
OTHER ASSETS
Financing Arrangement Receivable 94,624 114,460
Deposits 22,275 8,813
Note Receivable - Stockholder 117,000 125,000
Other Assets 16,248 182,601
----------- -----------
Total Other Assets 250,147 430,864
----------- -----------
TOTAL ASSETS $ 9,552,906 $ 9,414,440
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 247,126 $ 253,238
Foreign Income Tax Payable 28,707 23,280
----------- -----------
Total Current Liabilities 275,833 276,518
----------- -----------
COMMITMENTS AND CONTINGENCIES -- --
----------- -----------
Total Liabilities 275,833 276,518
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock, $.00067 Par Value 7,500,000
Shares Authorized, 3,300,000 Shares Issued
and Outstanding 2,211 2,211
Additional Paid-In Capital 9,919,557 9,919,557
Cumulative Other Comprehensive Income (Loss) (517,151) (125,179)
Deficit (122,309) (653,432)
Treasury Stock, at cost (5,235) (5,235)
----------- -----------
Total Stockholders' Equity 9,227,073 9,137,922
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,552,906 $ 9,414,440
=========== ===========
The accompanying notes are an integral part of this statement.
F-2
<PAGE>
<TABLE>
<CAPTION>
LATIN AMERICAN CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Common Stock
-----------------------
Number Par Additional Other Retained
of Value Paid-In Comprehensive Earnings Treasury
Shares $.00067 Capital Income (Loss) (Deficit) Stock
---------- ---------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE
JANUARY 1, 1997 3,300,000 $ 2,211 $9,919,557 4,003 $(828,069) --
ACQUISITION OF 3,400
SHARES OF TREASURY
STOCK, AT COST -- -- -- -- -- $ 5,235
ADJUSTMENT FOR
FOREIGN CURRENCY
TRANSLATIONS -- -- -- (129,182) -- --
DIVIDENDS PAID -- -- -- -- (87,189) --
NET INCOME FOR
THE YEAR ENDED
DECEMBER 31, 1997 -- -- -- 261,826 --
---------- ---------- ---------- ---------- ---------- ----------
BALANCE -
DEC. 31, 1997 3,300,000 2,211 9,919,557 (125,179) (653,432) 5,235
ADJUSTMENT FOR
FOREIGN CURRENCY
TRANSLATIONS -- -- -- (391,972) -- --
NET INCOME FOR THE
YEARS ENDED
DEC. 31, 1998 -- -- -- -- 531,123 --
---------- ---------- ---------- ---------- ---------- ----------
BALANCE -
DEC. 31, 1998 3,300,000 $ 2,211 $9,919,557 $ (517,151) $ (12,309) $ 5,235
========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of this statement.
F-3
</TABLE>
<PAGE>
LATIN AMERICAN CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
---------- ----------
Revenue $2,392,142 $1,933,233
Selling, General &
Administrative Expenses 1,727,686 1,688,077
Depreciation 258,133 186,529
---------- ----------
Income (Loss) from
Operations Before Interest Income,
Income taxes and Extraordinary Item 406,323 58,627
Interest Income 153,507 222,878
---------- ----------
Income from
Operations Before Income Taxes and
Extraordinary Item 559,830 281,505
Income Taxes 196,707 103,679
---------- ----------
Income (Loss) from
Operations Before Extraordinary
Item 363,123 177,826
Utilization of Net Operating Losses and
Foreign Tax Credits 168,000 84,000
---------- ----------
Net Income (Loss) $ 531,123 $ 261,826
========== ==========
EARNINGS (LOSS) PER COMMON SHARE AND
COMMON SHARE EQUIVALENT
Common Share Equivalent Outstanding 3,296,600 3,300,000
========== ==========
Net Income (Loss) $ .16 $ .08
========== ==========
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
LATIN AMERICAN CASINOS, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 531,123 $ 261,826
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities:
Depreciation 258,133 186,529
Changes in Assets - (Increase) Decrease:
Accounts Receivable (153,336) (320,534)
Prepaid Expenses and Other Current Assets (27,505) 7,064
Inventory of Cigars (725,609) --
Deferred Income Tax -- (7,500)
Changes in Liabilities - Increase (Decrease):
Accounts Payable and Accrued Expenses (6,112) (114,496)
Foreign Income Tax Payable 5,427 (117,380)
----------- -----------
Net Cash (Used In) Operating
Activities (117,879) (104,491)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in Property and Equipment (1,327,758) (761,677)
Other Assets 180,717 (179,759)
Treasury Stock Acquisitions -- (5,235)
Dividend Payments -- (87,189)
----------- -----------
Net Cash (Used In) Investing
Activities (1,147,041) (1,033,860)
----------- -----------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents (391,972) (129,182)
----------- -----------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (1,656,892) (1,267,533)
CASH AND CASH EQUIVALENTS - BEGINNING 3,224,665 4,492,198
----------- -----------
CASH AND CASH EQUIVALENTS - ENDING $ 1,567,773 $ 3,224,665
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash Paid During the Year for:
Interest $ -- $ --
=========== ===========
Income Taxes, Foreign $ 23,280 $ 137,059
=========== ===========
The accompanying notes are an intergral part of this statement.
F-5
<PAGE>
LATIN AMERICAN CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A BUSINESS AND ORGANIZATION
Latin American Casinos, Inc. (formerly Repossession Auction, Inc.)
is a Delaware corporation incorporated on September 19, 1991. The
Company started a new business in 1994 in the gaming and casino
business primarily in Peru and other Latin American countries,
renting casino slot machines.
In 1994, the Company formed a Peruvian subsidiary, in late 1995 The
Company formed a Colombian subsidiary and in 1997 the company formed
a subsidiary in Nicaragua that are in the gaming and casino business
in Latin America. These operations include the renting of casino
slot machines to casino operators. The Company had allocated
$5,600,000 for the purchase of machines and equipment. As of
December 31, 1998 the Company had acquired approximately 8,000 slot
machines, approximately 2,000 of which have been acquired for parts
and other related equipment, at a total cost of $5,580,705,
including applicable costs for transportation, duty and
refurbishing.
B PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, Latin
American Casinos Del Peru S.A. (formally known as Latin American
Casinos, Inc. S.A.) a Peruvian corporation, of Colombia LTPA a
Colombian Corporation and Latin American Casinos of Nicaragua.
Effective September 23, 1997 the Company incorporated World's Best
Rated Cigar Company (World's) as a wholly owned subsidiary of Latin
American Casinos, Inc., to distribute quality cigars. In addition,
Premium Cigar Manufactures (Premium) was incorporated in 1988 as a
wholly-owned subsidiary of Latin American Casinos, Inc. It is
intended that World will market premium cigars at "off price" where
as it is anticipated that Premium will acquire premium cigars from
six South American producers and market them through large retail
chains, initially on a consignment basis. Operations of these
subsidiaries have not commenced; however, as of December 31, 1998
the company has expended approximately $926,000 primarily for start
up costs and initial inventory acquisitions. Such pre-operating
expenditures have been included as $33,000 prepaid and other current
assets, $726,000 as inventory and $102,000 as fixed assets in the
accompanying financial statements. World Best Rated Cigar Company
had committed with a cigar manufacture in South America to acquire a
minimum number of cigars per month. The arrangement had extended for
twenty years; however, with the delay in the commencement of the
cigar operations the purchase commitment was cancelled. It is
anticipated cigar operations will commence in mid 1999.
All material intercompany transactions, balances and profits have
been eliminated.
F-6
<PAGE>
LATIN AMERICAN CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
C PROPERTY AND EQUIPMENT
Property and Equipment are stated at cost. Depreciation is provided
on accelerated and straight-line methods over the estimated useful
lives of the respective assets. Maintenance and repairs are charged
to expense as incurred; major renewals and betterments are
capitalized. When items of property or equipment are sold or
retired, the related cost and accumulated depreciation are removed
from the accounts and any gain or loss is included in the results of
operations.
D REVENUE RECOGNITION
Revenue is recognized monthly on the rental of slot machines as the
slot machines are placed in service.
E STATEMENT OF CASH FLOWS
For purposes of this statement, the Company considers all liquid
investments purchased with an original maturity of three months or
less to be cash equivalents.
F INCOME (LOSS) PER COMMON SHARE
Earnings per common share and common share equivalents were computed
by dividing net income (loss) by the weighted average number of
shares of common stock and common stock equivalents outstanding
during the period. The incentive stock options granted (see note 5)
have been considered to be the equivalent of common stock when the
market price of the common stock exceeds the exercise price of the
options. The increase in the number of common shares was reduced by
the number of common shares that are assumed to have been purchased
with the proceeds from the exercise of the options; those purchases
were assumed to have been made at the average price of the common
stock during the period. During 1998 and all 1997 warrants, stock
options and underwriter's options were anti-dilutive.
F-7
<PAGE>
LATIN AMERICAN CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
G SIGNIFICANT CONCENTRATION OF CREDIT RISK
The Company has concentrated its credit risk for cash by maintaining
deposits in banks located within the same geographic region. The
maximum loss that would have resulted from risk totalled $1,411,086
and $3,094,000 as of December 31, 1998 and December 31, 1997 for the
excess of the deposit liabilities reported by the bank over the
amounts that would have been covered by federal insurance.
H USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements, and revenues and expenses
during the period reported. Actual results could differ from those
estimates. Estimates are used when accounting for uncollectible
accounts receivable, obsolescence, equipment depreciation and
amortization, taxes, among others.
I FOREIGN CURRENCY TRANSLATION
For most international operations, assets and liabilities are
translated into U.S. dollars at year-end exchange rates, and
revenues and expenses are translated at average exchange rates
prevailing during the year. Translation adjustments, resulting from
fluctuations in exchange rates, are recorded as a separate component
of shareholders' equity, as other comprehensive income (loss).
J INVENTORIES
Inventory of cigars are stated at the lower of average cost or
market.
F-8
<PAGE>
LATIN AMERICAN CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997
NOTE 2. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
December 31, December 31,
1998 1997
------------ ------------
Land & Building $ 421,882 $ 421,882
Rental Equipment 5,580,705 4,229,873
Leasehold Improvements 26,027 8,222
Furniture, Fixtures & Office Equipment 153,930 141,737
Transportation Equipment 149,876 143,948
------------ -----------
Total 6,332,426 4,945,652
Less: Accumulated Depreciation 834,686 517,543
------------ -----------
Property and Equipment - Net $ 5,497,734 $ 4,428,109
============ ===========
Included in Rental Equipment is approximately $1,500,000 of parts
and supplies purchased or obtained from other machines previously
taken apart for parts.
Depreciation expense for the years ended December 31, 1998 and 1997
was $258,133 and $186,529, respectively.
Rent expense for the years ended December 31, 1998 and 1997 was
$92,000 and $91,000, respectively.
Effective April 1, 1996, the Company leased the land and building
owned by the Company for $1,500 per month to an unrelated party for
a three year period. Effective February 1, 1998 the lease was
rewritten for a new tenant with similar terms.
NOTE 3. NOTE RECEIVABLE - STOCKHOLDER
The Company advanced $150,000 to one of the stockholders in 1993.
The stockholder repaid $21,000 during 1994, $4,000 during 1997 and
$8,000 in 1998. All interest charged through December 1998 has been
paid by the stockholder. The Company expects that the balance of the
note will be repaid 1999. Interest is being charged at a rate of
prime plus 1% per annum. Included in the statement of operations is
$11,188 of interest income in 1998 on this note.
F-9
<PAGE>
LATIN AMERICAN CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997
NOTE 4. WARRANTS AND OPTIONS
As of December 31, 1998, the Company has outstanding 1,500,000 five
year warrants to purchase one share of the Company's common stock at
an exercise price of $7.25 by December 11, 1999.
NOTE 5. INVESTMENT BANKER WARRANTS
Effective June 5, 1998 the Company contracted with an investment
banker to provide on a non-exclusive basis to the company assistance
in possible mergers, acquisitions and internal capital structuring.
The duration of the contract is for five years. In consideration for
these services Latin American Casinos, Inc. granted warrants to
purchase an aggregate of 225,000 shares of common stock at the
closing bid price of $1.875 as of June 5, 1998 which can be
exercised through June 5, 2003. These warrants vest and become
irrevocable as follows: 75,000 warrants with signing of the
agreement, 75,000 warrants 180 days after the signing of the
agreement and an additional 75,000 warrants 365 days after the
signing of the agreement.
NOTE 6. INCENTIVE STOCK OPTION PLAN
On September 30, 1991, the Company adopted the 1991 Incentive Stock
Option Plan in which the aggregate number of shares for which
options may be granted under the plan shall not exceed 450,000
shares. On June 13, 1994, the Board of Directors adopted the 1994
Stock Option Plan in which the aggregate number of shares for which
options may be granted under the plan shall not exceed 1,000,000
shares. The term of each option shall not exceed ten years from the
date of granting (five years for options granted to employees owning
more than 10% of the outstanding shares of the voting stock of the
Company). The 1994 plan became effective on June 13, 1994 and will
terminate in June 2004 unless terminated earlier by action of the
Board of Directors. In December, 1995, the Company authorized the
issuance under the 1994 Stock Option Plan of 492,500 options at an
exercise price of $2.50 per share to various officers and employees.
On March 6, 1997 the Company authorized the issuance of an
additional 415,000 options at an exercise price of $2.50 to various
officers and employees. Effective December 31, 1998 the company
ratified the repricing of 872,000 of employee stock options to $1.00
per share and simultaneously authorized the issuance of 85,000
options at an exercise price $1.00 per share and cancelled 10,000
options issued in 1995 at $2.50 per share.
F-10
<PAGE>
LATIN CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997
NOTE 7. PROVISION FOR INCOME TAXES
The provision for income taxes consisted of the following for the
years ended December 31:
1998 1997
----------- -----------
Current
Federal $ 168,000 $ 96,156
State -- 1,738
Foreign 28,707 13,285
----------- -----------
196,707 111,179
----------- -----------
Deferred
Federal -- --
State -- --
Foreign -- (7,500)
----------- -----------
-- (7,500)
----------- -----------
Income Tax Provision $ 196,707 $ 103,679
=========== ===========
Deferred income taxes resulting from differences between accounting
for financial statements purposes and accounting for tax purposes,
were as follows.
1998 1997
----------- -----------
Revenue Recognition $ -- $ (22,000)
----------- -----------
Tax Effects of Timing Differences $ -- $ (7,500)
=========== ===========
The differences between the provision for income taxes and income
taxes computed using the federal income tax rate were as follows.
1998 1997
----------- -----------
Amount Computed Using the Federal
statutory rate $ 168,000 $ 84,000
State Taxes -- 1,738
Assessment of prior years taxes -- --
Foreign Taxes 28,707 5,785
Other-Additional Taxes Prior Year -- 12,156
Net Operating Losses and Tax Credits (168,000) (84,000)
----------- -----------
Income Tax Provision, Net $ 28,707 $ 19,679
=========== ===========
As of December 31, 1998, the Company had available for income tax
purposes unused net operating loss carryforwards which may provide
future tax benefits of $166,000, expiring in year 2010. No valuation
allowance has been reported for unremitted foreign profits.
In addition the Company has available approximate foreign tax
credits of $310,000 to offset future financial statement of income
tax.
F-11
<PAGE>
LATIN AMERICAN CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997
NOTE 8. COMMITMENTS AND CONTINGENCIES
A LITIGATION
The Company is a defendant from time to time in claims and lawsuits
arising out of the normal course of its business, none of which are
expected to have a material adverse effect on its business or
operations.
B EMPLOYMENT AGREEMENTS
In January 1997 the company entered into a new five year employment
agreement with the Chief Executive Officer which provides for an
annual salary commencing January 1997 of $275,000 and increasing at
$25,000 per annum commencing January 1, 1998. The agreement provides
for an adjustment in salary to reflect increases, but not decreases,
in the consumer price index. The agreement further provides that in
the event of either a merger, consolidation sale or conveyance of
substantially all the assets of the Company which results in the
discharge of the Chief Executive Officer he would be entitled to
200% of the balance of payments remaining under the contract.
Further, the agreement provides that an annual bonus shall be at the
discretion of the Board of Directors.
C FOREIGN ASSETS
The accompanying consolidated balance sheet for the period ended
December 31, 1998, includes assets relating to the Company's slot
machine operations in Peru, Colombia and Nicaragua South America, of
$4,211,000, $2,171,000 and $362,000, respectively. Although, these
countries are considered politically and economically stable, it is
possible that unanticipated events in foreign countries could
disrupt the Company's operations. In that regard the Company has
been informed that in Peru an excise tax has been instituted
effective October 1, 1996 on the lessees of gaming equipment. The
Company with others in the industry have been negotiating with the
appropriate governmental agencies to have the excise tax
significantly curtailed. In addition, a significant portion of the
Company's inventory in Cigars is being stored in South America
awaiting finalization of the corporate marketing and distribution
plan. In October 1998, Nicaragua suffered the effects of hurricane
"Mitch". The company has indicated that future operations in
Nicaragua will either cease or be significantly curtailed.
F-12
<PAGE>
LATIN AMERICAN CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997
NOTE 8. COMMITMENTS AND CONTINGENCIES (Continued)
D LEASE COMMITMENT
The Company's Miami office is obligated for a three year lease for
its premises which expires in September 2001 and requires monthly
rent of $2,200.
NOTE 9. SUBLEASE AGREEMENT AND FINANCING ARRANGEMENT
In 1994, the Company had subleased the used car and truck lot and a
portion of the office space in Miami, Florida to an unrelated party
for the operation of a used car business. The Company was owed
$114,460. The outstanding balance was collateralized by inventory,
equipment, accounts receivable and was personally guaranteed by the
sublessee's stockholder. As of May 1, 1995, the sublessee abandoned
the property without notice. Management continues to pursue the
recovery of the amounts due under the financing arrangement in full.
The Company has indicated the proceedings may take more than twelve
months to resolve. The receivable is shown as long term in the
accompanying financial statements. In February 1998 approximately
$19,000 had been collected on the amounts due.
NOTE 10 DIVIDEND PAYMENT
On April 15, 1997 The Board of Directors declared a $.05 per share
dividend to shareholders of record on May 30, 1997, payable
September 1, 1997. Simultaneously, the Company's officers and
directors waived their rights to the payment of such dividend. The
company disbursed $87,189, in 1997 pursuant to this dividend
declaration.
F-13
<PAGE>
LATIN AMERICAN CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997
NOTE 11 UNAUDITED FINANCIAL INFORMATION
For The Quarters Ended
----------------------
March 31 June 30 Sept. 30 Dec. 31
1998 1998 1998 1998
---------- ---------- ---------- ---------
Revenues $ 666,808 $ 731,853 $ 667,561 $ 325,920
========== ========== ========== =========
Income (Loss) From
Continuing Operations $ 194,739 $ 228,755 $ 128,959 $ (21,330)
========== ========== ========== =========
Net Income (Loss) $ 194,739 $ 228,755 $ 128,959 $ (21,330)
========== ========== ========== =========
Earnings (Loss) Per
Common Share * $ .06 $ .07 $ .04 $ (.01)
========== ========== ========== =========
- ----------
*At December 31, 1998 all outstanding options and warrants
were considered anti-dilutive
F-14
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The executive officers and directors of the Company are as follows:
NAME AGE DIRECTOR SINCE
- ---- --- --------------
Lloyd Lyons 58 1989
Donald D. Schiffour 67 1992
Jose A. Caballero 42 1994
Angel Garcia 39 1995
Ronald Zaid 62 1997(1)
- ----------
Resigned on January 20, 1999.
11
<PAGE>
Lloyd Lyons is Chairman of the Board and Chief Executive Officer and is
the founder of the Company. Prior to founding the Company, Mr. Lyons was General
Manager and auctioneer of Miami Recovery Corp., a Miami based used car auction
company, from 1987 to 1989.
Mr. Schiffour is Vice President, Chief Financial Officer and a Director
of the Company. Mr. Schiffour joined the Company as Vice President of
International Operations in June 1992 and in 1994 he was appointed as the
Company's Chief Financial Officer. Prior to joining the Company, Mr. Schiffour
was the General Manager for Samson Automobile Leasing Co., in Pittsburgh,
Pennsylvania.
Mr. Caballero has served on the Board of Directors since April, 1994.
Mr. Caballero is the Vice President of Exfi International Corporation, an
advertising and marketing agency that specializes in doing work for companies
that plan to expand their business into Latin America. Mr. Caballero has been
with Exfi International Corporation since 1987.
Mr. Garcia joined the Company in January, 1995 and serves as President
of LACI in Peru. Mr. Garcia was the Marketing Manager of Slot Operations for one
of the largest casinos in Lima, Peru before joining LACI. He was named to the
Board of Directors of the Company in April, 1995.
Mr. Zaid joined the Board of Directors in March, 1997 and resigned in
January 1999. Mr. Zaid has been a successful entrepreneur in many businesses
including the leasing of security equipment and automobiles.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued during
the last three completed fiscal years ended December 31, 1998 by the Company for
services rendered by the Chief Executive Officer during those years:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
===========================================================================================================================
Annual Compensation Long Term Compensation
- ---------------------------------------------------------------------------------------------------------------------------
Awards Payouts
- ---------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- ---------------------------------------------------------------------------------------------------------------------------
Other
Annual Restricted All Other
Name and Compen- Stock Options/ LTIP Compen-
Principal Salary Bonus sation Awards SARs Payouts sation
Position Year $ $ $ $ (#) $ $
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lloyd Lyons, 1998 300,000 -- -- -- 650,000* -- --
Chief Executive Officer 1997 275,000 100,000 [42,000] -- 350,000 -- --
1996 236,000 -- -- -- -- -- --
===========================================================================================================================
</TABLE>
12
<PAGE>
* Options which were repriced from $2.50 to $1.0 per share.
REPORT ON REPRICING OF OPTIONS
The Board of Directors determined that in lieu of awarding a cash bonus
and an increase in his non-accountable expense allowance to Mr. Lyons in
connection with the performance of his duties as the Chief Executive Officer and
Chairman of the Board of the Company, his outstanding stock options would be
re-priced on the same basis as other outstanding stock options which were
similarly repriced.
The following table sets forth certain information with respect to
outstanding stock options held by the Chief Executive Officer or exercised in
1998.
<TABLE>
<CAPTION>
====================================================================================================================
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NAME ACQUIRED ON VALUE OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
(a) EXERCISE (#) REALIZED ($) 1998 DECEMBER 31, 1998
- --------------------------------------------------------------------------------------------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Lloyd Lyons 0 0 416,666 233,334
====================================================================================================================
</TABLE>
EMPLOYMENT AGREEMENTS
In January, 1997, the Company entered into a five year employment
agreement with Lloyd Lyons, the Chief Executive Officer which provides for an
annual salary commencing January, 1997 of $275,000 and increasing $25,000 per
annum commencing January 1, 1998. The agreement provides for an adjustment in
salary to reflect increases, but not decreases, in the consumer price index. The
agreement further provides that in the event of either a merger, consolidation,
sale or conveyance of substantially all of the assets of the Company which
results in the discharge of the Chief Executive Officer, he would be entitled to
200% of the balance of payments remaining under the agreement. Further, the
agreement provides that an annual bonus may be awarded at the discretion of the
Board of Directors.
Other than the incentive bonus plan described above and the stock
option plans described below, as of December 31, 1998, the Company does not have
any contingent forms of remuneration, including any pension, retirement, stock
appreciation, cash or stock bonus, or other compensation plan.
DIRECTOR COMPENSATION
Non-Management directors receive $300 for each meeting attended.
13
<PAGE>
1991 INCENTIVE STOCK PLAN AND 1994 STOCK OPTION PLAN
In September 1991, the Company adopted the 1991 Incentive Stock Plan
(the "1991 Plan"). The maximum number of shares available for issuance under the
1991 Plan is 450,000 shares. No options have been issued under this Plan and in
March 1999, the Board of Directors terminated it. In June 1994, the Board of
Directors adopted the 1994 Stock Option Plan (the "Plan"). The maximum number of
shares available for issuance under the Plan is 1,000,000 shares. The Plan
terminates on June 13, 2004. The Plan is designed to provide additional
incentives for Directors and officers and other key employees of the Company, to
promote the success of the business and to enhance the Company's ability to
attract and retain the services of qualified persons. The Plan is administered
by the Board of Directors. The Plan authorizes the Board of Directors to grant
key employees selected by it, incentive stock options and non-qualified stock
options. The exercise price of shares of Common Stock subject to options
qualifying as incentive stock options must not be less than the fair market
value of the Common Stock on the date of the grant. The exercise price of
incentive options granted under the Plan to any participant who owns stock
possessing more than 10% of the total combined voting power of all classes of
outstanding stock of the Company must be at least equal to 100% of the fair
market value on the date of grant. Fair market value has been determined to be
the closing sales price for the Company's common stock reported by Nasdaq. To
date, 982,500 options have been issued under the Plan, but none have been
exercised.
The Board of Directors may amend the Plan at any time but may not,
without shareholder approval, adopt any amendment which would materially
increase the benefits accruing to participants or materially modify the
eligibility requirements. The Company also may not, without shareholder
approval, adopt any amendment which would increase the maximum number of shares
which may be issued under the Plans, unless the increase results from a stock
dividend, stock split or other change in the capital stock of the Company. In
March 1999, the Board of Directors authorized an amendment to the Plan
increasing the number of shares to be issued thereunder from 1,000,000 to
1,500,000. This amendment will be submitted for shareholder approval at the 1999
Annual Meeting.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding shares of
the Common Stock beneficially owned as of March 15, 1999, by (i) each person or
a group, known to the Company, who beneficially owns more than 5% of the Common
Stock, (ii) each of the Company's directors, and (iii) all executive officers
and directors as a group:
- --------------------------------------------------------------------------------
NUMBER OF SHARES
BENEFICIALLY
NAME OWNED(1) PERCENT OF CLASS
- --------------------------------------------------------------------------------
Lloyd Lyons 1,734,612(2) 43.91%
c/o Latin American Casinos, Inc.
200 NE 164th Street
North Miami Beach, FL 33162
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
Donald D. Schiffour 92,000(3) 3.0%
c/o Latin American Casinos, Inc.
200 NE 164th Street
North Miami Beach, FL 33162
- --------------------------------------------------------------------------------
Geraldine Lyons 198,072(4) 5.87%
c/o Latin American Casinos, Inc.
200 NE 164th Street
North Miami Beach, FL 33162
- --------------------------------------------------------------------------------
Angel Garcia 65,000(5) 1.93%
Mariscal Sucre 321 Miraflores
Lima, 18 Peru
- --------------------------------------------------------------------------------
Ronald Zaid 3,000 *
16 Birchwood Park Court
Jericho, NY 11753
- --------------------------------------------------------------------------------
Jose A. Caballero 0 0%
12900 SW 11th Avenue
Miami, FL 33176
- --------------------------------------------------------------------------------
All Executive Officers
and Directors as a group 54.14%
- --------------------------------------------------------------------------------
(1) To the Company's knowledge, all shares of Common Stock are owned
beneficially, with sole voting and investment power, except as otherwise
noted.
(2) Includes options to purchase 650,000 shares of Common Stock of the Company
exercisable at $1.00 per share.
(3) Includes options to purchase 85,000 shares of Common Stock of the Company
exercisable at $1.00 per share.
(4) Includes options to purchase 75,000 shares of Common Stock of the Company
exercisable at $1.00 per share and 123,072 shares of Common Stock held in
trust for 6 grandchildren.
(5) Includes options to purchase 65,000 shares of Common Stock of the Company
exercisable at $1.00 per share.
- ----------
* Less than 1%.
15
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of December 31, 1998, Mr. Lyons, the Chief Executive Officer is
indebted to the Company for $117,000, pursuant to a loan taken in 1993 in the
amount of $150,000. Mr. Lyons pays interest on the loan, at the rate of prime
plus 1%.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Index of exhibits as required by Item 601 of Regulation S-B.
Exhibit No. Description of Exhibit
----------- ----------------------
3.1 Articles of Incorporation (Delaware), as amended
3.2 Certificate of Merger Merging Repossession Auction,
Inc. (Florida corporation) and Repossession Auction,
Inc. (Delaware corporation)
3.3 Bylaws
4.3 Form of Warrant Agreement
10.3 Employment Agreement between the Company and Lloyd
Lyons dated January 1, 1997(1)
10.4 1994 Stock Option Plan
10.5 Lease dated September 9, 1998 between Company and Oska
Partnership re: executive offices.
10.6 Agreement dated July 12, 1998 with Tabacelera
Panamericano Y Del Caribe S.A. (with certain portions
omitted pursuant to Rule 24b-2)
10.7 Agreement dated July 20, 1998 with Tabacos De Oriente
(with certain portions omitted pursuant to Rule 24b-2)
10.8 Agreement dated July 20, 1998 with Tabacos Del Caribe
(with certain portions omitted pursuant to Rule 24b-2)
10.9 Agreement dated July 12, 1998 with Tacunisa (with certain
portions omitted pursuant to Rule 24b-2)
16
<PAGE>
10.10 Agreement dated July 12, 1998 with Tabanica, S.A. (with
certain portions omitted pursuant to Rule 24b-2)
27.1 Financial Data Schedule
(1) Incorporated herein by reference from the 10-KSB filed by the Company for
the year ended December 31, 1997.
(b) Reports on Form 8-K
None
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Latin American Casinos, Inc. has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
LATIN AMERICAN CASINOS, INC.
By: /s/ LLOYD LYONS
----------------------------------------------------
Lloyd Lyons, Chairman and Chief
Executive Officer
Date: April 13, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
Latin American Casinos, Inc., and in the capacities and on the 13th day of
April, 1999.
/s/ LLOYD LYONS
--------------------------------------------------------
Lloyd Lyons, Chairman, Chief Executive Officer and
Director
/s/ DONALD D. SCHIFFOUR
--------------------------------------------------------
Donald D. Schiffour, Vice President, Chief Financial
Officer and Director
--------------------------------------------------------
Jose A. Caballero, Director
/s/ ANGEL GARCIA
--------------------------------------------------------
Angel Garcia, President, Latin American Operations
and Director
18
Exhibit 3.1
SECRETARY of STATE
DIVISION of CORPORATIONS
FILED 9:00 a.m. 09/19/1991
912625170 - 2274303
CERTIFICATE OF INCORPORATION
OF
REPOSSESSION AUCTION, INC.
FIRST: The name of the corporation is REPOSSESSION AUCTION, INC.
SECOND: The address of its registered office in the State of Delaware
is 1209 Orange Street, Wilmington, Delaware, County of New Castle, name of its
registered agent at such address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
The purpose specified in the foregoing paragraph shall in nowise be
limited or restricted by reference to, or inference from, the terms of any
provision in this Certificate of Incorporation.
The corporation shall possess and may exercise all powers and
privileges necessary or convenient to effect the foregoing purpose, including
the general powers now or hereafter conferred by the laws of the State of
Delaware upon corporations formed under the General Corporation Law of Delaware.
FOURTH: The total number of capital stock which the corporation shall
have authority to issue is 5,000,000 shares, which shall consist of common
stock, par value one tenth of one cent ($.001) per share, for a total par value
amounting in the aggregate to $5,000.
The Board of Directors of the corporation is authorized to determine or
alter the voting powers, designations, preferences and relative, participating,
optional or other rights, if any, and the qualifications, limitations or
restrictions thereof, if any, granted to or imposed upon any wholly-unissued
class and/or series of capital stock in any resolution or resolutions of the
Board of Directors originally fixing the number of shares constituting any such
wholly-unissued class and/or series, to increase or decrease (but not below the
number of shares of any such class and/or series then outstanding) the number of
shares of any such class and/or series, and to fix the number of shares of any
such class and/or series.
<PAGE>
FIFTH: The name and mailing address of the sole incorporator is as
follows:
NAME MAILING ADDRESS
---- ---------------
John S. Stoppelman 4350 N. Fairfax Drive, Suite 420
Arlington, Virginia 22203
SIXTH: The name and mailing address of the person who is to serve as
the sole director until the first annual meeting of the stockholders, or until
their successors are duly elected and qualify, are as follows:
NAME MAILING ADDRESS
---- ---------------
1. Lloyd Lyons, 11401 N.W. Seventh Avenue
Chairman of the Board Miami, Florida 33168
and Chief Executive Officer
SEVENTH The corporation shall, to the full extent permitted by section
145 of the General Corporation Law of Delaware, as amended from time to time,
indemnify all persons whom it may indemnify pursuant thereto.
A director of the corporation shall not be personally liable to the
corporation or its members for monetary damages for breach of fiduciary duty as
a director, except for. liability (i) for any breach of the director's duty of
loyalty to the corporation or its members, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under section 174 of the General Corporation Law of Delaware, or (iv)
for any transaction from which the director derived an improper personal
benefit.
EIGHTH: The private property of the stockholders of the corporation
shall not be subject to the payment of corporate debts to any extent whatsoever.
NINTH: The Board of Directors shall have the power the assent or vote
of the stockholders to make, alter, amend, change, add to, or repeal the by-laws
of the corporation; PROVIDED, HOWEVER, that any by-law made by the BOARD of
DIRECTORS may be altered, amended or repealed by the stockholders at any time.
The powers and authorize herein conferred upon the Board of Directors
are in furtherance, and not in limitation, of those conferred by the laws of the
State of Delaware. In addition to the powers and authorities herein or by
statute expressly conferred upon, it, the Board of Directors may exercise all
such powers and do all such as acts and things as may be exercised or done by
the corporation, subject, nevertheless, to the provisions of the laws of the
State of Delaware, of this certificate of incorporation and to the by-laws of
the
2
<PAGE>
corporation; PROVIDED, HOWEVER, that no by-law made by is the stockholders shall
invalidate any prior act by the directors which would have been valid if such
by-law had not been made.
TENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware, on the application in a summary way
of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors, or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
ELEVENTH: The corporation reserves the right for amend, alter, change
or appeal any provision contained in the Certificate of Incorporation and all
rights conferred upon stockholders, directors and officers herein are granted
subject to this reservation.
THE UNDERSIGNED, being the sole incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, does make this certificate of incorporation, hereby
declaring and certifying that this is his act and deed and the facts herein
stated are true, and accordingly, has hereunto set his hand on this 18th day of
September, 1991.
/s/ JOHN S. STOPPELMAN
--------------------------------
JOHN S. STOPPELMAN
3
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE PAGE 1
I, EDWARD J. FREEL, SECRETARY OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THAT THE ATTACHED IS A TRUE AND CORRECT COPY OF THE Certificate OF
INCORPORATION OF "REPOSSESSION AUCTION, INC.", FILED IN THIS OFFICE ON THE
NINETEENTH DAY OF SEPTEMBER, A.D. 1991, at 9 O'CLOCK A.M.
(GRAPHIC SEAL OMITTED)
/s/ EDWARD J. FREEL
-----------------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
AUTHENTICATION: 7673618
DATE: 10-13-95
2274303 8100
950232882
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 06/16/1994
944109118 - 2274303
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
REPOSSESSION AUCTION, INC., a Corporation organized and existing by
virtue of the General Corporation Law of the State of Delaware does hereby
certify that:
FIRST. At the annual meeting of shareholders held on June 13, 1994, an
appropriate majority of the holders of the shares of common stock entitled to
vote authorized the amendment of the Certificate of Incorporation so that the
Article thereof numbered "FIRST" shall be read as follows:
"FIRST. The name of the Corporation is Latin American Casinos, Inc."
SECOND. The said amendment was duly adopted in accordance with
provisions of Section 242 of the General Corporate Law of the State of Delaware.
In WITNESS THEREOF, said corporation has caused this certificate to be
signed by Jeffrey A. Felder, its President, and Geraldine Lyons, its Secretary,
this 13th day of June, 1994.
REPOSSESSION AUCTION, INC.
(CORPORATE SEAL)
BY: /s/ JEFFREY A. FELDER
------------------------------------
Jeffrey A. Felder
President
ATTEST:
/s/ GERALDINE LYONS
- ----------------------------
Geraldine Lyons
Secretary
<PAGE>
STATE of FLORIDA
COUNTY OF DADE
This instrument was acknowledged before me on the 13th day of June,
1994 by Jeffrey A. Felder as President of Repossession Auction, Inc., now known
as Latin American Casinos, Inc., who acknowledged that he had executed the same
for the purpose, consideration and in the capacity therein stated, and as the
act and deed of said corporation. He further acknowledged to me that the facts
stated therein are true and correct.
Personally known to me. /s/ LYDIA VILLASUSO
--------------------------------
LYDIA VILLASUSO
Notary Public
My commission expires:
June 26, 1994 (NOTARY SEAL OMITTED)
----------------------------
----------------------------------------
LYDIA VILLASUSO
MY COMMISSION #CC 025325
EXPIRES JUNE 26, 1994
BONDED THRU NOTARY PUBLIC UNDERWRITERS
----------------------------------------
- 2 -
Exhibit 3.2
CERTIFICATE OF MERGER
MERGING
REPOSSESSION AUCTION INC. (FLORIDA Corporation)
INTO
REPOSSESSION AUCTION INC. (DELAWARE Corporation)
**************
REPOSSESSION AUCTION, INC. , a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY THAT;
FIRST: The Corporation was incorporated on the 19th day of September
1991, pursuant to the General Corporation Law of the State of Delaware
("Repossession Auction"), was incorporated on December 11, 1989 under the
Corporation Law of the State of Florida.
SECOND: An Agreement and Plan of Merger attached hereto as Exhibit A,
has been approved, adopted, certified, executed and acknowledged by the
Corporation and by Repossession Auction, Inc., in accordance with Sections
607.1101 - 607.1103 of the Corporation Law of the State of Florida.
THIRD: The corporation shall be the Surviving Corporation.
FOURTH: The Certificate of Incorporation of the Corporation shall be
the Certificate of the Incorporation of the surviving Corporation.
FIFTH: The merger shall become effective upon the completion of the
filing of this Certificate of Merger with the
<PAGE>
Secretary of State of Delaware, and the filing of Articles of Merger with the
Department of State of Florida.
SIXTH: Anything herein or elsewhere to the contrary notwithstanding,
this merger may be terminated and abandoned by the Board of Directors of the
Corporation at any time prior to the date of filing of this Certificate of
Merger with the Secretary of State of Delaware.
SEVENTH: The executed Agreement and Plan of Merger is on file at the
Corporation's principal place of business, located at 11401 N.W. Seventh Avenue,
Miami, Florida, 19442.
EIGHTH: A copy of the Agreement and Plan of Merger shall be furnished
by the Corporation, on request and without cost, to any stockholder of
Repossession Auction.
IN WITNESS WHEREOF, the corporation has caused this Certificate of
Merger to be signed by Lloyd Lyons, its President, and attested by Geraldine E.
Lyons, Its Secretary, on this 23rd day of September, 1991.
REPOSSESSION AUCTION, INC.
BY /s/ LLOYD LYONS
--------------------------------------------------------
Lloyd Lyons
President
(CORPORATE SEAL)
ATTEST:
/s/ GERALDINE E. LYONS
- ---------------------------
GERALDINE E. LYONS
SECRETARY
- 2 -
<PAGE>
STATE OF FLORIDA
COUNTY OF DADE
THIS instrument was acknowledged before me on the 13th day of June,
1994 by Jeffrey A. Felder as President of Repossession Auction, Inc, now known
as Latin American Casinos, Inc., who acknowledged that he had executed the same
for the purpose, consideration and in the capacity therein stated, and as the
act and deed of said corporation. He further acknowledged to me that the facts
stated therein are true and correct.
Personally known to me. /s/ LYDIA VILLASUSO
--------------------------------
LYDIA VILLASUSO
Notary Public
My commission expires:
June 26, 1994 (NOTARY SEAL OMITTED)
----------------------------
----------------------------------------
LYDIA VILLASUSO
MY COMMISSION #CC 025325
EXPIRES JUNE 26, 1994
BONDED THRU NOTARY PUBLIC UNDERWRITERS
----------------------------------------
- 2 -
<PAGE>
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 10:00 a.m. 09/30/1991
912745015 - 2274303
AGREEMENT AND PLAN OF MERGER
OF
REPOSSESSION AUCTION, INC., (Florida)
INTO
REPOSSESSION AUCTION, INC., (Delaware)
This agreement and plan of merger (the "Agreement and Plan of Merger")
dated as of September 23, 1991 by sentencing between Repossession Auction, Inc.,
a corporation organized and existing under the laws of the State of Delaware
(hereinafter the "Surviving Corporation"), and Repossession Auction, Inc., a
corporation organized and existing under the laws of the StatE of Florida
(hereinafter the "Merging Corporation").
WHEREAS, the Board of Directors of the Merging Corporation and the
Board of Directors of the Surviving Corporation deem it advisable that the
Merging Corporation be merged with and into the Surviving Corporation, and that
is the Surviving Corporation be the surviving corporation of such merger; and
WHEREAS, (i) the designation and number of the shares of capital stock
which the Merging Corporation is authorized to issue is 500 shares of common
stock, par value $1.00 per share, of which 100 are outstanding, and (ii) the
designation and number of shares of capital stock which the Surviving
Corporation is authorized to issue is 5,000,000 shares of common stock, par
value $.001 per share, of which no shares are outstanding.
<PAGE>
NOW, THEREFORE, the terms and conditions of the merger of the Merging
CORPORATION into the Surviving Corporation (the "Merger") and the manner and
basis of converting the shares of the Merging Corporation into the shares,
obligations or other securities of the Surviving Corporation, and other
provisions on that with respect to the proposed Merger are as follows:
ARTICLE I
The name of the Merging Corporation is Repossession Auction, Inc. The
name of the surviving Corporation is Repossession Auction, Inc.
ARTICLE II
The Merger pursuant to this Agreement and Plan of Merger shall been
subject to the prior approval of the holders of not less than two-thirds of the
outstanding shares of capital stock of the Merging Corporation. Subject to such
approving vote, the Merger shall become effective upon the filing of Articles of
Merging, together with any other required documents, with the Department of
State of Florida as required by the Corporation Law of the State of Florida, and
the filing of a Certificate of Merger, together with any other required
documents, with the Secretary of Delaware, as required by the Delaware General
Corporation Law. Upon the Merger becoming effective:
(a) The separate corporate existence of the Merging Corporation shall
cease and the Merging
2
<PAGE>
Corporation shall be merged with and into the Surviving Corporation.
(b) The surviving corporation shall thereupon and thereafter possess
all of the rights, privileges, immunities and franchises, of a public as well as
of a private nature, of the Merging Corporation; and all rights, title and
interest of the Merging Corporation in all property, whether real, personal or
mixed, and all debts due whatever account, including subscriptions to shares,
and all other choses in action, and all and every other interest, of or
belonging to or due to the Merging Corporation, shall be taken by and deemed to
be transferred to and vested in the Surviving Corporation without further act or
deed; and the title to all real estate, or any interest therein, vested in the
Merging Corporation, shall not revert or be in any way impaired by reason of the
Merger.
(c) The Surviving Corporation shall thereupon and thereafter be
responsible and liable for all of the liabilities and obligations of the Merging
CORPORATION; and any claim existing or action or proceeding pending by or
against the Merging Corporation may be prosecuted to judgement as if the Merger
had not taken place, or the Surviving Corporation may be substituted in its
place; and neither the rights of creditors nor any liens upon the property of
the Merging Corporation shall be impaired by the Merger, provided that such
liens, if any, upon the property of the Merging Corporation shall be limited to
the property affected thereby immediately prior to the effectiveness
3
<PAGE>
of the Merger.
(d) The corporation existence of the Surviving Corporation shall
continue unaffected and unimpaired by the Merger.
ARTICLE III
MANNER AND EFFECTING THE MERGER
(a) Each share of common stock of the Merging Corporation issued and
outstanding or in the treasury of the Merging Corporation upon the effectiveness
of the Merger shall be deemed to be 10,500 shares of such stock of the Surviving
Corporation from and after the effectiveness of the Merger, and shall no longer
be a share of stock of the Merging Corporation.
(b) Upon the effectiveness of the Merger, each shareholder of a stock
certificate or certificates formerly representing shares of common stock of the
Merging Corporation shall be entitled receive; upon surrender of such
certificate or certificates to the Registrar and Transfer Agent for the
Surviving and Merging Corporations, a new certificate representing 10,500 shares
of common stock of the Surviving Corporation for each share of the Merging
Corporation.
(c) From and after the effectiveness of the Merger, each option,
warrant, conversion or other right to require the Merging Corporation to issue
shares of common stock of the Merging Corporation which is outstanding upon the
effectiveness of the Merger shall be deemed to be an option, warrant,
conversion, or other right (as the case may be) to require the Surviving
4
<PAGE>
Corporation to issue the same number of shares of common stock (times 10,500) of
the Surviving Corporation (as the case may be), subject to the same terms and
conditions applicable to such option, warrant, conversion or other right prior
to the effectiveness of the Merger.
ARTICLE IV
CERTIFICATE OF INCORPORATION; BY-LAWS; DIRECTORS AND OFFICERS
(a) The Certificate of INCorporation of the Surviving Corporation in
effect on the effective date of the Merger shall continue as the Certificate of
Incorporation of the Surviving Corporation until the same shall thereafter be
altered, amended or repealed in accordance with law and said Certificate of
Incorporation.
(b) The By-laws of the Surviving Corporation in effect on the effective
date of the Merger shall continue as the BY-LAWS of the Surviving Corporation
until the same shall thereafter be altered, amended or repealed in accordance
with law, the Certificate of Incorporation and said By-Laws.
(c) From and after the effective date of the Merger, the Board of
Directors and the officers of the Merging Corporation holding office on the
effective date of the Merger shall be and constitute the Board of Directors (and
the members thereof) and the officers of the Surviving Corporation.
5
<PAGE>
ARTICLE V
FEES AND EXPENSES
The Surviving Corporation shall pay all fees and expenses of carrying
this Agreement and Plan of Merger into effect and accomplishing the Merger
provided for herein.
ARTICLE VI
TERMINATION AND ABANDONMENT
This Agreement and Plan of Merger, at any time prior to the
effectiveness thereof, may be terminated or abandoned by either the Board Of
Directors of the Surviving Corporation or the Board of Directors of the Merging
Corporation. In the event of such termination and abandonment, notice thereof
shall forthwith be given to the Merging Corporation or the Surviving Corporation
(as the case may be) and two the Merging Corporation's shareholders of record as
of the date hereof and thereupon this Agreement and Plan of Merger shall become
void and of no effect.
ARTICLE VII
MISCELLANEOUS
(a) This Agreement and Plan of Merger shall be governed by and
construed in accordance with the laws of the State of Delaware.
(b) This Agreement and Plan of Merger contains the entire agreement
between the Merging Corporation and the Surviving
6
<PAGE>
Corporation with respect to the Merger.
(c) This Agreement and Plan of Merger may be executed in any number of
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one agreement.
IN WITNESS WHEREOF, the undersigned have caused this Agreement and Plan
of Merger to be duly executed and delivered by duly authorized officers of the
undersigned as of the date first above written.
Merging Corporation:
REPOSSESSION AUCTION, INC. (FLORIDA)
BY: /s/ LLOYD LYONS
--------------------------------------------------------
Lloyd Lyons
President
Surviving Corporation:
REPOSSESSION AUCTION, INC. (DELAWARE)
BY: /s/ LLOYD LYONS
--------------------------------------------------------
Lloyd Lyons
President
7
Exhibit 3.3
BY-LAWS
OF
LATIN AMERICAN CASINOS, INC.
As Amended - December 4, 1991
<PAGE>
TABLE OF CONTENTS
Page
No.
---
Article I - Offices
Section 1. Registered Office ........................... 1
Section 2. Offices ..................................... 1
Article II - Meetings of Stockholders
Section 1. Place of Meetings ........................... 1
Section 2. Annual Meetings ............................. 1
Section 3. Special Meetings ............................ 2
Section 4. Notice of Meetings .......................... 2
Section 5. Voting List ................................. 3
Section 6. Quorum and Adjournment ...................... 3
Section 7. voting ...................................... 4
Section 8. Proxies ..................................... 4
Section 9. Consent of Stockholders in
Lieu of Meeting ........................... 5
Article III - Directors
Section 1. Number and Term of Office ................... 5
Section 2. Election .................................... 6
Section 3. Filling of Vacancies ........................ 6
Section 4. Chairman of the Board ....................... 6
Section 5. Powers of the Board ......................... 7
Section 6. Place of Meeting ............................ 7
Section 7. Annual Meeting .............................. 7
Section 8. Regular Meetings ............................ 8
Section 9. Special Meetings ............................ 8
Section 10. Quorum and Manner of Acting ................. 8
Section 11. Consent of Directors in Lieu of Meeting ..... 9
Section 12. Presence at Meetings ........................ 9
Section 13. Compensation of Directors ................... 9
Section 14. Removal of Directors ........................ 10
Article IV - Notices
Section 1. Manner of Giving Notice .................... 10
Section 2. Waiver of Notice ........................... 10
i
<PAGE>
Page
No.
---
Article V - Officers
Section 1. Officers .................................... 11
Section 2. Compensation ................................ 11
Section 3. Term of Office; Removal and Vacancies ....... 11
Section 4. Chairman of the Board ....................... 12
Section 5. The President ............................... 12
Section 6. Executive Vice Presidents and
Vice Presidents ........................... 13
Section 7. The Secretary ............................... 13
Section 8. The Treasurer ............................... 13
Section 9. Surety Bond ................................. 14
Section 10. Chief Financial Officer ..................... 15
Section 11. Other Officers and Agents ................... 15
Section 12. Additional Powers and Duties ................ 15
Article VI - Committees
Section 1. Designation ................................. 15
Section 2. Representations, Quorum ..................... 16
Article VII - Stock Certificates
Section 1. Form of Certificate ......................... 16
Section 2. Lost Certificates ........................... 17
Section 3. Transfers of Stock .......................... 17
Section 4. Record Date ................................. 18
Section 5. Registered Stockholders ..................... 18
Article VIII - Fiscal Year ............................................ 19
Article IX - Indemnification ........................................... 19
Article X - Amendments ................................................ 20
Article XI - Stock held by the Corporation .............................. 20
ii
<PAGE>
As Amended December 4, 1991
BY-LAWS
OF
LATIN AMERICAN CASINOS, INC.
<PAGE>
LATIN AMERICAN CASINOS, INC.
BY-LAWS
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office of the corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware, and
The Corporation Trust Company shall be the registered agent of the Corporation.
Section 2. OFFICES. The corporation may have offices at such place both
within and without the State of Delaware as the Board of Directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. All meetings of the stockholders for the
election of directors shall be held at such place either within or without the
State of Delaware as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting. Meetings of stockholders for
any other purpose may be held at such time and place, within or without the
State of Delaware as shall be designated by the person or persons calling such
meeting and stated in the notice of such meeting.
1
<PAGE>
Section 2. ANNUAL MEETINGS. The annual meetings of stockholders for the
election of directors and the transaction of such other business as may properly
be brought before the meeting shall be held at such date and time as shall be
designated from time to time by the Board of Directors.
Section 3. SPECIAL MEETINGS. Except as otherwise provided by law, a
special meeting of the stockholders may be called at any time by the President,
the Chairman of the Board or the Board of Director, and shall be called by the
President or the Secretary at the request, in writing, of the holders of at
least ten percent (10%) of the shares of stock issued, outstanding and entitled
to vote. Such request shall state the purpose or purposes of the proposed
meeting."
Section 4. NOTICE OF MEETINGS. Except as otherwise provided by law,
written notice of each meeting of stockholders, whether annual or special
stating the place, date and hour of the meeting and, in the case of a special
meeting, the purpose or purposes for which the meeting is to be held, shall be
given to each stockholder entitled to vote at such meeting not less than ten
(10) or more than sixty (60) days before the date of such meeting. If mailed,
the notice shall be addressed to each stockholder in a postage-prepaid envelope
at its address as it appears on the records of the corporation unless, prior to
the time of mailing, the Secretary shall have received from any such stockholder
a written request that notices intended for it be mailed to some other address,
in which case notices intended for
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such stockholder shall be mailed to the address designated in such request.
Section 5. VOTING LIST. The officer who has charge of the stock ledger
of the corporation shall prepare and make, at least ten (10 days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 6. QUORUM AND ADJOURNMENT. Except as otherwise provided by law,
at all meetings of the stockholders, the holders of a majority of the shares of
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum for the transaction of business.
If, however, a quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have
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power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. 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 notified. If the adjournment is for more than thirty 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 stockholder of record
entitled to vote at the meeting.
Section 7. VOTING. When a quorum is present or represented at any
meeting, the vote of the holders of a majority of the shares constituting such
quorum shall decide any question brought before such meeting, unless the
question is one upon which a vote of a different percentage of shares is
required by statute or the certificate of incorporation or these by-laws, in
which case the vote of such different percent of shares shall be required.
Unless otherwise provided in the certificate of incorporation or these by-laws,
each stockholder of record on the applicable record date shall be entitled at
every meeting of the stockholders to one vote in person or by proxy for each
share of capital stock held by such stockholder.
Section 8. PROXIES. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy. Every proxy
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must be in writing and signed by the stockholder or his attorney-in-fact. No
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period.
Section 9. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Any action
required or permitted to be taken at any annual or special meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing. Such written consent shall be filed with the records of
the corporation.
ARTICLE III
DIRECTORS
Section 1. NUMBER AND TERM OF OFFICE. The number of directors may be
fixed from time to time by resolution of the Board of Directors or by action of
the stockholders. The number of directors initially shall be three. Directors
shall be elected at each annual meeting of stockholders, except as provided in
Section 3 of this Article, and each director shall hold office until the next
annual meeting of stockholders and
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until his successor shall have been elected and qualified or until his death,
resignation, disqualification or removal from office. Directors need not be
stockholders.
Section 2. ELECTION. Directors shall be elected by the affirmative vote
of holders of at least a majority of the shares of stock issued and outstanding
and entitled to vote thereon.
Section 3. FILLING OF VACANCIES. Vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office until the next annual election and until their successors are duly
elected and shall qualify, unless sooner displaced. If there are no directors in
office, then an election of directors may be held in the manner provided by
statute. If, at the time of filling any vacancy or newly created directorship,
the directors then in office shall constitute less than a majority of the whole
board (as constituted immediately prior to any such increase), the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office.
Section 4. CHAIRMAN OF THE BOARD. A Chairman of the Board
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shall be appointed by the Board of Directors from among the directors. The
Chairman of the Board or, in his absence his designee, shall preside at all
meetings of the Board of Directors.
Section 5. POWERS OF THE BOARD. The business and affairs of the
corporation shall be managed by or under the direction of its Board of
Directors, which may exercise all such powers of the corporation and do all such
lawful acts and things as are not by statute or by the certificate of
incorporation or by these bylaws directed or required to be exercised or done by
the stockholders.
Section 6. PLACE OF MEETINGS. The Board of Directors of the corporation
may hold meetings, both regular and special, either within or without the State
of Delaware.
Section 7. ANNUAL MEETING. The first meeting of each newly elected
Board of Directors shall be held as soon as practicable after the annual
election of directors for the purpose of organization, the designation of the
Chairman of the Board, the election of officers and the transaction of other
business. Such annual meeting of the Board of Directors may be held without
notice if it shall be held on the day fixed for the annual meeting of
stockholders and as soon as practicable after the time fixed for such
stockholders' meeting. If such annual meeting of the Board of Directors shall
not be held on such date, it shall be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board
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of Directors, or as shall be specified in a consent or written waiver signed by
all of the directors.
Section 8. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held without notice at such time and at such place as shall from time to
time be determined by the Board of Directors by affirmative vote of a majority
of the whole Board of Directors.
Section 9. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chairman of the Board or the President on seven (7) days'
notice to each director, either personally or by mail or by telegram; special
meetings shall be called by the President or Secretary in like manner and on
like notice on the written request of two directors unless the Board of
Directors consists of only one director, in which case special meetings shall be
called by the President or Secretary in like manner and on like notice on the
written request of the sole director.
Section 10. QUORUM AND MANNER OF ACTING. At all meetings of the Board
of Directors the presence of a majority of directors shall constitute a quorum
for the transaction of business. If a quorum shall not be present at any meeting
of the Board of Directors the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present. At any meeting at which a quorum is present, the act
of a majority of directors present shall be the act of the Board of Directors,
unless a
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greater number is required by statute; provided, however, that the unanimous
vote of all directors (not merely those present) shall be required for the Board
of Directors to take any action affecting: the sale or issuance of stock by the
corporation; declaration of dividends; amendment of the By-Laws; salaries and
bonuses of officers; capital expenditures in excess of $2,000; and the sale,
disposition or investment of the corporations's assets having a fair market
value in excess of $2,000.
Section 11. CONSENT OF DIRECTORS IN LIEU OF MEETING. Any action
required or permitted to be taken at any meeting of the Board of Directors may
be taken without a meeting if all members of the Board of Directors consent
thereto in writing and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
Section 12. PRESENCE AT MEETINGS. Members of the Board of Directors of
the corporation may participate in a meeting of the Board of Directors by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and participation
in a meeting pursuant thereto shall constitute presence in person at such
meeting.
Section 13. COMPENSATION OF DIRECTORS. The Board of Directors shall
have the authority to fix the compensation of directors. The directors may be
paid their expenses, if any, for attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of
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Directors or a stated salary as directors. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor.
Section 14. REMOVAL OF DIRECTORS. Any director may be removed, with or
without cause, at any time, by the affirmative vote of the holders of a majority
of the outstanding shares of stock issued, outstanding and entitled to vote at
an election of directors, at a meeting of the stockholders called for such
purpose.
ARTICLE IV
NOTICES
Section 1. MANNER OF GIVING NOTICE. Whenever, under the provisions of
the statutes or of the certificate of incorporation or of these by-laws, notice
is required to be given to any director or stockholder, it shall not be
construed to require personal notice, but such notice may be given in writing,
by mail, telegram, telex or cable, addressed to such director or stockholder, at
his address as it appears on the records of the corporation, and such notice
shall be deemed to have been duly given when deposited for immediate
transmission or delivery with the communication medium selected.
Section 2. WAIVER OF NOTICE. Whenever any notice is required to be
given under the provisions of the statutes or of the certificate of
incorporation or of these by-laws, a written waiver thereof, signed by the
person or persons entitled to such
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notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting.
ARTICLE V
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a
Chairman of the Board, a President, a Secretary, a Treasurer and such other
officers as, from time to time, may be deemed by the Board of Directors to be
necessary or advisable in the conduct of the affairs of the corporation. The
officers shall be elected or appointed by the Board of Directors. Any number of
offices may be held by the same person.
Section 2. COMPENSATION. The salaries of all officers and agents of the
corporation shall be fixed by or under the direction of the Board of Directors.
Section 3. TERM OF OFFICE; REMOVAL AND VACANCIES. So far as
practicable, all officers shall be elected at the first meeting of the Board of
Directors following the annual meeting of stockholders in each year. Each
officer of the corporation shall hold office until his successor is chosen and
qualifies or until his earlier resignation or removal. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. Any vacancy occurring
in any office of the corporation shall be filled by the Board of Directors.
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Section 4. CHAIRMAN OF THE BOARD. The Chairman of the Board shall call
and preside over meetings of the Board of Directors, shall preside over each
meeting of the stockholders and shall promote the interests of the corporation
and its subsidiaries generally. In his absence, the Chairman's designee shall
perform the Chairman's duties.
Section 5. THE PRESIDENT. The President shall be the chief executive
officer of the corporation and shall have general and active supervision and
control of all of the business affairs of the corporation and shall see that all
orders and resolutions of the Board of Directors are carried into effect. He
shall have general authority to cause the employment or appointment of such
employees and agents of the corporation as the proper conduct of operations may
require and to fix their compensation, subject to the prior written concurrence
of the Chairman of the Board and subject to the provisions of these by-laws; to
remove or suspend any employee or agent who shall have been employed or
appointed under his authority or under authority of an officer subordinate to
him; to suspend for cause, pending final action by the authority which shall
have elected or appointed him, any officer of the corporation and, in general,
to exercise all of the powers usually appertaining to the office of president of
a corporation, except as otherwise provided in these by-laws. In the absence of
the President, his duties shall be performed and his powers may be exercised by
such other officer as shall be designated either by him in writing or, failing
such designation, by the Board of
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Directors.
Section 6. EXECUTIVE VICE PRESIDENTS AND VICE PRESIDENTS. There may be
one or more executive vice presidents and vice presidents who shall be subject
to the direction of the President. He or they shall have such duties as shall be
established from time to time by the President and the Chairman of the Board
acting jointly.
Section 7. THE SECRETARY. The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and of the Board of Directors,
shall attend all such meetings and shall keep and attest true records of all
proceedings thereat. He shall have custody of the corporate seal and shall have
authority to affix the same and to attest any and all instruments or writings to
which the same may be affixed. He shall seep an account for all books,
documents, papers and records of the corporation, except those for which some
other officer or agent is properly accountable. He shall have authority to sign
stock certificates when authorized by the Board of Directors and shall generally
perform all of the duties usually appertaining to the office of secretary of a
corporation. In the absence of the Secretary an Assistant Secretary appointed by
the Board of Directors or Secretary PRO TEMPORE appointed by the President or
Chairman of the Board shall perform his duties.
Section 8. THE TREASURER. Under the general direction of the President,
and subject to any duties which may be delegated to a Chief Financial Officer
pursuant to Section 10 of this
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Article, the Treasurer shall have the care and custody of all moneys, funds and
securities of the corporation; shall deposit or cause to be deposited all such
funds in and with such depositories as the Board of Directors shall from time to
time direct; shall advise upon all terms of credit granted by the corporation
and its subsidiary corporations, respectively; shall be responsible for the
collection of all their accounts, and shall cause to be recorded, daily, a
statement of all receipts and disbursements of the corporation, in order that
proper entries may be made in the books of account. He shall have power to sign
stock certificates when authorized by the Board of Directors; to endorse for
deposit or collection, or otherwise, all checks, drafts, notes, bills of
exchange or other commercial paper payable to the corporation, and to give
proper receipts of discharges for all payments to the corporation. In the
absence of the Treasurer, his duties shall be performed by an Assistant Treasure
designated by the Board of Directors, or by some other officer designated by the
President or Chairman of the Board.
Section 9. SURETY BOND. If required by the Board of Directors, the
treasurer shall give the corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of such office and for the restoration to the
corporation, in case of the death, resignation, retirement or removal from
office of the treasure, of all books, papers, vouchers, money and other property
of whatever kind in the
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treasurer's possession or control belonging to the corporation.
Section 10. CHIEF FINANCIAL OFFICER. There may be a Chief Financial
Officer who shall be subject to the direction of the President. He all have such
duties as shall be established from time to time by the President and Chairman
of the Board acting jointly.
Section 11. OTHER OFFICERS AND AGENTS. The Board of Directors may
appoint such other officers and agents from time to time as it shall deem
necessary, who shall perform such duties and have such powers as the Board of
Directors or the President and the Chairman of the Board acting jointly may from
time to time prescribe.
Section 12. ADDITIONAL POWERS AND DUTIES. In addition to the foregoing
especially enumerated duties and powers, the several officers of the corporation
shall perform such other duties and exercise such further powers as may be
provided in these by-laws or as the Board of Directors may from time to time
determine, or as may be assigned to them by any competent superior officer.
ARTICLE VI
COMMITTEES
Section 1. DESIGNATION. The Board of Directors, by resolution adopted
by a majority of the whole Board, may authorize and appoint such committees as
may be deemed desireable or necessary and may delegate policy-making authority
to any such
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committee.
Section 2. REPRESENTATIONS; QUORUM. Representatives of such committees
shall be appointed by the Board of Directors. At any committee meeting, a
majority of committee members shall constitute a quorum for the transaction of
business and action shall be taken upon the affirmative vote of a majority of
committee members present and voting at a meeting at which a quorum is present.
ARTICLE VII
STOCK CERTIFICATES
Section 1. FORM OF CERTIFICATE. Every holder of stock in the
corporation shall be entitled to have a certificate signed by, or in the name of
the corporation by the Chairman of the Board or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the corporation, certifying the number of shares owned by
him in the corporation.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of
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stock; provided that, except as otherwise provided in Section 202 of the General
Corporation Law of Delaware, in lieu of the foregoing requirements, there may be
set forth on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, a statement that the
corporation will furnish, without charge, to each stockholder who so requests a
statement as to the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
Section 2. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificates, or
his legal representative, to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation,
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 3. TRANSFERS OF STOCK. Upon surrender to the
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corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, to cancel the old certificate and to record the transaction upon its
books.
Section 4. RECORD DATE. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; PROVIDED,
HOWEVER, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 5. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends and other distributions, and to vote as
such owner, and to hold liable for calls and assessments a person registered on
its books as the owner of shares, and shall not be bound to
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recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of
ARTICLE VIII
FISCAL YEAR
The fiscal year of the corporation shall end on December 31 of each
year.
ARTICLE IX
INDEMNIFICATION
The corporation shall indemnify its officers, directors, employees and
agents to the full extent permitted by the General Corporation Law of Delaware,
as amended from time to time.
A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.
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ARTICLE X
AMENDMENTS
These by-laws may be altered, amended or repealed at any regular or
special meeting of the stockholders or of the Board of Directors. Notice of any
such proposed alteration or repeal shall be contained in the notice of any such
special meeting.
ARTICLE XI
STOCK HELD BY THE CORPORATION
The Board of Directors or such other directors, officers or individuals
as the Board of Directors by resolution may appoint shall have full power and
authority on behalf of the corporation in person or by proxy to attend, to act
and to vote at any meeting of stockholders of any corporation in which the
corporation may hold stock, and at any such meeting shall possess, and may
exercise, any and all of the rights and powers incident to the ownership of such
stock.
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Exhibit 4.3
WARRANT AGREEMENT
AGREEMENT, dated as of this __ day of December, 1991, by and among
REPOSSESSION AUCTION, INC., a Delaware corporation ("Company") and AMERICAN
STOCK TRANSFER AND TRUST COMPANY, as Warrant Agent (the "Warrant Agent").
WITNESSETH
WHEREAS, in connection with a public offering of up to 1,725,000 units
("Units"), each unit consisting of one (1) share of the Company's Common Stock,
$.00067 par value ("Common Stock") and one (1) Common Stock Purchase Warrant
pursuant to an underwriting agreement (the "Underwriting Agreement") dated
December 12, 1991 between the Company, Stratton Oakmont Inc., ("Stratton") and
M.H. Meyerson & Co., Inc. ("Meyerson" and, together with Stratton, the
"Underwriters") and the issuance to the Underwriters or their designees of a
Unit Purchase Option to purchase 150,000 additional Units, dated as of December
19, 1991 (the "Unit Purchase Option"), the Company will issue up to 1,875,000
Common Stock Purchase Warrants (the "Warrants"); and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer exchange and redemption of the Warrants, the
issuance of certificates representing the Warrants, the exercise of the
Warrants, and the rights of the holders thereof;
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the Warrant Agent, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS. As used herein, the following terms shall have
the following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean stock of the Company of any class,
whether now or hereafter authorized, which has the right to participate in the
distribution of earnings and assets of the Company without limit as to amount or
percentage, which at the date hereof consists of 7,500,000 shares of Common
Stock, $.00067 par value.
(b) "Corporate Office" shall mean the office of the Warrant Agent (or
its successor) at which at any particular time its principal business shall be
administered, which office is located at the date hereof at 40 Wall Street, New
York, New York 10005.
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(c) "Exercise Date" shall mean, as to any Warrant, the date on which
the Warrant Agent shall have received both (a) the Warrant Certificate
representing such Warrant, with the exercise form thereon duly executed by the
Registered Holder thereof or his attorney duly authorized in writing, and (b)
payment in cash, or by official bank or certified check made payable to the
Company, of an amount in lawful money of the United States of America equal to
the applicable Purchase Price.
(d) "Initial Warrant Exercise Date" shall mean December __, 1991.
(e) "Purchase Price" shall mean the purchase price per share to be paid
upon exercise of each Warrant in accordance with the terms hereof, which price
shall be $7.25 per share, subject to adjustment from time to time pursuant to
the provisions of Section 9 hereof, and subject to the Company's right to reduce
the Purchase Price upon notice to all warrantholders.
(f) "Redemption Price" shall mean the price at which the Company may,
at its option, redeem the Warrants, in accordance with the terms hereof, which
price shall be $0.05 per Warrant.
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(g) "Registered Holder" shall mean as to any Warrant and as of any
particular date, the person in whose name the certificate representing the
Warrant shall be registered on that date on the books maintained by the Warrant
Agent pursuant to Section 6.
(h) "Transfer Agent" shall mean American Stock Transfer and Trust
Company, as the Company's transfer agent, or its authorized successor, as such.
(i) "Warrant Expiration Date" shall mean 5:00 P.M. (New York time) on
December 11, 1996, or the Redemption Date as defined in Section 8, whichever is
earlier; provided that if such date shall in the State of New York be a holiday
or a day on which banks are authorized or required to close, then 5:00 P.M. (New
York time) on the next following day which in the State of New York is not a
holiday or a day on which banks are authorized or required to close. Upon notice
to all warrantholders the Company shall have the right to extend the warrant
expiration date.
SECTION 2. WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES.
(a) A Warrant initially shall entitle the Registered Holder of the
Warrant representing such Warrant to purchase one share of Common Stock upon the
exercise thereof, in accordance
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with the terms hereof, subject to modification and adjustment as provided in
Section 9.
(b) Upon execution of this Agreement, Warrant Certificates representing
the number of Warrants sold pursuant to the Underwriting Agreement shall be
executed by the Company and delivered to the Warrant Agent. Upon written order
of the Company signed by its President or Chairman or a Vice President and by
its Secretary or an Assistant Secretary, the Warrant Certificates shall be
countersigned, issued and delivered by the Warrant Agent as part of the Units.
(c) From time to time, up to the Warrant Expiration Date, the Transfer
Agent shall countersign and deliver stock certificates in required whole number
denominations representing up to an aggregate of 1,875,000 shares of Common
Stock, subject to adjustment as described herein, upon the exercise of Warrants
in accordance with this Agreement.
(d) From time to time, up to the Warrant Expiration Date, the Warrant
Agent shall countersign and deliver Warrant Certificates in required whole
number denominations to the persons entitled thereto in connection with any
transfer or exchange permitted under this Agreement; provided that no Warrant
Certificates shall be issued except (i) those initially
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issued hereunder, (ii) those issued on or after the Initial Warrant Exercise
Date, upon the exercise of fewer than all Warrants represented by any Warrant
Certificate, to evidence any unexercised Warrants held by the exercising
Registered Holder, (iii) those issued upon any transfer or exchange pursuant to
Section 6; (iv) those issued in replacement of lost, stolen, destroyed or
mutilated Warrant Certificates pursuant to Section 7; (v) those issued pursuant
to the Unit Purchase Option; and (vi) at the option of the Company, in such form
as may be approved by the its Board of Directors, to reflect any adjustment or
change in the Purchase Price, the number of shares of Common Stock purchasable
upon exercise of the Warrants or the Redemption Price therefor made pursuant to
Section 9 hereof.
(e) Pursuant to the terms of the Unit Purchase Option, the Underwriters
may purchase up to 150,000 Units, which include up to 150,000 Warrants.
Notwithstanding anything to the contrary contained herein, the Warrants
underlying the Unit Purchase Option shall not be subject to redemption by the
Company.
SECTION 3. FORM AND EXECUTION OF WARRANT CERTIFICATES. (a) The Warrant
Certificates shall be substantially in the form annexed hereto as Exhibit A (the
provisions of which are hereby incorporated herein) and may
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have such letters, numbers or other marks of identification or designation and
such legends, summaries or endorsements printed, lithographed or engraved
thereon as the Company may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Warrants may be listed, or to conform to
usage or to the requirements of Section 2(b). The Warrant Certificates shall be
dated the date of issuance thereof (whether upon initial issuance, transfer,
exchange or in lieu of mutilated, lost, stolen, or destroyed Warrant
Certificates) and issued in registered form. Warrant Certificates shall be
numbered serially with the letter W.
(b) Warrant Certificates shall be executed on behalf of the Company by
its Chairman of the Board, President or any Vice President and by its Secretary
or an Assistant Secretary, by manual signatures or by facsimile signatures
printed thereon, and shall have imprinted thereon a facsimile of the Company's
seal. Warrant Certificates shall be manually countersigned by the Warrant Agent
and shall not be valid for any purpose unless so countersigned. In case any
officer of the Company who shall have signed any of the Warrant Certificates
shall cease to be an officer of the Company or to
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hold the particular office referenced in the Warrant Certificate before the date
of issuance of the Warrant Certificates or before countersignature by the
Warrant Agent and issue and delivery thereof, such Warrant Certificates may
nevertheless be countersigned by the Warrant Agent, issued and delivered with
the same force and effect as though the person who signed such Warrant
Certificates had not ceased to be an officer of the Company or to hold such
office. After countersignature by the Warrant Agent, Warrant Certificates shall
be delivered by the Warrant Agent to the Registered Holder without further
action by the Company, except as otherwise provided by Section 4(a) hereof.
SECTION 4. EXERCISE. Each Warrant may be exercised by the Registered
Holder thereof at any time on or after the Initial Exercise Date, but not after
the Warrant Expiration Date, upon the terms and subject to the conditions set
forth herein and in the applicable Warrant Certificate. A Warrant shall be
deemed to have been exercised immediately prior to the close of business on the
Exercise Date and the person entitled to receive the securities deliverable upon
such exercise shall be treated for all purposes as the holder of those
securities upon the exercise of the Warrant as of the close of business on the
Exercise Date. As soon as practicable on or after the Exercise Date the Warrant
Agent shall deposit the proceeds
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received from the exercise of a Warrant and shall notify the Company in writing
of the exercise of the Warrants. Promptly following, and in any event within
five days after the date of such notice from the Warrant Agent, the Warrant
Agent, on behalf of the Company, shall cause to be issued and delivered by the
Transfer Agent, to the person or persons entitled to receive the same, a
certificate or certificates for the securities deliverable upon such exercise,
(plus a certificate for any remaining unexercised Warrants of the Registered
Holder) unless prior to the date of issuance of such certificates the Company
shall instruct the Warrant Agent to refrain from causing such issuance of
certificates pending clearance of checks received in payment of the Purchase
Price pursuant to such Warrants. Upon the exercise of any Warrant and clearance
of the funds received, the Warrant Agent shall promptly remit the payment
received for the Warrant (the "Warrant Proceeds") to the Company or as the
Company may direct in writing, subject to the provisions of Sections 4(b) and
4(c) hereof.
SECTION 5. RESERVATION OF SHARES; LISTING; PAYMENT OF TAXES; ETC. (a)
The Company covenants that it will at all times reserve and keep available out
of its authorized Common Stock, solely for the purpose of issue upon exercise of
Warrants, such number of shares of Common Stock as shall then
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be issuable upon the exercise of all outstanding Warrants. The Company covenants
that all shares of Common Stock which shall be issuable upon exercise of the
Warrants shall, at the time of delivery, be duly and validly issued, fully paid,
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, (other than those which the Company shall promptly pay or
discharge) and that upon issuance such shares shall be listed on each national
securities exchange or eligible for inclusion in each automated quotation
system, if any, on which the other shares of outstanding Common Stock of the
Company are then listed or eligible for inclusion.
(b) The Company covenants that if any securities to be reserved for the
purpose of exercise of Warrants hereunder require registration with, or approval
of, any governmental authority under any federal securities law before such
securities may be validly issued or delivered upon such exercise, then the
Company will in good faith and as expeditiously as reasonably possible, endeavor
to secure such registration or approval. The Company will use reasonable efforts
to obtain appropriate approvals or registrations under state "blue sky"
securities laws. With respect to any such securities, however, Warrants may not
be exercised by, or shares of Common Stock issued to, any Registered Holder in
any state in which such exercise would be unlawful.
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(c) The Company shall pay all documentary, stamp or similar taxes and
other governmental charges that may be imposed with respect to the issuance of
Warrants, or the issuance, or delivery of any shares upon exercise of the
Warrants; provided, however, that if the shares of Common Stock are to be
delivered in a name other than the name of the Registered Holder of the Warrant
Certificate representing any Warrant being exercised, then no such delivery
shall be made unless the person requesting the same has paid to the Warrant
Agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized to requisition
the Company's Transfer Agent from time to time for certificates representing
shares of Common Stock issuable upon exercise of the Warrants, and the Company
will authorize the Transfer Agent to comply with all such proper requisitions.
The Company will file with the Warrant Agent a statement setting forth the name
and address of the Transfer Agent of the Company for shares of Common Stock
issuable upon exercise of the Warrants.
SECTION 6. EXCHANGE AND REGISTRATION OF TRANSFER. (a) Warrant
Certificates may be exchanged for other Warrant Certificates representing an
equal aggregate number of
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Warrants of the same class or may be transferred in whole or in part. Warrant
Certificates to be exchanged shall be surrendered to the Warrant Agent at its
Corporate Office, and upon satisfaction of the terms and provisions hereof, the
Company shall execute and the Warrant Agent shall countersign, issue and deliver
in exchange therefor the Warrant Certificate or Certificates which the
Registered Holder making the exchange shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which, subject
to such reasonable regulations as it may prescribe, it shall register Warrant
Certificates and the transfer thereof in accordance with its regular practice.
Upon due presentment for registration of transfer of any Warrant Certificate at
such office, the Company shall execute and the Warrant Agent shall issue and
deliver to the transferee or transferees a new Warrant Certificate or
Certificates representing an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for registration
or transfer, or for exchange or exercise, the subscription form on the reverse
thereof shall be duly endorsed, or be accompanied by a written instrument or
instruments of transfer and subscription, in form satisfactory to the Company
and the Warrant Agent, duly executed by the
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Registered Holder or his attorney-in-fact duly authorized in writing.
(d) A service charge may be imposed by the Warrant Agent for any
exchange or registration of transfer of Warrant Certificates. In addition, the
Company may require payment by such holder of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for exchange
in case of mutilated Warrant Certificates shall be promptly cancelled by the
Warrant Agent and thereafter retained by the Warrant Agent until termination of
this Agreement or resignation as Warrant Agent, or, with the prior written
consent of Stratton, disposed of or destroyed, at the direction of the Company.
(f) Prior to due presentment for registration of transfer thereof, the
Company and the Warrant Agent may deem and treat the Registered Holder of any
Warrant Certificate as the absolute owner thereof and of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Company or
the Warrant Agent) for all purposes and shall not be affected by any notice to
the contrary. The Warrants,
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which are being publicly offered in Units with shares of Common Stock pursuant
to the Underwriting Agreement, will be immediately detachable from the Common
Stock and transferable separately therefrom.
SECTION 7. LOSS OR MUTILATION. Upon receipt by the Company and the
Warrant Agent of evidence satisfactory to them of the ownership of and loss,
theft, destruction or mutilation of any Warrant Certificate and (in case of
loss, theft or destruction) of indemnity satisfactory to them, and (in the case
of mutilation) upon surrender and cancellation thereof, the Company shall
execute and the Warrant Agent shall (in the absence of notice to the Company
and/or Warrant Agent that the Warrant Certificate has been acquired by a bona
fide purchaser) countersign and deliver to the Registered Holder in lieu thereof
a new Warrant Certificate of like tenor representing an equal aggregate number
of Warrants. Applicants for a substitute Warrant Certificate shall comply with
such other reasonable regulations and pay such other reasonable charges as the
Warrant Agent may prescribe.
SECTION 8. REDEMPTION. (a) Subject to the provisions of paragraph 2(e)
hereof, on not less than thirty (30) days notice, the Warrants may be redeemed,
at the option of the Company, at a redemption
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price of $0.05 per Warrant, provided the Market Price of the Common Stock
receivable upon exercise of such Warrant shall exceed $13.00 (the "Target
Price"), subject to adjustment as set forth in Section 8(f), below. Market Price
for the purpose of this Section 8 shall mean (i) the average closing bid price,
for fifteen (15) consecutive business days (or such other period as Stratton may
consent to), ending with the date of the notice of redemption, which notice
shall be mailed no later than five days thereafter, of the Common Stock (A) as
reported by the National Association of Securities Dealers, Inc. Automatic
Quotation System, if the Common Stock is then so listed or (B) if the Common
Stock is not so listed, as reported in the over-the-counter market or (ii) the
last reported sale price, for fifteen (15) consecutive business days (or such
other period as Stratton may consent to), ending with the date of the notice of
redemption, which notice shall be mailed no later than five days thereafter, on
the primary exchange on which the Common Stock is traded, if the Common Stock is
traded on a national securities exchange. All Warrants of a class, except those
comprising the Unit Purchase Option, must be redeemed if any of that class are
redeemed.
(b) If the conditions set forth in Section 8(a) are met, and the
Company desires to exercise its right to redeem the Warrants1 it shall request
Stratton to mail a notice of
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redemption to each of the Registered Holders of the Warrants to be redeemed,
first class, postage prepaid, not later than the thirtieth day before the date
fixed for redemption, at their last address as shall appear on the records
maintained pursuant to Section 6(b). Any notice mailed in the manner provided
herein shall be conclusively presumed to have been duly given whether or not the
Registered Holder receives such notice.
(c) The notice of redemption shall specify (i) the redemption price,
(ii) the date fixed for redemption, (iii) the place where the Warrant
Certificates shall be delivered and the redemption price paid, (iv) that
Stratton will assist each Registered Holder of a Warrant in connection with the
exercise thereof and (v) that the right to exercise the Warrant shall terminate
at 5:00 P.M. (New York time) on the business day immediately preceding the date
fixed for redemption. The date fixed for the redemption of the Warrants shall be
the Redemption Date. No failure to mail such notice nor any defect therein or in
the mailing thereof shall affect the validity of the proceedings for such
redemption except as to a Registered Holder (a) to whom notice was not mailed or
(b) whose notice was defective. An affidavit of the Warrant Agent or of the
Secretary or an Assistant Secretary of Stratton or the Company that notice of
redemption has been mailed shall, in the absence of fraud, be prima facie
evidence of the facts stated therein.
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(d) Any right to exercise a Warrant shall terminate at 5:00 P.M. (New
York time) on the business day immediately preceding the Redemption Date. On and
after the Redemption Date, Holders of the Warrants shall have no further rights
except to receive, upon surrender of the Warrant, the Redemption Price.
(e) From and after the Redemption Date specified for, the Company
shall, at the place specified in the notice of redemption, upon presentation and
surrender to the Company by or on behalf of the Registered Holder thereof of one
or more Warrant Certificates evidencing Warrants to be redeemed deliver or cause
to be delivered to or upon the written order of such Holder a sum in cash equal
to the redemption price of each such Warrant. From and after the Redemption Date
and upon the deposit or setting aside by the Company of a sum sufficient to
redeem all the Warrants called for redemption, such Warrants shall expire and
become void and all rights hereunder and under the Warrant Certificates, except
the right to receive payment of the redemption price, shall cease.
(f) If the shares of the Company's Common Sock are subdivided or
combined into a greater or smaller number of shares of Common Stock, the Target
Price shall be proportionally adjusted by the ratio which the total number of
shares of Common Stock outstanding immediately prior to such
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Event bears to the total number of shares of Common Stock to be outstanding
immediately after such event.
SECTION 9. - ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES OF
COMMON STOCK OR WARRANTS.
(a) Subject to the exceptions referred to in Section 9(g) below, in the
event the Company shall, at any time or from time to time after the date hereof,
sell any shares of Common Stock for a consideration per share less than the
Market Price of the Common Stock (as defined in Section 8) on the date of the
sale, or issue any shares of Common Stock as a stock dividend to the holders of
Common Stock, or subdivide or combine the outstanding shares of Common Stock
into a greater or lesser number of shares (any such sale, issuance, subdivision
or combination being herein called a "Change of Shares"), then, and thereafter
upon each further Change of Shares, the Purchase Price in effect immediately
prior to such Change of Shares shall be changed to a price (including any
applicable fraction of a cent) determined by multiplying the Purchase Price in
effect immediately prior thereto by a fraction, the numerator of which shall be
the sum of the number of shares of Common Stock outstanding immediately prior to
the issuance of such additional shares and the number of shares of Common Stock
which the aggregate consideration received (determined as provided in subsection
9(f)(F) below) for the
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issuance of such additional shares would purchase at such current market price
per share of Common Stock, and the denominator of which shall be the sum of the
number of shares of Common Stock outstanding immediately after the issuance of
such additional shares. Such adjustment shall be made successively whenever such
an issuance is made.
Upon each adjustment of the Purchase Price pursuant to this Section 9,
the total number of shares of Common Stock purchasable upon the exercise of each
Warrant shall (subject to the provisions contained in Section 9(b) hereof) be
such number of shares (calculated to the nearest tenth) purchasable at the
Purchase Price in effect immediately prior to such adjustment multiplied by a
fraction, the numerator of which shall be the Purchase Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Purchase Price in effect immediately after such adjustment.
(b) The Company may elect, upon any adjustment of the Purchase Price
hereunder, to adjust the number of Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the exercise
of each Warrant as hereinabove provided, so that each Warrant outstanding after
such adjustment shall represent the right to purchase one share of Common Stock.
Each warrant held of record prior to such
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adjustment of the number of Warrants shall become that number of Warrants
(calculated to the nearest tenth) determined by multiplying the number one by a
fraction, the numerator of which shall be the Purchase Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Purchase Price in effect immediately after such adjustment. Upon each adjustment
of the number of Warrants pursuant to this Section 9, the Company shall, as
promptly as practicable, cause to be distributed to each Registered Holder of
Warrant certificates on the date of such adjustment Warrant Certificates
evidencing, subject to Section 10 hereof, the number of additional Warrants to
which such Holder shall be entitled as a result of such adjustment or, at the
option of the Company, cause to be distributed to such Holder in substitution
and replacement for the Warrant Certificates held y him prior to the date of
adjustment (and upon surrender thereof, if required by the Company) new Warrant
Certificates evidencing the number of Warrants to which such Holder shall be
entitled after such adjustment.
(c) In case of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock, or in case of any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the continuing corporation and
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which does not result in any reclassification, capital reorganization or other
change of outstanding shares of Common Stock), or in case of any sale or
conveyance to another corporation of the property of the Company as or
substantially as, an entirety (other than a sale/leaseback, mortgage or other
financing transaction), the Company shall cause effective provision to be made
so that each holder of a Warrant then outstanding shall have the right
thereafter by exercising such Warrant, to purchase the kind and number of shares
of stock or other securities or property (including cash) receivable upon such
reclassification, capital reorganization or other change, consolidation, merger,
sale or conveyance by a holder of the number of shares of Common Stock that
might have been purchased upon exercise of such Warrant immediately prior to
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance. Any such provision shall include provision for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 9. The Company shall not effect any
such consolidation, merger or sale unless prior to or simultaneously with the
consummation thereof the successor (if other than the Company) resulting from
such consolidation or merger or the corporation purchasing assets or other
appropriate corporation or entity shall assume, by written instrument executed
and delivered to the Warrant Agent, the obligation to deliver to
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the holder of each Warrant such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holders maybe entitled to
purchase and the other obligations under this Agreement. The foregoing
provisions shall similarly apply to successive reclassifications, capital
reorganizations and other changes of outstanding shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase Price or
the number of shares of Common Stock purchasable upon exercise of the Warrants,
the Warrant Certificates theretofore and thereafter issued shall, unless the
Company shall exercise its option to issue new Warrant Certificates pursuant to
Section 2(d) hereof, continue to express the Purchase Price per share, the
number of shares purchasable thereunder and the Redemption Price therefor as the
Purchase Price per share, and the number of shares purchasable and the
Redemption Price therefore were expressed in the Warrant Certificates when the
same were originally issued.
(e) After each adjustment of the Purchase Price pursuant to this
Section 9, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (i) the
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Purchase Price as so adjusted, (ii) the number of shares of Common Stock
purchasable upon exercise of each Warrant after such adjustment, and, if the
Company shall have elected to adjust the number of Warrants, the number of
Warrants to which the registered holder of each Warrant shall then be entitled,
and the adjustment in Redemption Price resulting therefrom, and (iii) a brief
statement of the facts accounting for such adjustment. The Company will promptly
file such certificate with the Warrant Agent and cause a brief summary thereof
to be sent by ordinary first class mail to Stratton and to each registered
holder of Warrants at his last address as it shall appear on the registry books
of the Warrant Agent. No failure to mail such notice nor any defect therein or
in the mailing thereof shall affect the validity thereof except as to the holder
to whom the Company failed to mail such notice, or except as to the holder whose
notice was defective. The affidavit of an officer of the Warrant Agent or the
Secretary or an Assistant Secretary of the Company that such notice has been
mailed shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
(f) For purposes of Section 9(a) and 9(b) hereof, the following
provisions (A) to (F) shall also be applicable:
(A) The number of shares of Common Stock outstanding at any
given time shall include shares of Common Stock owned or held by or for
the account of
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the Company and the sale or issuance of such treasury shares or the
distribution of any such treasury shares shall not be considered a
Change of Shares for purposes of said sections.
(B) No adjustment of the Purchase Price shall be made unless
such adjustment would require an increase or decrease of at least $.lO
in such price; provided that any adjustments which by reason of this
clause (B) are not required to be made shall be carried forward and
shall be made at the time of and together with the next subsequent
adjustment which, together with any adjustment(s) so carried forward,
shall require an increase or decrease of at least $.10 in the Purchase
Price then in effect hereunder.
(C) In case of (1) the sale by the Company for cash of any
rights or warrants to subscribe for or purchase, or any options for the
purchase of, Common Stock or any securities convertible into or
exchangeable for Common Stock without the payment of any further
consideration other than cash, if any (such convertible or exchangeable
securities being herein called "Convertible Securities."), or (2) the
issuance by the Company, without the receipt by the Company of any
consideration therefor, of any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or
Convertible Securities, in each case, if (and only if) the
consideration payable to the Company upon the exercise of such rights,
warrants or options shall consist of cash, whether or not such rights,
warrants or options, or the right to convert or exchange such
Convertible Securities, are immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such
rights, warrants or options or upon the conversion or exchange of such
Convertible Securities (determined by dividing (x) the minimum
aggregate consideration payable to the Company upon the exercise of
such rights, warrants or options, plus the consideration received by
the Company for the issuance or sale of such rights, warrants or
options, plus, in the case of such Convertible Securities, the minimum
aggregate amount of additional consideration, if any, other than such
Convertible Securities, payable upon the conversion or exchange
thereof, by (y) the total maximum number of shares of Common Stock
issuable upon the exercise of such rights, warrants or options or upon
the conversion or exchange of such Convertible Securities issuable upon
the exercise of
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such rights, warrants or options) is less than the fair market value of
the Common Stock on the date of the issuance or sale of such rights,
warrants or options, then the total maximum number of shares of Common
Stock issuable upon the exercise of such rights, warrants or options or
upon the conversion or exchange of such Convertible Securities (as of
the date of the issuance or sale of such rights, warrants or options)
shall be deemed to be outstanding shares of Common Stock for purposes
of Sections 9(a) and 9(b) hereof and shall be deemed to have been sold
for cash in an amount equal to such price per share.
(D) In case of the sale by the Company for cash of any
Convertible Securities, whether or not the right of conversion or
exchange thereunder is immediately exercisable, and the price per share
for which Common Stock is issuable upon the conversion or exchange of
such Convertible Securities (determined by dividing (x) the total
amount of consideration received by the Company for the sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, other than such Convertible Securities, payable
upon the conversion or exchange thereof, by (y) the total maximum
number of shares of Common Stock issuable upon the conversion or
exchange of such Convertible Securities) is less than the fair market
value or the Common Stock on the date of the sale of such Convertible
Securities, then the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of such Convertible Securities
(as of the date of the sale of such Convertible Securities) shall be
deemed to be outstanding shares of Common Stock for purposes of
Sections 9(a) and 9(b) hereof and shall be deemed to have been sold for
cash in an amount equal to such price per share.
(E) In case the Company shall modify the rights of conversion,
exchange or exercise of any of the securities referred to in (C) above
or any other securities of the Company convertible, exchangeable or
exercisable for shares of Common Stock, for any reason other than an
event that would require adjustment to prevent dilution, so that the
consideration per share received by the Company after such modification
is less than the market price on the date prior to such modification,
the Purchase Price to be in effect after such modification shall be
determined by multiplying the Purchase Price in effect immediately
prior to such
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event by a fraction, of which the numerator shall be the number of
shares of Common Stock outstanding multiplied by the market price on
the date prior to the modification plus the number of shares of Common
Stock which the aggregate consideration receivable by the Company for
the securities affected by the modification would purchase at the
market price and of which the denominator shall be the number of shares
of Common Stock outstanding on such date plus the number of shares of
Common Stock to be issued upon conversion, exchange or exercise of the
modified securities at the modified rate. Such adjustment shall become
effective as of the date upon which such modification shall take
effect. On the expiration of any such right, warrant or option or the
termination of any such right to convert or exchange any such
Convertible Securities, the Purchase Price then in effect hereunder
shall forthwith be readjusted to such Purchase Price as would have
obtained (a) had the adjustments made upon the issuance or sale of such
rights, warrants, options or Convertible Securities been made upon the
basis of the issuance of only the number of shares of Common Stock
theretofore actually delivered (and the total consideration received
therefor) upon the exercise of such rights, warrants or options or upon
the conversion or exchange of such Convertible Securities and (b) had
adjustments been made on the basis of the Purchase Price as adjusted
under clause (a) for all transactions (which would have affected such
adjusted Purchase Price) made after the issuance or sale of such
rights, warrants, options or Convertible Securities.
(F) In case of the sale for cash of any shares of Common
Stock, any Convertible Securities, any rights or warrants to subscribe
for or purchase, or any options for the purchase of, Common Stock or
Convertible Securities, the consideration received by the Company
therefore shall be deemed to be the gross sales price therefor without
deducting therefrom any expense paid or incurred by the Company or any
underwriting discounts or commissions or concessions paid or allowed by
the Company in connection therewith.
(g) No adjustment to the Purchase Price of the Warrants or to the
number of shares of Common Stock purchasable upon the exercise of each Warrant
will be made, however,
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(i) upon the exercise of any of the options presently
outstanding under the Repossession Auction, Inc. 1991 Incentive Stock
Plan (the "Plan") for officers, directors and certain other key
personnel of the Company; or
(ii) upon the issuance or exercise of any other securities
which may hereafter be granted or exercised under the Plan or under any
other employee benefit plan of the Company; or
(iii) upon the sale or exercise of the Warrants, including
without limitation the sale or exercise of any of the Warrants
comprising the Unit Purchase Option; or
(iv) upon the sale of any shares of Common Stock in the
Company's initial public offering, including, without limitation,
shares sold upon the exercise of any overallotment option granted to
the Underwriters in connection with such offering; or
(v) upon the issuance or sale of Common Stock or Convertible
Securities upon the exercise of any rights or warrants to subscribe for
or purchase, or any options for the purchase of, Common Stock or
Convertible Securities, whether or not such rights, warrants or options
were outstanding on the date of the original sale of the Warrants or
were thereafter issued or sold; or
(vi) upon the issuance or sale of Common Stock upon conversion
or exchange of any Convertible Securities, whether or not any
adjustment in the Purchase Price was made or required to be made upon
the issuance or sale of such Convertible Securities and whether or not
such Convertible Securities were outstanding on the date of the
original sale of the Warrants or were thereafter issued or sold.
(h) As used in this Section 9, the term "Common Stock" shall mean and
include the Company's Common Stock authorized on the date of the original issue
of the Units and shall also include any capital stock of any class of the
Company thereafter authorized which shall not be limited to a
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fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends and in the distribution of assets upon the voluntary
liquidation, dissolution or winding up of the Company; provided, however, that
the shares issuable upon exercise of the Warrants shall include only shares of
such class designated in the Company's Certificate of Incorporation as Common
Stock on the date of the original issue of the Units, or (i) in the case of any
reclassification, change, consolidation, merger, sale or conveyance of the
character referred to in Section 9(c) hereof, the stock, securities or property
provided for in such section, or (ii) in the case of any reclassification or
change in the outstanding shares of Common Stock issuable upon exercise of the
Warrants as a result of a subdivision or combination or consisting or a change
in par value, or from par value to no par value, or from no par value to par
value, such shares of Common Stock as so reclassified or changed.
(i) Any determination as to whether an adjustment in the Purchase Price
in effect hereunder is required pursuant to Section 9, or as to the amount of
any such adjustment, if required, shall be binding upon the holders of the
Warrants and the Company if made in good faith by the Board of Directors of the
Company.
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(j) If and whenever the Company shall grant to the holders of Common
Stock, as such, rights or warrants to subscribe for or to purchase, or any
options for the purchase of, Common Stock or securities convertible into or
exchangeable for or carrying a right, warrant or option to purchase Common
Stock, the Company shall concurrently therewith grant to each Registered Holder
as of the record date for such transaction of the Warrants then outstanding, the
rights, warrants or options to which each Registered Holder would have been
entitled if, on the record date used to determine the stockholders entitled to
the rights, warrants or options being granted by the Company, the Registered
Holder were the holder of record of the number of whole shares of Common Stock
then issuable upon exercise (assuming, for purposes of this section 9(j), that
exercise of Warrants is permissable during periods prior to the Initial Warrant
Exercise Date) of his Warrants. Such grant by the Company to the holders of the
Warrants shall be in lieu of any adjustment which otherwise might be called for
pursuant to this Section 9.
SECTION 10. FRACTIONAL WARRANTS AND FRACTIONAL SHARES.
(a) If the number of shares of Common Stock purchasable upon the
exercise of each Warrant is adjusted pursuant to Section 9 hereof, the Company
nevertheless shall not be required to issue fractions of shares, upon exercise
of the Warrants or otherwise, or to distribute certificates that
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<PAGE>
evidence fractional shares. With respect to any fraction of a share called for
upon any exercise hereof, the Company shall pay to the Holder an amount in cash
equal to such fraction multiplied by the current market value of such fractional
share, determined as follows:
(1) If the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such exchange or
listed for trading on the NASDAQ Quotation System, the current value
shall be the last reported sale price of the Common Stock such exchange
on the last business day prior to the date of exercise of this Warrant
or if no such sale made on such day, the average of the closing bid and
asked prices for such day on such exchange; or
(2) If the Common Stock is not listed or admitted to unlisted
trading privileges, the current value shall be the mean of the last
reported bid and asked prices reported by the National Quotation
Bureau, Inc. on the last business day prior to the date of the exercise
of this Warrant; or
(3) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and
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<PAGE>
asked prices are not so reported, the current value shall be an amount
determined in such reasonable manner as may be prescribed by the Board
of Directors of the Company.
SECTION 11. WARRANT HOLDERS NOT DEEMED STOCKHOLDERS. No holder of
Warrants shall, as such, be entitled to vote or to receive dividends or be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of such Warrants for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon the holder of Warrants, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issue or reclasification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such Holder shall have exercised such Warrants and
been issued shares of Common Stock in accordance with the provisions hereof.
SECTION 12. RIGHTS OF ACTION. All rights of action with respect to this
Agreement are vested in the respective Registered Holders of the Warrants, and
any Registered Holder
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<PAGE>
of a Warrant, without consent of the Warrant Agent or of the holder of any other
Warrant, may, in his own behalf and for his own benefit, enforce against the
Company his right to exercise his Warrants for the purchase of shares of Common
Stock in the manner provided in the Warrant Certificate and this Agreement.
SECTION 13. AGREEMENT OF WARRANT HOLDERS. Every holder of a Warrant, by
his acceptance thereof, consents and agrees with the Company, the Warrant Agent
and every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books of the
Warrant Agent by the Registered Holder thereof in person or by his attorney duly
authorized in writing and only if the Warrant Certificates reprsenting such
Warrants are surrendered at the office of the Warrant Agent, duly endorsed or
accompanied by a proper instrument of transfer satisfactory to the Warrant Agent
and the Company in their sole discretion, together with payment of any
applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the person in
whose name the Warrant Certificate is registered as the holder and as the
absolute, true and lawful owner of the Warrants represented thereby for all
purposes, and
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<PAGE>
neither the Company nor the Warrant Agent shall be affected by any notice or
knowledge to the contrary, except as otherwise expressly provided in Section 7
hereof.
SECTION 14. CANCELLATION OF WARRANT CERTIFICATES. If the Company shall
purchase or acquire any Warrant or Warrants, the Warrant Certificate or Warrant
Certificates evidencing the same shall thereupon be delivered to the Warrant
Agent and cancelled by it and retired. The Warrant Agent shall also cancel
Common Stock following exercise of any or all of the Warrants represented
thereby or delivered to it for transfer, splitup, combination or exchange.
SECTION 15. CONCERNING THE WARRANT AGENT. The Warrant Agent acts
hereunder as agent and in a ministerial capacity for the Company, and its duties
shall be determined solely by the provisions hereof. The Warrant Agent shall
not, by issuing and delivering Warrant Certificates or by any other act
hereunder be deemed to make any representations as to the validity, value or
authorization of the Warrant Certificates or the Warrants represented thereby or
of any securities or other property delivered upon exercise of any Warrant or
whether any stock issued upon exercise of any Warrant is fully paid and
nonassessable.
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<PAGE>
The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase Price or the Redemption Price provided in this
Agreement, or to determine whether any fact exists which may require any such
adjustments, or with respect to the nature or extent of any such adjustment,
when made, or with respect to the method employed in making the same. It shall
not (i) be liable for any recital or statement of facts contained herein or for
any action taken, suffered or omitted by it in reliance on any Warrant
Certificate or other document or instrument believed by it in good faith to be
genuine and to have been signed or presented by the proper party or parties,
(ii) be responsible for any failure on the part of the Company to comply with
any of its covenants and obligations contained in this Agreement or in any
Warrant Certificate, or (iii) be liable for any act or omission in connection
with this Agreement except for its own negligence or wilful misconduct.
The Warrant Agent may at any time consult with counsel satisfactory to
it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.
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<PAGE>
Any notice, statement, instruction, request, direction, order or demand
of the Company shall be sufficiently evidenced by an instrument signed by the
Chairman of the Board, President, any Vice President, its Secretary, or
Assistant Secretary (unless other evidence in respect thereof is herein
specifically prescribed). The Warrant Agent shall not be liable for any action
taken, suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand believed by it to be genuine.
The Company agrees to pay the Warrant Agent reasonable compensation for
its services hereunder and to reimburse it for its reasonable expenses
hereunder; it further agrees to indemnify the Warrant Agent and save it harmless
against any and all losses, expenses and liabilities, including judgments, costs
and counsel fees, for anything done or omitted by the Warrant Agent in the
execution of its duties and powers hereunder except losses, expenses and
liabilities arising as a result of the Warrant Agent's negligence or wilful
misconduct.
The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a result
of the Warrant Agent's own negligence or wilful misconduct), after giving 30
days' prior written notice to the Company. At least 15 days prior to the date
such resignation is to become effective, the Warrant
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<PAGE>
Agent shall cause a copy of such notice of resignation to be mailed to the
Registered Holder of each Warrant Certificate at the Company's expense. Upon
such resignation, or any inability of the Warrant Agent to act as such
hereunder, the Company shall appoint a new warrant agent in writing. If the
Company shall fail to make such appointment within a period of 15 days after it
has been notified in writing of such resignation by the resigning Warrant Agent,
then the Registered Holder of any Warrant Certificate may apply to any court of
competent jurisdiction for the appointment of a new warrant agent. Any new
warrant agent, whether appointed by the Company or by such a court, shall be a
bank or trust company having a capital and surplus, as shown by its last
published report to its stockholders, of not less than $10,000,000 or a stock
transfer company. After acceptance in writing of such appointment by the new
warrant agent is received by the Company, such new warrant agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named herein as the Warrant Agent, without any further assurance,
conveyance, act or deed; but if for any reason it shall be necessary or
expedient to execute and deliver any further assurance, conveyance, act or deed,
the same shall be done at the expense of the Company and shall be legally and
validly executed and delivered by the resigning Warrant Agent. Not later than
the effective date of any such appointment the
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<PAGE>
Company shall file notice thereof with the resigning Warrant Agent and shall
forthwith cause a copy of such notice to be mailed to the Registered Holder of
each Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant agent
may be converted or merged or any corporation resulting from any consolidation
to which the Warrant Agent or any new warrant agent shall be a party or any
corporation succeeding to the trust business of the Warrant Agent shall be a
successor warrant agent under this Agreement without any further act provided
that such corporation is eligible for appointment as successor to the Warrant
Agent under the provisions of the preceding paragraph. Any such successor
warrant agent shall promptly cause notice of its succession as warrant agent to
be mailed to the Company and to the Registered Holder of each Warrant
Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of its or
their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same manner
and to the same extent and with like effects as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
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<PAGE>
SECTION 16. MODIFICATION OF AGREEMENT. The Warrant Agent and the
Company may by supplemental agreement make any changes or corrections in this
Agreement (i) that they shall deem appropriate to cure any ambiguity or to
correct any defective or inconsistent provision or manifest mistake or error
herein contained; or (ii) that they may deem necessary or desirable and which
shall not adversely affect the interests of the holders of Warrant Certificates;
PROVIDED, HOWEVER, that this Agreement shall not otherwise be modified,
supplemented or altered in any respect except with the consent in writing of the
Registered Holders of Warrant Certificates representing not less than 50% of the
Warrants then outstanding; and PROVIDED, FURTHER, that no change in the number
or nature of the securities purchasable upon the exercise of any Warrant, or the
Purchase Price therefor, or the acceleration of the Warrant Expiration Date,
shall be made without the consent in writing of the Registered Holder of the
Warrant Certificate representing such Warrant, other than such changes as are
specifically prescribed by this Agreement as originally executed or are made in
compliance with applicable law.
SECTION 17. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid as
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<PAGE>
follows: if to the Registered Holder of a Warrant Certificate, at the address of
such holder as shown on the registry books maintained by the Warrant Agent; if
to the Company, at Repossesion Auction, Inc., 11401 N. W. Seventh Avenue, Miami,
Florida 33168, attention: Lloyd Lyons, or at such other address as may have been
furnished to the Warrant Agent in writing by the Company; and if to the Warrant
Agent, at its Corporate Office.
SECTION 18. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws.
SECTION 19. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the Company and, the Warrant Agent and their respective
successors and assigns, and the holders from time to time of Warrant
Certificates Nothing in this Agreement is intended or shall be construed to
confer upon any other person any right, remedy or claim, in equity or at law, or
to impose upon any other person any duty, liability or obligation.
SECTION 20. TERMINATION. This Agreement shall terminate at the close of
business on the Expiration Date of all the Warrants or such earlier date upon
which all Warrants
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<PAGE>
have been exercised, except that the Warrant Agent shall account to the Company
for cash held by it and the provisions of Section 15 hereof shall survive such
termination.
SECTION 21. COUNTERPARTS. This Agreement may be executed in several
counterparts, which taken together shall constitute a single document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
REPOSSESSION AUCTION, INC.
By:________________________________________
AMERICAN STOCK TRANSFER AND
TRUST COMPANY
By:________________________________________
Authorized Officer
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<PAGE>
EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]
REPOSSESSION AUCTION, INC.
No. W ______________Warrants
VOID AFTER DECEMBER 11, 1996
WARRANT CERTIFICATE FOR
PURCHASE OF COMMON STOCK
This certifies that FOR VALUE RECEIVED ________________________________
________________________________________________________________________________
or registered assigns (the Registered Holder) is the owner of the number of
Warrants (the "Warrants") specified above. Each Warrant initially entitles the
Registered Holder to purchase, subject to the terms and conditions set forth in
this Certificate and the Warrant Agreement (as hereinafter defined), one fully
paid and non-assessable share of Common Stock, $.00067 par value, of
Repossession Auction, Inc., a Delaware corporation (the Company) at any time
prior to the Expiration Date (as hereinafter defined), upon the presentation and
surrender of the Warrant Certificate with the Subscription Form on the reverse
hereof duly executed, in the United States at the corporate office of American
Stock Transfer and Trust Company, as Warrant Agent, or its successor (the
"Warrant Agent"), accompanied by payment of U.S. $7.25 per share of Common
Stock if the Warrant is exercised by 5:00 p.m. Eastern
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<PAGE>
Standard time on ___________, 1996 (the "Purchase Price") in lawful money of
the United States of America in cash or by official bank or certified check made
payable to the Company. The Company may, at its election, reduce the purchase
price, subject to any applicable regulatory requirements.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in a Warrant Agreement (the "Warrant Agreement"), dated ___________, by
and among the Company and the Warrant Agent.
In certain events provided for in the Warrant Agreement, the Purchase
Price or the number of shares of Common Stock subject to purchase upon the
exercise of each Warrant represented hereby are subject to modification or
adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificates or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
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<PAGE>
The term "Expiration Date" shall mean 5:00 p.m. Eastern Standard time
on _____________, or such earlier date as the Warrants shall expire. If such
date shall in the State of New York be a holiday or a day on which the banks are
authorized to close, then the Expiration Date shall mean 5:00 p.m. Eastern
Standard time the next following day which in the State of New York is not a
holiday or a day on which banks are authorized to close. The Company may, at its
election, extend the expiration date, subject to any applicable regulatory
requirements.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of this Warrant in the United States unless a registration
statement under the Securities Act of 1933, as amended, with respect to such
securities is effective. The Company has consented and agreed that it will use
its reasonable best efforts to file a registration statement and to cause the
same to become effective and to keep such registration statement current while
any of the Warrants are outstanding. This Warrant shall not be exercisable by a
Registered Holder in any state of the United States where such exercise would be
unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at he corporate offices of the Warrant Agent, for a new
Warrant Certificate or
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<PAGE>
Warrant Certificates of like tenor representing an equal aggregate number of
Warrants, each of such new Warrant Certificates to represent such number of
Warrants as shall be designated by such Registered Holder at the time of such
surrender. Upon due presentment with a reasonable transfer fee per certificate
(as determined from time to time by the Warrant Agent) in addition to any tax or
other governmental charge imposed in connection therewith, for registration or
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights as a shareholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
This Warrant may be redeemed at the option of the Company, at a
redemption price of $.O5 per Warrant at any time, provided the market price (as
defined in the Warrant Agreement) for the securities issuable upon exercise of
such Warrant shall
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<PAGE>
exceed $13.00 per share. Notice of redemption shall be given not later than the
thirtieth day before the date fixed for redemption, all as provided in the
Warrant Agreement. On and after the date fixed for redemption, the Registered
Holder shall have no rights with respect to this Warrant except to receive the
$.05 per Warrant upon surrender of this Certificate.
Prior to due presentment for registration or transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
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<PAGE>
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
REPOSSESSION AUCTION, INC.
Date: ___________________ By: __________________________________
By: __________________________________
[seal]
This Warrant is one of the
warrants referred to in the
above-mentioned Warrant
Agreement.
AMERICAN STOCK TRANSFER AND
TRUST COMPANY, as Warrant
Agent
By: _______________________
Authorized Officer
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<PAGE>
[FOR OF REVERSE OF WARRANT CERTIFICATE]
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
upon the terms and subject to the conditions set forth in the Warrant Agreement
dated _____________, 1991, ____________ Warrants represented by this Warrant
Certificate, and to purchase the securities issuable upon the exercise of such
Warrants, and requests that certificates for such securities shall be issued in
the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
[please print or type name and address]
and be delivered to
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
[please print or type name and address]
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
In full payment of the Purchase Price with respect to the Warrants
exercised, the undersigned hereby tenders payment of $___________ in cash or by
official bank or certified check payable in United States currency to the order
of Repossession Auction, Inc. and undertakes to provide to the Warrant Agent
<PAGE>
any additional tax or charge within five (5) business days hereof.
Dated: _______________________________ x___________________________________
(Signature)
___________________________________
Certificate Nos. Name (Please Print)
___________________________________ ___________________________________
(Address)
___________________________________
Number of Warrants: Taxpayer Identification Number
___________________________________ ___________________________________
Signature Guaranteed
___________________________________
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<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, _____________________________________________________ hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
[please print or type name and address]
_______________________ of the Warrants represented by this Warrant Certificate,
and hereby irrevocably constitutes and appoints_________________________________
________________________________________________________________________________
Attorney to transfer this Warrant Certificate on the books of the Company, with
full power of substitution in the premises.
Dated: _______________________________ x___________________________________
(Signature)
___________________________________
Certificate Nos. Name (Please Print)
___________________________________ ___________________________________
(Address)
___________________________________
Number of Warrants: Taxpayer Identification Number
___________________________________ ___________________________________
Signature Guaranteed
___________________________________
<PAGE>
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGE MENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR
MIDWEST STOCK EXCHANGE.
-2-
Exhibit 10.4
LATIN AMERICAN CASINOS, INC.
1994 STOCK OPTION PLAN
1. PURPOSE.
This 1994 Stock Option Plan (the "Plan") is intended to encourage stock
ownership by employees and directors of Latin American Casinos, Inc. (the
"Company"), a Delaware corporation, its divisions and Subsidiary Corporations,
so that they may acquire or increase their proprietary interest in the Company,
and to encourage such employees and directors to remain in the employ of the
Company and to put forth maximum efforts for the success of the business. It is
further intended that options granted by the Board of Directors of the Company
(the "Board") pursuant to Section 5 hereof shall constitute "incentive stock
options" ("Incentive Stock Options") within the meaning of IRC Section 422, as
thereafter (the "Code"), and options granted by the Board pursuant to Section 6
hereof shall constitute "nonqualified stock options" (Nonqualified Stock
Options") and, together with Incentive Stock Options, ("Options").
2. ADMINISTRATION AND AUTHORITY.
The Plan shall be administered by the Board. The Board shall have the
authority in its discretion, subject to and not inconsistent with the express
provisions of the Plan, to administer the Plan and to exercise all the powers
and authorities either specifically granted to it under the Plan or necessary or
advisable in the administration of the Plan, including, without limitation, the
authority to grant Options; to determine which Options shall constitute
Incentive Stock Options and which Options shall constitute Nonqualified Stock
Options; to determine the purchase price of the shares of Common Stock covered
by each Option (the "Option Price"); to determine the persons to whom, and the
time or times at which, Options shall be granted; to determine the number of
shares of Common Stock to be covered by each Option; to interpret the Plan; to
prescribe, amend and rescind rules and Regulations relating to the Plan; to
determine the terms and provisions of the Option Agreements (which need not be
identical) evidencing Options granted under the Plan; and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
- 1 -
<PAGE>
3. LIABILITY.
No member of the Board shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Option.
4. ELIGIBILITY.
Options may be granted to employees including, without limitation,
officers and directors who are employees of the Company or its subsidiaries,
consultants and independent contractors. In determining the persons to whom
Options shall be granted and the number of shares to be covered by each Option,
the Board shall take into account the duties of the respective persons, their
present and potential contributions to the success of the Company and such other
factors as the Board shall deem relevant in connection with accomplishing the
purpose of the Plan. A person to whom and Option has been granted is sometimes
referred to herein as an "Optionee." An Optionee shall be eligible to receive
more than one Option during the term of the Plan, but only on the terms and
subject to the restrictions hereinafter set forth.
5. SHARES.
The shares subject to Options hereunder shall be shares of the
Company's Common Stock (the "Common Stock"). Such shares may, in whole or in
part, be authorized but unissued shares or shares that have been or may be
reacquired by the Company. The aggregate amount of the Company's Common Stock as
to which Options may be granted under the Plan shall not exceed 1,000,000
shares. The limitation established by the preceding sentence shall be subject to
adjustment as provided in Section 8.09 hereof. If any outstanding Option expires
or is terminated without having been exercised in full, the shares of Common
Stock allocable to the unexercised portion of such Option shall (unless the Plan
shall have been terminated) become available for subsequent grants of Options.
6. INCENTIVE STOCK OPTIONS.
Options granted pursuant to this Section 6 are intended to constitute
Incentive Stock Options and shall be subject to the following special terms and
conditions, in addition to the general terms and conditions specified in Section
8 hereof.
6.01 VALUE OF SHARES.
The aggregate Fair Market Value (determined as of the date the
Incentive Stock Option is granted) of the shares of
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<PAGE>
Common Stock with respect to which Options granted under this Plan and all other
option plans of the Company and any Subsidiary Corporation become exercisable
for the first time by an optionee during any calendar year shall be determined
by the Board.
6.02 TEN PERCENT STOCKHOLDER.
In the case of an Incentive Stock Option granted to a holder of 10% of
the Company's voting stock, (a) the Option Price shall not be less than 110% of
the Fair Market Value of the shares of Common Stock of the Company on the date
the Incentive Stock Option is granted, and (b) the exercise period shall not
exceed 5 years from the date the Incentive Stock Option is granted.
7. NONQUALIFIED STOCK OPTIONS.
Options granted pursuant to this Section 7 are intended to constitute
Nonqualified Stock Options and shall be subject only to the general terms and
conditions specified in Section 8 hereof.
8. TERMS AND CONDITIONS OF OPTIONS.
Each Option shall be evidenced by a written Option Agreement between
the Company and the Optionee, which agreement shall comply with and be subject
to the following terms and conditions:
8.01 NUMBER OF SHARES.
Each Option Agreement shall state the number of shares of Common Stock
specified in the Option.
8.02 TYPE OF OPTION.
Each Option Agreement shall specifically identify the portion, if any,
of the Option which constitutes an Incentive Stock Option and the portion, if
any, which constitutes a Nonqualified Stock Option.
8.03 OPTION PRICE.
Each Option Agreement shall state the Option Price which, in the case
of Incentive Stock Options, shall be not less than 100% of the Fair Market Value
of the shares of Common Stock of the Company of the date the Option is granted.
The Option Price shall be subject to adjustment as provided in Section 8.09
hereof. The date when the Board adopts a resolution granting an Option will be
considered the date when such Option is granted.
- 3 -
<PAGE>
8.04 MEDIUM AND TIME OF PAYMENT.
The Option Price shall be paid in full, at the time of exercise, in
cash or in shares of Common Stock having a Fair Market Value equal to such
Option Price or in a combination of cash and such shares, and may be effected in
whole or in part (a) with monies received from the Company at the time of
exercise as a compensatory cash payment, or (b) with monies borrowed from the
Company pursuant to repayment terms and conditions as shall be determined from
time to time by the Board, in its discretion, separately with respect to each
exercise of Options and each Optionee; provided, however, that each such method
and time for payment and each such borrowing and terms and conditions of
repayment shall be permitted by and be in compliance with applicable law, and
provided, further, if the Option Price is paid with monies borrowed from the
Company, such fact shall be noted conspicuously on the certificate evidencing
such shares in accordance with applicable law.
8.05 TERM AND EXERCISE OF OPTIONS.
Options shall be exercisable over the exercise period as and at the
times and upon the conditions that the Board may determine, as reflected in the
Option Agreement, provided, however, the Board shall have the authority to
accelerate the exercisability of any outstanding Option at such time and under
such circumstances as it, in its sole discretion, deems appropriate. The
exercise period shall be determined by the Board for all Options; provided,
however that such exercise period shall not exceed ten (10) years from the date
such Option is granted. The exercise period shall be subject to earlier
termination as provided in Sections 8.06 and 8.07 hereof. An Option may be
exercised, as to any or all full shares of Common Stock as to which the Option
has become exercisable, by giving written notice of such exercise to the Board;
provided, however, that an Option may not be exercised at any one time as to
fewer than100 shares (or such number of shares as to which the Option is then
exercisable if such number of shares is less than 100).
8.06 TERMINATION
Except as provided in Section 8.05 and in this Section 8.06 hereof, an
Option may not be exercised unless the Optionee is then in the employ of the
Company or a division or Subsidiary Corporation (or a corporation issuing or
assuming the Option in a transaction to which IRC Section 425(a) applies), and
unless the Optionee has remained continuously so employed since the date of
grant of the Option. If the employment of an Optionee shall terminate (other
than by reason of death, disability or retirement), all Options of such Optionee
that are exercisable at the
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<PAGE>
time of such termination may, unless earlier terminated in accordance with their
terms, be exercised within three months after such termination; provided,
however, that if the employment of an Optionee shall terminate for cause, all
Options theretofore granted to such Optionee shall, to the extent not
theretofore exercised, terminate forthwith. Nothing in the Plan or in any Option
shall confer upon an individual any right to continue in the employ of the
Company or any of its divisions or Subsidiary Corporations or interfere in any
way with the right of the Corporation or any such division or Subsidiary
Corporation to terminate such employment.
8.07 DEATH, DISABILITY OR RETIREMENT.
If an Optionee shall die while employed by the Company, or a Subsidiary
Corporation thereof, or within three months after the termination of such
Optionee's employment, other than for cause, or if the Optionee's employment
shall terminate by reason of disability or retirement, all Options theretofore
granted to such Optionee (to the extent otherwise exercisable) may, unless
earlier terminated in accordance with their terms, be exercised by the Optionee
or by the Optionee's estate or by a person who acquired the right to exercise
such Option by bequest or inheritance or otherwise by reason of the death or
disability of the Optionee, at any time within one year after the date of death,
disability or retirement of the Optionee.
8.08 NONTRANSFERABILITY OF OPTIONS.
Options granted under the Plan shall not be transferable otherwise than
(a) by will; (b) by the laws of descent and distribution; or (c) to a revocable
inter vivos trust for the primary benefit of the Optionee and his or her spouse.
Options may be exercised, during the lifetime of the Optionee, only by the
Optionee, his or her guardian, legal representative or the Trustee of an above
described trust.
8.09 EFFECT OF CERTAIN CHANGES.
(1) If there is any change in the number of shares of Common Stock
through the declaration of stock dividends, or through recapitalization
resulting in stock splits, or combinations or exchanges of such shares,
the number of shares of Common Stock available for Options, the number
of such shares covered by outstanding Options and the price per share
of such Options shall be proportionately adjusted by the Board to
reflect any increase or decrease in the number
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<PAGE>
of issued shares of Common Stock; provided, however, that any
fractional shares resulting from such adjustment shall be eliminated.
(2) In the event of the proposed dissolution or liquidation of the
company, in the event of any corporate separation or division,
including, but not limited to, split-up, split-off or spin-off, or in
the event of a merger or consolidation of the Company with another
corporation, the Board may provide that the holder of each Option then
exercisable shall have the right to exercise such Option (at its then
Option Price) solely for the kind and amount of shares of stock and
other securities, property, cash or any combination thereof receivable
upon such dissolution, liquidation, or corporate separation or
division, or merger or consolidation by a holder of the number of
shares of Common Stock for which such Option might have been exercised
immediately prior to such dissolution, liquidation, or corporate
separation or division, or merger or consolidation; or the Board may
provide, in the alternative, that each Option granted under the Plan
shall terminate as of a date to be fixed by the Board; provided,
however, that not less than 30-days' written notice of the date so
fixed shall be given to each Optionee, who shall have the right, during
the period of 30 days preceding such termination, to exercise the
Options as to all or any part of the shares of Common Stock covered
thereby, including shares as to which such Options would not otherwise
be exercisable; provided, further, that failure to provide such notice
shall not invalidate or affect the action with respect to which such
notice was required.
(3) If while unexercised Options remain outstanding under the Plan, the
stockholders of the Company approve a definitive agreement to merge or
consolidate the Company with or into another corporation or to sell or
otherwise dispose of all or substantially all of its assets, or adopt a
plan of liquidation (each, a "Disposition Transaction"), then the Board
may (a) make an appropriate adjustment to the number and class of
shares available for options, and to the amount and kind of shares or
other securities or property (including cash) receivable upon exercise
of any outstanding options after the effective date of such
transaction, and the price thereof, or, in lieu of such adjustment,
provide for the cancellation of all options outstanding at or prior to
the effective date of such transaction; (b) provide that exercisability
of all Options shall be accelerated, whether or not otherwise
exercisable; or (c) in its discretion, permit Optionees to surrender
outstanding options for cancellation; provided, however, that if the
stockholders approve such Disposition Transaction within five years of
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<PAGE>
the date of adoption of this Plan, the Board shall provide for the
alternative in (b) above. Upon any cancellation of an outstanding
Option pursuant to this Section, the Optionee shall be entitled to
receive, in exchange therefor, a cash payment under any such Option in
an amount per share determined by the Board in its sole discretion, but
not less than the difference between the per share exercise price of
such Option and the Fair Market Value of a share of the Company Common
Stock on such date as the Board shall determine.
(4) Paragraphs (2) and (3) of this Section 8.09 shall not apply to a
merger or consolidation in which the Company is the surviving
corporation and shares of Common Stock are not converted into or
exchanged for stock, securities of any other corporation, cash or any
other thing of value. Notwithstanding the preceding sentence, in case
of any consolidation or merger of another corporation into the Company
in which the Company is the surviving corporation and in which there is
a reclassification or change (including a change to the right to
receive cash or other property) of the shares of Common Stock (other
than a change in par value, or from par value to no par value, or as a
result of a subdivision or combination, but including any change in
such shares into two or more classes or series of shares), the Board
may provide that the holder of each Option then exercisable shall have
the right to exercise such Option solely for the kind and amount of
shares of stock and other securities (including those of any new direct
or indirect parent of the Company), property, cash or any combination
thereof receivable upon such reclassification, change, consolidation or
merger by the holder of the number of shares of Common Stock for which
such Option might have been exercised.
(5) In the event of a change in the Common Stock of the Company as
presently constituted which is limited to a change of all of its
authorized shares with par value into the same number of shares with a
different par value or without par value, the shares resulting from any
such change shall be deemed to be the Common Stock within the meaning
of the Plan.
(6) To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Board,
whose determination in that respect shall be final, binding and
conclusive, provided that each Incentive Stock Option granted pursuant
to this Plan shall not be adjusted in a manner that causes such option
to fail to continue to qualify as an Incentive Stock Option within
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<PAGE>
the meaning of IRC Section 422.
(7) Except as hereinbefore expressly provided in this Section 8.09, the
Optionee shall have no rights by reason of any subdivision or
consolidation of shares of stock or any class or the payment of any
stock dividend or any other increase or decrease in the number of
shares of stock of any class or by reason of any dissolution,
liquidation, merger, or consolidation or spin-of of assets or stock of
another corporation; and any issue by the Company of shares of stock of
any class shall not affect, and no adjustment by reason thereof shall
be made with respect to the number or price of shares of Common Stock
subject to the Option. The grant of an Option pursuant to the Plan
shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its
capital or business structures or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or part of its business or
assets.
8.10 RIGHTS AS A SHAREHOLDER.
An Optionee or a transferee of an Option shall have no rights as a
shareholder with respect to any Shares covered by the Option until the date of
the issuance of a certificate evidencing such shares. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distribution of other rights for which the record date is
prior to the date such certificate is issued, except as provided in Section 8.09
hereof.
8.11 OTHER PROVISIONS.
The Option Agreements authorized under the Plan shall contain such
other provisions, including, Without limitation, (a) the imposition of
restrictions upon the exercise of an Option; (b) in the case of an Incentive
Stock Option, the inclusion of any condition not inconsistent with such Option
qualifying as an Incentive Stock Option; and (c) conditions relating to
compliance with applicable federal and state securities laws, as the Board shall
deem advisable.
9. AGREEMENT BY OPTIONEE REGARDING WITHHOLDING TAXES.
If the Board shall so require, as a condition of the exercise, each
Optionee shall agree that (a) no later than the date of exercise of any Option,
the Optionee will pay to the Company or make arrangements satisfactory to the
Board regarding payment of any federal, state or local taxes of any kind
required by law to be withheld upon the exercise of such Options, and (b)
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<PAGE>
the Company shall, to the extent permitted or required by law, have the right to
deduct federal, state and local taxes of any kind required by law to be withheld
upon the exercise of such Option from any payment of any kind otherwise due to
the Optionee.
10. TERM OF PLAN.
Options may be granted pursuant to the Plan from time to time within a
period of 10 years from the date the Plan is adopted by the Board, or the date
the Plan is approved by the stockholders of the Company, whichever is earlier.
11. DEFINITIONS.
As used in this Plan, the following words and phrases shall have the
meanings indicated:
(a) "DISABILITY" shall mean an Optionee's inability to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or
that has lasted or can be expected to last for a continuous period of not
less than one year.
(b) "FAIR MARKET VALUE" per share as of a particular date shall mean
(i) the closing sales price per share of Common Stock on a national
securities exchange for the last preceding date on which there was a sale
of such Common Stock on such exchange; or (ii) if the shares of Common
Stock are then traded on an over-the-counter market, the average of the
closing bid and asked prices for the shares of Common Stock in such
over-the-counter market for the last preceding data on which there was a
sale of such Common Stock in such market, or (iii) in case no reported sale
takes place, the average of the closing bid and asked prices on the
National Association of Securities Dealers' Automated Quotations System
("NASDAQ") or any comparable system, or if the shares of Common Stock are
not listed on NASDAQ or comparable system, the closing sale price or, in
case no reported sale takes place, the average of the closing bid and asked
prices, as furnished by any member of the National Association of
Securities Dealers, Inc. selected from time to time by the Company for that
purpose; or (iv) if the shares of Common Stock are not then listed on a
national securities exchange or traded in an over-the-counter market, such
value as the Board in its discretion may determine.
(c) "PARENT COMPANY" shall mean any corporation (other than the
Company) in an unbroken chain of corporations
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<PAGE>
ending with the employer corporation if, at the time of granting an Option,
each of the corporations other than the employer corporation owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
(d) "SUBSIDIARY CORPORATION" shall mean any corporation (other than the
Company) in an unbroken chain of corporations beginning with the employer
corporation if, at the time of granting an Option, each of the corporations
other than the last corporation in the unbroken chain owns stock possessing
50% or more f the total combined voting power of all classes of stock in
one of the other corporations in such chain.
(e) "TEN PERCENT STOCKHOLDER" shall mean an Optionee who, at the time
an Incentive Stock Option is granted, owns stock possessing more than 10%
of the total combined voting power of all classes of stock of the company
or of its Parent or Subsidiary Corporations.
12. AMENDMENT AND TERMINATION OF THE PLAN.
The Board at any time and from time to time may suspend, terminate,
modify or amend the Plan; provided, however, that any amendment that would
materially increase the aggregate number of shares of Common Stock as to which
Options may be granted under the Plan or materially increase the benefits
accruing to participants under the Plan or materially modify the requirements as
to eligibility for participation in the Plan shall be subject to the approval of
the holders of a majority of the Common Stock issued and outstanding, except
that any such increase modification that may result from adjustments authorized
by Section 8.09 hereof shall not require such approval. Except as provided in
Section 8 hereof, no suspension, termination, modification or amendment of the
Plan may adversely affect any Option previously granted, unless the written
consent of the Optionee is obtained.
13. APPROVAL OF STOCKHOLDERS.
The Plan shall take effect upon its adoption by the Board of Directors
but shall be subject to the approval of the holders of a majority of the issued
and outstanding shares of Common Stock of the Company, which approval must occur
within 12 months after the date the Plan is adopted by the Board.
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<PAGE>
14. EFFECT OF HEADINGS.
The headings and other captions contained in this Plan are for
convenience and reference only and shall not be used in interpreting, construing
or enforcing any of the provisions of this Plan.
IN WITNESS WHEREOF, pursuant to the due authorization and adoption of
this Plan by the Board of Directors on June 13, 1994, the Company has caused
this Plan to be duly executed by its duly authorized officers.
Latin American Casinos, Inc.
By:
----------------------------
Lloyd Lyons
By:
----------------------------
By:
----------------------------
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<PAGE>
SAMPLE
AGREEMENT UNDER
THE 1994 STOCK OPTION PLAN
OF
LATIN AMERICAN CASINOS, INC.
THIS AGREEMENT is made by and between LATIN AMERICAN CASINOS, INC., a
Delaware Corporation (the "Company") and the optionee identified at the
conclusion of this Agreement (hereinafter referred to as the "Optionee") as of
the date of grant set forth in Appendix A hereto.
WHEREAS, the Company has determined that the Optionee is an existing or
potential officer, key employee, consultant or adviser of the Company (or its
subsidiaries) and considers it desirable and in its best interests that the
Optionee be given an inducement to acquire a proprietary interest in the
Company, and an added incentive to advance the interests of the Company, by
possessing an option to purchase the common shares of the Company ("Common
Stock") in accordance with The 1994 Stock Option Plan of Latin American Casinos,
Inc. (the "1994 Plan").
NOW, THERFORE, in consideration of the promises contained herein, it is
agreed by and between the parties as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the
option to purchase the number of shares of Common Stock set forth in
Appendix A to this Agreement (the "Option Shares") at the purchase
price per share set forth therein (the "Option Price"), in the manner
and subject to the conditions hereinafter provided (the "Option").
2. TIME OF EXERCISE OF OPTION. Unless otherwise provided in
Appendix A, the Option may be exercised in whole or in part over a five
year period commencing as of the date of this Agreement, unless and
until the Option is terminated as provided in Sections 4 and 5 below.
3. METHOD OF EXERCISE. The Option shall be exercised by written
notice in the form of Appendix B (if the Option Shares are not
registered under the Securities Act of 1993 at the time of exercise) or
Appendix C (if the Option Shares are registered under the Securities
Act of 1993 at the time of exercise) directed to the Company, at the
Company's principal place of business, accompanied by payment of the
Option Price for the number of shares being acquired. The Company shall
deliver such shares as promptly as practicable, provided that if any
law, regulation or agreement requires the Company to take any action
with respect to the shares specified in such notice before the delivery
thereof, then the date of delivery thereof, then the date of delivery
of such shares shall be extended for the period necessary to take such
action.
4. TERMINATION. In the event of a termination of the Optionee's
association with
<PAGE>
the Company and its subsidiaries in all capacities as an officer,
employee, consultant of adviser, then the Option shall continue to
be/exercisable for the number of shares as to which it was exercisable
at the date of such termination of association and shall terminate on
the date which is three months thereafter in the case of an Incentive
Stock Option or one year thereafter in the case of any other option or,
if earlier, the date which is five years from the date of this
Agreement, PROVIDED HOWEVER, that if such termination of association is
by reason or Optionee's death or disability (within the meaning of
Section 122 (c) (6) of the Internal Revenue Code), then the Option
shall immediately become exercisable in full and shall terminate on the
date which is one year thereafter or, if earlier, the date which is
five years from the date of this Agreement.
5. ADJUSTMENTS. The number and price of the Option Shares shall
be proportionately adjusted to reflect, as deemed equitable and
appropriate by the Board of Directors of the Company, any stock
dividend, stock split or share combination of the Common Stock or
recapitalization of the Company. In the event of any merger,
consolidation, sale of substantially all the assets, reorganization,
dissolution or liquidation of the Company, in connection with which all
the outstanding shares of the Company's Common Stock are converted into
or exchangeable for other securities or other property, the Option
shall terminate, but the Optionee shall have the right, immediately
prior to such event, to exercise the Option in full without regard to
the vesting schedule set forth in section 2 hereof; provided, however,
that in the case of a merger, consolidation, sale of substantially all
the assets or reorganization, the parties thereto may provide that the
Optionee shall not have such right, but in that case the Option, to the
extent not previously exercised, shall continue in effect and subject
to the vesting schedule set forth in section 2 hereof but shall pertain
not to Option Shares but to the securities or other property into or
for which the remaining Option Shares would have been convertible or
exchangeable if they had been outstanding at the effective time of the
transaction (e.g., in the case of a merger of the Company into another
company, if each share of Common Stock of the Company is converted into
two shares of preferred stock of the acquiring company, the Optionee
shall be entitled upon exercise and payment of the Option Price to
acquire two shares of that preferred stock). If, prior to the exercise
of the Option with respect to all the Option Shares, any securities
issued by any of the subsidiaries of the Company or any rights to
acquire such securities are distributed to the holders of the Common
Stock of the Company, and if at the time of such distribution the
Optionee is an officer or employee of or consultant or adviser to the
subsidiary, then, in each case, the Board shall provide either (a) that
the Optionee shall thereafter be entitled upon exercise of the Option
to receive, in addition to the shares of Common Stock or other
securities receivable upon the exercise of the Option, the securities
of the subsidiary that the Optionee would have been entitled to receive
if the Option had been so exercised immediately prior to the record
date for such distribution (and at the time of such distribution, the
Company shall make appropriate reserves to insure the timely
performance of the foregoing), or (b) that the Option Price shall be
reduced (but not to less than the par value of the Common Stock) to the
price determined by multiplying (i) the Option Price on the record date
for determining stockholders entitled to receive such distribution by
(ii) a fraction, the numerator of which is the result of such Option
Price reduced by the value of such
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<PAGE>
distribution applicable to one share of Common Stock (such value to be
determined by the Board in its discretion) and the denominator of which
is such Option Price.
6. RIGHTS PRIOR TO EXERCISE OF OPTION. The Option is
nontransferable by the Optionee, otherwise than by will or the laws of
descent and distribution, and during the Optionee's lifetime is
exercisable only by the Optionee. The Optionee shall have no rights as
a stockholder with respect to the Option Shares until payment of the
Option Price and delivery to the Optionee of such shares as herein
provided.
7. RESTRICTIONS ON DISPOSITION. An Optionee who exercise an
option by executing Appendix B may dispose of shares of Common Stock
acquired as a result of this Agreement only as provided in Appendix B.
8. AGREEMENT BY OPTIONEE REGARDING WITHHOLDING TAXES. No later
than the date of a first exercise of the Option, the Optionee will pay
to the Company or make arrangements satisfactory to the Company
regarding payment of any federal, state or local taxes of any kind
required by law to be withheld upon the exercise of such Option. The
Company shall, to the extent permitted or required by law, have the
right to deduct from any payment of any kind otherwise due to the
Optionee the amount of any federal, state or local taxes of any kind
required by law to be withheld upon the exercise of such Option.
9. INCENTIVE STOCK OPTION PLAN. The terms of the 1994 Plan are
incorporated herein by reference. The Optionee acknowledges receipt of
a copy of the 1994 Plan and agrees to be bound by the terms thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed.
OPTIONEE LATIN AMERICAN CASINOS, INC.
By:
- ---------------------------- ---------------------------
Lloyd Lyons
President
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<PAGE>
APPENDIX A
1. NAME OF OPTIONEE: ____________________
2. TOTAL NUMBER OF OPTION SHARES: __________
3. OPTION PRICE: $_________
For Incentive Stock option the option price must be at least fair
market value of the Company's Share at the time of the option's
issuance, or in the case of Incentive Stock Options for a Ten-Percent
stockholder, 110% of fair market value. In determining whether an
Optionee is a Ten-Percent Stockholder, the Optionee is considered to
own: (a) the stock owned, directly or indirectly, by or for his
brothers and sisters (whether by the whole or half blood), spouse,
ancestors, and lineal descendants and (b) his proportional share of the
stock owned, directly or indirectly, by a corporation, partnership
trust or estate of which he is a stockholder, partner or beneficiary.
(See IRC 424(d).)
4. DATE OF GRANT: _________________
(This is the date of approval of the option by the Board of Directors.)
5. EXPIRATION DATE: _______________
(Must be within then years of grant; five years in the case of an
Incentive Stock Option for a Ten-Percent Stockholder.)
6. VESTING: As specified in Section 2 of the Agreement.
(For Incentive Stock Options, the product of the Option Price and the
number of Option Shares for which options are first exercisable in any
calendar year may not exceed $100,000. See Plan Paragraph 6 (f); IRC
Section 422 (d).)
7. INCENTIVE STOCK OPTION: YES_____ NO__X__
(Indicate whether the option is intended to be an Incentive Stock
Option under IRC Section 422.)
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<PAGE>
APPENDIX B
Latin American Casinos, Inc.
3909 N.E. 163rd Street
Suite 202-B
North Miami Beach, FL 33160
Dear Sirs:
I hereby exercise an option to purchase the number of shares of Common
Stock of Latin American Casinos, Inc. (the "Company") set forth below (the
"Shares"), enclose herewith the aggregate purchase price for the Shares, and
represent, warrant and agree as follows:
1. I am acquiring the Shares for investment and not with a view to
resale or distribution thereof. I have no present intention of selling or
otherwise disposing of all or any of such Shares, and am acquiring the Shares
for my own account. No other person has a direct or indirect beneficial interest
in the Shares.
2. I understand: that the Shares are not registered under the
Securities Act of 1993 (the "Act"); that the Shares are being issued in reliance
upon the provisions of Section 4(2) of the Act, exempting from the registration
requirements of the Act transactions not involving any public offering; that the
Shares must be held indefinitely unless they are subsequently registered under
the Act or unless an exemption from such registration is available; and that the
Company is under no obligation to register the Shares or to comply with any
conditions required for an exemption from registration.
3. I agree not to sell any of the Shares without registration under
applicable federal and state securities laws or an opinion of counsel
satisfactory to the Company that registration is not required under the Act or
any applicable state securities laws. I further consent to the placement of a
restrictive legend on the certificates evidencing the Shares in substantially
the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE
AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE
REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND
STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
- 5 -
<PAGE>
4. Consistent with the foregoing, I further consent to issuance of
stop-transfer instructions to the Company's transfer agent, if any, with respect
to the Shares or the notation of stop-transfer instructions in appropriate
records of the Company.
Unless otherwise requested in instructions attached hereto, please issue the
certificate representing the Shares in my name and deliver the certificate to:
Name:____________________________________
Address:__________________________________
__________________________________
Social Security Number: ______________________
Number of Shares: __________ Aggregate Purchase Price $ _____________
Date: _____________________
Very truly yours,
-----------------------------
(Please Print Name)
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<PAGE>
APPENDIX C
Latin American Casinos, Inc.
3909 N.E. 163rd Street
Suite 202-B
North Miami Beach, FL 33160
Dear Sirs:
I hereby exercise an option to purchase the number of shares of Common
Stock of Latin American Casinos, Inc. (the "Company") set forth below (the
"Shares"). The aggregate purchase price for the Shares is enclosed. Unless
otherwise requested in instructions attached hereto, please issue the
certificate representing the Shares in my name and deliver the certificate to:
Name:____________________________________
Address:__________________________________
___________________________________
Social Security Number: ______________________
Number of Shares: __________ Aggregate Purchase Price $ _____________
Date: _____________________
Very truly yours,
-----------------------------
(Please Print Name)
Exhibit 10.5
BUSINESS LEASE
THIS AGREEMENT, entered into this 9th day of Sept. 1998 between OSKA PARTNERSHIP
hereinafter called the LESSOR, party of the first part, and LATIN AMERICAN
CASINOS, INC. OF THE COUNTY OF DADE and State of FLORIDA hereinafter called the
LESSEE or TENANT, party of the second part:
WITNESSETH, That the said lessor does this day lease unto said lessee, and said
lessee does hereby hire and take as tenant under said lessor 2000-04 N.E. 164TH
STREET, N.M.B., FLORIDA, in the METRO SHOPPING CENTER situate in Dade County,
Florida, to be used and occupied by the lessee as EXECUTIVE OFFICES AND CIGAR
DISTRIBUTION AND SALES and for no other purposes or uses whatsoever, for the
term of three years (3) subject and conditioned on the provisions of Clause ten
of this lease beginning the FIRST day of October 1998, and ending the 30TH day
of September 2001 at and for the agreed total rental of Seventy nine thousand
two hundred ($79,200.00) Dollars, payable as follows:
THE SUM OF TWENTY TWO HUNDRED ($2,200.00) DOLLARS WILL BE DUE AND PAYABLE UPON
THE SIGNING OF THIS LEASE AND APPLIED TOWARDS THE MONTHLY AMOUNT DUE ON THE
FIRST DAY OF OCTOBER 1998 AND LIKE SUM OF $2,200. WILL BE DUE AND PAYABLE ON THE
FIRST DAY OF EACH SUCCESSIVE MONTH THEREAFTER UP TO AND INCLUDING THE FIRST DAY
OF SEPTEMBER 2001. THE AFOREMENTIONED RENTAL IS TO BE PAID PLUS APPLICABLE
FLORIDA SALES TAX AND OTHER CHARGES AND ASSESSMENTS PURSUANT TO CLAUSES
CONTAINED IN THIS LEASE.
All payments to be made to the lessor on the first day of each and every month
in advance without demand at the office of SECURITY REALTY INVESTMENTS, INC.
15499 West Dixie Highway, North Miami Beach, Fl 33162 or at such other place and
to such other person as the lessor may from time to time designate in writing.
The following express stipulations and conditions are made a part of this lease
and are hereby assented to by the lessee:
FIRST: The lessee shall not assign this lease, nor sub-let the premises, or any
part thereof nor use the same, or any part thereof nor permit the same, or any
part thereof, to be used for any other purpose than as above stipulated, nor
make any alterations therein, and all additions thereto, without the written
consent of the lessor, and all additions, fixtures or improvements which may be
made by lessee, except movable office furniture, shall become the property of
the lessor and remain upon the premises as apart thereof, and be surrendered
with the premises at the termination of this lease.
SECOND: All personal property placed or moved in the premises above described
shall be at the risk of the lessee or owner thereof, and lessor shall not be
liable for any damage to said personal property, or to the lessee arising from
the bursting or leaking of water pipes, or from any act of negligence of any
co-tenant or occupants of the building or of any other person whomsoever.
Lessor: OSKA PARTNERSHIP
Lessee: LATIN AMERICAN CASINOS
Property Address: 2000-04 NE 164
Date: 30 Sept. 98 Initial:______
Page 1
<PAGE>
THIRD: That the tenant they shall promptly execute and comply with all statues,
ordinances, rules, orders, regulations and requirements of the Federal, State
and City Government and of any and all their Departments and Bureaus applicable
to said premises, during said term; and shall also promptly comply with and
execute all rules, orders and regulations of the applicable fire prevention
codes for the prevention of fires, at their own cost and expense.
FOURTH: In the event the premises shall be destroyed or so damaged or injured by
fire or other casualty during the life of this agreement, whereby the same shall
be rendered untenantable, then the lessor shall have the right to render said
premises tenantable by repairs within ninety days therefrom. If said premises
are not rendered tenantable within ninety days it shall be optional with either
party hereto to cancel this lease. and in the event of cancellation the rent
shall be paid only to the date of such fire or casualty. The cancellation herein
mentioned shall be evidenced in writing.
FIFTH: The prompt payment of the rent for said premises1 upon the dates named,
and the faithful observance of the rules and regulations printed upon this
lease, and which are hereby made a part of this covenant, and of such other and
further rules or regulations as may be hereafter made, by the Lessor, are the
conditions upon which the lease is made and accepted and any failure on the part
of the lessee to comply with the terms of said lease, or any of said rules and
regulations now in existence, or which may be hereafter prescribed by the lessor
shall, at the option of the lessor, work a forfeiture of this contract, and all
of the rights of the lessee hereunder.
SIXTH: If the lessee shall abandon or vacate said premises before the end of the
term of this lease, or shall suffer the rent to be in arrears, the lessor may,
at his option, forthwith cancel this lease or he may enter said premises as the
agent of the lessee, by force or otherwise, without being liable in any way
therefor, and re-let the premises with or without any furniture that may be
therein, as the agent of the lessee, at such price and upon such terms and for
such duration of time as the lessor may determine, and receive the rent
therefor, applying the same to the payment of the rent due by these presents,
and if the full rental herein provided shall not be realized by lessor over and
above the expenses to lessor in such re-letting, the said lessee shall pay any
deficiency, and if more than the full rental is realized lessor will pay over to
said lessee the excess of demand.
SEVENTH: In the event of any litigation arising out of or in any way connected
to this Lease agreement, the prevailing party shall be entitled to recover his
reasonable attorneys fees incurred at any stage of litigation including, but not
limited to, trial or appeal.
Lessor: OSKA PARTNERSHIP
Lessee: LATIN AMERICAN CASINOS
Property Address: 2000-04 NE 164
Date: 30 Sept. 98 Initial:______
Page 2
<PAGE>
EIGHTH: The lessee agrees that he will pay all charges for rent, gas,
electricity or other illumination, and for all water used on said premises, and
should said charges for RENT, ELECTRICITY or WATER herein provided for at any
time remain due and unpaid after the space of five days after the same shall
have become due, the lessor may at its option consider the said lessee to be a
tenant at sufferance and the entire rent for the rental period then next ensuing
shall at once be due and payable and may forthwith be collected by distress or
otherwise.
NINTH: The said lessee hereby pledges and assigns to the lessor all the
furniture, fixtures, goods and chattels of said lessee, which shall or may be
brought or put on said premises as security for the payment of the rent herein
reserved and the lessee agrees that the said lien may be enforced by distress
foreclosure or otherwise at the election of the said lessor, and does hereby
agree to pay any and all reasonable attorneys fees which may be incurred,
together with costs and charges therefore incurred or paid by the Lessor.
TENTH: It is hereby agreed and understood between Lessor and Lessee that in the
event the lessor decides to remodel, alter or demolish all or any part of the
premises leased hereunder, or in the event of the sale or long term lease of all
or any part of the premises; requiring this space, the Lessee hereby agrees to
vacate same upon receipt of sixty (6O) days written notice and the return of any
advance rental paid on account of this lease.
ELEVENTH: The lessor or any of his agents, shall have the right to enter said
premises during all reasonable hours, to examine the same to make such repairs,
additions, or alterations as may be deemed necessary for the safety, comfort, or
preservation thereof, or of said building, or to exhibit said premises, and to
put or keep upon the doors or windows thereof a notice "FOR RENT" at any time
within SIXTY (60) days before the expiration of this lease. The right of entry
shall likewise exist for the purpose of removing placards, signs, fixtures,
alterations, or additions, which do not conform to this agreement, or to the
rules and regulations of the building.
TWELFTH: Lessee hereby accepts the premises in the condition, order and repair
as they are in at the commencement of said term, excepting only reasonable wear
and tear arising from the use thereof under this agreement, and to make good to
said lessor immediately upon demand, any damage to, including but not limited to
the following, water apparatus, electric lights or any fixtures, appliances or
appurtenances of said premises, or of the building, caused by any act or neglect
of lessee, or of any person or persons in the employ or under the control of the
lessee.
Lessor: OSKA PARTNERSHIP
Lessee: LATIN AMERICAN CASINOS
Property Address: 2000-04 NE 164
Date: 30 Sept. 98 Initial:______
Page 3
<PAGE>
THIRTEENTH: It is expressly agreed and understood by and between the parties to
this agreement, that the landlord shall not be liable for any damage or injury
by water, which may be sustained by the said tenant or other person or for any
other damage or injury resulting from the carelessness, negligence, or improper
conduct on the part of any other tenant or agents, or employees, or by reason of
the breakage, leakage, or obstruction of the water, sewer or soil pipes, or
other leakage in or about the said building.
FOURTEENTH: If the lessee shall become insolvent or if bankruptcy proceedings
shall be begun by or against the lessee, before the end of said term the lessor
is hereby irrevocably authorized at its option to forthwith cancel this lease as
for a default. Lessor may elect to accept rent from such receiver, trustee, or
other judicial officer during the term of their occupancy in their fiduciary
capacity without effecting lessor's rights as contained in this contract, but no
receiver, trustee or other judicial officer shall ever have any right, title or
interest in or to the above described property by virtue of this contract.
FIFTEENTH: Lessee hereby waives and renounces for himself and family any and all
homestead and exemption rights he may have now, or hereafter, under or by virtue
of the constitution and laws of the State of Florida or any other State or of
the United States, as against the payment of said rental or any portion hereof,
or any other obligation or damage that may accrue under the terms of this
agreement.
SIXTEENTH: This contract shall bind the lessor and its assigns or successors,
and the heirs, assigns, personal representatives, or successors as the case may
be, of the lessee.
SEVENTEENTH: It is understood and agreed between the parties hereto that time is
of the essence of this contract and this applies to all terms and conditions
contained herein.
EIGHTEENTH: It is understood and agreed between the parties hereto that written
notice mailed or delivered to the premises leased hereunder shall constitute
sufficient notice to the lessee and written notice mailed or delivered to the
office of the lessor shall constitute sufficient notice to the lessor, to comply
with the terms of this contract.
NINETEENTH: The rights of the lessor under the foregoing shall be cumulative,
and failure on the part of the lessor to exercise promptly any rights given
hereunder shall not operate to forfeit any of the said rights.
TWENTIETH: It is further understood and agreed between the parties hereto that
any charges against the lessee by the lessor for services or for work done on
the premises by order of the lessee or otherwise accruing under this contract
shall be considered as rent due and shall be included in any lien for rent due
and unpaid.
Lessor: OSKA PARTNERSHIP
Lessee: LATIN AMERICAN CASINOS
Property Address: 2000-04 NE 164
Date: 30 Sept. 98 Initial:______
Page 4
<PAGE>
TWENTY-FIRST: It is hereby understood and agreed that any signs or advertising
to be used, including awnings, in connection with the premises leased hereunder
shall be first submitted to the lessor for approval before installation of same.
TWENTY-SECOND: All glass, signs, front and rear doors, door closures and the
interior of the premises including, but not limited to, air conditioning
repairs, bathroom plumbing, are the responsibility of the Lessee, who shall make
all repairs thereto at its sole cost and expense and lessee shall carry plate
glass insurance and furnish Lessor with a Certificate of such coverage upon
possession.
TWENTY-THIRD: Lessor agrees not to unreasonably or arbitrarily withhold the
consent required in Paragraph First, but Lessee shall continue to be liable for
the payment of the rent and performance of all obligations of Lessee as herein
contained.
TWENTY-FOURTH: Lessee's rights under this lease are subject to any bonafide
mortgage now or hereafter covering the leased premises and also subject to any
underlying lease at anytime covering same.
TWENTY-FIFTH: Lessee shall keep the leased premises and walks immediately
adjacent thereto, in the front and rear, broom clean. Other public areas,
including parking lot and landscaping are the responsibility of the Lessor,
except where damage is thereto is done by the Lessee, its agents or
representatives. Lessee further agrees to retain necessary exterminating
services for the leased premises during the term of this lease.
TWENTY-SIXTH: Lessee shall pay each month, in addition to the rent specified,
any rental tax fixed by the law of the State of Florida, or the County of Dade,
or a municipal subdivision thereof.
TWENTY-SEVENTH: OPTION: Lessor agrees to grant to lessee a three (3) year option
for renewal at the termination of this lease agreement. This option will be
subject to the same terms and conditions as contained herein with the following
exception: during the initial year of said option period there will be either a
5% or cost of living increase, whichever is greater, over the rental rate of the
final year of this lease agreement. For the remaining 2 years of said option
period there will be an annual cost of living increase, with a minimum of 3% and
a maximum of 5%, subject to the same terms and conditions as set forth herein.
LESSEE MUST NOTIFY LESSOR, IN WRITING, OF HIS INTENTION TO EXERCISE SAID OPTION
60 DAYS PRIOR TO THE TERMINATION OF THIS LEASE AGREEMENT.
Lessor: OSKA PARTNERSHIP
Lessee: LATIN AMERICAN CASINOS
Property Address: 2000-04 NE 164
Date: 30 Sept. 98 Initial:______
Page 5
<PAGE>
TWENTY-EIGHTH: THIS PARAGRAPH IS INTENTIONALLY OMITTED
TWENTY-NINTH: It is further agreed that all trash pickups shall be in addition
to base rent and shall be the obligation of the Lessee. The cost of trash and
sewer shall be divided between all tenants and there will be a monthly charge to
be included with rent. Currently such charge is $100.00 per month. In the event
there is a raise in the monthly charge of trash removal or if lessee's trash
causes additional increase due to his type of business generating more trash
than average, then in that event, lessor has the right to raise lessee's monthly
trash removal costs or in the alternative, lessor may request that lessee
provide his own dumpster at lessee's own expense.
THIRTIETH: Lessee shall carry public liability insurance in amounts not less
than $100,000 for personal injuries for one claimant and $300,000 for personal
injuries per occurrence and $25,000, for property damage, indemnifying the
Lessee and Lessor against all claims and demands for which the Lessee may be
liable under the terms of this agreement. A copy of such policy, or certificate
thereof, with the endorsement or clause showing the interest of the Lessor,
shall be delivered to the lessor within ten (10) days after the execution
hereof; and such certificate or policy shall provide that the policy be
non-cancellable with respect to Lessor without thirty (30) days prior written
notice to Lessor. Lessee further agrees that it will indemnify and save harmless
the Lessor from and against all loss, cost, damage, and expense, including
reasonable attorney's fees arising out of or resulting from the use of the
premises, occasioned by the negligence or other misconduct of the Lessee, its
agents, contractors, employees, servants, invitees, or licensees.
THIRTY-FIRST: Lessee represents that he has made an inspection of the premises
and is fully familiar with the condition of the premises and is fully familiar
with the condition thereof and that he accepts premises "as is".
THIRTY-SECOND: All notices required to be sent in writing to Lessor by Certified
Mail, shall be addressed to OSKA PARTNERSHIP, P.O. Box 69-4256, Miami, Florida
33269, or at such other place and to such other person as the lessor, may from
time to time, designate by written notice; and to Lessee addressed to LLOYD
LYONS, 2000-04 N.E. 164TH STREET, NORTH MIAMI BEACH, FLORIDA
33162.
Lessor: OSKA PARTNERSHIP
Lessee: LATIN AMERICAN CASINOS
Property Address: 2000-04 NE 164
Date: 30 Sept. 98 Initial:______
Page 6
<PAGE>
THIRTY-THIRD: The failure of either party to insist on strict performance of any
covenants or condition herein contained, shall not be construed as a waiver of
such covenant, condition or opinion in any other instance. This lease cannot be
changed or terminated orally.
THIRTY-FOURTH: The provisions of this lease shall be severable and should any
provision, covenant, or portion thereof be declared invalid or unenforceable
such invalidity or unenforcability, shall not effect the remaining provisions,
covenants, or portions herein.
THIRTY-FIFTH: "Lessee" and "Lessor" are used for singular and plural as context
requires.
THIRTY-SIXTH: Tenant is required to install a sign affixed to the fascia in
accordance with the Metro Shopping Center's sign criteria. All exterior signs,
whether presently painted upon the demised premises or affixed to the building,
and such signs as may be painted or affixed to the demised premises in the
future shall be maintained by the Lessee and at the expense of the Lessee, in
such condition so as not to detract from the general appearance of the building.
Lessor shall be the sole judge of the need for proper maintenance of said signs.
Lessee hereby releases Lessor from any liability for water damage resulting from
said sign. Tenant must obtain prior approval from the Landlord, and where
applicable, County and/or City permit for such sign must be obtained before
installation.
THIRTY-SEVEN: Lessee may make no alterations to the premises without first
submitting a complete plan for alterations to Lessor and obtaining Lessor's
written approval and consent to such alteration, nor may Lessee erect or use any
signs without Lessor's prior written approval. It is understood that once Lessor
has given written approval that no change maybe made without submission of such
changes to the Lessor and Lessor's prior written approval of such changes before
they are implemented.
THIRTY-EIGHTH: Lighting fixtures, roof sign and air conditioning are the
property of the Lessor and in consideration of Lessee's having use of same,
Lessee hereby agrees to be responsible for maintenance and repair thereof at its
own cost and expense and hereby releases Lessor from any liability for water
damage resulting from said sign and/or air conditioning system.
THIRTY-NINTH: Lessee agrees not to part his motor vehicle, not to permit his
employees to park their motor vehicles in front of any part of the entire
building, it being agreed that employee parking facilities are at the east end
of the rear parking lot only, if available.
Lessor: OSKA PARTNERSHIP
Lessee: LATIN AMERICAN CASINOS
Property Address: 2000-04 NE 164
Date: 30 Sept. 98 Initial:______
Page 7
<PAGE>
FORTIETH: Lessee shall within ten (10) days after notice from Lessor discharge
of record any mechanic's lien for material or labor claimed to have furnished to
the premises on Lessee's behalf.
FORTY-FIRST: Whenever anything under this lease depends upon the prior consent
or approval of Lessor, such consent or approval shall not be unreasonably
withheld.
FORTY-SECOND: The amount of $2,200.00 represents Security to the Lessor for the
performance by the Lessee of the terms, conditions and agreements, contained in
this lease and to be performed by the Lessee. If, at the expiration of this
lease, the Lessee shall not be in default hereunder, and if the demised premises
are surrendered in the same order and condition as when received, excepting only
normal wear and tear, then Lessor shall return to lessee the amount of said
security. The Security amount shall not draw interest nor be kept in a separate
or segregated escrow account except as provided by law.
FORTY-THIRD: Lessee shall not have the right to assign this lease or transfer
this lease by the transfer of the corporate stock of a corporation. If Lessee at
the time is a corporation, or sublet any portion of premises at any time during
the term hereof or any extension thereof without the written consent of the
Lessor.
FORTY-FOURTH: The basic rental provided for herein shall, beginning with the
rent payable on OCTOBER 1, 1999 and on the first day of OCTOBER of every year
thereafter, during the term of this lease be adjusted higher and increased,
based upon the percentage increase of a certain Cost of Living index, THERE WILL
A MINIMUM ANNUAL INCREASE OF 3% AND A MAXIMUM ANNUAL INCREASE OF 5%, the basic
rent payable for the current year shall be increased in direct proportion, AND
WILL COINCIDE WITH THE ABOVE MINIMUM AND MAXIMUM to the increase in the Cost of
Living index from the most recent month of the previous year to the most recent
month of the current year. The Cost of Living index to be used is the "Consumer
Price Index for all Urban Consumer (1967=100)- All items," published in the
Monthly Labor Review of the Bureau of Labor Statistics of the United States
Department of Labor. If the aforementioned Index becomes unavailable, the index
to be used is the "Consumer Price Index" issued by the United States Department
of Labor for the South Atlantic Group of States. In no event, however, shall the
basic Rent for any year of the lease term be less than the Basic Rent for any
preceding year of the lease term.
Lessor: OSKA PARTNERSHIP
Lessee: LATIN AMERICAN CASINOS
Property Address: 2000-04 NE 164
Date: 30 Sept. 98 Initial:______
Page 8
<PAGE>
FORTY-FIFTH: Lessee covenants not to introduce any hazardous or toxic materials
onto the premises without A) first obtaining Lessor's written consent and B)
complying with all applicable federal, state and local laws or ordinances
pertaining to the transportation, storage, use or disposal or such materials,
including but not limited to obtaining proper permits. If Lessee's
transportation, storage, use or disposal of hazardous or toxic materials on the
premises results in:
1) contamination of the soil or surface or ground water or
2) loss or damage to person(s) or property, then Lessee agrees to respond in
accordance with the following paragraph FORTY-SIXTH:
FORTY-SIXTH: Lessee agrees to:
1) notify Lessor immediately of any contamination, claim of contamination, loss
or damage,
2) after consultation and approval of Lessor, to clean up the contamination in
full compliance with all applicable statutes, regulations and standards, and
3) to indemnify, defend and hold Lessor harmless from and against any claims,
suits, causes of action, appeals, costs and fees, including attorney's fees,
arising from or connected with any such contamination, claim of contamination,
loss or damage. This provision shall survive termination of this lease.
FORTY-SEVENTH: RADON GAS: Lessee is hereby notified that radon gas is a
naturally occurring radioactive gas that, when it has accumulated in a building
in sufficient quantities, may present health risks to persons who are exposed to
it over time. Levels of radon that exceed federal and state guidelines have been
found in buildings in Florida. Additional information regarding radon and radon
testing may be obtained from your county public health unit.
RULES. REGULATIONS. AND CONDITIONS OF OCCUPANCY OF: Lessee agrees to abide by
the following rules, regulations and conditions of occupancy:
1) That these rules, regulations, and conditions of occupancy shall go into
effect immediately.
2) Lessee shall not allow its agents, employees, guests, invitees or other
persons upon the premises, to litter the grounds. All litter shall be placed in
the garbage dumpster or other trash receptacles provided.
3) All cars of the Lessee, their agents and employees shall be parked only in
the parking area described in Paragraph THIRTY-NINTH. Parking on the grass,
obstructing the garbage dumpsters, double parking and/or obstructing other cars
is strictly prohibited.
Lessor: OSKA PARTNERSHIP
Lessee: LATIN AMERICAN CASINOS
Property Address: 2000-04 NE 164
Date: 30 Sept. 98 Initial:______
Page 9
<PAGE>
4) Wrecked motor vehicles, any motor vehicle that is inoperative for any reason,
or any motor vehicle without current license plates, are not permitted to be
parked in the parking areas or on any other property owned by the lessor. Upon
notice by the lessor or its agents, such described motor vehicles shall be
removed, repaired, or properly licensed immediately. If the lessee does not
comply with said notice, the lessee further agrees that the lessor may have such
vehicle removed at the lessees expense.
5) Lessee shall not conduct any activities outside of the leased unit other than
the loading or unloading of merchandise and/or equipment in the ordinary course
of business.
6) Lessee shall not display any merchandise or other materials outside of the
leased unit.
RISK OF LOSS The management only rents space to the Lessee and makes no
representation or warranties concerning the security or safety of lessee's
property located on the lessor's property. The lessee is specifically advised
that no security system is proof against theft or loss and that the lessee is
solely responsible for obtaining insurance sufficient to cover lessee's
property.
ALL RISK OF LOSS OR DAMAGE TO ANY OF LESSEES PROPERTY RESULTING FROM THEFT,
FIRE, FLOOD OR ANY OTHER CASUALTY, ACT OF GOD, OR INTENTIONAL OR NEGLIGENT ACT
OF A THIRD PARTY, IS SOLELY AND ENTIRELY ON THE LESSEE. THE LESSOR IS NOT A
BAILEE, WAREHOUSEMEN OR INSURER OF LESSEE'S PROPERTY. THE RELATIONSHIP BETWEEN
THE PARTIES IS ONE OF LESSOR AND LESSEE ONLY. THE LESSEE HEREBY RELEASES THE
LESSOR FROM ANY AND ALL LIABILITY FOR LOSS OR DAMAGE TO CUSTOMERS PROPERTY.
The Lessee takes the rented space "AS IS" and specifically acknowledges
that the Lessor has made no representations or warranties concerning the
security or safety of Lessee's property. The lessee acknowledges that the Lessor
is not storing property on behalf of the Lessee, but is merely renting space to
the Lessee. The Lessee acknowledges that he has inspected the premises and found
them to be suitable for his purposes and accepts the same on an "AS IS" basis.
Lessor: OSKA PARTNERSHIP
Lessee: LATIN AMERICAN CASINOS
Property Address: 2000-04 NE 164
Date: 30 Sept. 98 Initial:______
Page 10
<PAGE>
EXCLUSIVE CONTROL The Lessee has sole and exclusive control over the rented
space and the storage and care of any property placed in the rented space. The
Lessee must provide his or her own lock and key and must keep the rented space
locked even when empty.
LATE CHARGES: Lessee agrees to pay all rents and sums provided to be paid to
Lessor hereunder at the times and in the manner provided herein, and in the
event Lessee fails to pay any sum required to be paid hereunder within TEN (10)
working days of the due date, then there shall be added to such payment a "Late
Charge" in the amount of ONE HUNDRED ($100.00) DOLLARS.
ACCELERATION OF RENTAL-WHERE INSTALLMENT NOT PAID If Lessee shall fail to pay
any month's installment of rent for a period of 30 days after the same becomes
due and payable, then all the installments of rent for the whole term of this
lease agreement shall at the option of the Lessor, or its assigns, become due
and payable at once without demand.
SPECIAL CLAUSES; Upon signing of this lease agreement, a Security Deposit in the
amount of $ 2,200.00 and first months rent in the amount of 2,449.50 will be due
and payable (TOTAL: $4,649.50)
CURRENT MONTHLY AMOUNT DUE:
Rent:- $2,200.00
S.T.:- 149.50
Trash:- 100.00
Total:- $2,449.50
IN WITNESS WHEREOF, the parties hereto have hereunto executed this instrument
for the purpose herein expressed, the day and year above written.
WITNESS: OSKA PARTNERSHIP
[SIGNATURE ILLEGIBLE] /s/ PHYLLIS MYERS
- -------------------------- --------------------------
Lessor
Phyllis Myers - Managing Partner
[SIGNATURE ILLEGIBLE] LATIN AMERICAN CASINOS, INC.
- -------------------------- ----------------------------
/s/ LLOYD LYONS
--------------------------
LLOYD LYONS, CEO
- --------------------------
As to Lessee
Dated: 9/30/98
-------------
Page 11
<PAGE>
ADDENDUM TO LEASE AGREEMENT
This ADDENDUM is annexed to and forms a part of that certain Business
Lease (the "Lease") dated as of the 30th day of September, 1998, OSKA
Partnership (hereinafter sometimes referred to as "Lessor") and Latin American
Casinos, Inc. (hereinafter sometimes referred to as "Lessee").
1. ADDENDUM TAKES PRECEDENCE. In the event of any conflict between the
terms and provisions of this Addendum and the terms and provisions of the Lease
to which this Addendum is annexed, the terms and provisions of this Addendum
shall take precedence.
2. WORK BY LESSOR AND LESSEE. Lessee shall present a space plan to
Lessor for Lessor's approval, of which interior walls may be removed by Lessee
with permit. Upon the lease being signed, Lessee shall be permitted to remove
the walls agreed upon, at Lessee's expense. Lessor agrees to do the following
work at Lessor's expense:
(a) Air conditioning unit or units are to be in good working
order and condition.
(b) Existing lighting fixtures are to be in good working order
and condition.
(c) Existing lighting fixtures are to have all bulbs working.
(d) Plumbing in bathrooms are to be in good working order and
condition.
(e) Premises are to be clean and the carpets are to be steamed
cleaned.
3. OCCUPANCY. Lessee shall be permitted to occupy the premises prior to
November 1, 1998 free of rent or other charge. Lessee's occupancy shall not
unreasonably interfere with Lessor's work.
4. MAINTENANCE. Lessor shall, at its sole cost and expense, make all
repairs to the foundation, exterior weight bearing walls (excluding all doors,
windows, plate glass and show cases), the roof of the building, and that part of
the electrical, plumbing and water and sewer lines outside the of the premises,
providing, however, that such damage is not caused by the negligence of Lessee
or Lessee's agents.
5. ACCESS BY LESSOR. Access by Lessor to the premises shall only be
upon reasonable notice to Lessee, except in the case of an emergency.
6. DESTRUCTION OF PREMISES. With respect to paragraph fourth of the
Lease, the rental and other charges under the Lease shall be abated during any
period that the premises are
<PAGE>
untenantable. To the extent any damage renders the premises partially
untenantable, the rental and other charges under the least shall be partially
abated during any such period.
7. NO HAZARDOUS MATERIALS. Lessor agrees that Lessee is not responsible
for any hazardous wastes and/or materials in, on, under or about the premises
prior to the day of this Lease.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Addendum as of
the day and year first above written.
Signed, sealed and delivered
in the presence of:
/s/ [SIGNATURE ILLEGIBLE] Lessor:
- ----------------------------
OSKA PARTNERSHIP
(SIGNATURE ILLEGIBLE) By: /s/ PHYLLIS MYERS
- ---------------------------- -----------------------------------
LESSOR: /s/ PHYLLIS MYERS
LESSEE:
LATIN AMERICAN CASINOS, INC.
(SIGNATURE ILLEGIBLE)
- ---------------------------- By: /s/ LLOYD LYONS
-----------------------------------
LLOYD LYONS, CEO
(SIGNATURE ILLEGIBLE)
- ----------------------------
Exhibit 10.6
AGREEMENT
THIS AGREEMENT is made this 12 day of July, 1998, between WORLD'S BEST
RATED CIGAR COMPANY, a Florida corporation ("Buyer"), whose address is 3941 N.E.
163rd Street, North Miami Beach, Florida 33160, and TABACELERA PANAMERICANA Y
DEL CARIBE SA ("Seller"), whose address is HOTEL EL MESON 1C. AL ESTE ESTELI
NIC. CENTRO AMERICA.
WITNESSETH:
WHEREAS, Seller has agreed to manufacture and sell cigars to Buyer
("Cigars") in accordance with Buyer's requirements as set forth by Buyer from
time to time.
NOW, THEREFORE, in consideration of the sum of Ten ($10.00) Dollars,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. RECITALS OF FACTS. The foregoing recitals of facts are true
and correct and are hereby incorporated into this Agreement.
2. REQUIREMENTS. Seller agrees to manufacture and sell Cigars to
Buyer based on Buyer's stated purchase requirements from time to time. All
Cigars shall be manufactured and sold in accordance with the standards and
specifications set forth herein and shall be of the highest quality.
3. TYPE OF CIGARS; PRICING. The type of Cigar and the price to be
charged by Seller to Buyer for each type of Cigar is set forth on Schedule "A"
attached hereto and made a part hereof. Payment shall be in U.S. Dollars unless
otherwise agreed to by Buyer and Seller.
4. TERM. The term of this Agreement shall be for a period of ten
(10) years, subject to the right of Buyer to cancel this Agreement upon at least
sixty (60) days prior written notice to Seller at any time and for any reason
(or no reason).
5. QUALITY AND SPECIFICATIONS. Seller has agreed to deliver
Cigars meeting the following minimum quality standards and specifications:
o All Cigars shall use long leaf tobacco.
o All Cigars shall be hand rolled.
o All Cigars shall be of the highest quality tobacco and shall
be of no lesser quality than the highest premium grade
offered by Seller to any other party.
<PAGE>
o The filler used in the Cigars shall be of the highest premium
grade and shall be of no lesser quality than the highest
premium grade offered by Seller to any other party.
o The parchment wrapping for the Cigars shall be of such
quality as Buyer shall direct.
o Seller will label the Cigars with such labeling as Buyer may
direct.
o Cigars shall be individually packaged by the Seller in
cellophane and properly packaged and boxed for shipping.
6. INVENTORY. So as to ensure that Cigars are available for
Buyer's orders, as and when placed by Buyer, Seller agrees to keep available in
its in inventory at all times at least 200,000 of each of the Cigars listed on
Schedule A attached hereto. All inventory shall be kept in a properly regulated
humidor.
7. PAYMENT TERMS. Payment for each order shall be as follows:
A. As and when the order is placed, Buyer shall pay to Seller
twenty-five percent (25%) of the amount due for the order;
B. Fifty percent (50%) of the amount of the order shall be due
and payable at the time of shipping by Seller; and
C. The remaining twenty-five percent (255) of the order shall be
due upon receipt of the Cigar order by Buyer.
It is understood that Seller shall have no right to retain payment for any
Cigars which do not meet the minimum standards and specifications set forth
herein and, upon demand, any non-conforming Cigars shall be immediately replaced
by Seller at Seller's cost, with Seller fully responsible for all costs
associated with shipping and delivery of same to Buyer. If not immediately
replaced, any monies previously paid for non-conforming Cigars shall be promptly
reimbursed to Buyer. Buyer reserves the right to declare Cigars as
non-conforming at any time, and neither acceptance of possession by Buyer or
prior payment by Buyer shall be deemed to restrict Buyer's rights in this
respect.
8. SHIPPING: RISK OF LOSS. Seller shall be responsible for
delivery and cost of expense of delivery of the Cigars to a shipper designated
by Buyer. From and after delivery of the Cigars to the shipper, Buyer bears the
risk of loss.
9. CUSTOMS. Buyer shall be responsible to pay customs and import
and export taxes, if any, pertaining to the Cigars.
2
<PAGE>
10. TIMING OF DELIVERY. All orders shall be fulfilled by Seller
and delivered for shipping to buyer no later than thirty (30) days of the date
that an order is placed. All Cigars used by Seller from its inventory to fulfill
any order shall be of the same quality and standards set forth above. Buyer
shall have the first right of access to any such inventory maintained by Seller
if necessary to satisfy Buyer's purchasing requirements form time to time.
11. INFORMATION ON OTHER MANUFACTURERS. To the extent legally
permitted, Seller agrees to provide Buyer with information on other purchasers
form Seller.
12. OPTION TO PURCHASE. Buyer is hereby granted an Option to
Purchase the plantation and/or Cigar factory of Seller. The parties agree to
enter into good faith negotiations in order to establish the terms of said
option to purchase. The Option to Purchase, once agreed to, shall be documented
in a form reasonably satisfactory to Buyer.
13. DEFAULTS AND REMEDIES. In the event of default by either party
hereunder, the parties hereto shall have all rights and remedies available under
law, by statute or otherwise, subject to the arbitration provision set forth
below. Prior to declaring any party in default, the non-defaulting party shall
provide the defaulting party with written notice of default with no less than 10
days to cure the default. In addition to all other remedies available to Buyer,
if Seller fails to meet the requirements specified by buyer for any cigar order,
or if the Seller otherwise fails to perform any other provision of this
agreement, then buyer may make or procure, upon such terms and in such manner as
buyer deems appropriate, Cigars meeting Buyer's specifications through another
party. In such event, Seller shall be liable to buyer for all reasonable costs
caused by such failure which Buyer incurs during the time Buyer is without its
Cigars and for any excess costs of Cigars above the price as stated herein.
14. LIMIT OF AUTHORITY. Both parties are independent contractors
and this Agreement does not constitute either party as the legal representative
of the other for any purpose whatsoever. Neither party has authority to assume
or create any obligation whatsoever, express or implied, on behalf of or in the
name of the other party in any manner whatsoever.
15. ARBITRATION OF DISPUTES. Any dispute, controversy or breach
arising out of or relating to this Agreement, shall be settled by arbitration to
be held in the City of Miami, Dade County Florida before a single arbitrator in
accordance with the rules then in effect of the American Arbitration Association
or any successor thereto. The arbitrator may impose damages, grant injunctions
or grant other relief in such dispute or controversy. The decision of the
arbitrator shall be final, conclusive, and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's decision in any court
having jurisdiction of the Florida courts for this purpose. In such arbitration,
the parties waive personal service of any process of other papers and agree that
service thereof may be made in accordance with the notice provisions of this
Agreement. The non-prevailing party in such arbitration shall pay all of the
reasonable attorneys' fees and costs of the prevailing party, including any
appeal thereof, with the proviso, however, that each party shall pay one-half of
the fees separately charged by the arbitrator.
3
<PAGE>
16. GOVERNING LAW. This Agreement shall be governed by enforced
and construed in accordance with the laws of the State of Florida.
17. MISCELLANEOUS. This Agreement and the terms and provisions
hereof may only be changed, waived or discharged by an instrument in writing
signed by the parties hereto. This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof and no party hereto has
made any representation or warranty or covenant in connection with the matters
set forth herein except as expressly stated herein. All the terms of this
Agreement shall be binding upon the respective personal representatives,
successors and assigns of the parties hereto and shall inure to the benefit of
and be enforceable by the parties hereto, and their respective personal
representatives, successors and assigns. This Agreement shall be construed
without regard to any presumption or other rule requiring construction against
the party causing this Agreement to be drafted. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which
together shall be deemed to be one agreement. If, for any reason, any provision
of this Agreement is held invalid, such invalidity shall not affect any other
provision of this Agreement, and the Agreement shall otherwise remain in full
force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
In the presence of: BUYER:
WORLD'S BEST RATED CIGAR COMPANY,
A Florida corporation
/s/ DONALD D. SCHIFFOUR By:/s/ LLOYD LYONS
- -------------------------- --------------------------
Donald D. Schiffour Lloyd Lyons, President
/s/ GERALDINE LYONS SELLER:
- --------------------------
Geraldine Lyons /s/ TAPACASA
--------------------------------------
/s/ RONNIE LYONS
- -------------------------- By: /s/ PEDRO RAMOS, GERENTE PRES.
Ronnie Lyons -----------------------------------
Pedro Ramos, Gerente Pres.
/s/ FELIX PEDRO FLORES
- --------------------------
Felix Pedro Flores
EXHIBITS:
A- Type of Cigar and Pricing
4
<PAGE>
PROGRAMA "A"
PRECIOS DE LOS CIGARROS
NOMBRE TAMANO PRECIO
------ ------ ------
# 1 Robusto (5 x 50 ) ****
# 2 Panetela esp. (38 x 6 ) ****
# 3 Toro (6 x 50 ) ****
# 4 Torpedo (6.5 x 54) ****
# 5 Churchill (7 x 48 ) ****
# 6 Presidente (52 x 7.5) ****
100% cuban seede, long filler,
hand made Cigars.
- ----------
* Confidential portions of this Exhibit have been omitted and filed separately
with the Commission pursuant to a request for Confidential Treatment.
Exhibit 10.7
AGREEMENT
THIS AGREEMENT is made this 20 day of JULY, 1998, between WORLD'S BEST
RATED CIGAR COMPANY, a Florida corporation ("Buyer"), whose address is 3941 N.E.
163'rd. Street, North Miami Beach, Florida 33160, and TABACOS DE ORIENTE
("SELLER"), whose address is (Illegible), Honduras.
W I T N E S S E T H:
WHEREAS, Seller has agreed to manufacture and sell cigars to Buyer
("Cigars") in accordance with the Buyer"s requirements as set forth by Buyer
from time to time.
NOW, THEREFORE, in consideration of the sum of Ten ($10.00) Dollars of
which are hereby acknowledged, the parties agree as follows:
1. RECITALS OF FACTS. The foregoing recitals of facts are true and
correct and are hereby incorporated into this Agreement.
2. REQUIREMENTS. Seller agrees to manufacture and sell Cigars to Buyer
based on Buyer's stated purchase requirements from time to time. All Cigars
shall be manufactured and sold in accordance with the standards and
specifications set forth herein and shall be of the highest quality.
3. TYPE OF CIGARS; PRICING. The type of Cigar and the price to be
charged by Seller to Buyer for each type of Cigar is set forth on Schedule "A"
attached hereto and made a part of hereof. Payment shall be in U.S. Dollars
uniess otherwise agreed to by Buyer and Seller.
4. TERM. The term of this Agreement shall be for a period of ten (10)
years, subject to the right of Buyer or Seller to cancel this Agreement upon at
least (60) days prior By written notice at any time and for any time and for any
reason (or no reason).
5. QUALITY AND SPECIFICATIONS. Seller has agreed to deliver Cigars
meeting the following minimum quality standards and specifications:
o All Cigars shall use long leave tobacco.
o All Cigars shall be hand rolled.
o All Cigars shall be of the highest quality tobacco and shall
be of no lesser quality than the highest premium grade
offered by Seller to any other party.
<PAGE>
-2-
o The filler used in the Cigars shall be of the highest premium
grade and shall be of no lesser quality than the highest
premium grade offered by the Seller to any other party.
o The parchment wrapping for the Cigars shall be of such quality
as Buyer shall direct.
o Cigars shall be individually packaged by the Seller in
cellophane and properly packaged and boxed for shipping.
6. INVENTORY. So as to ensure that the Cigars are available for Buyer's
orders, as and when placed by Buyer, Seller agrees to keep available in its
inventory at all times tobacco in sufficient amounts to make at least 200,000 of
each of the Cigars listed on Schedule A attached hereto. All inventory shall be
kept in a properly regulated humidor.
7. PAYMENT TERMS. Payment for each order shall be as follows:
A. As and whether the order is placed, Buyer shall pay to Seller
fifty percent (50%) of the amount due for that order;
B. Fifty percent (50%) of the amount of the order shall be due
and payable at the time of shipping by Seller.
It is understood that Seller shall have no right to retain payment for
any Cigars which do not meet the minimum standards and specifications set forth
herein and, upon demand, any non-conforming Cigars shall be immediately replaced
by Seller's cost. If not immediately replaced, any monies previously paid for
non-conforming Cigars shall be promptly reimbursed to Buyer. Buyer has the right
to employ and place in the factory of Seller, at all times, A supervisor to
inspect all cigars prior to packaging and to classify the same as acceptable or
non-acceptable, Before shipment of the Cigars.
8. SHIPPING: RISK OF LOSS. Seller shall be responsible for delivery and
cost of expense of delivery of the Cigars to a shipper designated by Buyer,
F.O.B. Managua or F.O.B. Tegucigalpa, depending on Country of origin. From and
after delivery of the Cigars to the shipper, Buyer bears the risk of loss.
9. CUSTOMS. Buyer shall be responsible to pay customs and export taxes,
if any, pertaining to the Cigars.
<PAGE>
10. TIMING OF DELIVERY. All orders shall be fulfilled by Seller and
delivered for shipping to Buyer no later than thirty (30) days of the date that
an order is placed. All Cigars used by Seller from its inventory to fulfill any
order shall be of the same quality and standards set forth above. Buyer shall
have the first right of access to any such inventory maintained by Seller if
necessary to satisfy Buyer's purchasing requirements from time to time.
11. INFORMATION ON OTHER MANUFACTURERS. To the extent legally
permitted, Seller agrees to provide Buyer with information on other purchasers
from SELLER.
12. OPTION TO PURCHASE. Buyer is hereby granted a Option to Purchase
the plantation and/or Cigar factory of SELLER. The parties agree to enter into
good faith negotiations in order to establish the terms of said option to
purchase. The Option to Purchase, once agreed to, shall be documented in a form
reasonably satisfactory to Buyer.
13. DEFAULTS and REMEDIES. In the event of default by either party
hereunder, the parties hereto shall have all rights and remedies available under
law, by statute or otherwise, subject to the arbitration provision set forth
below. Prior to declaring any party in default, the non-defaulting party shall
provide the defaulting party with written notice of default with no less than 10
days to cure the default. In addition to all other remedies available to buyer,
if Seller fails to meet the requirements specified by Buyer for any Cigar order,
or if the Seller otherwise fails to perform any other provision of this
agreement, then Buyer may make or procure, upon such terms and in such manner as
Buyer deems appropriate, Cigars meeting Buyer's specifications through another
party.
14. LIMIT OF AUTHORITY. Both parties are independent contractors and
this Agreement does not constitute either party as the legal representative of
the other for any purpose whatsoever. Neither party has authority to assume or
create any obligation whatsoever, express or implied, on behalf of or in the
name of the other party, nor to bind the other party in any manner whatsoever.
15. ARBITRATION DISPUTES. Any dispute, controversy or breach arising
out of or related to this Agreement, shall be settled by arbitration to be held
in the City of Miami, Dade County, Florida before a single arbitrator in
accordance with the rules then in effect of the American Arbitration Association
or any successor thereto. The arbitrator may impose damages, grant injunctions
or grant other relief in such dispute or controversy. The decision of the
arbitrator shall be final, conclusive, and binding on the parties to the
arbitration. Judgement may be entered on the arbitrator's decision in any court
having jurisdiction, and the parties irrevocably consent to the jurisdiction of
the Florida courts for this purpose. In such arbitration, the parties waive
personal service of any process or other papers and agree that service thereof
may be made in accordance with the notice provisions of this Agreement. The
non-prevailing party, including any appeal thereof, with the proviso, however,
that each party shall pay one-half of the fees separately charged by the
arbitrator.
3
<PAGE>
16. GOVERNING LAW. This Agreement shall be governed by, enforced and
construed in accordance. with the laws of the State of Florida.
17. MISCELLANEOUS. This Agreement and the terms and provisions hereof
may only be change, waived or discharged by an instrument in writing signed by
the parties hereto. This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof and no party hereto has
made any representation or warranty or covenant in connection with the matters
set forth herein except as expressly stated herein. All the terms of this
Agreement shall be binding upon the respective personal representatives,
successors and assigns of the parties hereto and shall inure to the benefit of
and enforceable by the parties hereto, and their respective personal
representatives, successors and assigns. This Agreement shall be construed
without regard to any presumption or other rule requiring construction against
the party causing this Agreement to be drafted. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which
together shall be deemed to be one agreement. If, for any reason, any provision
of this Agreement is held invalid, such invalidity shall not affect any other
provision of this Agreement, and the Agreement shall otherwise remain in full
force and effect.
IN WITNESS WHEREOF, the parts have executed this Agreement as of the
day and year first above written.
In the presence of: Buyer:
WORLD'S BEST RATED Cigar COMPANY,
a FLORIDA corporation
/s/ DONALD SCHIFFOUR BY: /s/ LLOYD LYONS
- --------------------------- ----------------------------------------
DONALD SCHIFFOUR LLOYD LYONS
President
/s/ GERALDINE LYONS
- ---------------------------
GERALDINE LYONS
SELLER: /s/ DIRECTOR TABACOS DE ORIENTE
------------------------------------
TABACOS DE ORIENTE
/s/ RONNIE LYONS BY: /s/ GILBERTO OLIVA
- --------------------------- ----------------------------------------
RONNIE LYONS GILBERTO OLIVA
EXHIBITS:
A - Type of Cigar and Pricing
4
<PAGE>
PROGRAMA "A"
PRECIOS DE LOS CIGARROS
-----------------------
NOMBRE TAMANO PRECIO
------ ------ ------
Robusto 50x5 ***
Corona 42x6 ***
Churchill 50x7 ***
Corona Grande 44x7 ***
Presidente 52x8 ***
Torpedo 52x6 1/2 ***
- ----------
* Confidential portions of this Exhibit have been omitted and filed separately
with the Commission pursuant to a request for Confidential Treatment.
Exhibit 10.8
Agreement
THIS Agreement is made this 20 day of JULY, 1998, between WORLD'S BEST
RATED CIGAR COMPANY, a Florida corporation ("Buyer"), whose address is 3941 N.E.
163'rd. Street, North Miami Beach, Florida 33160, and TABACOS DEL CARIBE
("Seller"), whose address is BARRIO EL SARZAL DANLI EL PARAISO.
W I T N E S S E T H:
WHEREAS, Seller has agreed to manufacture and sell cigars to Buyer
("Cigars") in accordance with the Buyer"S requirements as set forth by Buyer
from time to time.
NOW, THEREFORE, in consideration of the sum of Ten ($10.00) Dollars of
which are hereby acknowledged, the parties agree as follows:
1. RECITALS OF FACTS. The foregoing recitals of facts are true and
correct and are hereby incorporated into this Agreement.
2. REQUIREMENTS. Seller agrees to manufacture and sell Cigars to Buyer
based on Buyer'S stated purchase requirements from time to time. All Cigars
shall be manufactured and sold in accordance with the standards and
specifications set forth herein and shall be of the highest quality.
3. TYPE OF CIGARS; PRICING. The type of Cigar and the price to be
charged by Seller to Buyer for each type of Cigar is set forth on Schedule "A"
attached hereto and made a part of hereof. Payment shall be in U.S. Dollars
uniess otherwise agreed to by Buyer and Seller.
4. TERM. The term of this Agreement shall be for a period of ten (10)
years, subject to the right of Buyer or Seller to cancel this Agreement upon at
least (60) days prior BY written notice at any time and for any time and for any
reason (or no reason).
5. QUALITY AND SPECIFICATIONS. Seller has agreed to deliver Cigars
meeting the following minimum quality standards and specifications:
o All Cigars shall use long leave tobacco.
o All Cigars shall be hand rolled.
o All Cigars shall be of the highest quality tobacco and
shall be of no lesser quality than the highest premium
grade offered by Seller to any other party.
<PAGE>
-2-
o The filler used in the Cigars shall be of the highest
premium grade and shall be of no lesser quality than the
highest premium grade offered by the Seller to any other
party.
o The parchment wrapping for the Cigars shall be of such
quality as Buyer shall direct.
o Cigars shall be individually packaged by the Seller in
cellophane and properly packaged and boxed for shipping.
6. INVENTORY. So as to ensure that the Cigars are available for Buyer'S
orders, as and when placed by Buyer, Seller agrees to keep available in its
inventory at all times tobacco in sufficient amounts to make at least 200,000 of
each of the Cigars listed on Schedule A attached hereto. All inventory shall be
kept in a properly regulated humidor.
7. PAYMENT TERMS. Payment for each order shall be as follows:
A. As and whether the order is placed, Buyer shall pay to
Seller fifty percent (50%) of the amount due for that
order;
B. Fifty percent (50%) of the amount of the order shall be
due and payable at the time of shipping by Seller.
It is understood that Seller shall have no right to retain payment for any
Cigars which do not meet the minimum standards and specifications set forth
herein and, upon demand, any non-conforming Cigars shall be immediately replaced
by Seller'S cost. If not immediately replaced, any monies previously paid for
non-conforming Cigars shall be promptly reimbursed to Buyer. Buyer has the right
to employ and place in the factory of Seller, at all times, A supervisor to
inspect all cigars prior to packaging and to classify the same as acceptable or
non-acceptable, before shipment of the Cigars.
8. SHIPPING: RISK OF LOSS. Seller shall be responsible for delivery and
cost of expense of delivery of the Cigars to a shipper designated by Buyer,
F.O.B. Managua or F.O.B. Tegucigalpa, depending on Country of origin. From and
after delivery of the Cigars to the shipper, Buyer bears the risk of loss.
9. CUSTOMS. Buyer shall be responsible to pay customs and export taxes,
if any, pertaining to the Cigars.
<PAGE>
-3-
10. TIMING OF DELIVERY. All orders shall be fulfilled by Seller and
delivered for shipping to Buyer no later than thirty (30) days of the date that
an order is placed. All Cigars used by Seller from its inventory to fulfill any
order shall be of the same quality and standards set forth above. Buyer shall
have the first right of access to any such inventory maintained by Seller if
necessary to satisfy Buyer'S purchasing requirements from time to time.
11. INFORMATION ON OTHER MANUFACTURERS. To the extent legally
permitted, Seller agrees to provide Buyer with information on other purchasers
from Seller.
12. OPTION TO PURCHASE. Buyer is hereby granted a Option to Purchase
the plantation and/or Cigar factory of Seller. The parties agree to enter into
good faith negotiations in order to establish the terms of said option to
purchase. The Option to Purchase, once agreed to, shall be documented in a form
reasonably satisfactory to Buyer.
13. DEFAULTS and REMEDIES. In the event of default by either party
hereunder, the parties hereto shall have all rights and remedies available under
law, by statute or otherwise, subject to the arbitration provision set forth
below. Prior to declaring any party in default, the non-defaulting party shall
provide the defaulting party with written notice of default with no less than 10
days to cure the default. In addition to all other remedies available to buyer,
if Seller fails to meet the requirements specified by Buyer for any Cigar order,
or if the Seller otherwise fails to perform any other provision of this
agreement, then Buyer may make or procure, upon such terms and in such manner as
Buyer deems appropriate, Cigars meeting Buyer'S specifications through another
party.
14. LIMIT OF AUTHORITY. Both parties are independent contractors and
this Agreement does not constitute either party as the legal representative of
the other for any purpose whatsoever. Neither party has authority to assume or
create any obligation whatsoever, express or implied, on behalf of or in the
name of the other party, nor to bind the other party in any manner whatsoever.
15. ARBITRATION DISPUTES. Any dispute, controversy or breach arising
out of or related to this Agreement, shall be settled by arbitration to be held
in the City of Miami, Dade County, Florida before a single arbitrator in
accordance with the rules then in effect of the American Arbitration Association
or any successor thereto. The arbitrator may impose damages, grant injunctions
or grant other relief in such dispute or controversy. The decision of the
arbitrator shall be final, conclusive, and binding on the parties to the
arbitration. Judgement may be entered on the arbitrator's decision in any court
having jurisdiction, and the parties irrevocably consent to the jurisdiction of
the FLORIDA courts for this purpose. In such arbitration, the parties waive
personal service of any process or other papers and agree that service thereof
may be made in accordance with the notice provisions of this Agreement. The
non-prevailing party, including any appeal thereof, with the proviso, however,
that each party shall pay one-half of the fees separately charged by the
arbitrator.
3
<PAGE>
16. GOVERNING LAW. This Agreement shall be governed by, enforced and
construed in accordance. with the laws of the State of Florida.
17. MISCELLANEOUS. This Agreement and the terms and provisions hereof
may only be change, waived or discharged by an instrument in writing signed by
the parties hereto. This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof and no party hereto has
made any representation or warranty or covenant in connection with the matters
set forth herein except as expressly stated herein. All the terms of this
Agreement shall be binding upon the respective personal representatives,
successors and assigns of the parties hereto and shall inure to the benefit of
and enforceable by the parties hereto, and their respective personal
representatives, successors and assigns. This Agreement shall be construed
without regard to any presumption or other rule requiring construction against
the party causing this Agreement to be drafted. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which
together shall be deemed to be one agreement. If, for any reason, any provision
of this Agreement is held invalid, such invalidity shall not affect any other
provision of this Agreement, and the Agreement shall otherwise remain in full
force and effect.
IN WITNESS WHEREOF, the parts have executed this Agreement as of the
day and year first above written.
In the presence of: Buyer:
WORLD'S BEST RATED CIGAR COMPANY,
a FLORIDA corporation
/s/ DONALD SCHIFFOUR BY: /s/ LLOYD LYONS
- --------------------------- ----------------------------------------
DONALD SCHIFFOUR LLOYD LYONS
President
/s/ GERALDINE LYONS
- ---------------------------
GERALDINE LYONS
SELLER: /s/ TABACOS DEL CARIBE
------------------------------------
TABACOS DEL CARIBE
BY: /s/ EVELIO OVIEDO, Director
---------------------------------------
EVELIO OVIEDO
EXHIBITS:
A - Type of Cigar and Pricing
4
<PAGE>
PROGRAMA "A"
TABACOS DEL CARIBE
- --------------------------------------------------------------------------------
APARTADO NO.33 CONRADO PLASENCIA TELEFAX: 883-2413
DANLI, EL PARAISO TELEFONO:883-2286
HONDURAS, C.A. E-mail:[email protected]
DANLI, 19 DE JUNIO DE 1998
TO: MR. LLOYD LYONS
FROM: CONRADO PLASENCIA
THIS THE SAMPLE FOR NATURAL TOBBACO
PROPOUSAL
1 TROPEDO 54/36X6 ******
2 PRESIDENTE 52X8-1/2 ******
3 ROBUSTO 50X5 ******
4 CHURCHILL 49X7 ******
5 CORONA 44X6 ******
6 No 4 42X5-1/2 ******
EAGLE NATIONAL BANK OF MIAMI
MI.CC. OFFICE 1200 NORTHWEST 78TH AVE
MIAMI, FLORIDA 33126
ACCOUNT NO. 066006349/2210030/26
- ----------
* Confidential portions of this Exhibit have been omitted and filed separately
with the Commission pursuant to a request for Confidential Treatment.
Exhibit 10.9
AGREEMENT
THIS AGREEMENT is made this 12 day of JULY, 1998, between WORLD'S BEST
RATED CIGAR COMPANY, a Florida corporation ("Buyer"), whose address is 3941 N.E.
163'rd. Street, North Miami Beach, Florida 33160, and TACUNISA ("Seller"), whose
address is BANIC 1C ESTE OCOTAL N.S. NICARAGUA.
W I T N E S S E T H:
WHEREAS, Seller has agreed to manufacture and sell cigars to Buyer
("Cigars") in accordance with the Buyer"S requirements as set forth by Buyer
from time to time.
NOW, THEREFORE, in consideration of the sum of Ten ($10.00) Dollars of
which are hereby acknowledged, the parties agree as follows:
1. RECITALS OF FACTS. The foregoing recitals of facts are true and
correct and are hereby incorporated into this Agreement.
2. REQUIREMENTS. Seller agrees to manufacture and sell Cigars to Buyer
based on Buyer'S stated purchase requirements from time to time. All Cigars
shall be manufactured and sold in accordance with the standards and
specifications set forth herein and shall be of the highest quality.
3. TYPE OF CIGARS; PRICING. The type of Cigar and the price to be
charged by Seller to Buyer for each type of Cigar is set forth on Schedule "A"
attached hereto and made a part of hereof. Payment shall be in U.S. Dollars
uniess otherwise agreed to by Buyer and Seller.
4. TERM. The term of this Agreement shall be for a period of ten (10)
years, subject to the right of Buyer or Seller to cancel this Agreement upon at
least (60) days prior BY written notice at any time and for any time and for any
reason (or no reason).
5. QUALITY AND SPECIFICATIONS. Seller has agreed to deliver Cigars
meeting the following minimum quality standards and specifications:
o All Cigars shall use long leave tobacco.
o All Cigars shall be hand rolled.
o All Cigars shall be of the highest quality tobacco and shall
be of no lesser quality than the highest premium grade
offered by Seller to any other party.
<PAGE>
-2-
o The filler used in the Cigars shall be of the highest premium
grade and shall be of no lesser quality than the highest
premium grade offered by the Seller to any other party.
o The parchment wrapping for the Cigars shall be of such
quality as Buyer shall direct.
o Cigars shall be individually packaged by the Seller in
cellophane and properly packaged and boxed for shipping.
6. INVENTORY. So as to ensure that the Cigars are available for Buyer'S
orders, as and when placed by Buyer, Seller agrees to keep available in its
inventory at all times tobacco in sufficient amounts to make at least 200,000 of
each of the Cigars listed on Schedule A attached hereto. All inventory shall be
kept in a properly regulated humidor.
7. PAYMENT TERMS. Payment for each order shall be as follows:
A. As and whether the order is placed, Buyer shall pay to Seller
fifty percent (50%) of the amount due for that order;
B. Fifty percent (50%) of the amount of the order shall be due
and payable at the time of shipping by Seller.
It is understood that Seller shall have no right to retain payment for any
Cigars which do not meet the minimum standards and specifications set forth
herein and, upon demand, any non-conforming Cigars shall be immediately replaced
by Seller'S cost. If not immediately replaced, any monies previously paid for
non-conforming Cigars shall be promptly reimbursed to Buyer. Buyer has the right
to employ and place in the factory of Seller, at all times, A supervisor to
inspect all cigars prior to packaging and to classify the same as acceptable or
non-acceptable, before shipment of the Cigars.
8. SHIPPING: RISK OF LOSS. Seller shall be responsible for delivery and
cost of expense of delivery of the Cigars to a shipper designated by Buyer,
F.O.B. Managua or F.O.B. Tegucigalpa, depending on Country of origin. From and
after delivery of the Cigars to the shipper, Buyer bears the risk of loss.
9. CUSTOMS. Buyer shall be responsible to pay customs and export taxes,
if any, pertaining to the Cigars.
<PAGE>
10. TIMING OF DELIVERY. All orders shall be fulfilled by Seller and
delivered for shipping to Buyer no later than thirty (30) days of the date that
an order is placed. All Cigars used by Seller from its inventory to fulfill any
order shall be of the same quality and standards set forth above. Buyer shall
have the first right of access to any such inventory maintained by Seller if
necessary to satisfy Buyer'S purchasing requirements from time to time.
11. INFORMATION ON OTHER MANUFACTURERS. To the extent legally
permitted, Seller agrees to provide Buyer with information on other purchasers
from Seller.
12. OPTION TO PURCHASE. Buyer is hereby granted a Option to Purchase
the plantation and/or Cigar factory of Seller. The parties agree to enter into
good faith negotiations in order to establish the terms of said option to
purchase. The Option to Purchase, once agreed to, shall be documented in a form
reasonably satisfactory to Buyer.
13. DEFAULTS AND REMEDIES. In the event of default by either party
hereunder, the parties hereto shall have all rights and remedies available under
law, by statute or otherwise, subject to the arbitration provision set forth
below. Prior to declaring any party in default, the non-defaulting party shall
provide the defaulting party with written notice of default with no less than 10
days to cure the default. In addition to all other remedies available to buyer,
if Seller fails to meet the requirements specified by Buyer for any Cigar order,
or if the Seller otherwise fails to perform any other provision of this
agreement, then Buyer may make or procure, upon such terms and in such manner as
Buyer deems appropriate, Cigars meeting Buyer'S specifications through another
party.
14. LIMIT OF AUTHORITY. Both parties are independent contractors and
this Agreement does not constitute either party as the legal representative of
the other for any purpose whatsoever. Neither party has authority to assume or
create any obligation whatsoever, express or implied, on behalf of or in the
name of the other party, nor to bind the other party in any manner whatsoever.
15. ARBITRATION DISPUTES. Any dispute, controversy or breach arising
out of or related to this Agreement, shall be settled by arbitration to be held
in the City of Miami, Dade County, Florida before a single arbitrator in
accordance with the rules then in effect of the American Arbitration Association
or any successor thereto. The arbitrator may impose damages, grant injunctions
or grant other relief in such dispute or controversy. The decision of the
arbitrator shall be final, conclusive, and binding on the parties to the
arbitration. Judgement may be entered on the arbitrator's decision in any court
having jurisdiction, and the parties irrevocably consent to the jurisdiction of
the FLORIDA courts for this purpose. In such arbitration, the parties waive
personal service of any process or other papers and agree that service thereof
may be made in accordance with the notice provisions of this Agreement. The
non-prevailing party, including any appeal thereof, with the proviso, however,
that each party shall pay one-half of the fees separately charged by the
arbitrator.
3
<PAGE>
16. GOVERNING LAW. This Agreement shall be governed by, enforced and
construed in accordance. with the laws of the State of Florida.
17. MISCELLANEOUS. This Agreement and the terms and provisions hereof
may only be change, waived or discharged by an instrument in writing signed by
the parties hereto. This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof and no party hereto has
made any representation or warranty or covenant in connection with the matters
set forth herein except as expressly stated herein. All the terms of this
Agreement shall be binding upon the respective personal representatives,
successors and assigns of the parties hereto and shall inure to the benefit of
and enforceable by the parties hereto, and their respective personal
representatives, successors and assigns. This Agreement shall be construed
without regard to any presumption or other rule requiring construction against
the party causing this Agreement to be drafted. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which
together shall be deemed to be one agreement. If, for any reason, any provision
of this Agreement is held invalid, such invalidity shall not affect any other
provision of this Agreement, and the Agreement shall otherwise remain in full
force and effect.
IN WITNESS WHEREOF, the parts have executed this Agreement as of the
day and year first above written.
In the presence of: BUYER:
WORLD'S BEST RATED CIGAR COMPANY,
a Florida corporation
BY: /s/ LLOYD LYONS
----------------------------------------
LLOYD LYONS, President
SELLER:
/s/ TACUNISA
-----------------------------------------
TACUNISA
BY: /s/ GILBERTO OLIVA, JR.
----------------------------------------
GILBERTO OLIVA, JR.
EXHIBITS:
A - Type of Cigar and Pricing
4
<PAGE>
PROGRAMA "A"
PRECIOS DE LOS CIGARROS
-----------------------
NOMBRE TAMANO PRECIO
------ ------ ------
Robusto 50x5 ***
Panetela 38x6 ***
Churchill 50x7 ***
No 1 Corona 44x6 1/2 ***
Presidente 52x8 ***
Torpedo 52x6 1/2 ***
- ----------
* Confidential portions of this Exhibit have been omitted and filed separately
with the Commission pursuant to a request for Confidential Treatment.
Exhibit 10.10
AGREEMENT
THIS AGREEMENT is made this 12 day of JULY, 1998, between WORLD'S BEST
RATED CIGAR COMPANY, a Florida corporation ("Buyer"), whose address is 3941 N.E.
163'rd. Street, North Miami Beach, Florida 33160, and TABANICA S.A. ("Seller"),
whose address is JALAPA N.S. NICARAGUA.
W I T N E S S E T H:
WHEREAS, Seller has agreed to manufacture and sell cigars to Buyer
("Cigars") in accordance with the Buyer"S requirements as set forth by Buyer
from time to time.
NOW, THEREFORE, in consideration of the sum of Ten ($10.00) Dollars of
which are hereby acknowledged, the parties agree as follows:
1. RECITALS OF FACTS. The foregoing recitals of facts are true and
correct and are hereby incorporated into this Agreement.
2. REQUIREMENTS. Seller agrees to manufacture and sell Cigars to buyer
based on Buyer's stated purchase requirements from time to time. All Cigars
shall be manufactured and sold in accordance with the standards and
specifications set forth herein and shall be of the highest quality.
3. TYPE OF CIGARS; PRICING. The type of Cigar and the price to be
charged by Seller to Buyer for each type of Cigar is set forth on Schedule "A"
attached hereto and made a part of hereof. Payment shall be in U.S. Dollars
uniess otherwise agreed to by Buyer and Seller.
4. TERM. The term of this Agreement shall be for a period of ten (10)
years, subject to the right of Buyer or Seller to cancel this Agreement upon at
least (60) days prior BY written notice at any time and for any time and for any
reason (or no reason).
5. QUALITY AND SPECIFICATIONS. Seller has agreed to deliver Cigars
meeting the following minimum quality standards and specifications:
o All Cigars shall use long leave tobacco.
o All Cigars shall be hand rolled.
o All Cigars shall be of the highest quality tobacco and shall
be of no lesser quality than the highest premium grade
offered by Seller to any other party.
<PAGE>
-2-
o The filler used in the Cigars shall be of the highest premium
grade and shall be of no lesser quality than the highest
premium grade offered by the Seller to any other party.
o The parchment wrapping for the Cigars shall be of such
quality as Buyer shall direct.
o Cigars shall be individually packaged by the Seller in
cellophane and properly packaged and boxed for shipping.
6. INVENTORY. So as to ensure that the Cigars are available for Buyer's
orders, as and when placed by Buyer, Seller agrees to keep available in its
inventory at all times tobacco in sufficient amounts to make at least 200,000 of
each of the Cigars listed on Schedule A attached hereto. All inventory shall be
kept in a properly regulated humidor.
7. PAYMENT TERMS. Payment for each order shall be as follows:
A. As and whether the order is placed, Buyer shall pay to Seller
fifty percent (50%) of the amount due for that order;
B. Fifty percent (50%) of the amount of the order shall be due
and payable at the time of shipping by Seller.
It is understood that Seller shall have no right to retain payment for any
Cigars which do not meet the minimum standards and specifications set forth
herein and, upon demand, any non-conforming Cigars shall be immediately replaced
by Seller'S cost. If not immediately replaced, any monies previously paid for
non-conforming Cigars shall be promptly reimbursed to Buyer. Buyer has the right
to employ and place in the factory of Seller, at all times, A supervisor to
inspect all cigars prior to packaging and to classify the same as acceptable or
non-acceptable, BEFORE shipment of the Cigars.
8. SHIPPING: RISK OF LOSS. Seller shall be responsible for delivery and
cost of expense of delivery of the Cigars to a shipper designated by Buyer,
F.O.B. Managua or F.O.B. Tegucigalpa, depending on Country of origin. From and
after delivery of the Cigars to the shipper, Buyer bears the risk of loss.
9. CUSTOMS. Buyer shall be responsible to pay customs and export taxes,
if any, pertaining to the Cigars.
<PAGE>
10. TIMING OF DELIVERY. All orders shall be fulfilled by Seller and
delivered for shipping to Buyer no later than thirty (30) days of the date that
an order is placed. All Cigars used by Seller from its inventory to fulfill any
order shall be of the same quality and standards set forth above. Buyer shall
have the first right of access to any such inventory maintained by Seller if
necessary to satisfy Buyer's purchasing requirements from time to time.
11. [DELETED &. INITIALED]
12. OPTION TO PURCHASE. Buyer is hereby granted a OPTION to PURCHASE
the plantation and/or Cigar factory of Seller. The parties agree to enter into
good faith negotiations in order to establish the terms of said option to
purchase. The OPTION to PURCHASE, once agreed to, shall be documented in a form
reasonably satisfactory to Buyer.
13. DEFAULTS and REMEDIES. In the event of default by either party
hereunder, the parties hereto shall have all rights and remedies available under
law, by statute or otherwise, subject to the arbitration provision set forth
below. Prior to declaring any party in default, the non-defaulting party shall
provide the defaulting party with written notice of default with no less than 10
days to cure the default. In addition to all other remedies available to buyer,
if Seller fails to meet the requirements specified by Buyer for any Cigar order,
or if the Seller otherwise fails to perform any other provision of this
agreement, then Buyer may make or procure, upon such terms and in such manner as
Buyer deems appropriate, Cigars meeting Buyer's specifications through another
party.
14. LIMIT OF AUTHORITY. Both parties are independent contractors and
this Agreement does not constitute either party as the legal representative of
the other for any purpose whatsoever. Neither party has authority to assume or
create any obligation whatsoever, express or implied, on behalf of or in the
name of the other party, nor to bind the other party in any manner whatsoever.
15. ARBITRATION DISPUTES. Any dispute, controversy or breach arising
out of or related to this Agreement, shall be settled by arbitration to be held
in the City of Miami, Dade County, Florida before a single arbitrator in
accordance with the rules then in effect of the American Arbitration Association
or any successor thereto. The arbitrator may impose damages, grant injunctions
or grant other relief in such dispute or controversy. The decision of the
arbitrator shall be final, conclusive, and binding on the parties to the
arbitration. Judgement may be entered on the arbitrator's decision in any court
having jurisdiction, and the parties irrevocably consent to the jurisdiction of
the Florida courts for this purpose. In such arbitration, the parties waive
personal service of any process or other papers and agree that service thereof
may be made in accordance with the notice provisions of this Agreement. The
non-prevailing party, including any appeal thereof, with the proviso, however,
that each party shall pay one-half of the fees separately charged by the
arbitrator.
3
<PAGE>
16. GOVERNING LAW. This Agreement shall be governed by, enforced and
construed in accordance. with the laws of the STATE of Florida.
17. MISCELLANEOUS. This Agreement and the terms and provisions hereof
may only be change, waived or discharged by an instrument in writing signed by
the parties hereto. This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof and no party hereto has
made any representation or warranty or covenant in connection with the matters
set forth herein except as expressly stated herein. All the terms of this
Agreement shall be binding upon the respective personal representatives,
successors and assigns of the parties hereto and shall inure to the benefit of
and enforceable by the parties hereto, and their respective personal
representatives, successors and assigns. This Agreement shall be construed
without regard to any presumption or other rule requiring construction against
the party causing this Agreement to be drafted. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which
together shall be deemed to be one agreement. If, for any reason, any provision
of this Agreement is held invalid, such invalidity shall not affect any other
provision of this Agreement, and the Agreement shall otherwise remain in full
force and effect.
IN WITNESS WHEREOF, the parts have executed this Agreement as of the
day and year first above written.
In the presence of: BUYER:
WORLD'S BEST RATED CIGAR COMPANY,
a Florida corporation
/s/ RONNIE LYONS BY: /s/ LLOYD LYONS
- --------------------------- ----------------------------------------
LLOYD LYONS, President
SELLER:
/s/ TABANICA, S.A.
-------------------------------------------
TABANICA, S.A.
BY: /s/ MEDARDO PADRON
----------------------------------------
MEDARDO PADRON
/s/ RONNIE LYONS
- ---------------------------
RONNIE LYONS
EXHIBITS:
A - Type of Cigar and Pricing
4
<PAGE>
PROGRAMA "A"
PRECIOS DE LOS CIGARROS
-----------------------
NOMBRE TAMANO PRECIO
------ ------ ------
Robusto 50x5 ***
Corona 42x5 1/2 ***
Churchill 50x7 ***
No 1 44x6 1/2 ***
Presidente 52x8 ***
Torpedo 52x6 1/2 ***
- ----------
* Confidential portions of this Exhibit have been omitted and filed separately
with the Commission pursuant to a request for Confidential Treatment.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000880242
<NAME> LATIN AMERICAN CASINOS, INC.
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 1,567,773
<SECURITIES> 0
<RECEIVABLES> 1,471,944
<ALLOWANCES> 149,814
<INVENTORY> 725,609
<CURRENT-ASSETS> 3,805,025
<PP&E> 6,332,426
<DEPRECIATION> 834,606
<TOTAL-ASSETS> 9,552,906
<CURRENT-LIABILITIES> 225,833
<BONDS> 0
0
0
<COMMON> 2,211
<OTHER-SE> 9,224,862
<TOTAL-LIABILITY-AND-EQUITY> 9,552,902
<SALES> 0
<TOTAL-REVENUES> 2,392,142
<CGS> 0
<TOTAL-COSTS> 1,985,819
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 559,830
<INCOME-TAX> 196,707
<INCOME-CONTINUING> 363,123
<DISCONTINUED> 0
<EXTRAORDINARY> 168,000
<CHANGES> 0
<NET-INCOME> 531,123
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
