SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM __________________ TO ______________________
COMMISSION FILE NUMBER: 0-20406
EZCONY INTERAMERICA INC.
(Exact name of registrant as specified in its charter)
BRITISH VIRGIN ISLANDS NOT APPLICABLE
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
CRAIGMIUR CHAMBERS
P.O. BOX 71
ROAD TOWN, TORTOLA, BRITISH VIRGIN ISLANDS NONE
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (507) 441-6566
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, NO PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [x]
The aggregate market value of the Common Stock held by non-affiliates of the
registrant as of March 20, 1998 was approximately $1,792,000 based on the $1.31
closing sale price for the Common Stock quoted on The Nasdaq Stock Market on
such date. For purposes of this computation, all executive officers and
directors of the registrant have been deemed to be affiliates. Such
determination should not be deemed to be an admission that such directors and
officers are, in fact, affiliates of the registrant.
The number of shares of Common Stock of the registrant outstanding as of March
20, 1998 was 4,510,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents have been incorporated by reference into the
parts indicated: The registrant's definitive Proxy Statement to be filed with
the Securities and Exchange Commission not later than 120 days after the end of
the fiscal year covered by this report - Part III.
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<TABLE>
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EZCONY INTERAMERICA INC.
TABLE OF CONTENTS
PAGE
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PART I
<S> <C>
Item 1. Business.......................................................................................1
Item 2. Properties.....................................................................................4
Item 3. Legal Proceedings..............................................................................5
Item 4. Submission of Matters to a Vote of Security Holders............................................5
PART II
Item 5. Market for Registrant's Common Stock Equity and Related Stockholder Matters....................5
Item 6. Selected Financial Data........................................................................6
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.....................................................................7
Item 8. Financial Statements and Supplementary Data...................................................12
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures................................................................31
PART III
Item 10. Directors and Executive Officers of the Registrant............................................31
Item 11. Executive Compensation........................................................................31
Item 12. Security Ownership of Certain Beneficial Owners and Management................................31
Item 13. Certain Relationships and Related Transactions................................................31
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K..............................32
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Ezcony Interamerica Inc. ("Ezcony" or the "Company") is a leading distributor to
Latin America of major brand name consumer electronics, including but not
limited to, Sony, Pioneer, AIWA, Samsung, Sharp, Motorola, Mitsubishi, Brother
and Philips. See "Major Brand Name Products."
The Company's consumer electronics products are sold principally to other
wholesalers and distributors as well as directly to retail chains. The Company
believes that it is one of the largest independent distributors to Latin America
of Sony and Pioneer products.
MARKET OVERVIEW
Since the Company began operations in 1982, the principal Latin American markets
for its products have varied significantly. The largest Latin American markets
for the Company's products in 1997 were Colombia, Paraguay, Ecuador and
Venezuela.
For a variety of political and economic reasons, the importation of
non-essential items such as consumer electronics has been restricted or
prohibited from time to time by many Latin American countries through exchange
controls, import quotas and restrictions, tariffs and other means. Changes in
the trade policies of Latin American countries affect both the market for the
Company's products as well as the Company's ability to sell its products. Future
political and economic changes in particular Latin American countries, including
changes in exchange rates, import duties or quotas, imposition or lifting of
exchange controls and other import restrictions, are likely to result in changes
in the importance to the Company of particular countries.
The following table illustrates, for the periods presented, the changes in the
principal Latin American markets for the Company's products by sales volume (in
thousands) and percentage of total net sales from continuing operations. A
portion of the Company's sales were made through distributors and exporters
located in the United States which totaled $6.2 million, $11.2 million and $15.7
million for the years ended December 31, 1995, 1996 and 1997, respectively.
<TABLE>
1995 1996 1997
----------------------- ----------------------- ----------------------
AMOUNT % AMOUNT % AMOUNT %
---------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Colombia $ 28,957 37 $ 28,421 26 $ 52,996 33
Paraguay 7,897 10 22,552 21 28,486 18
Ecuador 16,482 21 10,816 10 12,401 8
Venezuela 1,112 1 1,922 2 12,099 8
Mexico 2,694 4 5,441 5 4,743 3
Peru 2,615 3 2,553 2 4,458 3
Brazil 3,662 5 6,264 6 3,831 2
Bolivia 1,250 2 2,771 3 3,463 2
Others 12,860 17 28,006 25 36,346 23
---------- ----- ---------- ---- ---------- ----
Total $ 77,529 100% $ 108,746 100% $ 158,823 100%
========== ===== ========== ==== ========== ====
</TABLE>
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As described above, the Company does a substantial amount of business in Latin
America. There are significant "country risks" which arise in connection with
this business, including those associated with the receipt of payment for goods
sold. Colombia, which represents a significant market for the Company, is a
country for which the United States Government has taken a particular interest
in monitoring the flow of funds, especially those involving "structured
payments," i.e., repetitive payment practices typically using high volumes of
cash or financial instruments usually in "round" amounts.
For fiscal 1997, the Company experienced a loss as a result of a forfeiture
dispute that arose with the United States Government over certain structured
payments received in early 1998. The Company has discontinued accepting this
form of payment in connection with its Colombian receivables. The Company does
not believe that this change in payment policy will materially or adversely
affect its business. Although, the Company believes that payments received
currently comply with all applicable United States Government regulations and
laws, there can be no assurance that other, similar forms of payment will not be
challenged by the United States Government, or that the business done in
Colombia by the Company will not be materially affected by this governmental
scrutiny.
The Company believes that the consumer electronics markets in Latin America
differ from markets in the United States. First, the Company believes that in
Latin America independent regional distributors are usually the principal means
of distribution of consumer electronics unlike in the United States where direct
sales by manufacturers are more typical. Although most major consumer
electronics manufacturers have single-country distributors, operating
subsidiaries or joint ventures in the major Latin American countries,
independent regional distributors such as Ezcony still represent the predominant
channel for consumer electronic sales in Latin America. However, the Company
believes that over a period of time this means of distribution may well evolve
into a system more like that in the United States. Second, the Company believes
that state-of-the-art technology, while an important factor in marketing
consumer electronics in the United States, is less important in Latin America
where consumers generally are willing to purchase less advanced products for
longer periods of time. Finally, Latin American markets for consumer electronics
generally are less developed than in the United States. For example, products
such as televisions and radios have reached relatively low consumer penetration
levels in Latin America compared to the United States.
MAJOR BRAND NAME PRODUCTS
Ezcony distributes a wide range of major brand name consumer electronics,
including televisions, video cassette recorders, cellular products, automobile
audio equipment, personal portable stereos, home audio equipment, camcorders and
appliances. In 1997, sales of Pioneer, Sony, AIWA and Samsung products accounted
for approximately 34%, 33%, 12% and 9%, respectively, of the Company's total net
sales.
Ezcony purchases most of its major brand name consumer electronics directly from
manufacturers. As is customary with independent distributors of consumer
electronics in Latin America, Ezcony has no written distributorship agreement or
arrangement with any manufacturer. The Company has a continuing relationship
with Sony for over 15 years. The Company has not experienced difficulty in
obtaining a satisfactory supply of marketable consumer electronics from Pioneer,
Sony, AIWA and Samsung without having written distributorship or other
agreements. From time to time, the Company has purchased major brand name
consumer electronics from other sources, including other wholesalers and
distributors.
Most of the purchases of Pioneer products and Sony products, are supplied from
inventory of these manufacturers located at their warehouses in the Panama Colon
Free Zone. This method of supply allows the Company to limit the amount of
inventory that it must keep on hand, the related inventory holding costs and to
reduce the lead time on the placement of orders for products. The majority of
the Samsung products are supplied to the Company's warehouse in the United
States from a Samsung warehouse located in the same city. Sony, Pioneer and
Samsung extend the Company credit for its purchases, while
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AIWA requires the Company to provide letters of credit prior to shipment for
products which are purchased directly from the Far East. At December 31, 1997,
the Company's trade accounts payable to Sony, Pioneer and Samsung were
approximately $5.3 million, $5.0 million and $4.1 million, respectively.
Sales of Sony products accounted for approximately 33%, 37% and 43% of the
Company's major brand name product sales in 1997, 1996, and 1995, respectively.
Sales of Pioneer products accounted for approximately 34%, 36% and 28% of the
Company's major brand name products sales in 1997, 1996, and 1995, respectively.
Sales of AIWA products accounted for approximately 12%, 14% and 20% of the
Company's major brand name product sales in 1997, 1996 and 1995, respectively.
Sales of Samsung represented 9% of the Company's major brand name products sales
in 1997 and was not part of the Company's major brand name products in 1996 and
1995.
DISCONTINUED OPERATIONS
The Company's Hong Kong operation was closed in the fourth quarter of 1995. The
subsidiary produced consumer electronics to customer specifications for those
customers wanting to market their own private label brands.
In August 1997, the Company's Board of Directors approved a plan to sell or
liquidate its noncore business subsidiary, New World Interactive, Inc. ("New
World Interactive") as part of an overall reorganization program designed to
focus the Company's resources on its core business, the distribution of consumer
electronics. New World Interactive was engaged in the production and
distribution of Spanish and Portuguese CD-ROM software. The decision to
discontinue the subsidiary was based, in part, upon continuing significant
working capital requirements due to the Company's inability to obtain separate
additional capital through bank financing, public or private placement debt
or a combination of these for the subsidiary, and the lack of sufficient sales
volume. New World Interactive ceased all operations December 31, 1997, and is in
the process of self-liquidating its remaining assets (consisting primarily of
trade receivables and inventory) on a pro-rata basis to its creditors.
SALES AND DISTRIBUTION
Ezcony sells its products primarily to wholesalers and distributors for re-sale
in Latin America. In addition, the Company sells directly to several Latin
American retail chains. Ezcony has a direct sales staff, which regularly calls
on and visits customers and prospective customers and assists the Company in
evaluating market conditions and customers' creditworthiness in their assigned
market areas.
In certain markets sales are made to a small number of customers, while in other
markets (such as Colombia) sales are made to as many as 183 customers. The
Company's customers include distributors and exporters located in the United
States, most of whom re-export the Company's products directly to Latin America.
In 1997, 1996 and 1995, no customers accounted for more than 10% of total net
sales.
The Company maintains warehouse facilities in Panama and the United States. The
Company leases a warehouse in Miami, Florida, and uses on an as needed basis a
customs-bonded warehouse also in Miami. The Company leased two warehouses
located in the Panama Colon Free Zone for part of 1997. In October 1997, the
Company purchased a warehouse in the Panama Colon Free Zone, which was utilized
for the remainder of 1997. Operating from customs-bonded warehouses in the
United States and the Colon Free Zone allows the Company to import, store and
export products without incurring customs duties unless the products are sold
locally.
Generally, sales are recorded upon delivery of merchandise to the shipper. The
Company at times sells inventory while still on board vessels inbound from the
Far East. In these instances, inbound freight containers are transloaded in port
or at public warehouses for shipment to the Company's customers to
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minimize warehousing and handling costs. Since products are normally shipped to
its customers shortly after receiving an order, the Company historically has not
maintained a significant backlog of orders relative to its sales.
CUSTOMER CREDIT
The majority of sales by the Company are made on open account terms, generally
net 30 to 60 days after receipt of goods by the customers. All other sales are
made on the basis of payment on or in advance of delivery of merchandise to the
shipper or upon receipt of a letter of credit. Certain sales made by the Company
are collected in cash and other negotiable instruments. The Company requires
payment in U. S. dollars for all of its sales. The Company establishes credit
limits for its customers based on its knowledge of the customer, the customer's
payment history with available trade references, market conditions and other
factors. The Company performs its own analysis of the creditworthiness of its
customers, as the credit reporting systems in Latin America do not have an
extensive base. In addition to the risks customarily associated with extending
credit, the Company has experienced losses from uncollectible receivables due to
the difficulty of pursuing judicial remedies in most Latin American countries.
During 1997, the Company experienced credit losses of approximately $720,000
related to two companies in the United States and increased losses for Latin
American sales. The Company reviews its credit policies and credit that it has
exteneded to its customers on a regular basis in order to monitor and manage its
credit risks.
COMPETITION
The Company competes in the sale of consumer electronics with numerous
wholesalers and distributors, some of which have greater financial and other
resources than the Company. The Company believes that the most important
competitive factors in the sale of consumer electronics in Latin America are
extension of customer credit, price, quality and variety of merchandise and the
ability to obtain sufficient quantities of merchandise for immediate delivery.
EMPLOYEES
At December 31, 1997, the Company had 123 full-time employees, including 102 in
Panama and 21 in Miami. None of the Company's employees is represented by a
labor union. The Company has not experienced any material work stoppages. The
Company considers its relations with its employees to be good.
GEOGRAPHICAL SEGMENT INFORMATION
See Note 9 to the Company's Consolidated Financial Statements, Part II, Item 8.
for geographical segment information regarding sales, assets and operating
income (loss) and income (loss) for 1997, 1996 and 1995.
ITEM 2. PROPERTIES
The Company leased two 16,000 square feet warehouses and a 1,980 square foot
office in the Panama Colon Free Zone for monthly rentals totaling $11,100. In
October 1997, the Company transferred its warehousing operations from the two
leased warehouses to a 106,000 square foot warehouse in the Colon Free Zone that
the Company purchased for $1,700,000. In December 1997, the construction of the
Company's new 16,140 square foot office and showroom in the Colon Free Zone was
completed at costs totaling approximately $1,100,000. The Company believes that
the new warehouse, office and showroom were needed to support the current
operations and any future growth. The land that the warehouse, new offices and
showroom are situated on is leased from "La Zona Libre De Colon" which is a
governmental agency that owns the land of the Colon Free Zone. The leases on the
warehouse, office and showroom land expire on July 31, 2014 and October 31,
2016, respectively, and require annual payments of $12,952 and $6,811,
respectively. The leases can be renewed at the option of the Company at the
rental rate and terms which are in effect for the Colon Free Zone at the time of
renewal.
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ITEM 3. LEGAL PROCEEDINGS
The Company is from time to time involved in routine litigation. Based on the
advice of legal counsel, the Company believes that such actions presently
pending will not have a material adverse impact on the Company's consolidated
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter ended
December 31, 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock trades on The Nasdaq Stock Market under the symbol
"EZCOF". The following table sets forth the high and low sales prices for the
Common Stock for each quarter during the last two fiscal years as reported by
the Nasdaq National Market.
<TABLE>
1996 1997
------------------------------ ------------------------
HIGH LOW HIGH LOW
------- ------ ------ -----
<S> <C> <C> <C> <C>
First Quarter $ 2.25 $ 1.28 $ 3.81 $ 1.81
Second Quarter 3.75 1.44 3.13 2.25
Third Quarter 2.38 1.22 3.13 1.88
Fourth Quarter 2.53 1.31 2.75 1.88
</TABLE>
The number of record holders of the Common Stock on March 20, 1998 was 73.
The Company is not in compliance with the new market value of public float
requirement pursuant to NASD Marketplace Rule 4450 (a) (2), which became
effective February 23, 1998. At March 20, 1998, the Company's market value of
public float was approximately $1.8 million which is below the required minimum
of $5 million. The Company has been provided 90 calendar days, which expires May
28, 1998, in order to regain compliance with this standard. The Company expects
that it will not be able to cure the deficiency by May 28, 1998 and anticipates
obtaining inclusion of its Common Stock on the Nasdaq SmallCap Market. If the
Company does not obtain inclusion into the Nasdaq SmallCap Market or is
delisted, the Company's Common Stock will be traded on the "OTC Bulletin Board."
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The Company presently has no plans to pay any dividends on its Common Stock and
has not paid any dividends. All earnings will be retained for the foreseeable
future to support operations and to finance the growth and development of the
Company's business. The payment of future cash dividends, if any, will be at the
discretion of the Board of Directors of the Company and will depend upon, among
other things, future earnings, capital requirements, the Company's financial
condition and on such other factors deemed relevant by the Board of Directors.
The Company is not currently subject to any law or regulation of the British
Virgin Islands which would restrict or affect the remittance of dividends or
other payments to any holders of its Common Stock or which require tax
withholding from any United States holders of its Common Stock. There is no
reciprocal tax treaty between the British Virgin Islands and the United States
regarding withholding.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for each of the years in the five-year period ended
December 31, 1997 are derived from the Company's Consolidated Financial
Statements which have been prepared in accordance with generally accepted
accounting principles in the United States and have been audited by the
Company's independent accountants. The selected financial data should be read in
conjunction with the Company's Consolidated Financial Statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in Part II Item 7. of this Form 10-K.
<TABLE>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1993(1) 1994(1) 1995(1) 1996(1) 1997
--------- ---------- -------- ------- ------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales - continuing operations $ 101,385 $ 104,322 $ 77,529 $ 108,746 $ 158,823
Operating income (loss) from
continuing operations (5,105) 1,848 (370) 2,596 929
Income (loss) from continuing operations (7,835) 2,073 104 1,930 (933)
Income (loss) from discontinued operations 119 (848) (385) (852) (2,609)
Net income (loss) (7,716) 1,225 (281) 1,078 (3,541)
PER COMMON SHARE:
Income (loss) from continuing operations $ (1.74) $ 0.46 $ 0.02 $ 0.43 $ (0.21)
Income (loss) from discontinued operations 0.03 (0.19) (0.08) (0.19) (0.58)
--------- --------- --------- --------- ---------
Net income (loss) $ (1.71) $ 0.27 $ (0.06) $ 0.24 $ (0.79)
========= ========= ========= ========= =========
Weighted average number of
common shares outstanding 4,500 4,500 4,500 4,500 4,504
========= ========= ========= ========= =========
1993 1994 1995 1996 1997
--------- ---------- -------- ------- ------
BALANCE SHEET DATA:
Working capital $ 6,343 $ 7,603 $ 7,414 $ 8,386 $ 3,444
Total assets 36,154 33,996 29,336 37,542 56,929
Short-term debt 16,319 7,903 7,728 11,765 29,057
Long-term debt 622 574 519 458 1,717
Shareholders' equity 7,715 8,940 8,659 9,737 6,208
</TABLE>
(1) Amounts have been restated to reflect the discontinued operations of
the Hong Kong operation and New World Interactive.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included herein should be read in conjunction with the Consolidated
Financial Statements and the related Notes to Consolidated Financial Statements.
DISCONTINUED OPERATIONS
In October 1995, the Company adopted a formal plan to discontinue the operations
of its Hong Kong operation that produced private label consumer electronics for
customers and also purchased from other manufacturers for resale. The plan
called for a voluntary winding up under Hong Kong law with all operations
ceasing by October 31, 1995. Operating losses of this operation were absorbed
only to the extent of the Company's investment in this subsidiary, as any
further liability is limited, under Hong Kong law. Accordingly, no loss on
disposal of the Hong Kong operation is recognized as the prior operating losses
have already equaled the Company's investment.
In August 1997, the Company's Board of Directors approved a plan to sell or
liquidate its noncore business subsidiary, New World Interactive, as part of an
overall reorganization program designed to focus the Company's resources on its
core business, the distribution of consumer electronics. New World Interactive
was engaged in the production and distribution of Spanish and Portuguese CD-ROM
software. The decision to discontinue the subsidiary was based, in part, upon
continuing significant working capital requirements and the lack of sufficient
sales volumes. The Company recorded a loss on disposal of $1,874,786, which
includes $687,106 of operating losses during the phaseout period. The Company
ceased operations of New World Interactive effective December 31, 1997 and is in
the process of self-liquidating its remaining assets (consisting primarily of
trade receivables and inventory) on a pro-rata basis to its creditors. The
Company expects to complete the distributions by April 1998.
The financial information in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" refers to the continuing operations of the
Company and excludes the operations of New World Interactive and the Hong Kong
operations.
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996
NET SALES. Net sales increased 46% to $159 million in 1997 from $109 in 1996.
The increase is primarily attributable to the increased sales in the Company's
existing markets. The Company has also expanded its product lines to include new
brand names. Decreased sales to Brazil ($2.4 million decrease) and Turkey ($1.5
million decrease) were more than offset by increased sales to Colombia ($24.6
million increase), United States of America ($4.5 million increase), Paraguay
($5.9 million increase), Argentina ($2.8 million increase), Chile ($2.6 million
increase), Peru ($1.9 million increase), and Venezuela ($10.1 million increase)
and various other markets. The decreased sales to Brazil were due to the
economic downturn at the end of 1997, which caused the Company to curtail sales
to Brazil.
During 1997, sales of Sony products increased to $52.4 million or 33% of net
sales as compared to 1996 sales of $40.1 million or 37% of net sales. Pioneer
sales were $54.5 million in 1997 or 34% of net sales compared to $39.4 million
or 36% of net sales in 1996. Samsung represented a new brand name product line
for the Company in 1997 and contributed $13.8 million in net sales.
GROSS PROFIT. Gross profit increased 27% to $10.9 million in 1997 from $8.6
million in 1996. The Company's gross profit margin decreased to 6.9% in 1997
from 7.9% in 1996 due to lower average selling prices resulting from increased
competition.
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $10.0 million in 1997 versus $6.0 million
in 1996. Selling, general and administrative expenses were in large part
affected by charges incurred by the Company in 1997 as follows: (i) increase in
the provision for doubtful accounts of $1,745,000, (ii) provisions for disputed
amounts arising in the normal course of business and other losses totaling
approximately $373,000 and (iii) certain other charges consisting of (a) costs
associated with hiring of additional sales and administrative personnel, (b)
opening and closing a sales office, (c) severance costs of a key executive and
officer and (d) consultant fees for assisting in implementing a strategic plan
for the Company.
INTEREST. Interest income increased from $337,000 in 1996 to $454,000 in 1997
due to higher average daily balances of restricted cash.
Interest expense increased to $2.2 million in 1997 from $1.1 million in 1996, as
a result of additional borrowings which were used to support increased sales
activity.
LITIGATION EXPENSE. In 1997, the Company recorded litigation expense of $255,000
in connection with the settlement of a forfeiture action. See "Business Market
Overview" and Note 15 to the Company's Consolidated Financial Statements for the
year ended December 31, 1997.
OTHER INCOME. Other income decreased to $175,000 in 1997 from $282,000 in 1996.
This decrease is primarily attributable to the $108,000 settlement of a claim
filed against the Company's insurance carrier that was recorded in the 1996
period.
INCOME (LOSS) FROM CONTINUING OPERATIONS. Loss from continuing operations was
$933,000 ($.21 per share) in 1997 compared to income from continuing operations
of $1,930,000 ($.43 per share) in 1996. The change was primarily due to the
decrease in gross profit margins because of competition and the increase in
selling, general and administrative expenses and litigation expense, as
described above.
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995
NET SALES. Net sales increased 40% to $108.7 million in 1996 from $77.5 million
in 1995. Decreased sales in Ecuador ($5.7 million decrease) were more than
offset by increased sales to Paraguay ($14.7 million increase), United States
($4.9 million increase), Hong Kong ($4.1 million increase), Mexico ($2.7 million
increase), Costa Rica ($2.3 million increase) and various other markets.
During 1996, sales of Sony products increased to $40.1 million or 37% of net
sales compared to 1995 sales of $33.1 million or 43% of net sales. Pioneer sales
were $39.4 million or 36% of net sales in 1996 compared to $21.8 million or 28%
of net sales in 1995.
GROSS PROFIT. Gross profit increased 64% to $8.6 million in 1996 from $5.2
million in 1995. The Company's gross profit margin increased from 6.8% in 1995
to 7.9% in 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 6.6% from $5.6 million in 1995 to $6.0 million
in 1996. This was primarily due to higher commissions and related selling costs.
INTEREST. Interest income decreased from $434,000 in 1995 to $337,000 in 1996
due to lower yields and less interest charged to customers.
Interest expense increased from $930,000 in 1995 to $1.1 million in 1996 due to
increased borrowings.
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INCOME (LOSS) FROM CONTINUING OPERATIONS. Income from continuing operations was
$1.9 million ($0.43 per share) in 1996 compared to $104,000 ($0.02 per share) in
1995. The provision for income taxes increased from $114,000 in 1995 to $136,000
in 1996. The current and prior year tax provisions are primarily due to the
Company's Panamanian subsidiary. The U.S. subsidiary did not incur a tax
liability in 1996 and 1995 due to utilization of prior net operating losses.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operation through short-term bank
borrowings.
The Company used approximately $11.9 million in cash for operating activities in
1997. This utilization was primarily due to an increase in trade accounts
receivable of $16 million primarily as a result of greater sales on credit which
was offset in part by $3.5 million in increased accounts payable and $737,000 in
decreased inventory.
Cash used in investing activities was approximately $4.2 million in 1997
primarily attributable to an increase in restricted cash and capital
expenditures related to the purchase of the new warehouse, office and showroom.
Cash provided by financing activities was approximately $17.1 million in 1997
principally due to borrowings for the financing of increased accounts receivable
levels.
The Company receives open account credit from the majority of its principal
suppliers, with the exception of AIWA in amounts determined by such
manufacturers from time to time and are due on terms which range from 30 days to
90 days after receipt of inventory.
The Company continues to have good credit relationships with its principal
suppliers, Sony and Pioneer. At December 31, 1997 and 1996, the Company's credit
facility with Sony was $8 million which was partially collateralized by $4
million in stand-by letters of credit. The Company's credit facility with
Pioneer at December 31, 1997, was $8 million which was partially collateralized
by $2.5 million in stand-by letters of credit as compared to $4.5 million at
December 31, 1996. From time to time both Sony and Pioneer have allowed the
Company to exceed its credit line above its stated amount. At December 31, 1997,
the Company's trade payable to Sony and Pioneer was approximately $5.3 million
and $5.0 million, respectively.
The Company finances its purchases of inventory that is shipped from the Far
East by opening letters of credit to the suppliers up to 45 days in advance of
shipment. Upon receipt of inventory, the related letter of credit is converted
to trade acceptances, typically maturing within 120 to 180 days. The Company
incurs bank charges for the issuance and negotiation of letters of credit as
well as interest charges for the time the trade acceptances are outstanding.
At December 31, 1997, the Company had outstanding $28.8 million in notes and
acceptances principally maturing at varying dates through June 1998 at varying
interest rates based on LIBOR, IBOR and prime rate ranging from 8.9% to
10.3%, and had opened letters of credit aggregating approximately 9.4 million.
The Company's short-term borrowings are partially collateralized by
approximately $8.8 million of time deposits owned by the Company. None of the
Company's lenders is under any obligation to continue to provide credit to the
Company under currently existing terms.
9
<PAGE>
Management believes that the Company's ability to repay its indebtedness must be
achieved primarily through funds generated from its operations. The Company
intends to consolidate its credit facilities in an effort to obtain lower
interest rates and reduce inventory carrying costs by factoring its trade
accounts receivables which would also limit the Company's exposures to credit,
political and transfer risks. There can be no assurances that the Company will
be able to consolidate its credit facilities or finance its trade accounts
receivables.
As the Company expanded sales in existing markets such sales were primarily made
on a credit basis as compared to cash basis. Therefore, the number of day's
sales in accounts receivable increased to 72 days at December 31, 1997 from 61
days at December 31, 1996 which has adversely affected liquidity. Future
political and economic changes in the Latin American countries in which the
Company sells, such as the imposition or lifting of exchange controls, may
affect the Company's ability to collect its accounts receivable.
At December 31, 1997, the Company's working capital decreased to $3.4 million
from $8.4 million at December 31, 1996, primarily as a result of the loss
of New World Interactive, its financing with short-term debt
approximately $1.5 million of capital expenditures related to the new warehouse,
office and showroom and the loss from continuing operations.
From time to time, the Company experiences temporary liquidity problems that are
typically related to the Company's extension of credit to its customers.
Beginning in 1998, the Company has taken measures to decrease the number of days
to collect on its accounts receivable by not shipping merchandise to customers
that have past due balances and increasing the collection efforts of the
Company's credit and collection department and sales force.
At December 31, 1997, and March 27, 1998, the Company had available with ten
banks an aggregate of $36.5 million in bank facilities of which $37.9 million
and $36.2 million, respectively, was utilized. At December 31, 1997, the Company
was allowed to temporarily exceed the credit facility with two banks. From time
to time, the Company is overdue with various of its bank lenders for periods of
a few days for amounts the Company does not consider to be significant in light
of the size of its borrowings. All of the Company's lines of credit and credit
facilities from its various lenders are "on demand". The Company believes that
the current bank facilities are adequate to support the projected sales of the
Company in the short-term.
For a variety of political and economic reasons, the importation of nonessential
items such as consumer electronics has been restricted or prohibited from time
to time by many Latin American countries through exchange controls, import
quotas and restrictions, tariffs and other means. Accordingly, changes in the
trade policies of Latin American countries affect both the market for the
Company's products as well as the Company's ability to sell its products. The
ability of the Company to sustain continued sales growth is greatly dependent on
the continuing favorable economic and political climate of the Latin American
countries that it is currently operating in, the Company's ability to maintain
or increase the profit margins on its sales within the competitive market it
operates in, availability of payment methods to our customers, and, to a lesser
extent, product availability.
SEASONALITY
The Company's operations have historically been seasonal, with generally higher
sales in the third and fourth fiscal quarters. Higher third and fourth quarter
sales result from increased sales to retail chains and in anticipation of the
Christmas holiday season. Sales may also vary by fiscal quarter as a result of
the availability of merchandise for sale. Therefore, the results of any interim
period are not necessarily indicative of the results that might be expected
during a full fiscal year.
FOREIGN EXCHANGE FLUCTUATIONS
Although fluctuations in foreign exchange rates could affect the Company's cost
of inventory, such fluctuations have not been material to the Company's results
of operations since the Company makes all its purchases in U.S. dollars.
Unforeseen fluctuations in foreign exchange rates could result in the Company's
customers being unable to meet their obligations since the Company requires
payment in U.S. dollars for all of its sales.
10
<PAGE>
ASSET MANAGEMENT
In 1997, the Company's inventory turnover from continuing operations was 14
times compared to 12 times for the year ended December 31, 1996. The generally
high rate of inventory turnover benefits the Company by allowing it to maximize
its sales within its limitations in supplier and bank credit. The Company's high
rate of inventory turnover results from an increase in sales of goods in advance
of arrival. The Company generally does not maintain significant inventories of
its products. At December 31, 1997 inventories were $9.2 million compared to
$9.9 million at December 31, 1996, a decrease of 8%.
At December 31, 1997 trade accounts receivable were $31.5 million compared to
$18.2 million at December 31, 1996, an increase of 73%. The increase was
primarily due to the increased level of sales which has primarily been on
credit. At December 31, 1997, the number of days sales from continuing
operations in accounts receivable was 72 days compared to 61 days at December
31, 1996. This increase was principally due to an increase in the extension of
credit and terms to existing customers over the prior year as a result of
positive economic developments in the countries in which the Company sells.
The Company grants credit to its customers after considering various factors,
including reputation, the customer's payment history with available trade
references, location, available financial information and the number of years in
business. No formal credit reporting is available for Latin American companies.
The Company closely monitors credit sales by monitoring each customer's payment
history and other relevant information.
FORWARD LOOKING STATEMENTS
From time to time, the Company publishes "forward-looking statements", within
the meaning of the Private Securities Litigation Reform Act of 1995, including
certain statements in the "Management's Discussion and Analysis of Financial
Condition and Results of Operations," of this Form 10-K, which relate to such
matters as anticipated financial performance, business prospects, technological
developments, new products and similar matters. 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 the Company's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking statements. Such factors
include, among others: (i) expansion of the Company's "core" business into new
geographic markets and within its current markets; (ii) the general availability
of credit from its principal suppliers and banks to the Company to finance its
inventory, specifically, the continued cooperation of its major suppliers and
its banks to provide credit and their forbearance from time to time; (iii) the
expansion of available credit through the successful consolidation of the
Company's borrowings; (iv) the Company's ability to maintain or increase the
profit margins on its sales within the competitive market it operates in; (v)
continued positive economic developments in those foreign countries in which the
Company conducts a material amount of business, including Colombia, Paraguay,
Ecuador and Venezuela.
11
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
EZCONY INTERAMERICA INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Independent Accountants...........................................13
Consolidated Balance Sheets
As of December 31, 1997 and 1996........................................14
Consolidated Statements of Operations
For the Years Ended December 31, 1997, 1996 and 1995....................15
Consolidated Statements of Shareholders' Equity
For the Years Ended December 31, 1997, 1996 and 1995....................16
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1997, 1996 and 1995....................17
Notes to Consolidated Financial Statements..................................19
12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Ezcony Interamerica Inc.
We have audited the accompanying consolidated balance sheets of Ezcony
Interamerica Inc. and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Ezcony
Interamerica Inc. and subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
Miami, Florida
March 30, 1998
13
<PAGE>
<TABLE>
<CAPTION>
EZCONY INTERAMERICA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
---------------------------------------
1997 1996
-------------- --------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,280,887 $ 311,419
Trade accounts receivable, net 31,510,345 18,194,043
Due from directors, officers and employees, net 179,162 109,352
Due from affiliates, net - 9,686
Inventories 9,176,952 9,926,498
Prepaid expenses and other current assets 1,465,637 1,099,069
Restricted cash 8,834,319 6,082,924
-------------- --------------
Total current assets 52,447,302 35,732,991
Property and equipment, net 4,432,704 1,276,563
Other assets 48,616 532,298
-------------- --------------
Total assets $ 56,928,622 $ 37,541,852
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes and acceptances payable $ 28,842,438 $ 11,703,686
Current portion of long-term debt 214,537 61,604
Accounts payable 18,252,706 14,802,647
Accrued expenses and other current liabilities 1,693,543 677,536
Net current liabilities of discontinued operations - 101,857
-------------- --------------
Total current liabilities 49,003,224 27,347,330
Long-term debt 1,717,361 457,902
-------------- --------------
Total liabilities 50,720,585 27,805,232
-------------- --------------
Commitments and contingencies (Notes 14 and 15)
Shareholders' equity:
Common stock, no par value, 15,000,000 shares authorized;
issued and outstanding 4,510,000 shares in 1997 and
4,500,000 shares in 1996 12,954,723 12,941,910
Accumulated deficit (6,746,686) (3,205,290)
-------------- --------------
Total shareholders' equity 6,208,037 9,736,620
-------------- --------------
Total liabilities and shareholder's equity $ 56,928,622 $ 37,541,852
============== ==============
The accompanying notes to consolidated financial
statements are an integral part of these balance sheets.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
EZCONY INTERAMERICA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Net sales $ 158,822,628 $ 108,746,024 $ 77,528,741
Cost of sales 147,921,363 100,175,931 72,292,327
-------------- -------------- --------------
Gross profit 10,901,265 8,570,093 5,236,414
Selling, general and administrative expenses 9,971,888 5,973,991 5,606,492
-------------- -------------- --------------
Operating income (loss) 929,377 2,596,102 (370,078)
-------------- -------------- --------------
Other income (expenses):
Interest income 454,102 337,246 434,041
Interest expense (2,235,660) (1,148,697) (930,144)
Litigation (expense) reversal (255,000) - 726,454
Other 174,509 281,667 357,463
-------------- -------------- --------------
(1,862,049) (529,784) 587,814
-------------- -------------- --------------
Income (loss) from continuing operations
before income taxes (932,672) 2,066,318 217,736
Provision for income taxes - (136,490) (113,793)
-------------- -------------- --------------
Income (loss) from continuing operations (932,672) 1,929,828 103,943
-------------- -------------- ---------------
Discontinued operations:
Loss from discontinued operations, net
of income taxes (733,938) (852,174) (385,023)
Loss on disposal, including $687,106 for
operating losses during the phase out
period, net of income taxes (1,874,786) - -
-------------- -------------- --------------
(2,608,724) (852,174) (385,023)
-------------- -------------- --------------
Net income (loss) $ (3,541,396) $ 1,077,654 $ (281,080)
============== ============== ===============
Earnings per common share - basic and
assuming dilution-
Income (loss) from continuing operations $ (0.21) $ 0.43 $ 0.02
Loss from discontinued operations (0.58) (0.19) (0.08)
-------------- -------------- --------------
Net income (loss) $ (0.79) $ 0.24 $ (0.06)
============== ============== ==============
Weighted average number of common
shares outstanding - basic 4,503,644 4,500,000 4,500,000
Dilutive effect of stock options and warrants - 21,688 -
-------------- -------------- --------------
Weighted average number of common shares
outstanding - assuming dilution 4,503,644 4,521,688 4,500,000
============== ============== ==============
The accompanying notes to consolidated
financial statements are an integral part of these statements.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
EZCONY INTERAMERICA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NUMBER OF
SHARES TOTAL
ISSUED AND COMMON ACCUMULATED SHAREHOLDERS'
OUTSTANDING STOCK DEFICIT EQUITY
------------ ------------- -------------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 4,500,000 $ 12,941,910 $ (4,001,864) $ 8,940,046
Net loss - - (281,080) (281,080)
--------- ----------- ----------- ----------
Balance at December 31, 1995 4,500,000 12,941,910 (4,282,944) 8,658,966
Net income - - 1,077,654 1,077,654
--------- ----------- ----------- ----------
Balance at December 31, 1996 4,500,000 12,941,910 (3,205,290) 9,736,620
Stock options exercised 10,000 12,813 - 12,813
Net loss - - (3,541,396) (3,541,396)
--------- ----------- ----------- ----------
Balance at December 31, 1997 4,510,000 $12,954,723 $(6,746,686) $6,208,037
========= =========== =========== ==========
The accompanying notes to consolidated
financial statements are an integral part of these statements.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
EZCONY INTERAMERICA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1997 1996 1995
------------ ----------- ----------
<S>
<C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (3,541,396) $ 1,077,654 $ (281,080)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities-
Depreciation and amortization 262,390 187,611 223,373
Provision for doubtful accounts 2,646,509 901,950 875,864
Provision for inventory write-down 12,189 166,652 25,203
Loss on sale of fixed assets, net 1,830 8,113 -
Loss on disposal of discontinued operations 1,874,786 - -
Changes in operating assets and liabilities:
Increase in trade accounts receivable (15,962,811) (5,599,150) (8,079,568)
Decrease (increase) in due from affiliates, net 9,686 - (2,214)
Decrease (increase) in due from directors,
officers and employees, net (69,810) (60,885) 38,921
Decrease (increase) in inventories 737,357 (4,410,741) 9,581,208
Decrease (increase) in prepaid expenses and
other assets (332,886) (240,398) 41,951
Increase (decrease) in accounts payable 3,450,059 3,026,862 (1,432,485)
Increase (decrease) in accrued expenses
and other current liabilities 1,016,007 77,770 (81,625)
Decrease in accrued litigation costs
and expenses - - (770,432)
Net changes in discontinued operations (1,976,643) 355,455 (107,162)
----------- ----------- ---------
Net cash provided by (used in)
operating activities (11,872,733) (4,509,107) 31,954
----------- ----------- ---------
Cash flows from investing activities:
Net decrease (increase) in restricted cash (2,751,395) (951,521) 1,790,193
Purchases of property and equipment (1,487,904) (308,021) (365,002)
Proceeds from sale of property and equipment 17,543 23,450 -
----------- ---------- ---------
Net cash provided by (used in)
investing activities (4,221,756) (1,236,092) 1,425,191
----------- ----------- ----------
(Continued)
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
EZCONY INTERAMERICA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
YEAR ENDED DECEMBER, 31
-------------------------------------------------
1997 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from (repayment of) notes and
acceptances payable, net $ 17,138,752 $ 3,975,810 $ (174,802)
Proceeds from long-term borrowings 500,000 - -
Repayment of long-term debt (587,608) (54,525) (48,093)
Issuance of common stock 12,813 - -
----------- ----------- ----------
Net cash provided by (used in)
financing activities 17,063,957 3,921,285 (222,895)
----------- ----------- ----------
Net increase (decrease) in cash and cash equivalents 969,468 (1,823,914) 1,234,250
Cash and cash equivalents at beginning of year 311,419 2,135,333 901,083
----------- ----------- ----------
Cash and cash equivalents at end of year $ 1,280,887 $ 311,419 $2,135,333
=========== =========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 2,435,047 $ 1,429,316 $ 828,989
=========== =========== ==========
Cash paid during the year for taxes $ - $ 256,263 $ 337,379
=========== =========== ==========
Non-cash investing activities:
Long-term debt acquired in purchase of warehouse $ 1,500,000 $ - $ -
=========== =========== ==========
Pursuant to the discontinuance of its Hong Kong
operations in 1995, assets totaling $1,836,179 were
exchanged for liabilities of $1,836,179.
The accompanying notes to consolidated
financial statements are an integral part of these statements.
</TABLE>
18
<PAGE>
EZCONY INTERAMERICA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Ezcony Interamerica Inc. and subsidiaries (the "Company") was incorporated in
the British Virgin Islands on November 29, 1990.
The Company is a wholesale distributor to Latin American markets of a wide range
of brand name consumer electronic products, including televisions, videocassette
recorders, home and automobile audio equipment, cellular products and
appliances. The Company's products are distributed to a variety of customers,
including wholesalers and distributors who resell to retail markets.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Ezcony
Interamerica Inc. and its wholly owned subsidiaries. All significant
intercompany transactions and balances have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
Cash equivalents include all highly liquid investments with maturities of three
months or less when acquired.
INVENTORIES
Inventories are stated at the lower of cost or market, using the first-in,
first-out method. Inventories in transit are stated at cost.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation on equipment is computed using the straight-line
method over the estimated lives of these assets which range from 7 years to 20
years. Depreciation on the property is computed using the straight-line method
over a period of 40 years. Amortization of leasehold improvements is computed
using the straight-line method over the shorter of the lease term (including
renewal periods) or the estimated useful life of the related asset. Repairs and
maintenance are charged to expense as incurred while expenditures for major
renewals and betterments are capitalized.
19
<PAGE>
INCOME TAXES
The Company utilizes the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial statements and tax bases of assets
and liabilities using tax rates in effect for the year in which the differences
are expected to reverse. A valuation allowance is established when it is more
likely than not that some or all of the deferred tax assets will not be
realized.
The Company does not file a consolidated tax return in the United States. The
Company's United States subsidiaries file an income tax return for both state
and federal taxes. The Company's Panamanian subsidiary, which operates in the
Colon Free Zone, Republic of Panama, enjoys special tax rates granted by the
Panamanian tax authorities. Effective January 1, 1997, all income derived from
export operations of companies operating in the Colon Free Zone are tax exempt.
EARNINGS PER SHARE
In 1997, the Company adopted Statement of Financial Standards ("SFAS") No. 128,
"Earnings per Share" issued by the Financial Accounting Standards Board "FASB".
SFAS No. 128 requires the presentation of basic earnings per common share and
diluted earnings per common share. Basic earnings per common share is computed
by dividing income available to common stockholders by the weighted average
number of common shares outstanding. Diluted earnings per common share includes
the diluting effect of stock options and warrants. All prior year earnings per
share calculations have been restated in accordance with the provisions of SFAS
No. 128. Adoption of SFAS No. 128 did not have a material effect on the
Company's historically disclosed earnings per share.
REVENUE RECOGNITION
The Company recognizes revenue when products are shipped to customers.
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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period. These
estimates primarily relate to the determination of the allowance for doubtful
accounts. Although these estimates are based on management's knowledge of
current events and actions that it may undertake in the future, actual results
may ultimately differ from estimates.
NEW ACCOUNTING STANDARDS
In 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income", and
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information." These statements, which are effective for fiscal years beginning
after December 15, 1997, expand or modify disclosures and will have no impact on
the consolidated financial position, results of operations or cash flows of the
Company.
RECLASSIFICATIONS
Certain amounts included in the prior years' consolidated financial statements
have been reclassified to conform with the current year's presentation.
20
<PAGE>
3. DISCONTINUED OPERATIONS
In August 1997, the Company's Board of Directors approved a plan to sell or
liquidate its noncore business subsidiary, New World Interactive, Inc. ("New
World Interactive") as part of an overall reorganization program designed to
focus the Company's resources on its core business, the distribution of consumer
electronics. New World Interactive was engaged in the production and
distribution of Spanish and Portuguese CD-ROM software. The decision to
discontinue the subsidiary was based in part, upon continuing significant
working capital requirements and the Company's inability to obtain separate
additional capital through bank financing, public or private placement debt or a
combination of these for the subsidiary, and the lack of sufficient sales
volumes.
Due to the significant contractual obligations existing at the time of approval
of the plan to discontinue the subsidiary and due to the nature and conduct of
the business, New World Interactive's creditors were advised that New World
Interactive was experiencing significant cash flow problems and a deteriorating
financial condition and that management had decided to stop the production of
any "new" titles and continue with the production of titles already contracted
for. The Company anticipated that upon completion of these titles, and with its
existing inventory on completed titles, sufficient sale volumes would
materialize as a result of the Christmas holiday season, and generate sufficient
cash flows allowing New World Interactive to repay its obligations and avoid
having to pay to creditors a pro rata share of New World Interactive's assets.
New World Interactive closed its production facility on October 31, 1997 and
ceased operations on December 31, 1997. Subsequent to December 31, 1997, New
World Interactive is in the process of self-liquidating its remaining assets
(consisting primarily of trade receivables of approximately $92,000 and
inventory of approximately $66,000) on a pro rata basis to its remaining
creditors. New World Interactive surrendered all contract rights it may have had
in any software to its remaining creditors and returned all existing inventory.
These rights and inventory were given to the creditors without prejudice to any
remaining debt or any claim that the creditors may have against New World
Interactive. It is management's intentions that any claims that creditors may
have against New World Interactive will not be defended or responded to by New
World Interactive as there are no other remaining assets to distribute. The
Company believes that the ultimate completion of the liquidation of New World
Interactive including any potential litigation will not have a further material
adverse impact on the financial condition and results of operations of the
Company.
Net liabilities of the discontinued operation at December 31, 1997, consist
primarily of accounts payable and accrued expenses (including severance to a key
officer and employees) offset by accounts receivable and inventory. The
inventory is recorded at liquidation value and not at a potential selling price
as surrendered to its creditors. The loss on the disposal of New World
Interactive totaled $1,874,786, which includes a loss of $687,106 for operating
losses during the phase out period, and is reflected as loss on disposal in the
accompanying Consolidated Statement of Operations.
The accompanying consolidated balance sheets and consolidated statements of
operations have been reclassified to report separately the discontinued
operations in the prior periods. Selected results of the discontinued operations
were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $ 1,909,405 $ 3,135,047 $ 9,745,435
============ =========== ===========
Gross profit $ 214,881 $ 860,390 $ 887,360
============ =========== ===========
Selling, general and administrative expenses $ 930,564 $ 1,579,878 $ 1,336,557
============ =========== ===========
Net loss $ (2,608,724) $ (852,174) $ (385,023)
============ =========== ===========
</TABLE>
21
<PAGE>
4. RESTRICTED CASH
At December 31, 1997 and 1996, certificates of deposit were pledged by the
Company with various banks to guarantee the credit lines. The certificates of
deposit were placed in various banks in the following locations:
1997 1996
-------------- --------------
United States $ 1,484,319 $ 1,263,592
Panama 7,350,000 4,819,332
-------------- --------------
$ 8,834,319 $ 6,082,924
============== ==============
The certificates of deposit at December 31, 1997 and 1996 have annual interest
rates ranging from 4.9% to 7.8% and 5.2% to 6.3%, respectively.
5. INVENTORIES
At December 31, 1997 and 1996, inventories consisted primarily of consumer
electronic products at the following locations:
1997 1996
-------------- --------------
Colon Panama Free Zone warehouse $ 7,343,318 $ 9,240,883
U.S. warehouses 830,717 -
In transit 1,091,712 765,894
-------------- --------------
9,265,747 10,006,777
Reserve for obsolescence (88,795) (80,279)
-------------- --------------
$ 9,176,952 $ 9,926,498
============== ==============
6. PROPERTY AND EQUIPMENT
At December 31, 1997 and 1996, property and equipment consists of the following:
1997 1996
--------------- --------------
Buildings $ 3,796,730 $ 900,327
Furniture and office equipment 977,765 774,700
Transportation equipment 355,847 254,270
Leasehold improvements 87,109 306,196
Machinery and equipment 251,957 145,250
-------------- --------------
5,469,408 2,380,743
Less accumulated depreciation and amortization (1,036,704) (1,104,180)
-------------- --------------
$ 4,432,704 $ 1,276,563
============== ==============
During 1997, the Company purchased a warehouse in the Panama Colon Free Zone for
$1,700,000 and transferred its warehousing operations from two leased
warehouses. In addition, the construction of the Company's office and showroom
in the Panama Colon Free Zone was completed in December 1997 at costs totaling
approximately $1,100,000.
22
<PAGE>
7. CONCENTRATION OF CREDIT RISK
The Company's sales were made to customers located in, or for distribution in,
the following countries:
1997 1996 1995
------------- ------------- -------------
Colombia $ 52,995,593 $ 28,420,660 $ 28,957,239
Paraguay 28,486,493 22,551,519 7,897,374
United States 15,691,848 11,188,364 6,240,221
Ecuador 12,401,457 10,815,594 16,481,684
Venezuela 12,099,287 1,921,862 1,112,131
Mexico 4,742,561 5,441,236 2,693,610
Peru 4,458,382 2,553,372 2,614,713
Brazil 3,831,209 6,264,275 3,662,360
All other countries (primarily in
Latin America) 24,115,798 19,589,142 7,869,409
------------- ------------- -------------
$ 158,822,628 $ 108,746,024 $ 77,528,741
============= ============ =============
A summary of accounts receivable by country of distribution is as follows:
1997 1996
-------------- ---------------
Paraguay $ 10,186,458 $ 5,439,076
Colombia 9,849,299 4,897,323
Venezuela 4,062,259 336,172
Ecuador 3,620,585 3,860,227
Argentina 1,005,294 420,788
Brazil 422,446 1,481,340
All other countries (primarily in Latin America) 6,984,106 4,123,654
-------------- --------------
36,130,447 20,558,580
Less allowance for doubtful accounts (4,620,102) (2,364,537)
-------------- --------------
$ 31,510,345 $ 18,194,043
============== ==============
Certain sales made by the Company are collected in cash or other negotiable
instruments. During 1997, 1996 and 1995, the Company had no major customers
whose sales exceeded 10% of total net sales.
8. MAJOR SUPPLIERS
During the years ended December 31, 1997, 1996 and 1995, 33%, 37% and 37%,
respectively, of the Company's purchases consisted of products purchased from
Sony Corporation of Panama, S.A. (Sony). Amounts payable to Sony as of December
31, 1997 and 1996, were approximately $5,346,000 and $5,998,000, respectively.
Beginning in 1995, the Company significantly increased its purchases from
Pioneer International Latin America, S.A. (Pioneer). Pioneer purchases
represented 34%, 36% and 29% of total purchases for the year ended December 31,
1997, 1996 and 1995, respectively. Amounts payable to Pioneer as of December 31,
1997 and 1996, were approximately $5,000,000 and $6,996,000, respectively.
The Company does not have a written agreement with either Sony or Pioneer to act
as a distributor in any particular country. Sony and Pioneer could, at any time,
stop or limit sales to the Company or prohibit the Company from distributing its
products in any one or more countries. The Company is extended credit terms from
year-to-year.
23
<PAGE>
9. GEOGRAPHICAL SEGMENT INFORMATION
Sales originating from Panama, the United States and British Virgin Islands for
the years ended December 31, 1997, 1996 and 1995 were as follows:
1997 1996 1995
------------ ------------ ------------
Panama $ 139,471,528 $ 103,648,266 $ 64,344,680
United States 19,220,055 5,052,613 13,184,061
British Virgin Islands 131,045 45,145 -
------------- ------------- -------------
$ 158,822,628 $ 108,746,024 $ 77,528,741
============= ============= =============
Identifiable assets by geographical area are as follows:
1997 1996
------------- -------------
Panama $ 52,002,854 $ 36,474,383
United States 4,685,063 1,043,716
British Virgin Islands 240,705 23,753
-------------- --------------
$ 56,928,622 $ 37,541,852
============== ==============
Operating income (loss) from continuing operations by geographical area is as
follows:
1997 1996 1995
------------ ------------ ------------
Panama $ 2,615,913 $ 2,953,042 $ 909,965
United States (802,393) 109,324 (930,043)
British Virgin Islands (884,143) (466,264) (350,000)
------------- ------------- -------------
$ 929,377 $ 2,596,102 $ (370,078)
============= ============= =============
Income (loss) from continuing operations before income taxes by geographical
area is as follows:
1997 1996 1995
------------ ------------ ------------
Panama $ 788,760 $ 2,333,567 $ 645,174
United States (845,755) 81,795 (809,347)
British Virgin Islands (875,677) (349,044) 381,909
------------- ------------- -------------
$ (932,672) $ 2,066,318 $ 217,736
============= ============= =============
24
<PAGE>
10. NOTES AND ACCEPTANCES PAYABLE
Notes and acceptances payable at December 31, 1997 and 1996 consist of the
following:
<TABLE>
1997 1996
============ ============
<S> <C> <C>
Acceptances payable to banks and borrowings under several lines of credit
aggregating $36,500,000 bearing interest between 8.9% to 10.3%, maturing at
varying dates through June 1998, collateralized by certificates of deposit of
$8,834,319, trade accounts receivables, inventories and guaranteed by certain of
the Company's shareholders
$ 28,842,438 $ 11,703,686
============ ============
The weighted average interest rates as of December 31, 1997 and 1996 were 9.62%
and 9.61%, respectively.
11. LONG-TERM DEBT
Long-term debt at December 31, 1997 and 1996 consists of the following:
1997 1996
============ ============
Note payable, bearing interest at 10%, payable in monthly installments in the
amount of $12,681, expiring in May 2001, collateralized by a first mortgage on
the rental building $ 438,887 $ -
Note payable, bearing interest at 12%, payable in 120 monthly installments in
the amount of $10,045 expiring in December 2002, collateralized by a first
mortgage on the rental building - 519,506
Note payable, bearing interest at prime (8.5% at December 31, 1997)
plus 2%, payable in monthly installments in the amount of $21,090, with the
unpaid balance due in December 2002, collateralized by a first mortgage on the
warehouse 1,493,011 -
============ ============
1,931,898 519,506
Less current portion (214,537) (61,604)
============ ============
$ 1,717,361 $ 457,902
============ ============
</TABLE>
25
<PAGE>
Maturities of long-term debt are as follows:
YEAR ENDING DECEMBER 31,
1998 $ 214,537
1999 237,557
2000 263,049
2001 200,258
2002 167,204
Thereafter 849,293
--------------
$ 1,931,898
==============
12. INCOME TAXES
The provision for income taxes includes the following components:
<TABLE>
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
United States - Federal $ - $ - $ 10,269
Panama - 136,490 103,524
------------- ------------- -------------
$ - $ 136,490 $ 113,793
============= ============= =============
</TABLE>
The provision for income taxes differed from the amounts computed by applying
the U.S. federal income tax rate of 34% in 1997, 1996 and 1995 to income (loss)
before income tax expense as a result of the following:
<TABLE>
1997 1996 1995
------------ ------------- -------------
<S> <C> <C> <C>
Computed "expected" United States tax
(benefit) expense $ (317,108) $ 702,548 $ 74,030
Effect of foreign operations 29,552 (504,700) (176,965)
Valuation allowance change 286,282 (75,395) 206,464
Other, net 1,274 14,037 10,264
------------- -------------- -------------
Provision for income taxes $ - $ 136,490 $ 113,793
============= ============= =============
</TABLE>
At December 31, 1997, the Company's U.S. subsidiaries had net operating loss
carryforwards for U.S. tax purposes of approximately $810,000 (continuing
operations) and $1,670,000 (discontinued operations), expiring in
various years through 2012. A full valuation allowance has been recorded by the
Company since management believes that it is more likely than not that the
deferred tax assets will not be realized.
26
<PAGE>
The Company's Panamanian subsidiary operates in the Colon Free Zone, Republic of
Panama, and sells to customers abroad. According to Panamanian regulations,
companies operating in the Colon Free Zone derive local tax benefits from their
foreign sales. These companies enjoyed a special tax rate of 8.5% as compared to
a statutory rate of up to 34%, on profits derived from sales of merchandise
re-exported from the Colon Free Zone to countries other than Panama. In
addition, profits derived from sales not shipped through Panama (offshore sales)
are exempt from Panamanian taxes. Effective January 1, 1997, all income derived
from export operations of companies operating in the Colon Free Zone are 100%
tax exempt.
13. STOCK OPTION PLAN AND OTHER
The Company's 1992 stock option plan (the "Plan"), adopted by the Board of
Directors and the shareholders of the Company on April 21, 1992, is intended to
improve the Company's financial performance by providing long-term incentives to
the Company's directors, officers and key employees and to aid in the
recruitment of additional qualified and competent employees. The Plan is
administered by a committee comprised of outside directors (the "Committee").
On June 28, 1996, the shareholders approved the Board of Directors' amendment to
the Plan to increase the number of shares available for grant from 450,000
shares to 900,000 shares.
Under the Plan, 900,000 shares of common shares have been reserved for issuance
upon exercise of options. The Plan provides for the granting of both "incentive
stock options" and non-statutory stock options. Options can be granted under the
Plan on such terms and at such prices as determined by the Committee, except
that the per share exercise price of incentive stock options will not be less
than the fair market value of the common shares on the date of grant. Each
option will be exercisable after the period or periods specified in the option
agreement, but no option will be exercisable within six months after the date of
grant or after the expiration of 10 years from the date of grant. Options
granted under the Plan are not transferable other than by will or by the laws of
descent and distribution. The Plan authorizes the Company to make loans to
optionees to enable them to exercise their options and authorizes optionees to
exercise their stock options by payment with common shares, in each case at the
discretion of the Committee.
In connection with a public offering, in August 1992, the Company issued
warrants to purchase 150,000 common shares to the representatives of the
underwriters, exercisable at a price of $9.45 per share, as adjusted, for a
four-year term starting on August 6, 1993. In November 1994, the Company's Board
of Directors, in consideration of financial consulting and advisory services
rendered and to be rendered by such representatives, reduced the exercise price
on the warrants from $9.45 per share to $4.00 per share. In November 1996, the
Company's Board of Directors, in consideration of financial consulting and
advisory services to be rendered by one such representative, reduced the
exercise price on 97,750 warrants from $4.00 per share to $1.63 per share and
extended the term one additional year.
27
<PAGE>
The following table presents additional information concerning the activity in
the stock option plan:
<TABLE>
WEIGHTED
AVERAGE OF
NUMBER OF EXERCISE
OPTIONS PRICE
--------- ----------
<S> <C> <C>
Balance at December 31, 1994 109,000 $ 6.09
Options granted 60,000 3.13
Options terminated (83,000) 6.76
------------
Balance at December 31, 1995 86,000 3.38
Options granted 759,660 1.86
Options terminated (20,000) 2.39
------------
Balance at December 31, 1996 825,660 2.01
Options granted 25,000 2.55
Options exercised (10,000) 1.28
Options terminated (135,630) 2.03
------------
Balance at December 31, 1997 705,030 2.04
============
Warrants repriced during 1996 97,750
==========
1996 weighted average fair value
of warrants $ .80
=========
</TABLE>
No warrants were repriced during 1997.
<TABLE>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Weighted average fair value of
options granted during the year $ 1.82 $ 1.63 $ 2.21
======== ======== ========
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1997:
<TABLE>
NUMBER WEIGHTED NUMBER
OUTSTANDING AVERAGE WEIGHTED EXERCISABLE WEIGHTED
AT REMAINING AVERAGE AT AVERAGE
RANGE OF DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
PRICES 1997 LIFE (YEARS) PRICE 1997 PRICE
- --------------- ------------- ------------- ---------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
$1.25 - $1.88 277,530 7.78 $1.77 277,530 $1.77
$1.94 - $2.56 371,500 8.08 $1.98 259,396 $1.95
$3.50 - $4.13 56,000 5.49 $3.72 56,000 $3.72
----------- -----------
$1.25 - $4.13 705,030 7.76 $2.04 592,926 $2.03
=========== ===========
</TABLE>
28
<PAGE>
As of December 31, 1996, the Company adopted the disclosure provisions of SFAS
No. 123, "Accounting for Stock-Based Compensation." Accordingly, the Company is
required to disclose pro forma net income and earnings per share as if
compensation expense relative to the fair value of the options granted had been
included in earnings. The fair value of each option grant was estimated using
the Black-Scholes option-pricing model with the following assumptions (weighted
average) used for grants in 1997, 1996 and 1995, expected life of 6 years in
1997 and 10 years for 1996 and 1995; volatility factors of 80% for 1997 and 96%
for 1996 and 1995; risk-free interest rates of 6.1% for 1997 and 1996 and 6.8%
for 1995 and no dividend payments. Had compensation cost for the Company's
option plan been determined and recorded consistent with SFAS No. 123, the
Company's net income and earnings per share would have been reduced to the pro
forma amounts as follows:
<TABLE>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1997 1996 1995
------------- ------------- ------------
<S> <C> <C> <C>
Net income (loss)
As reported $ (3,541,396) $ 1,077,654 $ (281,080)
============= ============= =============
Pro Forma $ (3,864,939) $ 300,479 $ (394,079)
============= ============= =============
Earnings per share - basic and
assuming dilution
As reported $ (.79) $ .24 $ (.06)
========== ========== =========--
Pro Forma $ (.86) $ .07 $ (.09)
========== ========== =========--
</TABLE>
The 1997, 1996 and 1995 pro forma effect on net income (loss) is not necessarily
indicative of the effect in future years because it does not take into
consideration pro forma compensation expense related to grants made prior to
1995 and does not reflect a tax benefit related to the compensation expense as
such benefit would be reflected directly in shareholders' equity given that the
options are considered incentive stock options.
14. COMMITMENTS AND CONTINGENCIES
The Company has entered into various operating lease agreements. The following
is a schedule of future rental payments as of December 31, 1997 for operating
leases having initial noncancelable lease terms in excess of one year.
YEAR ENDING DECEMBER 31,
1998 $ 194,894
1999 191,471
2000 144,568
2001 92,263
2002 19,763
Thereafter 239,979
------------
$ 882,938
============
Rent expense was $233,181, $290,242 and $424,835 for each of the years ended
December 31, 1997, 1996 and 1995, respectively.
29
<PAGE>
The Company leases its building in Panama City, Panama. Rental income included
in other income in the accompanying consolidated statements of operations was
$174,509, $164,883 and $152,363 in 1997, 1996 and 1995, respectively. The
minimum future rental payments to be received on this noncancelable lease as of
December 31, 1997 are as follows:
1998 $ 183,113
1999 192,233
2000 201,870
2001 211,963
2002 222,513
Thereafter 292,749
------------
$ 1,304,441
============
At December 31, 1997, the Company had open letters of credit in the amount of
$9,436,243. Included in the open letters of credit at December 31, 1997 are
stand-by letters of credit in the amount of $7,100,000 collateralizing the trade
accounts of various vendors, primarily Sony and Pioneer.
The Company is currently in the process of evaluating its computer software and
databases to determine whether or not modifications will be required to prevent
problems related to the year 2000. Management does not currently anticipate any
significant or material impact on the Company as a result of implications
associated with this issue.
15. LEGAL MATTERS
On June 15, 1995, a final order on a lawsuit was executed. The order authorized
distribution of all settlement funds including return of excess funds to the
Company, thus terminating all further actions in the case. As a result, the
Company recorded as a reversal of litigation in the accompanying Consolidated
Statement of Operations $526,520, which represents both the refund to the
Company and the release of its obligation to contribute any further settlement
funds. In addition, the Company reversed approximately $200,000 of accrued legal
fees which is also included as reversal of litigation costs.
In 1998, the Company was notified of a forfeiture action against certain funds
deposited by the Company. The action requested the forfeiture of the seized
funds to the United States Government. The Company believes there is no basis
for the seizure or forfeiture. Nonetheless, to avoid the expense and disruption
of litigation and also the use of the seized funds for an extended period of
time, the Company reached an agreement to settle the forfeiture civil action
against these funds. Terms of the agreement require the return of all funds
seized less $255,000. The Company has recorded the settlement amount as
litigation (expense) reversal in the accompanying Consolidated Statement of
Operations, and as accrued expense and other current liabilities in the
accompanying Consolidated Balance Sheets as the seized funds related to 1997
sales.
The Company is also engaged in ordinary litigation incidental to its business.
The Company does not believe that such ordinary routine litigation will have a
material adverse effect on its consolidated financial position or results of
operations.
30
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to directors and executive officers of the Company
is incorporated by reference to the registrant's Proxy Statement to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
ITEM 11. EXECUTIVE COMPENSATION
The information required in response to this item is incorporated by reference
to the registrant's Proxy Statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A not later than 120 days after the end of
the fiscal year covered by this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required in response to this item is incorporated by reference
to the registrant's Proxy Statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A not later than 120 days after the end of
the fiscal year covered by this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required in response to this item is incorporated by reference
to the registrant's Proxy Statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A not later than 120 days after the end of
the fiscal year covered by this report.
31
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) FINANCIAL STATEMENTS
Financial statements of the Company are set forth in Part II
Item 8.
(2) FINANCIAL STATEMENTS SCHEDULE
Schedule II - Valuation and Qualifying Accounts for the years
ended December 31, 1997, 1996 and 1995
(3) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION METHOD OF FILING
------- -------------------------------------------------------------------------- ----------------
<S> <C> <C>
3 (a) Amended and Restated Memorandum of Association and Articles of Association
of the Registrant (2)
3 (b) Amendment to Amended and Restated Memorandum of Association and Articles
of Association (3)
4 (a) Form of Warrant Agreement (1)
4 (b) Amendment to Warrant Agreement (9)
4 (c) Second Amendment to Warrant Agreement (12)
(Item Nos. 10.1 through 10.2, inclusive, below, constitute the Company's
executive compensation plans and arrangements.)
10.1 Amended and Restated Stock Option Plan (12)
10.2 (b) Retirement Agreement dated February 26, 1996 with Moises Ezra Cohen
(9)
10.3 "Poliza de Credito" from "Banco Exterior" dated January 27, 1992
(with accompanying English summary) (1)
10.4 "Poliza de Credito" from "Banco Exterior" dated September 4, 1991
(with accompanying English summary) (1)
10.5 Confidentiality and Non-Competition Agreement of Enrique P. Lacs (1)
10.6 Letter from "Textiles Internacionales S.A." (with accompanying English summary) (1)
10.7 "Contrato de Arrendamiento de Local No. 102" (with accompanying English summary) (1)
(Continued)
32
<PAGE>
EXHIBIT
NO. DESCRIPTION METHOD OF FILING
------- ------------------------------------------------------------------------------- ----------------
10.8 "Contrato de Arrendamiento de Local No. 85" (with accompanying English summary) (1)
10.9 "Permiso de Operacion 179" (with accompanying English summary) (1)
10.10 Software License and Distribution Agreement with The Software Toolworks, Inc.
effective as of March 31, 1994 (4)
10.11 Localization and Distribution Agreement dated as of April 25, 1994 with
Time Warner Interactive Group, Inc. (Hell Cab) (4)
10.12 Software License and Distribution Agreement dated as of June 3, 1994 with
The Software Toolworks, Inc. (4)
10.13 Software License Agreement with Pixel Perfect, Inc. dated as of August 10, 1994 (4)
10.14 Software License and Distribution Agreement effective as of September 30, 1994,
with The Software Toolworks, Inc. (5)
10.15 Lease from Ezcony Trading Corporation to Hooters and Dreams, S.A. dated March 18,
1994 (with accompanying English summary) (5)
10.16 Contract for purchase of building from COFRISA dated January 20, 1995
(with accompanying English summary) (5)
10.17 Software License and Distribution Agreement effective as of March 30, 1995
with Mindscape, Inc. ("Renegade") (6)
10.18 Republishing, Localization and Distribution Agreement by and between Hyper-Quest
and New World Interactive dated April 19, 1995 (7)
10.19 International Distribution Agreement by and between Interplay Production and New
World Interactive, Inc. dated March 15, 1995 (7)
10.20 Localization and Distribution Agreement by and between Time Warner Interactive and
New World Interactive, Inc. dated February 17, 1995 (7)
10.21 Agreement between Motorola, Inc. and Ezcony Interamerica, Inc. dated August 8, 1995 (7)
10.22 Loan Agreement with Pribanco dated August 17, 1995 (with English summary) (8)
10.23 Localization and Distribution Agreement between Atari Games Corporation d/b/a Time
Warner Interactive and New World Interactive dated August 25, 1995 (8)
(Continued)
33
<PAGE>
EXHIBIT
NO. DESCRIPTION METHOD OF FILING
------- -------------------------------------------------------------------------------- ----------------
10.24 Mitsubishi Electronics America, Inc. Distributor Agreement with Ezcony Trading
Corp. dated February 21, 1996 (9)
10.25 Specific Terms and Conditions CD-ROM Bundling and Distribution Agreement between
Mindscape, Inc. and New World Interactive dated December 20, 1995 (9)
10.26 Software Localization and Distribution Agreement between Ringling Multimedia Corp.
and New World Interactive dated January 16, 1996 (9)
10.27 Credit Facility with Hamilton Bank maturing December 31, 1996 (9)
10.28 Hamilton Bank Security Agreement given by Ezcony Trading Corporation (9)
10.29 Loan Contract (Line of Credit) with Banco de Iberoamerica (with English summary) (9)
10.30 Localization and Distribution Agreement between Turner New Media, Inc. and
New World Interactive, Inc. dated as of October 27, 1995 (9)
10.31 License Agreement dated July 11, 1996 by and between GLLG International, Inc.
and New World Interactive, Inc. (10)
10.32 Software Localization and Distribution Agreement dated April 19, 1996 by and
between Ringling Multimedia Corporation and New World Interactive, Inc. (10)
10.33 Lease dated August 1, 1996 between Airport Key Corporation and New World
Interactive, Inc. (10)
10.34 Software Localization and Distribution Agreement by and between Ringling
Multimedia Corporation and New World Interactive, Inc. dated September 10, 1996 (11)
10.35 Software Localization and Distribution Agreement by and between Take Two Interactive
Software, Inc. dated September 16, 1996 (11)
10.36 International Distribution Agreement by and between Interplay Productions and
New World Interactive, Inc. dated February 15, 1996 (11)
10.37 Software License and Distribution Agreement with Mindscape, Inc. dated
August 28, 1996 (I) (12)
10.38 Software License and Distribution Agreement with Mindscape, Inc. dated
August 28, 1996 (II) (12)
(Continued)
34
<PAGE>
EXHIBIT
NO. DESCRIPTION METHOD OF FILING
------- -------------------------------------------------------------------------- ----------------
10.39 Localization and Distribution Agreement with Broderbund Software, Inc.
dated December 19, 1996 (12)
10.40 Credit Facility with Banco Internacional de Panama dated November 18, 1996
(with accompanying English summary) (12)
10.41 Five Heads of Agreement with Warner Interactive Entertainment Ltd. (12)
10.42 Distribution Agreement for Motorola Cellular Products dated June 17, 1996 (12)
10.43 Software License and distribution Agreement dated February 6, 1997 by and
between Norman & Globus, Inc., and New World Interactive, Inc. (13)
10.44 Software Localization and Distribution Agreement dated March 21, 1997 by
and between Ringling Multimedia Corporation and New World Interactive, Inc. (13)
10.45 International License and Distribution Agreement dated March 12, 1997 by and
between Interplay Production and New World Interactive, Inc. (13)
10.46 International License, Distribution and Localization Agreement dated
February 28, 1997 by and between Accolade, Inc. and New World Interactive, Inc. (14)
10.47 Credit Financing Agreement with Hamilton Bancorp Inc. dated May 7, 1997 (14)
10.48 Consulting Agreement with Ocean Reef Management, Inc. dated April 25, 1997 (14)
10.49 Cancellation of Consulting Agreement with Ocean Reef Management, Inc. dated
July 7, 1997 (14)
10.50 Mutual General Release between the Company and Ocean Reef Management, Inc.,
dated August 13, 1997 (14)
10.51 Addendum dated May 12, 1997 to the Distribution Agreement for Motorola Cellular
Products dated June 17, 1996 by and between King David Com.
Exportacao e Importacao Ltda. and Ezcony Interamerica Inc. (14)
10.52 Termination Agreement dated April 24, 1997 between Ezcony Interamerica Inc. and
its subsidiaries and John A. Galea (14)
10.53 Termination Agreement dated June 18, 1997 and Confidentiality and Noncompetition
Agreement by and between Ezcony Interamerica Inc. and Subsidiaries and Ezra Homsany (14)
10.54 "Poliza de Credito" from "Banco Exterior" dated July 8, 1997
(with accompanying English summary) (16)
(Continued)
35
<PAGE>
EXHIBIT
NO. DESCRIPTION METHOD OF FILING
------- ----------------------------------------------------------------------------- ----------------
10.55 "Poliza de Credito" from "Banco Internacional de Panama" dated June 16, 1997
(with accompanying English summary) (16)
10.56 "Poliza de Credito" from "The Chase Manhattan Bank" dated June 4, 1997
(with accompanying English summary) (16)
10.57 "Poliza de Credito" from "Banco Confederado De America Latina, S.A."
dated June 18, 1997 (with accompanying English summary) (16)
10.58 "Poliza de Credito" from "Banco Panamericano, S.A." dated June 17, 1997
(with accompanying English summary) (16)
10.59 Loan Contract (Line of Credit) with Banco de Iberoamerica
(with accompanying English summary) (16)
10.60 "Contrato de Compraventa De Acciones" (with accompanying English summary) (16)
10.61 Contract for purchase of building from COFRISA dated July 28, 1997
(with accompanying English summary) (16)
22 List of subsidiaries (9)
23 Consent of Coopers & Lybrand L.L.P. (15)
27.1 Financial Data Schedule (15)
</TABLE>
36
<PAGE>
(1) Incorporated by reference to Ezcony's Form F-1 dated May 21, 1992
(No. 33-48061)
(2) Incorporated by reference to Ezcony's Amendment No. 1 dated July 9,
1992 to Ezcony's Form F-1
(3) Incorporated by reference to Ezcony's Form 10-Q for the quarterly
period ended June 30, 1993
(4) Incorporated by reference to Ezcony's Form 10-Q for the quarterly
period ended September 30, 1994
(5) Incorporated by reference to Ezcony's Form 10-K for the year ended
December 31, 1994
(6) Incorporated by reference to Ezcony's Form 10-Q for the quarterly
period ended March 31, 1995
(7) Incorporated by reference to Ezcony's Form 10-Q for the quarterly
period ended June 30, 1995
(8) Incorporated by reference to Ezcony's Form 10-Q for the quarterly
period ended September 30, 1995
(9) Incorporated by reference to Ezcony's Form 10-K for the year ended
December 31, 1995
(10) Incorporated by reference to Ezcony's Form 10-Q for the quarterly
period ended June 30, 1996
(11) Incorporated by reference to Ezcony's Form 10-Q for the quarterly
period ended September 30, 1996
(12) Incorporated by reference to Ezcony's Form 10-K for the year ended
December 31, 1996
(13) Incorporated by reference to Ezcony's Form 10-Q for the quarterly
period ended March 31, 1997
(14) Incorporated by reference to Ezcony's Form 10-Q for the quarterly
period ended June 30, 1997
(15) Incorporated by reference to the comparable exhibit numbers as
contained in the Ezcony Annual Report on Form 10-K405, as filed with
the Securities and Exchange Commission on March 31, 1998
(16) Filed herewith
(a) Reports on Form 8-K
No reports on Form 8-K were filed in the last quarter of the period
covered by this report.
37
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
EZCONY INTERAMERICA INC.
Date: APRIL 14, 1998 BY: /S/ EZRA COHEN
-------------- ------------------
Ezra Cohen
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
SIGNATURE TITLE DATE
<S> <C> <C>
/S/ EZRA COHEN Director, Chairman of the Board, April 14, 1998
- -------------- President and Chief Operating Officer
Ezra Cohen
/S/ ANA M. MENENDEZ Chief Financial Officer April 14, 1998
- ------------------- (Principal Financial and Accounting
Ana M. Menendez Officer)
/S/ MOISES EZRA COHEN Director April 14, 1998
- ---------------------
Moises Ezra Cohen
/S/ DAVID DJEMAL Director April 14, 1998
- ---------------------
David Djemal
/S/ MICHAEL DOWLING Director April 14, 1998
- ---------------------
Michael Dowling
</TABLE>
38
<PAGE>
<TABLE>
SIGNATURE TITLE DATE
<S> <C> <C>
/S/ EZRA HOMSANY GATENO Director April 14, 1998
- -----------------------
Ezra Homsany Gateno
/S/ DANIEL HOMSANY Director April 14, 1998
- -----------------------
Daniel Homsany
/S/ ENRIQUE LACS Director April 14, 1998
- ------------------------
Enrique Lacs
/S/ LEONARD J. SOKOLOW Director April 14, 1998
- ------------------------
Leonard J. Sokolow
39
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON SCHEDULE
To the Board of Directors of
Ezcony Interamerica Inc.
Our report on the consolidated financial statements of Ezcony
Interamerica Inc. and subsidiaries is included on page 13 of the Form 10-K. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedules listed in the index on page 32 of this
Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Miami, Florida
March 30, 1998
40
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
EZCONY INTERAMERICA INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS OF YEAR
- ------------------------------------------ ----------- ------------- ---------- ----------
ALLOWANCE FOR DOUBTFUL ACCOUNTS-
<S> <C> <C> <C> <C>
Year ended December 31, 1997 $ 2,364,537 $ 2,646,509 $ (390,944) $ 4,620,102
=========== =========== ============ ===========
Year ended December 31, 1996 $ 3,431,510 $ 901,950 $(1,968,923) $ 2,364,537
=========== =========== =========== ===========
Year ended December 31, 1995 $ 2,651,199 $ 875,864 $ (95,553) $ 3,431,510
=========== =========== =========== ===========
</TABLE>
41
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- --------------
10.54 "Poliza de Credito" from "Banco Exterior" dated July 8, 1997 (with
accompanying English summary)
10.55 "Poliza de Credito" from "Banco Internacional de Panama" dated
June 16, 1997 (with accompanying English summary)
10.56 "Poliza de Credito" from "The Chase Manhattan Bank" dated June 4,
1997 (with accompanying English summary)
10.57 "Poliza de Credito" from "Banco Confederado De America Latina,
S.A." dated June 18, 1997 (with accompanying English summary)
10.58 "Poliza de Credito" from "Banco Panamericano, S.A." dated June 17,
1997 (with accompanying English summary)
10.59 Loan Contract (Line of Credit) with Banco de Iberoamerica (with
accompanying English summary)
10.60 "Contrato de Compraventa De Acciones" (with accompanying English
summary)
10.61 Contract for purchase of building from COFRISA dated July 28, 1997
(with accompanying English summary)
23 Consent of Coopers & Lybrand LLP
27.1 Financial Data Schedule
EXHIBIT 10.54
BANCO EXTERIOR ARGENTARIA, Av. Balboa, Esq. C/42 y 43, P.O.Box 8673 - Panama.
Telephone (507) 227-1122. Fax: (507) 227-3663.
CENTRAL SERVICES
Panama, July 8, 1997
Messrs.
EZCONY TRADING CORP.
Panama
ATTN.: MR. DAVID DJEMAL H.
Gentlemen:
We are pleased to inform you that our Credit Committee has approved lending for
a total of US$3,000,000 (three million U.S. dollars), upon the terms and
conditions described below:
1) AMOUNT: US$ 1,500,000 (three million U.S. dollars) (sic)
USE: Mortgage loan
MATURITY: Five years
AMORTIZATION: Fifty nine monthly installments of US$ 21,090,
to be applied to principal and interest, and a
final installment for the balance
INTEREST RATE: 2% over PRIME RATE, adjustable monthly
COMMISSIONS: 1%, charged a single time
2) AMOUNT: US$ 1,000,000 (one million U.S. dollars)
USE: Line for opening letters of credit and
negotiation of collections, with subsequent
financing in 120 days
MATURITY: One year
AMORTIZATION: Two (2) equal installments must be made for
each provision, at 90 and 120 days
INTEREST RATE: 1.5% over PRIME RATE, adjustable monthly
COMMISSIONS: Standard for letters of credit and documentary
collections
3) AMOUNT: US$ 500,000 (five hundred thousand U.S. dollars)
USE: Line for opening letters of credit
MATURITY: One year
COMMISSIONS: Standard for letters of credit
Follows a detailed description of the security under which we have approved the
loans indicated above, totaling US$3,000,000:
<PAGE>
/bullet/ First mortgage on real estate properties Nos. 12,449, 12,452, 12,459,
and 12,460.
/bullet/ Pledge of US$ 500,000 time deposit.
/bullet/ Personal bond from Messrs. Moises Ezra Cohen, Ezra Cohen Itzhaky, David
Djemal Homsany, Ezra Homsany Gateno, and Daniel Homsany Gateno.
/bullet/ Bond from Ezcony Interamerica Inc. and New World Interactive Inc.
companies.
These credit facilities shall be provided through a public document and a
mercantile pledge contract over a time deposit.
The lines of credit and loans indicated above will remain in force and at your
disposal provided you comply with the terms and conditions we have stipulated in
this letter and maintain a financial position satisfactory to the Bank. Said
terms and conditions may be modified at the Bank's option, by written
notification which we will make not less than ten days in advance.
We would appreciate your acknowledging receipt hereof, as an acceptance of these
credit transactions upon the conditions stipulated above, by signing the
enclosed copy of this letter prior to July 24, 1997. Following that date, we
will understand that you have not accepted the credit facilities we have
approved and our undertaking will cease at that time. In that event, the
approved credit facilities will cease to be at your disposal and this letter
will be deemed null and void.
In closing, let us say that we remain at your disposal to clarify any questions
you may have on the subject.
Sincerely yours,
BANCO EXTERIOR S.A.
(signed, illegible) (signed, illegible)
ROGELIO ESKILDSEN BRITTANNIA AMAYA
MANAGER OFFICER
EXHIBIT 10.55
BANCO INTERNACIONAL DE PANAMA
97(450-01)2507
June 16, 1997
Mr. David D'Jemal H.
EZCONY TRADING CORPORATION
City.-
Dear Mr. D'Jemal:
We are pleased to inform you that our Credit Committee decided at its last
meeting to grant you the credit facilities for which you have applied on behalf
of your highly respected company; they will be available upon the following
terms and conditions:
AMOUNT: US$ 500,000.00 (FIVE HUNDRED THOUSAND U.S. DOLLARS AND 00/100).
PURPOSE: A line of credit for inventory purchases through letters of credit,
collections, drafts, transfers, or cashiers' checks, with
disbursements maturing in 150 days.
DURATION: This line of credit has been approved for a one-year term, upon the
expiration of which we will conduct a formal review thereof. However,
the Bank may cancel it in advance of its expiration if that is
considered advisable in the Bank's judgment to protect its interests.
INTEREST: The applicable interest rate will be 10% per annum. However, the Bank
reserves the right to adjust the interest rate to reflect changes in
its cost of funds.
<PAGE>
BANCO INTERNACIONAL DE PANAMA
PAGE No. 2
97(450-01)2507) - Mr. David D'Jemal H.
SECURITY: 1. A joint bond given by Ezcony International Corp., Ezcony
Interamerica Inc. (Holding Corp.), and New World Interactive
Inc.
2. A personal bond given by Messrs. David D'Jemal H., Daniel
Homsany, and Ezra M. Cohen Y.
DOCUMENTATION: If you agree to our conditions, we will appreciate you sending
us the following documentation at your earliest convenience:
1. The Minutes of the Board of Directors Meeting of Ezcony
Trading Corp. at which the approved line of credit was
authorized and the persons authorized to sign the respective
documentation were designated.
2. The Minutes of the Shareholders Meetings of the companies
acting as surety, at which the joint bond securing all the
obligations assumed by Ezcony Trading Corporation toward Banco
Internacional de Panama was authorized.
3. Enclosed you will find our bond contracts, to be returned to
our offices duly signed. This documentation must be sent to our
Bank no later than 30 days from the date hereof, which is the
duration of our offer of credit.
RECIPROCITY: As reciprocity for the credit facilities, the company must
maintain a checking account with our bank, whose activity must be
in keeping with the amount of credit approved.
PERIODIC
REPORTS: To keep the Bank properly informed regarding your company's
commercial performance, we require you to furnish us periodic
reports on operations and semiannual statements of financial
position and results.
<PAGE>
BANCO INTERNACIONAL DE PANAMA
PAGE No. 3
97(450-01)2507) - Mr. David D'Jemal H.
In addition to the foregoing, we hereby notify you that the officer in charge of
your account at our Bank is Mr. RAFAEL VALLE H. We would appreciate your
addressing all correspondence and communications to our Bank in reference to
your account to the Executive in charge thereof.
We would like to take this opportunity to express our pleasure in being able to
continue meeting your company's credit needs, as well as our hope that this
business relationship will continue for many more years.
In closing, let us say we are at your disposal to reply to any inquiry you may
wish to make of us.
Sincerely yours,
BANCO INTERNACIONAL DE PANAMA
(signed, illegible) (signed, illegible)
Annabel de Teran Rafael Valle H.
VICE PRESIDENT FOR CREDIT MANAGER OF THE FREE ZONE BRANCH
AND ASSISTANT GENERAL MANAGER
AdeT/mpd
EXHIBIT 10.56
CHASE
The Chase Manhattan Bank
Branches in the Republic of Panama
P.O. Box 9A 7o.
Panama 9A, Republic of Panama
June 4, 1997
Mr. David Djemal
Director
EZCONY TRADING CORP.
Colon Free Zone
Dear Mr. Djemal:
We are pleased to confirm that, based on our examination of the audited fiscal
financial statements of Ezcony Trading Corporation at the end of operations as
of December 31, 1994, 1995, and 1996, The Chase Manhattan Bank has approved the
following credit facility:
FOR EZCONY TRADING CORP.
US$3,000,000.00 A line of credit for the opening of letters of credit
maturing in 180 days, and/or letters of security
guarantee arising from the absence of letter of
credit or collection documents filed with us. In
addition, the line calls for refinancing of
documentary collections maturing in up to 180 days.
INTEREST: LIBOR + 1.5% per annum, adjustable at the
Bank's option and payable on the 25th of each month.
Indicative rate at the date hereof: 8-7/8%.
COMMISSIONS ON LETTERS OF CREDIT:
OPENING: 1/4% for the first 90 days,
minimum $55.00 - 1/4% for each 30
additional days or fraction thereof
INCREASE/
EXTENSION: 1/4% for each 30 additional days,
minimum $50.00
NEGOTIATION: 3/8%
ACCEPTANCE: 1/4% for each 30 days or fraction
thereof, minimum $60.00
OTHER: According to current rate
<PAGE>
The Chase Manhattan Bank
-2-
June 4, 1997
Mr. David Djemal
Director
EZCONY TRADING CORP.
- --------------------------------------------------------------------------------
To back up this credit facility, we will require collateral in the form of cash
or real properties with a value of US$1,000,000.00, i.e., 33.33% of the value of
this line of credit. In addition, we will require personal bonds by the
shareholders.
The credit facilities described above will remain in force for the twelve months
subsequent to the date hereof, and their continuation in force will depend on
whether, in the Bank's judgment, the conditions and other factors which have
contributed to the decision to extend have not deteriorated. To that end, Ezcony
Trading Corporation undertakes to furnish its audited fiscal financial
statements to the Bank no later than 90 days after the end of the fiscal year,
as well as interim financial statements (not necessarily audited) no later than
60 days after the midpoint of the year. The company's shareholders/sureties must
furnish their personal financial statements, preferably as of the company's
fiscal year end, duly signed by them.
We would very much appreciate your indicating your satisfaction and acceptance
of the terms and conditions of this letter by signing and returning the enclosed
copy within the 15 days from the date hereof.
Sincerely yours,
(signed, illegible)
Maribel A. de Garuz
Vice President
EXHIBIT 10.57
LOAN AGREEMENT (LINE OF CREDIT)
In Panama City, Republic of Panama, on the eighteenth (18) day of June, nineteen
hundred and ninety-seven, by and between the undersigned, JUAN ANTONIO NINO, a
Panamanian male of legal age, married, a banker, a resident of this city, bearer
of personal identification card number eight - one hundred and sixty-four - one
thousand nine hundred and twenty-two (8-164-1922), acting on behalf and in
representation of BANCO CONFEDERADO DE AMERICA LATINA S.A. (COLABANCO), a
company duly incorporated and registered in file two hundred and sixty-one
thousand seven hundred and thirty-six (261736), roll thirty-five thousand nine
hundred and thirty-seven (35937), image zero, zero, zero, two (0002), Microfilm
Section (Commercial) of the Public Registry, being its General Manager and
Universal Agent and duly empowered for this act, as evidenced in file two
hundred and sixty-one thousand seven hundred and thirty-six (261736), roll
fifty-one thousand two hundred and twenty-one (51221), image zero, zero, zero
two (0002), Microfilm Section (Commercial) of the Public Registry, hereinafter
referred to as THE BANK, party of the first part; and DAVID DJEMAL HOMSANY, a
Panamanian male of legal age, married, a businessman, a resident of this city
and bearer of personal identification card number eight - two hundred and fifty
- - nine hundred and thirty-four (8-250-934), acting on behalf and in
representation of EZCONY TRADING CORP., a company duly incorporated and
registered in file ninety-three thousand two hundred and thirteen (93213), roll
nine thousand and sixty-one (9061), Image zero, zero, twenty-five (0025),
Microfilm Section (Commercial) of the Public Registry, duly empowered for this
act, as evidenced in the Minutes of Special Stockholders' Meeting and who shall
hereinafter be the BORROWER, party of the second part, it is hereby agreed in
this document to enter into a line of credit agreement according to the
following clauses: FIRST: THE BANK states that on this day, it has granted
BORROWER credit facilities under the modality of a line of credit up to a limit
of ONE MILLION DOLLARS (US$1,000,000), which is national tender in the Republic
of Panama (hereinafter DOLLARS), to be used by BORROWER as working capital for a
Stand By Letter of
<PAGE>
Credit in favor of Sony Corporation Panama: opening a letter of credit and
financing of same and of merchandise, through advances represented by promissory
notes. SECOND: BORROWER may dispose of the entire amount referred to as the
limit of this line of credit by making partial withdrawals, provided he leaves
with THE BANK and to its favor a promissory note or promissory notes for a
maximum term of one hundred and eighty (180) days, during which time the
payments to be made will be set; service payments shall be monthly and
consecutive service and payment of principal, at the end of the one hundred and
eighty days.
THIRD: To make use of this line of credit, BORROWER shall fill out and sign
the forms which THE BANK has available to BORROWER for this purpose.
FOURTH: BORROWER shall have a maximum term of one hundred and eighty (180)
days, as of the date of disbursement, to repay the sum of money disbursed by THE
BANK with respect to each promissory note.
FIFTH: BORROWER shall pay THE BANK for the promissory notes, commissions,
interest and current expenses at the time of each operation. Additionally,
BORROWER undertakes to pay an amount equal to one per cent (1%) as applicable
commitment commission, at each disbursement. Moreover, BORROWER undertakes to
pay a half-yearly commission equal to one per cent (1%) for the Letter of Credit
in favor of Sony Corporation Panama.
SIXTH: BORROWER undertakes to pay to THE BANK the sums of money disbursed by
the latter, on the payment due dates agreed to in each promissory note, as
stipulated in this agreement. If such periods of the promissory notes expire and
such sums have not been repaid to THE BANK, the line of credit shall be
automatically closed and BORROWER's obligations under this agreement shall be
considered due, giving rise to collection through the courts of any amounts that
according to THE BANK's books may be owing by BORROWER for principal and
interest, plus costs and expenses caused.
SEVENTH: BORROWER undertakes to maintain a current account with an average of
five (5) low figures in THE BANK throughout the entire duration of these
agreements or during such time as BORROWER has an outstanding balance.
<PAGE>
EIGHTH: THE BANK is expressly authorized by BORROWER to make such payments from
the aforementioned current account on expiry of the payments set out in the
promissory notes and those referred to in this agreement.
NINTH: (INTEREST) BORROWER states that it shall undertake to pay monthly to
THE BANK or to the order of same, eleven per cent (11%) annual interest on the
outstanding balance of the Letter of Credit and working capital, reviewable at
THE BANK's sole option and discretion, according to the costs of funding same,
per monthly payments due; the first service payment shall be made thirty (30)
days after disbursement and subsequent payments thirty (30) days after the first
until payment has been made in full. It is also hereby agreed that THE BANK may
charge higher interest than set out in this clause when it should so decide and
one or several times, provided that such interest is not higher than the maximum
allowed by the Banking Law of the Republic of Panama. In the event that THE BANK
decides to increase the agreed interest, it shall so inform BORROWER; if, within
the ten (10) days following such notice, BORROWER has not objected in writing,
THE BANK shall have the right to charge such increased interest. If, on the
contrary, BORROWER does not accept the increase, the loan or credit shall be
considered due and the outstanding balance payable within the ten (10) days
following the date on which BORROWER notified its objection. It is additionally
agreed that THE BANK may reduce the increased interest rate, whenever it should
deem it advisable and at its sole discretion, in accordance with this clause to
a rate which THE BANK may consider appropriate. To this end, THE BANK shall
notify BORROWER in writing of its decision to reduce the interest rate.
Likewise, THE BANK shall be empowered to increase the reduce interest rate
another or several times to the maximum interest allowed to Banks in the
Republic of Panama, according to the procedure established in this clause. In
addition, BORROWER undertakes to pay to THE BANK the Special Interest
Compensation Fund (F.E.C.I.) which at the date of this agreement has been set at
one per cent (1%) and, in future, to pay the interest rate which from time to
time may be set by the National Banking Commission for this purpose. Interest
rate, including F.E.C.I., is twelve per cent (12%).
<PAGE>
TENTH: It is clearly understood by THE PARTIES that the aforementioned
promissory notes are a simple means to facilitate the payments and that
consequently, shall not constitute a substitute for the obligations assumed
under this agreement.
ELEVENTH: The amount of the loans granted shall not exceed the limit set out in
the first clause of this agreement, but THE BANK may at any time reduce this
amount, terminate this agreement or modify the interest rate or any other
stipulation by giving written notice by letter, telegram or telex addressed to
BORROWER at the address it shall notify to THE BANK. BORROWER shall pay THE BANK
the opening commissions immediately upon opening of the credit and in due
course, the interest agreed in each case, according to this document.
TWELFTH: Throughout such time as the obligations assumed under this agreement
are outstanding, BORROWER undertakes:
a) To present to THE BANK such reports on its financial situation as THE
BANK may request; it is under the obligation to deliver its audited financial
statements within the one hundred and twenty (120) days following the close of
the fiscal year, and additionally, interim reports not later than sixty (60)
days after the first semester.
b) To allow BANK-appointed auditors to inspect its accounting and
inventory records, the cost being covered by BORROWER.
c) To continue to carry out the business it is currently involved in.
THIRTEENTH: THE BANK may declare due all of BORROWER's obligations assumed and
arising under this agreement and consequently, demand the immediate payment of
outstanding balances in the event that:
a) BORROWER ceases to supply THE BANK with the necessary information
required by the latter regarding the financial situation of the business and any
other necessary information, in the opinion of THE BANK.
b) As a result of judicial action, the assets of the business belonging to
BORROWER and/or those assigned as guaranty favor of THE BANK are attached or
seized or otherwise subjected to legal action.
c) BORROWER's financial situation is such that in THE BANK's opinion and
at its sole discretion, it is advisable to close the line of credit.
<PAGE>
d) Two (2) principal or service payments are in arrears.
e) Failure on the part of BORROWER to pay taxes, or social security
installments in a fiscal period, or rental of its business establishment if
appropriate, during the periods stipulated in the respective lease agreement.
f) Default of any of the clauses of this agreement.
FOURTEENTH: BORROWER and SOLIDARY GUARANTORS, identified below, authorize THE
BANK to transfer, assign or negotiate the balance of the credit and guaranties
established in its favor in this document with any national or international
financial institution or third party without prior notice.
FIFTEENTH: BORROWER states that it hereby constitutes commercial collateral in
favor of THE BANK on its fixed-term deposit(s) in the amount of THREE HUNDRED
THOUSAND DOLLARS (US$300,000) which it maintains in THE BANK, as well as on its
successive increments and renewals. Said obligations are moreover guaranteed
with the interest derived from the said deposit. BORROWER authorizes THE BANK to
close said deposit and use the funds arising from its closure to cover said
obligations, as deemed appropriate, even in the event that they are not in
arrears and that the guaranteed obligations are not yet due. THE BANK is
authorized to retain and renew this guaranty deposit under the same terms and
conditions as it offers to its clients until such time as all obligations
guaranteed by this deposit have been repaid in full and, if and when THE BANK
should so desire, to credit the liquid product of this deposit, its interest and
other credits to the payment of any of the obligations, with no need for
formalities or specific steps.
SIXTEENTH: Upon request, BORROWER shall pay THE BANK all expenses and fees
incurred by same in relation to the negotiation, implementation, steps before
the notary, including legal or financial consultants' fees and expenses or of
any other type which in the opinion of THE BANK, it may use to assist or advise
it during preparation and throughout the duration of the credit to enforce or
protect any term or condition of the agreement.
SEVENTEENTH: (BOND) At this point, DAVID DJEMAL HOMSANY, described above,
personally appeared to act in his own name and representation and on behalf and
in
<PAGE>
representation of the company named EZCONY INTERAMERICA, INC., a company duly
incorporated and registered in the British Virgin Islands, being duly empowered
for this act, as evidenced in the Minutes of the Special Stockholders' Meeting
and stated that they hereby become the SOLIDARY GUARANTORS (hereinafter referred
to as the SOLIDARY GUARANTORS) of BORROWER in favor of THE BANK, to guarantee
payment of the sum of ONE MILLION DOLLARS (US$1,000,000), which is legal tender
in the Republic of Panama, of principal, plus conventional or legal interest,
commissions and performance of each and every one of the obligations assumed by
BORROWER for the entire duration; this shall not be extinguished in whole or in
part due to any act or omission of THE BANK, even if the essential or accessory
terms, clauses and conditions are modified or any real or personal collateral is
released, without the prior notice or consent of THE SOLIDARY GUARANTORS. It is
understood that any extension or grace period granted by THE BANK to BORROWER
does not extinguish THE SOLIDARY BOND established by THE SOLIDARY GUARANTORS,
who openly consent that such extension or grace period does not exempt them from
their obligation towards THE BANK, although for any reason THE BANK may not
subrogate its rights and privileges. THE BANK may require THE SOLIDARY
GUARANTORS to repay the guaranteed obligations, with no need to require payment
made against BORROWER. It is also understood that THE SOLIDARY GUARANTORS
expressly waive any notice that may correspond to them. Likewise, the SOLIDARY
GUARANTORS renounce the domicile, the presentation, the benefit of exclusion and
the notice of any document covered by this bond not having received due
attention, the future requirement in case of arrears, steps pertaining to any
executory process initiated based on this bond and accept that all court or
out-of-court expenses, costs, lawyers' fees in relation to said process shall be
for their sole account and that the sum sued shall serve as the basis for any
public auction. This bond shall not be considered to be extinguished due to any
act or omission of THE BANK, nor because THE BANK allowed BORROWER to default on
its obligations or to fulfill them incompletely or differently from the agreed
manner or it did not insist on full compliance with the obligations or did not
exercise its respective contractual or legal rights in timely fashion.
<PAGE>
EIGHTEENTH: BORROWER and THE SOLIDARY GUARANTORS waive the steps for executory
process and domicile in the event that THE BANK should need to resort to
judicial collection of the obligations herein assumed and they agree that in
case of public auction of their assets, they should serve as the basis for
covering the suit, the sum owed plus the interest agreed upon and the
corresponding expenses.
NINETEENTH: The fact that at some point in time THE BANK waives or fails to
exercise one of its rights granted under this instrument, or expressly or
implicitly abandons one of them does not mean that THE BANK may not in future
exercise its right in whatever manner it should desire, since BORROWER and THE
SOLIDARY GUARANTORS agree that such rights continue to be valid and unaffected
throughout the duration of this agreement and its extensions, if any. If for any
reason, one of the clauses of this agreement is declared null or invalid, this
shall not affect the validity and enforceability of the remaining contents of
this agreement.
TWENTIETH: The period of duration of the line of credit agreement which is
herein entered into by THE BANK and BORROWER is one (1) year, as of the date on
which the agreed period begins to be counted and it shall be understood to be
automatically renewed unless communication to the contrary has taken place
between THE PARTIES.
TWENTY-FIRST: THE BANK reserves the right to cut off the line of credit at any
time if for any reason it deems it advisable; it shall notify BORROWER of this
by special delivery letter. BORROWER may at any time terminate the respective
accounts of the agreed letter of credit by repaying the outstanding balance at
such date and notifying THE BANK in writing before such payment, of its desire
to terminate the accounts.
TWENTY-SECOND: THE BANK states that it accepts all rights, liens and obligations
which BORROWER and THE SOLIDARY GUARANTORS have established in its favor, as
well as the bonds established in the terms described in this agreement.
TWENTY-THIRD: BORROWER and THE SOLIDARY GUARANTORS state that they know and
accept each and every one of the clauses and conditions of this agreement and
undertake to faithfully comply with them.
JUAN ANTONIO NINO, for COLABANCO
<PAGE>
DAVID DJEMAL HOMSANY, for EZCONY TRADING CORP.
DAVID DJEMAL HOMSANY, SOLIDARY GUARANTOR
DAVID DJEMAL HOMSANY, for EZCONY INTERAMERICA, INC.,
SOLIDARY GUARANTOR
EXHIBIT 10.58
PANABANK
BANCO PANAMERICANO, S.A.
Panama, June 17, 1997
Mr. David Djemal
EZCONY TRADING CORP.
Colon Province Free Zone
RE.: Approval of Revolving Line of Credit
Dear Mr. Djemal:
This is to confirm the terms and conditions approved by the Bank's Credit
Committee for the Revolving Line of Credit granted to your company:
1. AMOUNT Credit Line for US$ 1,000,000.00, in United States
legal tender
2. FACILITY Revolving Credit Line
3. PURPOSE Opening and refinancing of letters of credit
and advances for inventory purchases, and Stand-By
letter of credit for up to US$300,000.00
4. REPAYMENT Payment shall be made in 180 days, through
consecutive monthly interest-payment installments and
a single principal repayment at maturity
5. MATURITY 1 year, renewable
6. SECURITY DPF for US$ 300,000.00, Personal Bond from
the company's shareholders, and Joint Bond from the
related companies Ezcony Interamerica, Inc., Ezcony
International Corp., Ezcony Do Brasil, and New World
Interactive
<PAGE>
BANCO PANAMERICANO S.A.
EZCONY TRADING CORP.
June 17, 1997
Page No. 2
7. INTEREST The interest rate to be applied shall be the Prime
Rate + 1.5%
8. OTHER
REQUIREMENTS Maintain compensatory balances amounting to not
less than 5% in a checking account
If you agree to the conditions indicated above, please notify us to send you the
Line of Credit Contract and the respective Bond Contracts.
This credit will be subject to the credit policies of Banco Panamericano, C.A.
(PANABANK).
Please contact the undersigned for any inquiry in respect hereof.
Sincerely yours,
BANCO PANAMERICANO, S.A. (PANABANK)
(signed, illegible) (signed, illegible)
Guido Martinelli, Jr. Gustavo M. Eisenmann A.
Executive Vice President Credit Manager
and General Manager
/cer
EXHIBIT 10.59
Banco de Iberoamerica
LOAN AGREEMENT (LINE OF CREDIT)
In Panama City, Republic of Panama, on the sixteenth (16) day of the month of
October, nineteen hundred and ninety-five (1995), by and between the
undersigned: BANCO DE IBEROAMERICA, S.A., a company duly incorporated and
registered in file 005305, roll 0217, image 0292, Microfilm Section (Commercial)
of the Public Registry represented by its General Manager, JUAN MANUEL LIMA
BAUTISTA, a male Spaniard of legal age, married, a banker, a resident of this
city, bearer of passport No. 24688804, and by its Commercial Manager, MIGUEL
AQUILES MONTENEGRO BARAHONA, a male Panamanian of legal age, married, a banker,
a resident of this city, bearer of I.D. card No. 7-78-284, empowered for this
act, as evidenced in file 005365, rolls 36578 and 16059, images 0052 and 0078,
both of the Microfilm Section (Commercial) of the Public Registry, respectively,
in their capacities as universal agents with powers registered in the Public
Registry, who shall hereinafter be referred to as THE BANK, party of the first
part, and EZCONY TRADING CORP. and NEW WORLD INTERACTIVE CORP., both companies
duly incorporated and registered in files 93213 and 251801, rolls 9061 and
33425, images 0025 and 0092, both of the Microfilm Section (Commercial) of the
Public Registry, of Mr. MOISES EZRA COHEN, a Panamanian male of legal age,
married, a businessman, a resident of this city, bearer of personal
identification card No. N-16-236, is their President and Legal Representative,
duly empowered for this act, as evidenced in General Power of Attorney
registered in file 093213, roll 24338, image 0051, of the Microfilm Section
(Commercial) of the Public Registry and minutes of the Special Shareholders
Meeting held on August 3, 1995, which is enclosed below and forms part of this
document, respectively, party of the second part, who shall hereinafter be
referred to as BORROWER, hereby certify the signing of a line of credit
agreement, entered into in accordance with the provisions of the following
clauses:
FIRST: THE BANK states that on this day, it has granted credit facilities to
BORROWER under the modality of a line of credit of up to SEVEN HUNDRED AND
FIFTY-THOUSAND dollars, legal tender in the United States of America
(US$750,000) (hereinafter DOLLARS), which BORROWER shall use as follows: To open
letters of credit for a period of up to 180 days, financing of letters of credit
up to 180 days, including the supplier's period, collections financing of up to
180 days, payments to suppliers up to 180 days and bank guaranties for
withdrawal of merchandise from docks, for a period of 1 year. This line of
credit may be used by either company, EZCONY TRADING CORP. or NEW WORLD
INTERACTIVE CORP.
SECOND: BORROWER may dispose of the entire amount referred to as the limit of
this line of credit by making partial withdrawals, provided he leaves with THE
BANK and to its favor a promissory note or promissory notes for a maximum term
of one hundred and eighty (180) days, during which time the payments to be made
will be set, both with respect to principal and interest.
THIRD: To make use of this line of credit, BORROWER shall fill out and sign the
forms which THE BANK has available to BORROWER for this purpose.
<PAGE>
FOURTH: BORROWER shall have a maximum term of one hundred and eighty (180) days,
as of the date of disbursement, to repay the sum of money disbursed by THE BANK
with respect to each promissory note, letter of credit, collections, payments to
suppliers. BORROWER shall submit to THE BANK those letters that are to be
discounted and the product of the document shall be accredited to BORROWER's
current account. Letters discounted shall be paid on the dates due as indicated
on each letter. The due dates shall not exceed a period of (blank) days, as of
the date of submission for discount.
FIFTH: BORROWER shall pay THE BANK for the promissory notes and any other
documents mentioned in this agreement, commissions, interest and current
expenses at the time of each operation. BORROWER undertakes to pay a commission
of US$1,000 and a commission of US$50 for each disbursement evidenced on a
promissory note.
SIXTH: BORROWER undertakes to pay to THE BANK the sum of money disbursed by the
latter, on the payment due dates of each promissory note, as stipulated in this
agreement. If such periods of the promissory note or notes expire and such sums
have not been repaid to THE BANK, the line of credit shall be automatically
closed and BORROWER's obligations under this agreement shall be considered due,
giving rise to collection through the courts of any amounts that according to
THE BANK's books may be owing by BORROWER for principal and interest, plus costs
and expenses caused.
SEVENTH: BORROWER undertakes to maintain a current account in THE BANK with an
average balance not less than ten per cent (10%) of the facilities approved
throughout the entire duration of these agreements or during such time as
BORROWER has an outstanding balance.
EIGHTH: THE BANK is expressly authorized by BORROWER to make such payments
directly from the aforementioned current account on expiry of the payments set
out in the promissory notes referred to in this agreement.
NINTH: BORROWER shall pay monthly interest at the annual rate resulting from
adding three and one-half percentage points (3.5%) to the London Interbank
Offered Rate (L.I.B.O.R.) for loans with a six-month period applicable to the
sums of money disbursed by THE BANK for each operation, or the balance, based on
a three hundred and sixty-day (360) year. THE BANK is hereby empowered to change
this according to its own criteria and financial and monetary conditions. In
this case, BORROWER undertakes to pay the new interest rate five (5) days after
the date of a special delivery letter sent to the last address of BORROWER
registered with THE BANK and to pay the amount resulting from the variation.
BORROWER undertakes to pay the Special Interest Compensation Fund to THE BANK
(F.E.C.I.). If payment of the sum established in this document is in arrears,
either in respect of principal or of interest or any other reason, BORROWER
shall undertake to pay interest for arrears at the rate of 4% or at whatever
rate THE BANK may stipulate for overdue amounts, without prejudice to the other
rights and actions corresponding to THE BANK. In no case shall interest for
arrears be less than US$10 (ten dollars) monthly.
TENTH: It is clearly understood by THE PARTIES that the aforementioned
promissory notes are a simple means to facilitate the payments and that
consequently, shall not constitute a substitute for the obligations assumed
under this agreement.
ELEVENTH: The amount of the loans granted shall not exceed the limit set out in
the first clause of this agreement, but THE BANK may at any time reduce this
amount,
<PAGE>
terminate this agreement or modify the interest rate or any other
stipulation by giving written notice by letter, telegram or telex addressed to
BORROWER at the address it shall notify to THE BANK. BORROWER shall pay THE BANK
the commissions interest and current expenses at the time of each operation.
TWELFTH: Throughout such time as the obligations assumed under this agreement
are outstanding, BORROWER undertakes:
a) To present to THE BANK such reports on its financial situation as THE BANK
may request
b) To allow BANK-appointed auditors to inspect its accounting and inventory
records, the cost being covered by BORROWER.
c) To continue to carry out the business it is currently involved in.
d) To present to THE BANK any information which in its opinion is necessary
information.
THIRTEENTH: THE BANK may declare due all of BORROWER's obligations
assumed and arising under this line of credit and consequently, demand the
immediate payment of outstanding balances in the event that: BORROWER ceases to
supply THE BANK with the necessary information required by the latter regarding
the financial situation of the business and any other necessary information, in
the opinion of THE BANK. If the assets of the business belonging to BORROWER are
attached or seized or otherwise subjected to legal action due to action of a
third party or of THE BANK. BORROWER's financial situation is such that in THE
BANK's opinion and at its sole discretion, it is advisable to close the line of
credit. Two (2) principal or service payments are in arrears. Failure on the
part of BORROWER to pay taxes, or social security installments in a fiscal
period, or rental of its business establishment if appropriate, during the
periods stipulated in the respective lease agreement. Default of any of the
clauses of this agreement. BORROWER authorizes THE BANK to transfer, assign or
negotiate the credit balance outstanding, and the guaranties established in its
favor as a result of this document.
FOURTEENTH: Upon request, BORROWER shall pay THE BANK all expenses and fees
incurred by same in relation to the negotiation, implementation, steps before
the notary, including legal or financial consultants' fees and expenses or of
any other type which in the opinion of THE BANK, it may use to assist or advise
it during preparation and throughout the duration of the credit to enforce or
protect any term or condition of the agreement.
FIFTEENTH: BORROWER waives the steps for executory process and domicile in the
event that THE BANK should need to resort to judicial collection of the
obligations herein assumed by it and agrees that in the event of public auction
of its assets, the sum owing plus interests agreed upon and the respective
expenses should serve as the basis for the claim.
SIXTEENTH: BOND: At this point, MOISES EZRA COHEN, described above, personally
appeared to act in his own name and representation and on behalf and in
representation of the company, EZCONY INTERAMERICA, INC., a company duly
incorporated on October 26, 1990, with IBD No. 37322 under the laws of the
British
<PAGE>
Virgin Islands and of which he is President, being duly empowered for this act,
as evidenced in the Minutes of the Special Stockholders' Meeting held on August
3, 1995, enclosed below and an integral part of this document, and EZRA COHEN, a
Panamanian male of legal age, married, a businessman, a resident of this city
and bearer of personal identification card No. 8-223-130, who is acting in his
own name and representation, and stated that they hereby become the SOLIDARY
GUARANTORS (hereinafter referred to as the GUARANTORS) of BORROWER in favor of
THE BANK, to guarantee payment of the sum of SEVEN HUNDRED AND FIFTY THOUSAND
dollars (US$750,000), which is legal tender in the United States of America, of
principal, plus conventional or legal interest, commissions and performance of
each and every one of the obligations assumed by BORROWER for the entire
duration that they should survive; this shall not be extinguished in whole or in
part due to any act or omission of THE BANK, even if the essential or accessory
terms, clauses and conditions are modified or any real or personal collateral is
released, without the prior notice or consent of THE GUARANTORS. It is
understood that any extension or grace period granted by THE BANK to BORROWER
does not extinguish THE SOLIDARY BOND established by THE GUARANTORS, who openly
consent that such extension or grace period does not exempt them from their
obligation towards THE BANK, although for any reason THE BANK may not subrogate
its rights and privileges. THE BANK may require THE GUARANTORS to repay the
guaranteed obligations, with no need to require payment made against BORROWER.
It is also understood that THE GUARANTORS expressly waive any notice that may
correspond to them. Likewise, the GUARANTORS renounce the domicile, the
presentation, the benefit of exclusion, protest and notice of any document
covered by this bond not having received due attention, the future requirement
in case of arrears, steps pertaining to any executory process initiated based on
this bond and accept that all judicial or out-of-court expenses, costs, lawyers'
fees in relation to said process shall be for their sole account and that the
sum sued shall serve as the basis for any public auction. This bond shall not be
considered to be extinguished or weakened due to any act or omission of THE
BANK, nor because THE BANK allowed BORROWER to default on its obligations or to
fulfill them incompletely or differently from the agreed manner or it did not
insist on full compliance with the obligations or did not exercise its
respective contractual or legal rights in timely fashion.
SEVENTEENTH: COLLATERAL. At this point, BORROWER (EZCONY TRADING CORP.)
personally appeared and stated it shall hereinafter constitute collateral in
favor of THE BANK on its fixed-term deposits number 01-1001-224520, backup
number 203404, in the amount of TWO HUNDRED AND FIFTY THOUSAND dollars
(US$250,000), and on its successive increments and renewals in order to
guarantee and ensure payment of the obligations assumed or to be assumed in
future by BORROWER. Said obligations are additionally guaranteed by the interest
derived from said deposits, authorizing THE BANK to cancel the deposits under
reference and to use the funds derived from such cancellation to repay said
obligations as it should deem advisable, even assuming that there are no
accounts in arrears nor are the guaranteed obligations due.
THE BANK is authorized to retain and renew this guaranty deposit under the same
terms and conditions as THE BANK offers to its clients until such time as all
obligations guaranteed by this deposit have been repaid in full and, if and when
THE BANK should so
<PAGE>
desire, to credit the liquid product of this deposit, its interest and other
credits to the payment of any of its obligations, with no need for formalities
or specific steps.
EIGHTEENTH: BORROWER undertakes to maintain fire insurance and extension of
coverage to cover all existing inventory at the premises in an amount not less
than FIVE HUNDRED THOUSAND DOLLARS (US$500,000). The corresponding policies
should be duly endorsed favor of THE BANK. THE BANK may enter into the insurance
agreement and renew it, as well as pay the corresponding premium directly, in
which case BORROWER accepts that the sums paid for this reason be charged to the
debt and payment, interest and guaranties be subject to the same conditions
stipulated in this agreement. In the event of an accident and at the request of
THE BANK, should the product of the insurance be insufficient, BORROWER shall
pay the balance against it according to THE BANK's records.
NINETEENTH: At this point, (blank) personally appeared and undertakes to
contract and endorse to THE BANK life insurance in the amount of (blank)
dollars. Said insurance may be contracted by THE BANK by paying the premiums
directly, in which case BORROWER accepts that the amounts paid for this reason
shall be charged to the debt and shall be subject in respect of payment,
interest and guaranties to the same conditions stipulated in this agreement.
They likewise state that they accept the conditions established in the policy
and in the collective insurance contract entered into or to be entered into with
an insurance company acceptable to THE BANK and they agree that in the event of
meeting their death before fully repaying the obligations assumed under this
agreement, the product of the insurance should go to repaying the said
obligations. It is understood that if insurance is enough to cover the whole of
the obligations, THE BANK shall cancel the obligations assumed under this
agreement. In the event that the whole of the obligations are not covered by
insurance, the outstanding balance of same shall continue to be guaranteed until
such time as it is fully repaid, together with other values established in this
paper.
TWENTIETH: The duration of this line of credit agreement shall be from the date
of its execution to July eighteenth (18), nineteen hundred and ninety-six
(1996), and it shall be renewed automatically unless communication to the
contrary has taken place between THE PARTIES.
TWENTY-FIRST: THE BANK reserves the right to early cancellation of the line of
credit at any time if it deems it necessary for any reason and shall so notify
BORROWER by special delivery. BORROWER may at any time terminate the accounts
corresponding to the line of credit by repaying the balance due at such date and
notifying THE BANK in writing, upon making payment, of its desire to terminate
the accounts.
TWENTY-SECOND: THE BANK accepts the obligations assumed in its favor by BORROWER
and GUARANTORS, as well as the bonds established in the terms set down in this
document.
TWENTY-THIRD: BORROWER and GUARANTORS state that they know and accept each and
every one of the clauses and conditions of this agreement and undertake to
faithfully comply with them.
ANNEX 1
For BANCO DE IBEROAMERICA, S.A.
(SIGNED) JUAN MANUELA LIMA BAUTISTA, Passport No. 24688804.
<PAGE>
(SIGNED) EZCONY TRADING CORP., I.D. card N-16-236
(SIGNED) EZCONY INTERAMERICANA INC, MOISES EZRA COHEN, I.D. Card N-16-236.
(SIGNED) MIGUEL AQUILES MONTENEGRO BARAHONA, I.D. card 7-78-284
(SIGNED) NEW WORLD INTERACTIVE CORP. MOISES EZRA COHEN, I.D. n-16-236
(SIGNED) MOISES EZRA COHEN, I.D. card N-16-236
(SIGNED) EZRA COHEN, I.D. card 8-223-130
NOEMI MORENO ALBA, Notary Public, Tenth Circuit, Panama, Identity Card 7-37-78,
DOES HEREBY CERTIFY: that the signatures of MOISES EXRA COHEN and EZRA COHEN
have been recognized as their own by the parties signing this document;
consequently, they are genuine signatures.
Panama, October 18, 1995.
<PAGE>
ANNEX 1
TWENTY-FOURTH: It is hereby agreed that upon expiry of the obligations herein
assumed, THE BANK may require payment of the balance due, either judicially or
out-of-court, of any BORROWER, in which case the BORROWER required to pay shall
undertake to repay the whole of the amounts due, including principal, interest,
commissions and other expenses.
The obligation on the part of the BORROWER required to pay shall not be
affected, impaired or diminished because of the fact that the latter had not
directly requested disbursements from THE BANK under the line of credit, or
because of the fact that it had requested or received disbursements for an
amount lower than the amount claimed, if the amount of the obligations due
should result from use of the credit facility by any or all other BORROWERS.
For: BANCO DE IBEROAMERICA, S.A.
(SIGNED) JUAN MANUEL LIMA BAUTISTA, Passport No. 24688804
(SIGNED) MIGUEL AQUILES MONTENEGRO BARAHONA, I.D. card 7-78-284
For: BORROWER
(SIGNED) EZCONY TRADING CORP., NEW WORLD INTERACTIVE CORP.
MOISES EZRA COHEN, I.D. card N-16-236
Panama, October 16, 1995
I RAQUEL TORRIJOS DE GOMEZ, Notary Public of the Third Circuit of Panama, I.D.
Card No. 8-243-747, hereby CERTIFY:
That MOISES EZRA COHEN, whom I know, has signed this document in my presence and
that of the undersigned witnesses and consequently, the signatures are genuine.
Panama, October 16, 1995
(Signed): Witness. (Signed): Witness.
(Signed): Lic. RAQUEL TORRIJOS DE GOMEZ, Third Notary Public.
<PAGE>
MINUTES OF EXTRAORDINARY SHAREHOLDERS' MEETING
In Panama City, at 7:30 in the morning on August 3, 1995, an
Extraordinary Shareholders' Meeting of the NEW WORLD INTERACTIVE CORP. company
took place.
Prior summons having been waived by those who had a right to it and the
representation of 100% of the shares being present, there being thus the
regulatory quorum, the meeting was opened. It was presided by MOISES EZRA COHEN
MIZRACHI, acting as Secretary in said meeting DAVID DJEMAL, who are President
and Secretary, respectively, of this corporation.
The meeting being opened, the President explained that the reason for
the meeting was to authorize the company to hold a credit line agreement for the
amount of Seven Hundred and Fifty Thousand Dollars (US$750,000.00) with Banco de
Iberoamerica, S.A.
A motion was duly made, discussed and passed and the following
resolution was adopted:
IT IS HEREBY RESOLVED
1. To authorize the contracting of a credit line for the amount of Seven Hundred
and Fifty Thousand Dollars (US$750,000.00) with BANCO IBEROAMERICA, S.A., to be
used jointly with the EZCONY TRADING CORP. company.
2. To authorize Mr. MOISES EZRA COHEN MIZRACHI to sign all public and private
documents relating to his operation under the terms and conditions he may find
most favorable for the company.
There being no other matter to discuss, the meeting was closed at (blank)
(SIGNED) PRESIDENT.
(SIGNED) AD-HOC SECRETARY
I hereby certify that the above is a copy of the minutes of the Stockholders'
Meeting held on the date first above stated, which is contained in the company's
minute book.
(SIGNED) SECRETARY
<PAGE>
MINUTES OF EXTRAORDINARY SHAREHOLDERS' MEETING
In Panama City, at 9:00 in the morning on August 3, 1995, A Special
Shareholders' Meeting of the EZCONY INTERAMERICA, INC. company took place.
Prior summons having been waived by those who had a right to it and the
representation of 100% of the shares being present, there being thus the
regulatory quorum, the meeting was opened. It was presided by MOISES EZRA COHEN
MIZRACHI and EZRA COHEN YITZAKI acted as ad-hoc Secretary.
The meeting being opened, the President explained that the reason for
the meeting was to establish the company as a solidary guarantor of the present
and future obligations which the EZCONY TRADING CORPORATION and NEW WORLD
INTERACTIVE CORPORATION may assume with BANCO DE IBEROAMERICA, S.A., and to
designate the person who would act for the company.
A motion was duly made, discussed and passed and the following
resolution was adopted:
IT IS HEREBY RESOLVED
1. To authorize the company to establish itself as solidary guarantor of the
present and future obligations assumed or acquired by the companies, EZCONY
TRADING CORPORATION and NEW WORLD INTERACTIVE CORPORATION, with BANCO DE
IBEROAMERICA, S.A., whether one or both of such companies use the credit
facility contracted with said Bank.
2. To authorize Mr. MOISES EZRA COHEN MIZRACHI to sign all public and private
documents relating to his operation under the terms and conditions he may find
most favorable for the company.
There being no other matter to discuss, the meeting was closed at 10:00 a.m.
(SIGNED) PRESIDENT.
(SIGNED) AD-HOC SECRETARY
I hereby certify that the above is a copy of the minutes of the Stockholders'
Meeting held on the date first above stated, which is contained in the company's
minute book, and I also certify that the president and the secretary who sign
this document are the holders of said positions.
(SIGNED) AD-HOC SECRETARY
EXHIBIT 10.60
2308-97/1179
SHARE PURCHASE- SALE CONTRACT
By and between the undersigned VICTOR ATTIA CATTAN, a male businessman
of legal age, a resident of this city, Panamanian, bearer of personal
identification card No. 3-40-152, acting in his own name and representation, who
shall hereinafter be referred to as SELLER, party of the first part; and DANIEL
HOMSANY GATENO, male Panamanian of legal age, a businessman, a resident of this
city and bearer of personal identification card No. 8-255-185, acting on behalf
and in representation of EZCONY TRADING CORPORATION, S.A., a company duly
incorporated pursuant to the laws of the Republic of Panama and registered in
File 093213, Roll 9061, Image 0025 of the Mercantile Microfilm Section of the
Public Registry, authorized for this act, as evidenced in the minutes of the
competent corporate body of said company, who shall hereinafter be referred to
as BUYER, party of the second part, it has been agreed to enter into a Share
Purchase-Sale Contract, which shall be governed by the following:
CLAUSES:
FIRST: SELLER states and warrants to BUYER:
1. That he is the sole and legitimate owner of TEN (10) common shares with
a par value of ONE THOUSAND DOLLARS (US$1,000) each, which comprise the
entire capital stock of Distribuidora Versalles, S.A. (hereinafter THE
COMPANY).
2. That the shares referred to in item one (1) above are fully paid-in and
issued and that there is no encumbrance or charge over them.
3. That SELLER has free availability of the shares and there is no legal,
conventional, statutory, judicial or other restriction affecting the
free disposal of same.
<PAGE>
4. That at this date there is no lawsuit, legal proceeding or trial
against THE COMPANY which has been duly notified to it, initiated by
third parties or any other public officials or entities, that could in
any way adversely affect the business affairs, assets or financial
position of THE COMPANY and that, to the best of its knowledge, there
is moreover no threat of possible lawsuits or claims against it by
third parties.
SECOND: SELLER hereby undertakes to sell and transfer to BUYER one hundred per
cent (100%) of THE COMPANY'S shares, represented by ten Share Certificates from
number one (1) to number ten (10), containing one share each, with a par value
of one thousand dollars (US$1,000) each (hereinafter THE SHARES).
Transfer of THE SHARES shall be effected once SELLER complies with the
conditions contained in Clause Ninth of this Agreement and within the period
therein stipulated, and BUYER complies with its obligations and with payment of
THE SHARES, pursuant to the same Clause Ninth. Once this Clause has been
complied with, SELLER shall deliver to BUYER the respective, duly endorsed share
certificates.
Likewise, the parties agree that transfer of THE SHARES shall be done with no
reservations and will include any rights SELLER may have over the capital of THE
COMPANY, with no reservations or limitations whatsoever.
THIRD: SELLER states that Centauro Internacional, S.A., a company duly
incorporated pursuant to the laws of the Republic of Panama and registered in
File 269150, Roll 37832 and Image 0046, is the holder of credit obligations
originally established in favor of Banco Continental de Panama, S.A. by the
company, ALMACENADORA LAFA, S.A., through Public Writ No. 1770 of April 10,
1995, and which were later assigned to Centauro Internacional, S.A. through
Public Writ No. 3872 of August 1, 1995.
<PAGE>
FOURTH: SELLER states that THE COMPANY is the owner of Real Estate Property No.
12449, registered on Roll 16873, Entry 1, Document 1, of the Property Section,
Colon Province and that at the date of signing this agreement, said real estate
is encumbered by mortgage and antichresis in favor of Banco Continental de
Panama, S.A., for the amount of one million two hundred and fifty thousand
dollars (US$1,250,000), which is legal tender of the United States of America;
such encumbrances are collateral for the credit obligations mentioned in Clause
Third.
FIFTH: SELLER states that Bridgeocean Inc., S.A. company owns Real Estate
Property No. 12460, registered on Roll 16890, Entry 1, Document 4; that Ocean
Pavillion Corp., S.A. company owns Real Estate Property 12452, registered on
Roll 16873, Entry 1, Document 2 and that Centauro Internacional, S.A. company
owns Real Estate Property 12459, registered on Roll 16890, Entry 1, Document 3,
all in the Property Section of Colon Province.
Likewise, SELLER states that all real estate mentioned in this Clause are
encumbered with mortgage and antichresis in favor of Banco Continental de
Panama, S.A. for the amount of one million two hundred and fifty thousand
dollars (US$1,250,000), which is legal tender of the United States of America;
such encumbrances are collateral for the credit obligations contained in Clause
Third.
SIXTH: SELLER states that, on July 20, 1994, THE COMPANY entered into a Lease
Agreement for Lot No. 458 with the Colon Free Zone and BUYER hereby accepts
transfer of all rights and obligations contained in said Agreement.
SEVENTH: SELLER states that except for the provisions of clauses Fourth and
Sixth of this Agreement, THE COMPANY shall be free of all liabilities pending
payment. The parties also state that any liabilities or obligations THE COMPANY
may have arising from events or omissions prior to the signing of this Agreement
shall be assumed by SELLER.
<PAGE>
EIGHTH: BUYER shall receive the duly endorsed Share Certificates referred to in
Clause Second of this Agreement for the overall price of TWO HUNDRED THOUSAND
DOLLARS (US$200,000), legal tender of the United States of America, at the rate
of TWENTY THOUSAND DOLLARS (US$20,000), legal tender of the United States of
America, per share, after the conditions set out in Clause Ninth are complied
with.
NINTH: BUYER shall be under the obligation to pay SELLER the sum stated in the
preceding Clause, once the mortgage and antichresis are removed from Farm 12459,
registered in Roll 16890, Entry 1, Document 3, property of Centauro
Internacional, S.A.; once the mortgage and antichresis are removed from Real
Estate Property 12449, registered in Roll 16873, Entry 1, Document 1, property
of THE COMPANY; once the mortgage and antichresis are removed from Real Estate
Property 12460, registered in Roll 16890, Entry 1, Document 4, property of
Bridgeocean Inc., S.A.; once the mortgage and antichresis are removed from Real
Estate Property 12452, registered in Roll 16873, Entry 1, Document 2, property
of Ocean Pavillion Corp., S.A., all from the Property Section of Colon Province;
once any other encumbrances or limitations to control of title are removed over
said real estate, all of which are obligations for the account of SELLER, and
once the first mortgage and antichresis on the aforementioned Real Estate are
registered by BUYER in favor of Banco Exterior, by virtue of the mortgage loan
which this banking institution shall grant to BUYER. The necessary steps and
registration of this latter loan are part of the obligations of BUYER.
BUYER shall have until September thirtieth (30), 1997, to comply with its
obligations according to this Clause. Thirty (30) days after the date on which
SELLER fulfilled its commitments, the obligations provided in this Clause for
BUYER shall become enforceable.
Upon signing this Agreement, BUYER delivers to SELLER and the latter
acknowledges receipt to its full satisfaction an irrevocable promise of payment
by Banco Exterior in
<PAGE>
favor of SELLER in the amount of ONE HUNDRED AND FIFTY THOUSAND DOLLARS
(US$150,000), which is legal tender of the United States of America, which shall
remain valid at least until October thirtieth (30) of this year and which will
be subject to the removal of mortgage and antichresis that encumber the real
estate property mentioned in the first paragraph of this Clause in favor of
Banco Continental de Panama, S.A., the removal of any other encumbrances or
limitations to control of title that may encumber said real estate property and
the subsequent registration of the respective mortgages and antichresis of these
real estate properties in favor of Banco Exterior.
The remaining FIFTY THOUSAND DOLLARS (US$50,000), legal tender of the United
States of America, shall be paid directly by BUYER to SELLER, once the
conditions of the preceding paragraph have been met.
TENTH: BUYER recognizes that THE COMPANY is the potential beneficiary of the
acknowledgement of credit from the Colon Free Zone, for the costs incurred in
developing infrastructure in this international trade area (streets, sidewalks,
drainage, sanitation and rainwater systems, sewage and street lighting).
BUYER undertakes to pay Cohen and Attia Internaconal (sic) S.A. company the
amount of TWENTY-NINE THOUSAND TWO HUNDRED DOLLARS (US$29,200), legal tender of
the United States of America, after the Administration of the Colon Free Zone
agrees to enter into a Lease-Back Agreement with THE COMPANY, after the
Agreement enters into effect and after the benefit of the credit can be deducted
from THE COMPANY's rental payment to the Colon Free Zone by virtue of the Lease
Agreement for the Lot referred to in Clause Sixth of this Agreement, or by
virtue of any other lease Agreement entered into in future by THE COMPANY and
the Colon Free Zone.
The obligation to carry out all administrative steps to obtain the Lease-Back
Agreement from the Administration of the Colon Free Zone pertains to SELLER, who
shall act on
<PAGE>
behalf of THE COMPANY in this effort. Notwithstanding this, BUYER shall
cooperate in every way to comply with this objective.
If for any reason not due to causes attributable to BUYER, the Administration of
the Colon Free Zone fails to grant the Lease-Back Agreement to THE COMPANY, the
latter may act against SELLER to recover the sums owing THE COMPANY by the
Administration of the Colon Free Zone.
Immediately upon SELLER's payment to BUYER of the full amount mentioned in the
preceding paragraph, it may initiate the claim or claims it deems advisable on
behalf of THE COMPANY to obtain the Lease-Back Agreement from the Colon Free
Zone.
ELEVENTH: SELLER delivers to BUYER and the latter acknowledges receipt to its
satisfaction of the following documents:
a. Public Writ No. 206 of January 15, 1993.
b. Public Writ No. 29 of January 11, 1996.
c. Public Writ No. 858 of December 20, 1994.
d. Stock Register of Distribuidora Versalles, S.A.
e. Minute Book of Distribuidora Versalles, S.A.
f. Lease Agreement for Lot No. 458, entered into with the Colon Free Zone.
TWELFTH: SELLER states and warrants to BUYER, as follows:
1. That as evidenced in the Public Registry, Microfilm Section
(Commercial), File 269174, Roll 37834, Image 0002, THE COMPANY has been
duly registered.
2. That THE COMPANY has capital stock of ten (10) shares with a par value
of ONE THOUSAND DOLLARS (US$1,000), legal tender of the United States
of America, each.
<PAGE>
3. That the whole of THE COMPANY's capital is composed of ten (10)
certificates pertaining to one (1) share each, identified with numbers
from one (1) to ten (10), which account for one hundred per cent (100%)
of shares authorized, issued and outstanding, all of which belong to
SELLER.
4. That THE SHARES have been duly issued and are the exclusive property of
SELLER.
5. That SELLER may freely dispose of THE SHARES and that same are free of
any encumbrance and charge.
6. That THE SHARES have not been issued in violation of the rights of
other shareholders or third parties.
7. That no options of any kind exist or have been conferred by assignors,
nor warranties, agreements, requirements, commitments or suits pending
of any kind in which SELLER is involved, that may in any way have
restricted the transfer of THE SHARES or which may in any way affect
them. It likewise warrants that no obligations exist in THE COMPANY
that are convertible into shares.
8. That the transfer of THE SHARES comprises the dividends earned and not
distributed.
9. That no lawsuit or claim exists or is expected, nor any other manner of
judicial or administrative action against THE COMPANY for events or
omissions occurring prior to the signing of this Agreement.
10. THE COMPANY's accounting records and Financial Statements reflect the
current economic situation of THE COMPANY.
<PAGE>
11. That all information given by SELLER to BUYER in relation to THE
COMPANY is true, correct, accurate and faithful.
THIRTEENTH: In the event that any of the statements or warranties contained in
clauses First, Sixth, Seventh or Twelfth of this Agreement, SELLER shall answer
to BUYER, in line with the provisions which follow:
1. BUYER shall notify SELLER in writing of any fact it may learn of and as
a result of which any statements or warranties made in the
aforementioned clauses are or may be inaccurate, as well as any court
or out-of-court claim formulated against THE COMPANY, which refers to
the warranties or statements in question or is based on events or
omissions occurring prior to the signing of this Agreement.
2. Within the fifteen (15) days following receipt of notice as described
in the preceding clause, SELLER may determine whether the claim in
question is valid or unfounded. If SELLER does not transmit to BUYER in
writing and in a timely fashion, its opinion on the validity of a given
claim, BUYER shall assume that same is valid and if it deems it
advisable, shall pay and attempt to recover payment from SELLER.
3. Assuming that SELLER feels that the claim referred to in the preceding
clause has no merits, SELLER shall notify THE COMPANY in writing so
that it may refrain from paying the obligation in question. In this
case, BUYER shall cause THE COMPANY to grant to SELLER or a person
designated by the latter the necessary powers and attributes so that
SELLER may, at its own expense and on behalf of its principal, put in a
defense against the claim and assert the exceptions or arguments which
it may consider appropriate.
4. SELLER shall compensate THE COMPANY for any damages caused to it by
virtue of inaccuracy in the statements or warranties mentioned in this
clause, as
<PAGE>
well as for judicial or out-of-court claims made against THE COMPANY,
based on such statements or warranties, and those based on events or
omissions occurring prior to the signing of this Agreement.
FOURTEENTH: Each party shall cover its lawyers' fees. Notarial and other costs
incurred in order to formalize the Agreement shall be for the account of BUYER.
FIFTEENTH: The parties agree that any differences or disputes that may arise
between them in relation to compliance, application, interpretation or
termination of this Agreement shall be resolved by means of arbitration
according to the rules set out in the Judicial Code of the Republic of Panama.
SIXTEENTH: Any notice given by one party to the other in relation to this
Agreement shall be given in writing to the following addresses:
TO BUYER: Apartado Postal 3247, Zona Libre de Colon, Republica de Panama.
Telephone: 441-6566. Telefax: 441-1860.
TO SELLER: Apartado Postal 4060, Zona Libre de Colon, Republica de Panama.
Telephone: 445-3100. Telefax: 441-4238.
IN WITNESS OF FULL AGREEMENT WITH ALL OF THE ABOVE, both parties sign this
agreement in two identical copies, in Panama City, on the second (2) day of the
month of September, nineteen hundred and ninety-seven (1997).
SELLER BUYER
(signed) (signed)
VICTOR ATTIA CATTAN EZCONY TRADING CORPORATION
Identity Card 3-40-152. Daniel Homsany Gateno
Identity Card 8-255-185
<PAGE>
NOEMI MORENO ALBA, Notary Public, Tenth Circuit, Panama, Identity Card 7-37-78,
DOES HEREBY CERTIFY: that the signatures of VICTOR ATTIA CATTAN and DANIEL
HOMSANY GATENO have been recognized as their own by the parties signing this
document; consequently, they are genuine signatures.
Panama, September 3, 1997.
(There are two illegible signatures described as): Witness, Witness.
(signed, illegible) NOEMI MORENO ALBA, Tenth Notary Public.
<PAGE>
2308-97/1180
SHARE PURCHASE- SALE CONTRACT
By and between the undersigned VICTOR ATTIA CATTAN, a male businessman
of legal age, a resident of this city, Panamanian, bearer of personal
identification card No. 3-40-152, acting in his own name and representation, who
shall hereinafter be referred to as SELLER, party of the first part; and DANIEL
HOMSANY GATENO, male Panamanian of legal age, a businessman, a resident of this
city and bearer of personal identification card No. 8-255-185, acting on behalf
and in representation of EZCONY TRADING CORPORATION, S.A., a company duly
incorporated pursuant to the laws of the Republic of Panama and registered in
File 093213, Roll 9061, Image 0025 of the Mercantile Microfilm Section of the
Public Registry, authorized for this act, as evidenced in the minutes of the
competent corporate body of said company, who shall hereinafter be referred to
as BUYER, party of the second part, it has been agreed to enter into a Share
Purchase-Sale Contract, which shall be governed by the following:
CLAUSES:
FIRST: SELLER states and warrants to BUYER:
1. That he is the sole and legitimate owner of TEN (10) common shares with
a par value of ONE THOUSAND DOLLARS (US$1,000) each, which comprise the
entire capital stock of Bridgeocean Inc., S.A. (hereinafter THE
COMPANY).
2. That the shares referred to in item one (1) above are fully paid-in and
issued and that there is no encumbrance or charge over them.
3. That SELLER has free availability of the shares and there is no legal,
conventional, statutory, judicial or other restriction affecting the
free disposal of same.
<PAGE>
4. That at this date there is no lawsuit, legal proceeding or trial
against THE COMPANY which has been duly notified to it, initiated by
third parties or any other public officials or entities, that could in
any way adversely affect the business affairs, assets or financial
position of THE COMPANY and that, to the best of its knowledge, there
is moreover no threat of possible lawsuits or claims against it by
third parties.
SECOND: SELLER hereby undertakes to sell and transfer to BUYER one hundred per
cent (100%) of THE COMPANY'S shares, represented by ten Share Certificates from
number one (1) to number ten (10), containing one share each, with a par value
of one thousand dollars (US$1,000) each (hereinafter THE SHARES).
Transfer of THE SHARES shall be effected once SELLER complies with the
conditions contained in Clause Ninth of this Agreement and within the period
therein stipulated, and BUYER complies with its obligations and with payment of
THE SHARES, pursuant to the same Clause Ninth. Once this Clause has been
complied with, SELLER shall deliver to BUYER the respective, duly endorsed share
certificates.
Likewise, the parties agree that transfer of THE SHARES shall be done with no
reservations and will include any rights SELLER may have over the capital of THE
COMPANY, with no reservations or limitations whatsoever.
THIRD: SELLER states that Centauro Internacional, S.A., a company duly
incorporated pursuant to the laws of the Republic of Panama and registered in
File 269150, Roll 37832 and Image 0046, is the holder of credit obligations
originally established in favor of Banco Continental de Panama, S.A. by the
company, ALMACENADORA LAFA, S.A., through Public Writ No. 1770 of April 10,
1995, and which were later assigned to Centauro Internacional, S.A. through
Public Writ No. 3872 of August 1, 1995.
<PAGE>
FOURTH: SELLER states that THE COMPANY is the owner of Real Estate Property No.
12460, registered on Roll 16890, Entry 1, Document 4, of the Property Section,
Colon Province and that at the date of signing this agreement, said real estate
is encumbered by mortgage and antichresis in favor of Banco Continental de
Panama, S.A., for the amount of one million two hundred and fifty thousand
dollars (US$1,250,000), which is legal tender of the United States of America;
such encumbrances are collateral for the credit obligations mentioned in Clause
Third.
FIFTH: SELLER states that Distribuidora Versailles, S.A. company owns Real
Estate Property No. 12449, registered on Roll 16873, Entry 1, Document 1; that
Ocean Pavillion Corp., S.A. company owns Real Estate Property 12452, registered
on Roll 16873, Entry 1, Document 2 and that Centauro Internacional, S.A. company
owns Real Estate Property 12459, registered on Roll 16890, Entry 1, Document 3,
all in the Property Section of Colon Province.
Likewise, SELLER states that all real estate mentioned in this Clause are
encumbered with mortgage and antichresis in favor of Banco Continental de
Panama, S.A. for the amount of one million two hundred and fifty thousand
dollars (US$1,250,000), which is legal tender of the United States of America;
such encumbrances are collateral for the credit obligations contained in Clause
Third.
SIXTH: SELLER states that, on July 20, 1994, THE COMPANY entered into a Lease
Agreement for Lot No. 462 with the Colon Free Zone and BUYER hereby accepts
transfer of all rights and obligations contained in said Agreement.
SEVENTH: SELLER states that except for the provisions of clauses Fourth and
Sixth of this Agreement, THE COMPANY shall be free of all liabilities pending
payment. The parties also state that any liabilities or obligations THE COMPANY
may have arising from events or omissions prior to the signing of this Agreement
shall be assumed by SELLER.
<PAGE>
EIGHTH: BUYER shall receive the duly endorsed Share Certificates referred to in
Clause Second of this Agreement for the overall price of TWO HUNDRED THOUSAND
DOLLARS (US$200,000), legal tender of the United States of America, at the rate
of TWENTY THOUSAND DOLLARS (US$20,000), legal tender of the United States of
America, per share, after the conditions set out in Clause Ninth are complied
with.
NINTH: BUYER shall be under the obligation to pay SELLER the sum stated in the
preceding Clause, once the mortgage and antichresis are removed from Farm 12459,
registered in Roll 16890, Entry 1, Document 3, property of Centauro
Internacional, S.A.; once the mortgage and antichresis are removed from Real
Estate Property 12449, registered in Roll 16873, Entry 1, Document 1, property
of Distribuidora Versailles, S.A.; once the mortgage and antichresis are removed
from Real Estate Property 12460, registered in Roll 16890, Entry 1, Document 4,
property of THE COMPANY; once the mortgage and antichresis are removed from Real
Estate Property 12452, registered in Roll 16873, Entry 1, Document 2, property
of Ocean Pavillion Corp., S.A., all from the Property Section of Colon Province;
once any other encumbrances or limitations to control of title are removed over
said real estate, all of which are obligations for the account of SELLER, and
once the first mortgage and antichresis on the aforementioned Real Estate are
registered by BUYER in favor of Banco Exterior, by virtue of the mortgage loan
which this banking institution shall grant to BUYER. The necessary steps and
registration of this latter loan are part of the obligations of BUYER.
BUYER shall have until September thirtieth (30), 1997, to comply with its
obligations according to this Clause. Thirty (30) days after the date on which
SELLER fulfilled its commitments, the obligations provided in this Clause for
BUYER shall become enforceable.
Upon signing this Agreement, BUYER delivers to SELLER and the latter
acknowledges receipt to its full satisfaction an irrevocable promise of payment
by Banco Exterior in
<PAGE>
favor of SELLER in the amount of ONE HUNDRED AND FIFTY THOUSAND DOLLARS
(US$150,000), which is legal tender of the United States of America, which shall
remain valid at least until October thirtieth (30) of this year and which will
be subject to the removal of mortgage and antichresis that encumber the real
estate property mentioned in the first paragraph of this Clause in favor of
Banco Continental de Panama, S.A., the removal of any other encumbrances or
limitations to control of title that may encumber said real estate property and
the subsequent registration of the respective mortgages and antichresis of these
real estate properties in favor of Banco Exterior.
The remaining FIFTY THOUSAND DOLLARS (US$50,000), legal tender of the United
States of America, shall be paid directly by BUYER to SELLER, once the
conditions of the preceding paragraph have been met.
TENTH: BUYER recognizes that THE COMPANY is the potential beneficiary of the
acknowledgement of credit from the Colon Free Zone, for the costs incurred in
developing infrastructure in this international trade area (streets, sidewalks,
drainage, sanitation and rainwater systems, sewage and street lighting).
BUYER undertakes to pay Cohen and Attia Internaconal (sic) S.A. company the
amount of TWENTY-NINE THOUSAND TWO HUNDRED DOLLARS (US$29,200), legal tender of
the United States of America, after the Administration of the Colon Free Zone
agrees to enter into a Lease-Back Agreement with THE COMPANY, after the
Agreement enters into effect and after the benefit of the credit can be deducted
from THE COMPANY's rental payment to the Colon Free Zone by virtue of the Lease
Agreement for the Lot referred to in Clause Sixth of this Agreement, or by
virtue of any other lease Agreement entered into in future by THE COMPANY and
the Colon Free Zone.
The obligation to carry out all administrative steps to obtain the Lease-Back
Agreement from the Administration of the Colon Free Zone pertains to SELLER, who
shall act on
<PAGE>
behalf of THE COMPANY in this effort. Notwithstanding this, BUYER shall
cooperate in every way to comply with this objective.
If for any reason not due to causes attributable to BUYER, the Administration of
the Colon Free Zone fails to grant the Lease-Back Agreement to THE COMPANY, the
latter may act against SELLER to recover the sums owing THE COMPANY by the
Administration of the Colon Free Zone.
Immediately upon SELLER's payment to BUYER of the full amount mentioned in the
preceding paragraph, it may initiate the claim or claims it deems advisable on
behalf of THE COMPANY to obtain the Lease-Back Agreement from the Colon Free
Zone.
ELEVENTH: SELLER delivers to BUYER and the latter acknowledges receipt to its
satisfaction of the following documents:
a. Public Writ No. 209 of January 15, 1993.
b. Public Writ No. 28 of January 11, 1996.
c. Public Writ No. 857 of December 20, 1994.
d. Stock Register of Bridgeocean Inc. S.A.
e. Minute Book of Bridgeocean Inc. S.A.
f. Lease Agreement for Lot No. 462, entered into with the Colon Free Zone.
TWELFTH: SELLER states and warrants to BUYER, as follows:
1. That as evidenced in the Public Registry, Microfilm Section
(Commercial), File 269129, Roll 37831, Image 0002, THE COMPANY has been
duly registered.
2. That THE COMPANY has capital stock of ten (10) shares with a par value
of ONE THOUSAND DOLLARS (US$1,000), legal tender of the United States
of America, each.
<PAGE>
3. That the whole of THE COMPANY's capital is composed of ten (10)
certificates pertaining to one (1) share each, identified with numbers
from one (1) to ten (10), which account for one hundred per cent (100%)
of shares authorized, issued and outstanding, all of which belong to
SELLER.
4. That THE SHARES have been duly issued and are the exclusive property of
SELLER.
5. That SELLER may freely dispose of THE SHARES and that same are free of
any encumbrance and charge.
6. That THE SHARES have not been issued in violation of the rights of
other shareholders or third parties.
7. That no options of any kind exist or have been conferred by assignors,
nor warranties, agreements, requirements, commitments or suits pending
of any kind in which SELLER is involved, that may in any way have
restricted the transfer of THE SHARES or which may in any way affect
them. It likewise warrants that no obligations exist in THE COMPANY
that are convertible into shares.
8. That the transfer of THE SHARES comprises the dividends earned and not
distributed.
9. That no lawsuit or claim exists or is expected, nor any other manner of
judicial or administrative action against THE COMPANY for events or
omissions occurring prior to the signing of this Agreement.
10. THE COMPANY's accounting records and Financial Statements reflect the
current economic situation of THE COMPANY.
<PAGE>
11. That all information given by SELLER to BUYER in relation to THE
COMPANY is true, correct, accurate and faithful.
THIRTEENTH: In the event that any of the statements or warranties contained in
clauses First, Sixth, Seventh or Twelfth of this Agreement, SELLER shall answer
to BUYER, in line with the provisions which follow:
1. BUYER shall notify SELLER in writing of any fact it may learn of and as
a result of which any statements or warranties made in the
aforementioned clauses are or may be inaccurate, as well as any court
or out-of-court claim formulated against THE COMPANY, which refers to
the warranties or statements in question or is based on events or
omissions occurring prior to the signing of this Agreement.
2. Within the fifteen (15) days following receipt of notice as described
in the preceding clause, SELLER may determine whether the claim in
question is valid or unfounded. If SELLER does not transmit to BUYER in
writing and in a timely fashion, its opinion on the validity of a given
claim, BUYER shall assume that same is valid and if it deems it
advisable, shall pay and attempt to recover payment from SELLER.
3. Assuming that SELLER feels that the claim referred to in the preceding
clause has no merits, SELLER shall notify THE COMPANY in writing so
that it may refrain from paying the obligation in question. In this
case, BUYER shall cause THE COMPANY to grant to SELLER or a person
designated by the latter the necessary powers and attributes so that
SELLER may, at its own expense and on behalf of its principal, put in a
defense against the claim and assert the exceptions or arguments which
it may consider appropriate.
4. SELLER shall compensate THE COMPANY for any damages caused to it by
virtue of inaccuracy in the statements or warranties mentioned in this
clause, as
<PAGE>
well as for judicial or out-of-court claims made against THE COMPANY,
based on such statements or warranties, and those based on events or
omissions occurring prior to the signing of this Agreement.
FOURTEENTH: Each party shall cover its lawyers' fees. Notarial and other costs
incurred in order to formalize the Agreement shall be for the account of BUYER.
FIFTEENTH: The parties agree that any differences or disputes that may arise
between them in relation to compliance, application, interpretation or
termination of this Agreement shall be resolved by means of arbitration
according to the rules set out in the Judicial Code of the Republic of Panama.
SIXTEENTH: Any notice given by one party to the other in relation to this
Agreement shall be given in writing to the following addresses:
TO BUYER: Apartado Postal 3247, Zona Libre de Colon, Republica de Panama.
Telephone: 441-6566. Telefax: 441-1860.
TO SELLER: Apartado Postal 4060, Zona Libre de Colon, Republica de Panama.
Telephone: 445-3100. Telefax: 441-4238.
IN WITNESS OF FULL AGREEMENT WITH ALL OF THE ABOVE, both parties sign this
agreement in two identical copies, in Panama City, on the second (2) day of the
month of September, nineteen hundred and ninety-seven (1997).
SELLER BUYER
(signed) (signed)
VICTOR ATTIA CATTAN EZCONY TRADING CORPORATION
Identity Card 3-40-152. Daniel Homsany Gateno
Identity Card 8-255-185
<PAGE>
NOEMI MORENO ALBA, Notary Public, Tenth Circuit, Panama, Identity Card 7-37-78,
DOES HEREBY CERTIFY: that the signatures of VICTOR ATTIA CATTAN and DANIEL
HOMSANY GATENO have been recognized as their own by the parties signing this
document; consequently, they are genuine signatures.
Panama, September 3, 1997.
(There are two illegible signatures described as): Witness, Witness.
(signed, illegible) NOEMI MORENO ALBA, Tenth Notary Public.
<PAGE>
2308-97/1181
SHARE PURCHASE- SALE CONTRACT
By and between the undersigned VICTOR ATTIA CATTAN, a male businessman
of legal age, a resident of this city, Panamanian, bearer of personal
identification card No. 3-40-152, acting in his own name and representation, who
shall hereinafter be referred to as SELLER, party of the first part; and DANIEL
HOMSANY GATENO, male Panamanian of legal age, a businessman, a resident of this
city and bearer of personal identification card No. 8-255-185, acting on behalf
and in representation of EZCONY TRADING CORPORATION, S.A., a company duly
incorporated pursuant to the laws of the Republic of Panama and registered in
File 093213, Roll 9061, Image 0025 of the Mercantile Microfilm Section of the
Public Registry, authorized for this act, as evidenced in the minutes of the
competent corporate body of said company, who shall hereinafter be referred to
as BUYER, party of the second part, it has been agreed to enter into a Share
Purchase-Sale Contract, which shall be governed by the following:
CLAUSES:
FIRST: SELLER states and warrants to BUYER:
1. That he is the sole and legitimate owner of TEN (10) common shares with
a par value of ONE THOUSAND DOLLARS (US$1,000) each, which comprise the
entire capital stock of Centauro Internacional, S.A. (hereinafter THE
COMPANY).
2. That the shares referred to in item one (1) above are fully paid-in and
issued and that there is no encumbrance or charge over them.
3. That SELLER has free availability of the shares and there is no legal,
conventional, statutory, judicial or other restriction affecting the
free disposal of same.
<PAGE>
4. That at this date there is no lawsuit, legal proceeding or trial
against THE COMPANY which has been duly notified to it, initiated by
third parties or any other public officials or entities, that could in
any way adversely affect the business affairs, assets or financial
position of THE COMPANY and that, to the best of its knowledge, there
is moreover no threat of possible lawsuits or claims against it by
third parties.
SECOND: SELLER hereby undertakes to sell and transfer to BUYER one hundred per
cent (100%) of THE COMPANY'S shares, represented by ten Share Certificates from
number one (1) to number ten (10), containing one share each, with a par value
of one thousand dollars (US$1,000) each (hereinafter THE SHARES).
Transfer of THE SHARES shall be effected once SELLER complies with the
conditions contained in Clause Ninth of this Agreement and within the period
therein stipulated, and BUYER complies with its obligations and with payment of
THE SHARES, pursuant to the same Clause Ninth. Once this Clause has been
complied with, SELLER shall deliver to BUYER the respective, duly endorsed share
certificates.
Likewise, the parties agree that transfer of THE SHARES shall be done with no
reservations and will include any rights SELLER may have over the capital of THE
COMPANY, with no reservations or limitations whatsoever.
THIRD: SELLER states that THE COMPANY is the holder of credit obligations
originally established in favor of Banco Continental de Panama, S.A. by the
company, ALMACENADORA LAFA, S.A., through Public Writ No. 1770 of April 10,
1995, and which were later assigned to THE COMPANY through Public Writ No. 3872
of August 1, 1995.
FOURTH: SELLER states that THE COMPANY is the owner of Real Estate Property No.
12459, registered on Roll 16890, Entry 1, Document 3, of the Property Section,
<PAGE>
Colon Province and that at the date of signing this agreement, said real estate
is encumbered by mortgage and antichresis in favor of Banco Continental de
Panama, S.A., for the amount of one million two hundred and fifty thousand
dollars (US$1,250,000), which is legal tender of the United States of America;
such encumbrances are collateral for the credit obligations mentioned in Clause
Third.
FIFTH: SELLER states that Distribuidora Versalles, S.A. company owns Real Estate
Property No. 12449, registered on Roll 16873, Entry 1, Document 1; that
Bridgeocean Inc. company owns Real Estate Property 12460, registered on Roll
16890, Entry 1, Document 4, and that Ocean Pavillion Corp., S.A. company owns
Real Estate Property 12452, registered on Roll 16873, Entry 1, Document 2, all
in the Property Section of Colon Province.
Likewise, SELLER states that all real estate mentioned in this Clause are
encumbered with mortgage and antichresis in favor of Banco Continental de
Panama, S.A. for the amount of one million two hundred and fifty thousand
dollars (US$1,250,000), which is legal tender of the United States of America;
such encumbrances are collateral for the credit obligations contained in Clause
Third.
SIXTH: SELLER states that, on July 20, 1994, THE COMPANY entered into a Lease
Agreement for Lot No. 463 with the Colon Free Zone and BUYER hereby accepts
transfer of all rights and obligations contained in said Agreement.
SEVENTH: SELLER states that except for the provisions of clauses Third, Fourth
and Sixth of this Agreement, THE COMPANY shall be free of all liabilities
pending payment. The parties also state that any liabilities or obligations THE
COMPANY may have arising from events or omissions prior to the signing of this
Agreement shall be assumed by SELLER.
<PAGE>
EIGHTH: BUYER shall receive the duly endorsed Share Certificates referred to in
Clause Second of this Agreement for the overall price of ONE MILLION ONE HUNDRED
THOUSAND DOLLARS (US$1,100,000), legal tender of the United States of America,
at the rate of ONE HUNDRED AND TEN THOUSAND DOLLARS (US$110,000), legal tender
of the United States of America, per share, after the conditions set out in
Clause Ninth are complied with.
NINTH: BUYER shall be under the obligation to pay SELLER the sum stated in the
preceding Clause, once the mortgage and antichresis are removed from Farm 12459,
registered in Roll 16890, Entry 1, Document 3, property of Centauro
Internacional, S.A. company; once the mortgage and antichresis are removed from
Real Estate Property 12449, registered in Roll 16873, Entry 1, Document 1,
property of Distribuidora Versalles S.A. company; once the mortgage and
antichresis are removed from Real Estate Property 12460, registered in Roll
16890, Entry 1, Document 4, property of Bridgeocean Inc., S.A. company; once the
mortgage and antichresis are removed from Real Estate Property 12452, registered
in Roll 16873, Entry 1, Document 2, property of Ocean Pavillion Corp., S.A.
company, all from the Property Section of Colon Province; once any other
encumbrances or limitations to control of title are removed over said real
estate, all of which are obligations for the account of SELLER, and once the
first mortgage and antichresis on the aforementioned Real Estate are registered
by BUYER in favor of Banco Exterior, by virtue of the mortgage loan which this
banking institution shall grant to BUYER. The necessary steps and registration
of this latter loan are part of the obligations of BUYER.
BUYER shall have until September thirtieth (30), 1997, to comply with its
obligations according to this Clause. Thirty (30) days after the date on which
SELLER fulfilled its commitments, the obligations provided in this Clause for
BUYER shall become enforceable.
<PAGE>
Upon signing this Agreement, BUYER delivers to SELLER and the latter
acknowledges receipt to its full satisfaction an irrevocable promise of payment
by Banco Exterior in favor of SELLER in the amount of ONE HUNDRED AND FIFTY
THOUSAND DOLLARS (US$150,000.00), which is legal tender of the United States of
America, which shall remain valid at least until October thirtieth (30) of this
year and which will be subject to the removal of mortgage and antichresis that
encumber the real estate property mentioned in the first paragraph of this
Clause in favor of Banco Continental de Panama, S.A., the removal of any other
encumbrances or limitations to control of title that may encumber said real
estate property and the subsequent registration of the respective mortgages and
antichresis of these real estate properties in favor of Banco Exterior.
Upon signing this Agreement, BUYER delivers to SELLER and the latter
acknowledges receipt to its full satisfaction an irrevocable promise of payment
by Banco Exterior in favor of Banco Continental de Panama, S.A. in the amount of
NINE HUNDRED THOUSAND DOLLARS (US$900,000.00), which is legal tender of the
United States of America, which shall remain valid at least until October
thirtieth (30) of this year and which will be subject to the removal of mortgage
and antichresis that encumber the real estate property mentioned in the first
paragraph of this Clause in favor of Banco Continental de Panama, S.A., the
removal of any other encumbrances or limitations to control of title that may
encumber said real estate property and the subsequent registration of the
respective mortgages and antichresis of these real estate properties in favor of
Banco Exterior.
The remaining FIFTY THOUSAND DOLLARS (US$50,000), legal tender of the United
States of America, shall be paid directly by BUYER to SELLER, once the mortgage
and antichresis encumbrances over the Real Estate Properties mentioned in the
first paragraph of this Clause in favor of Banco Continental de Panama, S.A. are
removed; any other encumbrances or ownership limitations which may exist on said
Real Estate Properties are removed, and the first mortgages and antichresis on
the above mentioned Real Estate Properties are registered in favor of Banco
Exterior.
<PAGE>
The parties agree that, in the event the NINE HUNDRED THOUSAND DOLLARS
(US$900,000.00), legal tender of the United States of America, mentioned in the
fourth paragraph of this Clause, prove to be insufficient to cover credit
obligations included in Clause Third of the present Contract, BUYER may order
Banco Exterior to issue an irrevocable IOU in favor of Banco Continental de
Panama, S.A. BUYER will deduct any balance which in fulfillment of this
provision Banco Exterior pays Banco Continental de Panama, S.A. from the FIFTY
THOUSAND DOLLARS (US$50,000.00) which BUYER must pay directly to SELLER.
TENTH: BUYER recognizes that THE COMPANY is the potential beneficiary of the
acknowledgement of credit from the Colon Free Zone, for the costs incurred in
developing infrastructure in this international trade area (streets, sidewalks,
drainage, sanitation and rainwater systems, sewage and street lighting).
BUYER undertakes to pay Cohen and Attia Internaconal (sic) S.A. company the
amount of TWENTY-NINE THOUSAND TWO HUNDRED DOLLARS (US$29,200), legal tender of
the United States of America, after the Administration of the Colon Free Zone
agrees to enter into a Lease-Back Agreement with THE COMPANY, after the
Agreement enters into effect and after the benefit of the credit can be deducted
from THE COMPANY's rental payment to the Colon Free Zone by virtue of the Lease
Agreement for the Lot referred to in Clause Sixth of this Agreement, or by
virtue of any other lease Agreement entered into in future by THE COMPANY and
the Colon Free Zone.
The obligation to carry out all administrative steps to obtain the Lease-Back
Agreement from the Administration of the Colon Free Zone pertains to SELLER, who
shall act on behalf of THE COMPANY in this effort. Notwithstanding this, BUYER
shall cooperate in every way to comply with this objective.
<PAGE>
If for any reason not due to causes attributable to BUYER, the Administration of
the Colon Free Zone fails to grant the Lease-Back Agreement to THE COMPANY, the
latter may act against SELLER to recover the sums owing THE COMPANY by the
Administration of the Colon Free Zone.
Immediately upon SELLER's payment to BUYER of the full amount mentioned in the
preceding paragraph, it may initiate the claim or claims it deems advisable on
behalf of THE COMPANY to obtain the Lease-Back Agreement from the Colon Free
Zone.
ELEVENTH: SELLER delivers to BUYER and the latter acknowledges receipt to its
satisfaction of the following documents:
a. Public Writ No. 204 of January 15, 1993.
b. Public Writ No. 843 of December 16, 1994.
c. Public Writ No. 3872 of August 1, 1995.
d. Stock Register of Centauro Internacional, S.A.
e. Minute Book of Centauro Internacional, S.A.
f. Lease Agreement for Lot No. 463, entered into with the Colon Free Zone.
TWELFTH: SELLER states and warrants to BUYER, as follows:
1. That as evidenced in the Public Registry, Microfilm Section
(Commercial), File 269150, Roll 37832, Image 0046, THE COMPANY has been
duly registered.
2. That THE COMPANY has capital stock of ten (10) shares with a par value
of ONE THOUSAND DOLLARS (US$1,000.00), legal tender of the United
States of America, each.
3. That the whole of THE COMPANY's capital is composed of ten (10)
certificates pertaining to one (1) share each, identified with numbers
from one (1) to ten (10),
<PAGE>
which account for one hundred per cent (100%) of shares authorized,
issued and outstanding, all of which belong to SELLER.
4. That THE SHARES have been duly issued and are the exclusive property of
SELLER.
5. That SELLER may freely dispose of THE SHARES and that same are free of
any encumbrance and charge.
6. That THE SHARES have not been issued in violation of the rights of
other shareholders or third parties.
7. That no options of any kind exist or have been conferred by assignors,
nor warranties, agreements, requirements, commitments or suits pending
of any kind in which SELLER is involved, that may in any way have
restricted the transfer of THE SHARES or which may in any way affect
them. It likewise warrants that no obligations exist in THE COMPANY
that are convertible into shares.
8. That the transfer of THE SHARES comprises the dividends earned and not
distributed.
9. That no lawsuit or claim exists or is expected, nor any other manner of
judicial or administrative action against THE COMPANY for events or
omissions occurring prior to the signing of this Agreement.
10. THE COMPANY's accounting records and Financial Statements reflect the
current economic situation of THE COMPANY.
11. That all information given by SELLER to BUYER in relation to THE
COMPANY is true, correct, accurate and faithful.
<PAGE>
THIRTEENTH: In the event that any of the statements or warranties contained in
clauses First, Sixth, Seventh or Twelfth of this Agreement shall be found to be
inaccurate, SELLER shall answer to BUYER, in line with the provisions which
follow:
1. BUYER shall notify SELLER in writing of any fact it may learn of and as
a result of which any statements or warranties made in the
aforementioned clauses are or may be inaccurate, as well as any court
or out-of-court claim formulated against THE COMPANY, which refers to
the warranties or statements in question or is based on events or
omissions occurring prior to the signing of this Agreement.
2. Within the fifteen (15) days following receipt of notice as described
in the preceding clause, SELLER may determine whether the claim in
question is valid or unfounded. If SELLER does not transmit to BUYER in
writing and in a timely fashion, its opinion on the validity of a given
claim, BUYER shall assume that same is valid and if it deems it
advisable, shall pay and attempt to recover payment from SELLER.
3. Assuming that SELLER feels that the claim referred to in the preceding
clause has no merits, SELLER shall notify THE COMPANY in writing so
that it may refrain from paying the obligation in question. In this
case, BUYER shall cause THE COMPANY to grant to SELLER or a person
designated by the latter the necessary powers and attributes so that
SELLER may, at its own expense and on behalf of its principal, put in a
defense against the claim and assert the exceptions or arguments which
it may consider appropriate.
4. SELLER shall compensate THE COMPANY for any damages caused to it by
virtue of inaccuracy in the statements or warranties mentioned in this
clause, as well as for judicial or out-of-court claims made against THE
COMPANY, based
<PAGE>
on such statements or warranties, and those based on events or
omissions occurring prior to the signing of this Agreement.
FOURTEENTH: Each party shall cover its lawyers' fees. Notarial and other costs
incurred in order to formalize the Agreement shall be for the account of BUYER.
FIFTEENTH: The parties agree that any differences or disputes that may arise
between them in relation to compliance, application, interpretation or
termination of this Agreement shall be resolved by means of arbitration
according to the rules set out in the Judicial Code of the Republic of Panama.
SIXTEENTH: Any notice given by one party to the other in relation to this
Agreement shall be given in writing to the following addresses:
TO BUYER: Apartado Postal 3247, Zona Libre de Colon, Republica de Panama.
Telephone: 441-6566. Telefax: 441-1860.
TO SELLER: Apartado Postal 4060, Zona Libre de Colon, Republica de Panama.
Telephone: 445-3100. Telefax: 441-4238.
IN WITNESS OF FULL AGREEMENT WITH ALL OF THE ABOVE, both parties sign this
agreement in two identical copies, in Panama City, on the second (2) day of the
month of September, nineteen hundred and ninety-seven (1997).
SELLER BUYER
(signed) (signed)
VICTOR ATTIA CATTAN EZCONY TRADING CORPORATION
Identity Card 3-40-152. Daniel Homsany Gateno
Identity Card 8-255-185
NOEMI MORENO ALBA, Notary Public, Tenth Circuit, Panama, Identity Card 7-37-78,
<PAGE>
DOES HEREBY CERTIFY: that the signatures of VICTOR ATTIA CATTAN and DANIEL
HOMSANY GATENO have been recognized as their own by the parties signing this
document; consequently, they are genuine signatures.
Panama, September 3, 1997.
(There are two illegible signatures described as): Witness, Witness.
(signed, illegible) NOEMI MORENO ALBA, Tenth Notary Public.
<PAGE>
2308-97/1182
SHARE PURCHASE- SALE CONTRACT
By and between the undersigned VICTOR ATTIA CATTAN, a male businessman
of legal age, a resident of this city, Panamanian, bearer of personal
identification card No. 3-40-152, acting in his own name and representation, who
shall hereinafter be referred to as SELLER, party of the first part; and DANIEL
HOMSANY GATENO, male Panamanian of legal age, a businessman, a resident of this
city and bearer of personal identification card No. 8-255-185, acting on behalf
and in representation of EZCONY TRADING CORPORATION, S.A., a company duly
incorporated pursuant to the laws of the Republic of Panama and registered in
File 093213, Roll 9061, Image 0025 of the Mercantile Microfilm Section of the
Public Registry, authorized for this act, as evidenced in the minutes of the
competent corporate body of said company, who shall hereinafter be referred to
as BUYER, party of the second part, it has been agreed to enter into a Share
Purchase-Sale Contract, which shall be governed by the following:
CLAUSES:
FIRST: SELLER states and warrants to BUYER:
1. That he is the sole and legitimate owner of TEN (10) common shares with
a par value of ONE THOUSAND DOLLARS (US$1,000) each, which comprise the
entire capital stock of Ocean Pavillion Corp., S.A. (hereinafter THE
COMPANY).
2. That the shares referred to in item one (1) above are fully paid-in and
issued and that there is no encumbrance or charge over them.
3. That SELLER has free availability of the shares and there is no legal,
conventional, statutory, judicial or other restriction affecting the
free disposal of same.
<PAGE>
4. That at this date there is no lawsuit, legal proceeding or trial
against THE COMPANY which has been duly notified to it, initiated by
third parties or any other public officials or entities, that could in
any way adversely affect the business affairs, assets or financial
position of THE COMPANY and that, to the best of its knowledge, there
is moreover no threat of possible lawsuits or claims against it by
third parties.
SECOND: SELLER hereby undertakes to sell and transfer to BUYER one hundred per
cent (100%) of THE COMPANY'S shares, represented by ten Share Certificates from
number one (1) to number ten (10), containing one share each, with a par value
of one thousand dollars (US$1,000) each (hereinafter THE SHARES).
Transfer of THE SHARES shall be effected once SELLER complies with the
conditions contained in Clause Ninth of this Agreement and within the period
therein stipulated, and BUYER complies with its obligations and with payment of
THE SHARES, pursuant to the same Clause Ninth. Once this Clause has been
complied with, SELLER shall deliver to BUYER the respective, duly endorsed share
certificates.
Likewise, the parties agree that transfer of THE SHARES shall be done with no
reservations and will include any rights SELLER may have over the capital of THE
COMPANY, with no reservations or limitations whatsoever.
THIRD: SELLER states that Centauro Internacional, S.A., a company duly
incorporated pursuant to the laws of the Republic of Panama and registered in
File 269150, Roll 37832 and Image 0046, is the holder of credit obligations
originally established in favor of Banco Continental de Panama, S.A. by the
company, ALMACENADORA LAFA, S.A., through Public Writ No. 1770 of April 10,
1995, and which were later assigned to Centauro Internacional, S.A. through
Public Writ No. 3872 of August 1, 1995.
<PAGE>
FOURTH: SELLER states that THE COMPANY is the owner of Real Estate Property No.
12452, registered on Roll 16873, Entry 1, Document 2, of the Property Section,
Colon Province and that at the date of signing this agreement, said real estate
is encumbered by mortgage and antichresis in favor of Banco Continental de
Panama, S.A., for the amount of one million two hundred and fifty thousand
dollars (US$1,250,000.00), which is legal tender of the United States of
America; such encumbrances are collateral for the credit obligations mentioned
in Clause Third.
FIFTH: SELLER states that Bridgeocean Inc., S.A. company owns Real Estate
Property No. 12460, registered on Roll 16890, Entry 1, Document 4; that
Distribuidora Versalles, S.A. company owns Real Estate Property 12449,
registered on Roll 16873, Entry 1, Document 1 and that Centauro Internacional,
S.A. company owns Real Estate Property 12459, registered on Roll 16890, Entry 1,
Document 3, all in the Property Section of Colon Province.
Likewise, SELLER states that all real estate mentioned in this Clause are
encumbered with mortgage and antichresis in favor of Banco Continental de
Panama, S.A. for the amount of one million two hundred and fifty thousand
dollars (US$1,250,000), which is legal tender of the United States of America;
such encumbrances are collateral for the credit obligations contained in Clause
Third.
SIXTH: SELLER states that, on July 20, 1994, THE COMPANY entered into a Lease
Agreement for Lot No. 464 with the Colon Free Zone and BUYER hereby accepts
transfer of all rights and obligations contained in said Agreement.
SEVENTH: SELLER states that except for the provisions of clauses Fourth and
Sixth of this Agreement, THE COMPANY shall be free of all liabilities pending
payment. The parties also state that any liabilities or obligations THE COMPANY
may have arising from events or omissions prior to the signing of this Agreement
shall be assumed by SELLER.
<PAGE>
EIGHTH: BUYER shall receive the duly endorsed Share Certificates referred to in
Clause Second of this Agreement for the overall price of TWO HUNDRED THOUSAND
DOLLARS (US$200,000), legal tender of the United States of America, at the rate
of TWENTY THOUSAND DOLLARS (US$20,000), legal tender of the United States of
America, per share, after the conditions set out in Clause Ninth are complied
with.
NINTH: BUYER shall be under the obligation to pay SELLER the sum stated in the
preceding Clause, once the mortgage and antichresis are removed from Farm 12459,
registered in Roll 16890, Entry 1, Document 3, property of Centauro
Internacional, S.A.; once the mortgage and antichresis are removed from Real
Estate Property 12449, registered in Roll 16873, Entry 1, Document 1, property
of Distribuidora Versailles, S.A.; once the mortgage and antichresis are removed
from Real Estate Property 12460, registered in Roll 16890, Entry 1, Document 4,
property of Bridgeocean Inc., S.A. company; once the mortgage and antichresis
are removed from Real Estate Property 12452, registered in Roll 16873, Entry 1,
Document 2, property of THE COMPANY, all from the Property Section of Colon
Province; once any other encumbrances or limitations to control of title are
removed over said real estate, all of which are obligations for the account of
SELLER, and once the first mortgage and antichresis on the aforementioned Real
Estate are registered by BUYER in favor of Banco Exterior, by virtue of the
mortgage loan which this banking institution shall grant to BUYER. The necessary
steps and registration of this latter loan are part of the obligations of BUYER.
BUYER shall have until September thirtieth (30), 1997, to comply with its
obligations according to this Clause. Thirty (30) days after the date on which
SELLER fulfilled its commitments, the obligations provided in this Clause for
BUYER shall become enforceable.
Upon signing this Agreement, BUYER delivers to SELLER and the latter
acknowledges receipt to its full satisfaction an irrevocable promise of payment
by Banco Exterior in
<PAGE>
favor of SELLER in the amount of ONE HUNDRED AND FIFTY THOUSAND DOLLARS
(US$150,000), which is legal tender of the United States of America, which shall
remain valid at least until October thirtieth (30) of this year and which will
be subject to the removal of mortgage and antichresis that encumber the real
estate property mentioned in the first paragraph of this Clause in favor of
Banco Continental de Panama, S.A., the removal of any other encumbrances or
limitations to control of title that may encumber said real estate property and
the subsequent registration of the respective mortgages and antichresis of these
real estate properties in favor of Banco Exterior.
The remaining FIFTY THOUSAND DOLLARS (US$50,000), legal tender of the United
States of America, shall be paid directly by BUYER to SELLER, once the
conditions of the preceding paragraph have been met.
TENTH: BUYER recognizes that THE COMPANY is the potential beneficiary of the
acknowledgement of credit from the Colon Free Zone, for the costs incurred in
developing infrastructure in this international trade area (streets, sidewalks,
drainage, sanitation and rainwater systems, sewage and street lighting).
BUYER undertakes to pay Cohen and Attia Internaconal (sic) S.A. company the
amount of TWENTY-NINE THOUSAND TWO HUNDRED DOLLARS (US$29,200), legal tender of
the United States of America, after the Administration of the Colon Free Zone
agrees to enter into a Lease-Back Agreement with THE COMPANY, after the
Agreement enters into effect and after the benefit of the credit can be deducted
from THE COMPANY's rental payment to the Colon Free Zone by virtue of the Lease
Agreement for the Lot referred to in Clause Sixth of this Agreement, or by
virtue of any other lease Agreement entered into in future by THE COMPANY and
the Colon Free Zone.
The obligation to carry out all administrative steps to obtain the Lease-Back
Agreement from the Administration of the Colon Free Zone pertains to SELLER, who
shall act on
<PAGE>
behalf of THE COMPANY in this effort. Notwithstanding this, BUYER shall
cooperate in every way to comply with this objective.
If for any reason not due to causes attributable to BUYER, the Administration of
the Colon Free Zone fails to grant the Lease-Back Agreement to THE COMPANY, the
latter may act against SELLER to recover the sums owing THE COMPANY by the
Administration of the Colon Free Zone.
Immediately upon SELLER's payment to BUYER of the full amount mentioned in the
preceding paragraph, it may initiate the claim or claims it deems advisable on
behalf of THE COMPANY to obtain the Lease-Back Agreement from the Colon Free
Zone.
ELEVENTH: SELLER delivers to BUYER and the latter acknowledges receipt to its
satisfaction of the following documents:
a. Public Writ No. 208 of January 15, 1993.
b. Public Writ No. 25 of January 11, 1996.
c. Public Writ No. 852 of December 20, 1994.
d. Stock Register of Ocean Pavillion Corp., S.A.
e. Minute Book of Ocean Pavillion Corp., S.A.
f. Lease Agreement for Lot No. 464, entered into with the Colon Free Zone.
TWELFTH: SELLER states and warrants to BUYER, as follows:
1. That as evidenced in the Public Registry, Microfilm Section
(Commercial), File 269151, Roll 37832, Image 0054, THE COMPANY has been
duly registered.
2. That THE COMPANY has capital stock of ten (10) shares with a par value
of ONE THOUSAND DOLLARS (US$1,000), legal tender of the United States
of America, each.
<PAGE>
3. That the whole of THE COMPANY's capital is composed of ten (10)
certificates pertaining to one (1) share each, identified with numbers
from one (1) to ten (10), which account for one hundred per cent (100%)
of shares authorized, issued and outstanding, all of which belong to
SELLER.
4. That THE SHARES have been duly issued and are the exclusive property of
SELLER.
5. That SELLER may freely dispose of THE SHARES and that same are free of
any encumbrance and charge.
6. That THE SHARES have not been issued in violation of the rights of
other shareholders or third parties.
7. That no options of any kind exist or have been conferred by assignors,
nor warranties, agreements, requirements, commitments or suits pending
of any kind in which SELLER is involved, that may in any way have
restricted the transfer of THE SHARES or which may in any way affect
them. It likewise warrants that no obligations exist in THE COMPANY
that are convertible into shares.
8. That the transfer of THE SHARES comprises the dividends earned and not
distributed.
9. That no lawsuit or claim exists or is expected, nor any other manner of
judicial or administrative action against THE COMPANY for events or
omissions occurring prior to the signing of this Agreement.
10. THE COMPANY's accounting records and Financial Statements reflect the
current economic situation of THE COMPANY.
<PAGE>
11. That all information given by SELLER to BUYER in relation to THE
COMPANY is true, correct, accurate and faithful.
THIRTEENTH: In the event that any of the statements or warranties contained in
clauses First, Sixth, Seventh or Twelfth of this Agreement shall be found to be
inaccurate, SELLER shall answer to BUYER, in line with the provisions which
follow:
1. BUYER shall notify SELLER in writing of any fact it may learn of and as
a result of which any statements or warranties made in the
aforementioned clauses are or may be inaccurate, as well as any court
or out-of-court claim formulated against THE COMPANY, which refers to
the warranties or statements in question or is based on events or
omissions occurring prior to the signing of this Agreement.
2. Within the fifteen (15) days following receipt of notice as described
in the preceding clause, SELLER may determine whether the claim in
question is valid or unfounded. If SELLER does not transmit to BUYER in
writing and in a timely fashion, its opinion on the validity of a given
claim, BUYER shall assume that same is valid and if it deems it
advisable, shall pay and attempt to recover payment from SELLER.
3. Assuming that SELLER feels that the claim referred to in the preceding
clause has no merits, SELLER shall notify THE COMPANY in writing so
that it may refrain from paying the obligation in question. In this
case, BUYER shall cause THE COMPANY to grant to SELLER or a person
designated by the latter the necessary powers and attributes so that
SELLER may, at its own expense and on behalf of its principal, put in a
defense against the claim and assert the exceptions or arguments which
it may consider appropriate.
4. SELLER shall compensate THE COMPANY for any damages caused to it by
virtue of inaccuracy in the statements or warranties mentioned in this
clause, as
<PAGE>
well as for judicial or out-of-court claims made against THE COMPANY,
based on such statements or warranties, and those based on events or
omissions occurring prior to the signing of this Agreement.
FOURTEENTH: Each party shall cover its lawyers' fees. Notarial and other costs
incurred in order to formalize the Agreement shall be for the account of BUYER.
FIFTEENTH: The parties agree that any differences or disputes that may arise
between them in relation to compliance, application, interpretation or
termination of this Agreement shall be resolved by means of arbitration
according to the rules set out in the Judicial Code of the Republic of Panama.
SIXTEENTH: Any notice given by one party to the other in relation to this
Agreement shall be given in writing to the following addresses:
TO BUYER: Apartado Postal 3247, Zona Libre de Colon, Republica de Panama.
Telephone: 441-6566. Telefax: 441-1860.
TO SELLER: Apartado Postal 4060, Zona Libre de Colon, Republica de Panama.
Telephone: 445-3100. Telefax: 441-4238.
IN WITNESS OF FULL AGREEMENT WITH ALL OF THE ABOVE, both parties sign this
agreement in two identical copies, in Panama City, on the second (2) day of the
month of September, nineteen hundred and ninety-seven (1997).
SELLER BUYER
(signed) (signed)
VICTOR ATTIA CATTAN EZCONY TRADING CORPORATION
Identity Card 3-40-152. Daniel Homsany Gateno
Identity Card 8-255-185
<PAGE>
NOEMI MORENO ALBA, Notary Public, Tenth Circuit, Panama, Identity Card 7-37-78,
DOES HEREBY CERTIFY: that the signatures of VICTOR ATTIA CATTAN and DANIEL
HOMSANY GATENO have been recognized as their own by the parties signing this
document; consequently, they are genuine signatures.
Panama, September 3, 1997.
(There are two illegible signatures described as): Witness, Witness.
(signed, illegible) NOEMI MORENO ALBA, Tenth Notary Public.
EXHIBIT 10.61
REPUBLIC OF PANAMA Real Estate: 13919
Code: 3001
EIGHT NOTARY OF THE CIRCUIT (illegible): 23326
PANAMA PROVINCE Document No. 4
(illegible)
LIC. DIOMEDES EDGARDO CERRUD AYALA
NOTARY PUBLIC
Edificio Torre Cosmos Telephones: 213-8028
Planta Baja - Area Bancaria 264-6270
Apartado 6-6937 264-3676
El Dorado, Panama Fax: 264-3506
Cellular: 612-5656
COPY
WRIT No. 6874 OF JULY 28, 1997
CONTENTS: Whereby the company CONSORCIO PARA EL DESARROLLO DE FOLK RIVER, S.A.
(COFRISA) and the company EZCONY TRADING CORP. enter into a Purchase
and Sale Agreement.
<PAGE>
REPUBLIC OF PANAMA
NOTARIED DOCUMENT
(SEAL)
EIGHTH NOTARY OF THE PANAMA CIRCUIT
* * * * *
PUBLIC WRIT NUMBER SIX THOUSAND EIGHT HUNDRED AND SEVENTY-FOUR
6874
Whereby the company CONSORCIO PARA EL DESARROLLO DE FOLK RIVER, S.A. (COFRISA)
and the company EZCONY TRADING CORP. enter into a Purchase and Sale Agreement.
Panama, July 28, 1997.
In Panama City, Capital of the Republic of Panama and Head of the Notarial
Circuit of the same name, on the twenty-eighth (28th) day of the month of July,
nineteen hundred and ninety-seven (1997), before me, DIOMEDES EDGARDO CERRUD
AYALA, Eighth Notary Public of the Notarial Circuit of Panama, bearer of
personal identification card No. Eight - one hundred and seventy-one - three
hundred and one (8-171-301), personally came Mr. GUILLERMO VAN HOORDE GRAJALES,
a Panamanian male of legal age, married, a resident of this city, bearer of
personal identification card number Eight - one hundred and eighty-nine - seven
hundred and eighty (8-189-780), acting on behalf and in representation of the
company, CONSORCIO PARA EL DESARROLLO DE FOLK RIVER, S.A. (COFRISA), duly
registered in file Zero six two three one five (062315), roll Four eight zero
five (4805), image Zero one seven two (0172) of the Microfilm Section
(Commercial) of the Public Registry, authorized for this act by the minutes of
the Board of Directors as transcribed at the end of this public document and
which forms an integral part of same, party of the one part, who shall
hereinafter be referred to as SELLER; and DAVID D'JEMAL HOMSANY, a Panamanian
male of legal age, married, bearer of personal identification card number Eight-
two hundred and five - nine hundred and thirty-four (8-205-934), acting in his
capacity as Secretary of the company EZCONY TRADING CORP., a company duly
registered in file nine three two one three (93213), roll
<PAGE>
nine zero six one (9061), image two five (25) of the Microfilm Section
(Commercial) of the Public Registry, duly authorized for this act by the minutes
of a Special Stockholders' Meeting of the aforementioned company which is
transcribed at the end of this writ and which forms an integral part of same,
who shall hereinafter be referred to as BUYER, party of the second part; I
witness that I know these persons and that they requested me to certify by means
of public writ the Purchase and Sale Agreement they are entering into under the
following terms and conditions: FIRST: SELLER states that it owns Real Estate
Property number one three nine one nine (13919, duly registered in Code three
zero zero one (3001), Roll two three zero zero nine (23009), Complementary
Document one (1) of the Property Section of Colon Province of the Public
Registry, which consists in place of business 09-15, Edificio COFRISA number
nine (9), whose area, measurements and limits are stated in the Public Registry.
SECOND: SELLER states that sells in real and effective fashion to BUYER Real
Property number one three nine one nine (13919), described in the preceding
clause, for the amount of FIVE HUNDRED AND EIGHTY-NINE THOUSAND DOLLARS AND NO
CENTS (US$589,000.00), legal tender of the United States of America, of which
amount SELLER states it has already received to its entire satisfaction FIVE
HUNDRED AND THIRTY THOUSAND DOLLARS AND NO CENTS (US$530,000.00), legal tender
of the United States of America, and BUYER hereby undertakes to pay SELLER the
remaining portion, that is, the amount of FIFTY-NINE THOUSAND DOLLARS AND NO
CENTS (US$59,000.00), legal tender of the United States of America, at the time
of signing this public instrument by means of cashiers' check favor of SELLER.
THIRD: SELLER states that the sale of Real Property number one three nine one
nine (13919), whose data are found in this document, is done free of
encumbrances, save for legal ones and it undertakes to remedy such in case of
eviction. FOURTH: The parties state that legal and notarial expenses caused by
this writ, as well as Public Registry registration fees, shall be for the
account of BUYER. FIFTH: BUYER states that it accepts the sale made to it by
SELLER in the terms described in this agreement. MINUTES OF THE MEETING OF THE
BOARD OF DIRECTORS OF CONSORCIO PARA EL DESARROLLO DE FOLK RIVER, S.A.
(COFRISA). In Panama City, Republic of Panama, at nine in the
<PAGE>
morning (9:00 a.m.) on the twenty-fifth (25th) day of July, nineteen hundred and
ninety-seven (1997), at the company's corporate headquarters, a meeting of the
Board of Directors of CONSORCIO PARA EL DESARROLLO DE FOLK RIVER, S.A. (COFRISA)
was held. The following directors were present: JUAN DAVID MORGAN, Secretary of
the company, acting in his own name and in representation of EDUARDO MORGAN,
JR., Vice President, duly authorized for this act; MITSUO SAKA, Deputy, and
GUILLERMO VAN HOORDE GRAJALES, Treasurer. In the President's absence, GUILLERMO
VAN HOORDE GRAJALES acted as Ad-Hoc President of the meeting, and Juan David
Morgan, Secretary, acted as such. There being the regulatory quorum for a
meeting to take place and agreements to be arrived at, the directors agreed to
hold the meeting. The Ad-Hoc President announced that the purpose of the meeting
was to authorize the sale of Real Estate Property number one three nine one nine
(13919), duly registered in Code three zero zero one (3001), Roll two three zero
zero nine (23009), Complementary document one (1) of the Property Section of
Colon Province of the Public Registry, to the company EZCONY TRADING CORP. A
motion was duly made, seconded and unanimously approved. It was resolved: "To
authorize Mr. Guillermo Van Hoorde Grajales, Director-Treasurer of the company,
to transfer title in the way of a sale to the company, EZCONY TRADING CORP., to
Real Estate Property number one three nine one nine (13919), duly registered in
Code three zero zero one (3001), Roll two three zero zero nine (23009),
Complementary Document one (1) of the Property Section of Colon Province of the
Public Registry for the amount of FIVE HUNDRED AND EIGHTY-NINE THOUSAND DOLLARS
AND NO CENTS (US$589,000.00), legal tender of the United States of America. Mr.
Van Hoorde Grajales is hereby authorized to sign the documents and writs that
may be necessary for completing the transaction." There being no other matter to
discuss, the meeting was closed at ten in the morning (10:00 a.m.) of the same
day. (Signed) Guillermo Van Hoorde Grajales, Ad-Hoc President. Juan David
Morgan, Secretary. CERTIFICATE. The undersigned Secretary of the company
CONSORCIO PARA EL DESARROLLO DE FOLK RIVER, S.A. (COFRISA) CERTIFIES: 1. That on
the twenty-fifth (25) day of July, 1997, a meeting of the Board of Directors was
held. 2. That there was the necessary quorum at such meeting to adopt
<PAGE>
resolutions. 3. That the above is a true copy of the original Minutes. In
testimony of which I sign this Certificate. Given on July twenty-fifth (25),
1997. (Signed) Juan David Morgan, Secretary. MINUTES OF THE SPECIAL STOCKHOLDERS
MEETING OF THE COMPANY EZCONY TRADING CORP.
In Panama City, Republic of Panama, at ten in the morning (10:00 a.m.) on July
twenty-fifth (25), nineteen hundred and ninety-seven (1997), A Special
Stockholders' Meeting of the company EZCONY TRADING CORP, took place.
The meeting was presided by Mr. EZRA COHEN YITZAKI, President of the company and
Mr. David D'Jemal Homsany, Secretary of the company, took the minutes. The
President stated that the whole of the company's shares issued and outstanding
being represented, summons could be waived and there being the regulatory
quorum, the meeting could proceed to deal with any matter placed before it. The
President announced that the reason for the meeting was to authorize the
purchase from CONSORCIO PARA EL DESARROLLO DE FOLK RIVER, S.A. (COFRISA) of Real
Estate Property number one three nine one nine (13919), duly registered in Code
three zero zero one (3001), Roll two three zero zero nine (23009), Complementary
Document one (1) of the Property Section of Colon Province of the Public
Registry. A motion was duly made, seconded and unanimously approved. It was
resolved "To authorize Mr. David D'Jemal Homsany, Secretary of the Company, to
sign on behalf of the company such public and private documents as may be
necessary in order to purchase from the company CONSORCIO PARA EL DESARROLLO DE
FOLK RIVER, S.A. (COFRISA), Real Estate Property number one three nine one nine
(13919), duly registered in Code three zero zero one (3001), Roll two three zero
zero nine (23009), Complementary Document one (1) of the Property Section of
Colon Province of the Public Registry for the amount of FIVE HUNDRED AND
EIGHTY-NINE THOUSAND DOLLARS AND NO CENTS (US$589,000.00), legal tender of the
United States of America, of which amount FIVE HUNDRED AND THIRTY THOUSAND
DOLLARS AND NO CENTS (US$530,000.00), legal tender of the United States of
America, has already been paid to SELLER. There being no other matter to
discuss, the meeting was closed at eleven in the morning (11:00 a.m.) of the
same day. (Signed) Ezra Cohen Yitzaki, President. David
<PAGE>
D'Jemal Homsany, Secretary. CERTIFICATE: The undersigned Secretary of the
company EZCONY TRADING CORP. CERTIFIES: 1. That on the twenty-fifth (25) day of
July, 1997, a Special Stockholders Meeting was held. 2. That the necessary
quorum to adopt resolutions was present at the meeting. 3. That the above is a
true copy of the original Minutes. In testimony of which, I sign this
Certificate. Given on the twenty-fifth (25th) day of July, 1997. David D'Jemal
Homsany, Secretary. These minutes have been countersigned by Lic. Enrique A.
Jimenez, Jr. of the law firm Morgan & Morgan. (Signed) Enrique A. Jimenez, Jr.
The undersigned Notary Public certifies that by virtue of this Agreement, Real
Property Sales Tax has been paid according to law one hundred and six (106) of
December thirtieth, nineteen hundred and seventy-four (1974), amended by Law
thirty-one (31) of December thirtieth, nineteen hundred and ninety-one (1991),
according to voucher of the General Income Directorate, dated August eighteenth
(18), nineteen hundred and ninety-seven (1997), in the amount of eleven thousand
seven hundred and eighty and no cents (US$11,780.00), legal tender of the United
States of America. The Notary Public likewise points out that Clearance of Real
Property number two zero one three nine one (201391) for Real Property number
one three nine one nine (13919), valid until August thirty-first (31), nineteen
hundred and ninety-seven (1997). The Notary Public advises that a copy of this
instrument should be registered; it was read to those in attendance before the
attesting witnesses: QUIBIAN TERIBE PANAY GONZALEZ, a male and bearer of
personal identification card number eight - five hundred and twelve - six
hundred and seventy-five (8-512-675) and OLGA AMAYA VDA. DE HERRERA, a female
and bearer of personal identification card number three - twenty-five- nine
hundred and eighteen (3-25-918), both of legal age, Panamanian citizens and
residents of this city, whom I know and who are capable of carrying out this
act. It was found acceptable, they approved it and all signed as testimony
before me, the certifying Notary Public. THIS WRIT BEARS NUMBER SIX THOUSAND
EIGHT HUNDRED AND SEVENTY-FOUR.
6874
<PAGE>
(Signed) Guillermo Van Hoorde Grajales, David D'Jemal Homsany, Quibia Teribe
Panay Gonzalez, Olga Amaya Vda. de Herrera, DIOMEDES EDGARDO CERRUD AYALA,
Eighth Notary Public of the Panama Circuit. This copy which I hereby issue and
sign and on which I stamp my seal agrees with the original, in Panama City,
Republic of Panama, on the twenty-eight (28) day of the month of July, nineteen
hundred and ninety-seven (1997).
(Signed)
DIOMEDES EDGARDO CERRUD AYALA
Eighth Notary Public.
OFFICE OF THE PUBLIC REGISTRY
PANAMA.
We submit this document at 11:13:26.3 on August 19, 1997, Volume 258, Page
(blank), Entry 11034 of the Daily Record of GABRIEL MATOS, Head of Record.
Fees, B/ 1,416. Registration number 897112742.
(Signed illegibly)
<PAGE>
PANAMA REPUBLIC OF PANAMA
(SEAL)
The above document was registered in the Public Registry, Property Section,
Colon Province, Real Property 13919, Code 3001, Roll 23326, Complementary
Document No. 4. Entry 2 - Purchase & Sale. Fees B/ 1,180. Panama August 28,
1997.
The Head Registrar
(signed illegibly).
<PAGE>
REPUBLIC OF PANAMA
MINISTRY OF FINANCE AND TREASURY
GENERAL INCOME DIRECTORATE (DGI)
SINGLE ANNUAL COMPANY TAX
(LAW No. 1 of February 28, 1985)
No. 468879
Registration Number: Roll/Volume 9061. Image/Page 25. File/Entry 93213. DV 0 2.
Name of company: EZCONY TRADING CORPORATION. Name of legal representative:
MOISES EZRA COHEN. I.D. card N-16-236. Name of resident agent: EDMOND ESPINOSA,
I.D. card 4-95-420. Incorporated according to the Laws of the Country: Panama
(checked) Other countries (blank). Date of Public Registry registration: day 6
month 7 year 1982.
Formalization according to public writ No. 6781.
Period covered by payment: year 1996 to 1997. (N.T. Other years are blank.) For
use by DGI: Payment valid until month 10 day 6 year 1997. Amount 150.
We hereby swear under solemn oath and with full knowledge of the sanctions
imposed by Article 752 of the Fiscal Code that all information herein contained
is correct. We likewise swear that we know that the sanctions imposed by Article
752 of the Fiscal Code consist, INTER ALIA, in the fact that by making false
statements Fiscal Fraud may be committed, which shall be sanctioned by a fine
not less than 5 times and not exceeding 10 times the amount fraudulently
reported.
(Signed): EDMOND A. ESPINOSA, Legal Representative or Resident Agent. 4 - 95 -
420. Colon, October 2, 1996.
Amount (line 16) 150. Total payable 150.
<PAGE>
* * * * *
REPUBLIC OF PANAMA
MINISTRY OF FINANCE AND TREASURY
GENERAL INCOME DIRECTORATE (DGI)
SINGLE ANNUAL COMPANY TAX
(LAW No. 1 of February 28, 1985)
Registration number: Roll/Volume 4805. Image/Page 172. File/Entry 62315. DV C O.
For use by DGI: 38030.
Name of company: CONSORCIO PARA EL DESARROLLO DEL FOLK RIVER, S.A. (COFRISA).
Name of legal representative: MIROYOSHI AOKI. I.D. card (blank). Name of
resident agent: MORGAN & MORGAN. R.U.C. - I.D. No. 702-437-16272. Incorporated
under the Laws of the Country: PANAMA. Public Registry registration date:
October 30, 1980. Public writ No. 4821. Notary Public: Fourth. Date formalized:
October 21, 1980.
Period covered by payment: 1996-1997. (All other years are blank.) For use by
DGI: Valid until January 30, 1998. Amount 150.
"This form has been processed and printed by the automatic data processing
system of the MORGAN & MORGAN firm and it is therefore understood to be made
under solemn oath according to the authorization granted to this firm by
Resolution No. 201-53 of February 25, 1982, issued by the General Income
Directorate of the Ministry of Finance and Treasury."
MORGAN & MORGAN, Signature of Legal Representative or Resident Agent. R.U.C. -
I.D. 702-437-15272. Place and Date: Panama, September 26, 1996.
Amount: 150.00. Surcharge 0.00. Total payable 150.00.
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Ezcony Interamerica Inc. and subsidiaries on Form S-8 of our report dated March
30, 1998, on our audits of the consolidated financial statements and financial
statement schedule of Ezcony Interamerica Inc. and subsidiaries as of December
31, 1997 and 1996, and for the years ended December 31, 1997, 1996 and 1995,
which report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Miami, Florida
March 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,280,887
<SECURITIES> 0
<RECEIVABLES> 36,130,447
<ALLOWANCES> 4,620,102
<INVENTORY> 9,176,952
<CURRENT-ASSETS> 52,447,302
<PP&E> 5,469,408
<DEPRECIATION> 1,036,704
<TOTAL-ASSETS> 56,928,622
<CURRENT-LIABILITIES> 49,003,224
<BONDS> 0
0
0
<COMMON> 12,954,723
<OTHER-SE> (6,746,686)
<TOTAL-LIABILITY-AND-EQUITY> 56,928,622
<SALES> 158,822,628
<TOTAL-REVENUES> 158,822,628
<CGS> 147,921,363
<TOTAL-COSTS> 147,921,363
<OTHER-EXPENSES> 9,971,888
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,235,660
<INCOME-PRETAX> (932,672)
<INCOME-TAX> 0
<INCOME-CONTINUING> (932,672)
<DISCONTINUED> (2,608,724)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,541,396)
<EPS-PRIMARY> (.79)
<EPS-DILUTED> (.79)
</TABLE>
