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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 25, 1997.
REGISTRATION NO. 333-20037
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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SONOMA INTERNATIONAL
(Name of Small Business Issuer in its Charter)
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NEVADA 4493 94-0880052
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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3000 LEXINGTON FINANCIAL CENTER
LEXINGTON, KENTUCKY 40507
(606) 281-0000
(Address and telephone number of registrant's principal executive offices)
JAMES L. FRYE
SONOMA INTERNATIONAL
3000 LEXINGTON FINANCIAL CENTER
LEXINGTON, KENTUCKY 40507
(606) 281-0000
(Name, address and telephone number of agent for service)
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Copies to:
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<S> <C>
RICHARD F. DAHLSON
CRAIG G. ONGLEY ALAN I. ANNEX
JACKSON WALKER, L.L.P. CAMHY KARLINSKY & STEIN LLP
901 MAIN STREET, SUITE 6000 1740 BROADWAY, 16TH FL.
DALLAS, TX 75202 NEW YORK, N.Y. 10019-4315
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER SECURITY(1) OFFERING PRICE(1) FEE
- --------------------------------------------------------------------------------------------------------------------------
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Common Stock, $.001 par value........... 3,450,000 shares $6.00 $20,700,000 $6,273.00
- --------------------------------------------------------------------------------------------------------------------------
Representative's Warrants to purchase
Common Stock.......................... 300,000 $.0001 $30.00 (2)
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Common Stock underlying Representative's
Warrants(3)........................... 300,000 shares $7.20 $2,160,000 $655.00
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Total............................................................................. $22,860,030 $6,928.00
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933, as amended (the
"Securities Act") and includes shares subject to the exercise of the
Over-Allotment Option.
(2) No fee is required pursuant to Rule 457(g) under the Securities Act.
(3) Issuable upon the exercise of the Representative's Warrants.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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<PAGE> 2
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 25, 1997
3,000,000 SHARES
SONOMA INTERNATIONAL
COMMON STOCK
All of the shares of common stock, $.001 par value, (the "Common Stock")
offered hereby (the "Offering") are being issued and sold by SONOMA
INTERNATIONAL (the "Company"). Although the Company is a public reporting
company through a prior registration, prior to the Offering, there has been no
material public trading market for the Common Stock and there can be no
assurance that such a market will develop after completion of the Offering or,
if developed, that it will be maintained. It is currently anticipated that the
initial public offering price will be $6.00 per share. For information regarding
the factors considered in determining the public offering price of the Common
Stock, see "Underwriting."
The Company intends to apply to have the Common Stock quoted on the Nasdaq
National Market under the proposed symbol "SNMA."
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
DILUTION AND SHOULD NOT BE PURCHASED BY INVESTORS WHO CANNOT AFFORD THE ENTIRE
LOSS OF THEIR INVESTMENT. SEE "RISK FACTORS" COMMENCING ON PAGE 4 AND "DILUTION"
AT PAGE 9.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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Per Share................................ $ $ $
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Total(3)................................. $ $ $
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(1) Does not include additional compensation payable to National Securities
Corporation, the Representative (the "Representative") of the several
Underwriters (as defined herein), in the form of a non-accountable expense
allowance or the value of the Representative's Warrants granted to
Representative to purchase up to 300,000 shares of Common Stock and which
were sold to Representative at a nominal price. In addition, see
"Underwriting" for information concerning indemnification and contribution
arrangements with the Underwriters and other compensation payable to the
Representative.
(2) Before deducting expenses estimated to be $1,500,000 payable by the Company
including the Underwriter's non-accountable expense allowance.
(3) The Company has granted to the Underwriters an option (the "Over-Allotment
Option"), exercisable within 45 days from the date of this Prospectus, to
purchase up to 450,000 additional shares of Common Stock upon the same
terms and conditions as set forth above solely to cover over-allotments, if
any. If the option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to the Company will be
$ , $ and $ , respectively. See "Underwriting."
The shares of Common Stock are offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters and
subject to approval of certain legal matters by their Counsel and subject to
certain other conditions. The Underwriters reserve the right to withdraw, cancel
or modify this Offering and to reject any order in whole or in part. It is
expected that the delivery of the shares will be made at the offices of National
Securities Corporation in Seattle, Washington on or about , 1997.
NATIONAL SECURITIES CORPORATION
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE> 4
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information and financial statements and
notes thereto appearing elsewhere in this Prospectus. Unless otherwise
indicated, the information contained in this Prospectus assumes no exercise of
the Over-Allotment Option or the Representative's Warrants (as defined).
Potential investors should carefully consider the information set forth under
"Risk Factors."
THE COMPANY
Sonoma International (the "Company" or "Sonoma") was formed as a Nevada
corporation in 1940 and had no material operations from 1988 until its
acquisition of Jamestown Resort & Marina Ltd., Jamestown Resort & Marina, Inc.
and Key West Conch Harbor, Inc. in December 1996. As a result of the
acquisitions, Sonoma now operates and manages leisure oriented real estate
properties. It currently controls two facilities, the Jamestown Resort & Marina
and the Key West Conch Harbor. The Jamestown Resort & Marina ("Jamestown"),
located on Lake Cumberland in South Central Kentucky, comprises approximately
291 acres of land and water leased from the U.S. Army Corps of Engineers.
Jamestown's facilities include: (i) a marina consisting of 805 slips, 645 of
which are annual rentals to the public and the remaining 160 of which are used
for transient rentals and to house the Company's Jamestown rental watercraft
fleet; (ii) the ship's store (which sells groceries, sundries and gifts); (iii)
a restaurant; (iv) a fuel depot; (v) yacht club and snack bar; (vi) lodging
rentals consisting of 18 individual cabins and 40 suites in a hotel setting
called the "Lodge" and (vii) boat rentals comprising 19 pontoon boats, 30 house
boats and the Jamestown Queen, a 140 passenger paddle-wheel boat used primarily
for sight seeing and dinner cruises. The percentage of total Company gross
revenues from Jamestown operations, assuming Key West Conch Harbor was acquired
effective January 1, 1995, were 86%, and 71% for the twelve month period ended
December 31, 1995 and 1996 respectively. During the twelve months ending
December 31, 1996, marina slip rentals accounted for 31% of the Jamestown gross
revenues and boat rentals, lodging and fuel sales comprised 16.7%, 17% and
13.7%, respectively, with the restaurant, ship's store and miscellaneous sales
responsible for the remainder.
Key West Conch Harbor ("Key West") is located on approximately two acres of
land, owned by the Company, in Key West Florida's "Old Town" preservation
district and has approximately 251 feet of frontage on a city street on one end
and 221 feet of water front on the opposite end. Key West is primarily a
commercial dock and fueling facility which currently consists of a 450 foot
newly constructed dock with two 100 foot finger piers, a Texaco Star Port(R)
fueling dock and a two story building housing marina operations and a small
convenience store with lavatory facilities. Also planned is a restaurant and
beverage facility and several retail shops, which the Company intends to lease
to third parties. The percentage of total Company gross revenues from Key West,
operations assuming Key West Conch Harbor was acquired effective January 1,
1995, were 14% and 29% for the twelve month period ending December 31, 1995 and
1996 respectively. Substantially all Key West's gross revenues are from fueling
sales and slip rentals.
The Company experienced a net loss before extraordinary items, of $611,060
in 1995 and $141,482 in 1996 and a reduction in its accumulated deficit from
$4,048,932 in 1995 to $1,671,928 in 1996. However, as a result of the completed
acquisitions and the reduction in debt to be accomplished with the proceeds of
this Offering, the Company expects to break even or make a small profit in 1997.
However, there can be no assurance that the Company will achieve such results.
See "Business".
Sonoma's business strategy is to utilize the Jamestown and Key West
facilities as cornerstone properties to provide a base from which to expand its
operations through future development and acquisition of leisure oriented real
estate properties including hotels, resorts, spas, marinas and other commercial
real property. The objective of the strategy is to attempt to balance out uneven
cash flow caused by seasonality of the resort and marina business by acquiring
properties whose "off " seasons are opposite of each other, and to utilize
economies of scale including reducing management personnel, and obtaining
quantity discounts for goods the Company resells and supplies the Company uses
in its day to day operations.
Through continuing acquisitions, the Company believes that it may develop
additional synergies and cost savings which could provide the Company a greater
opportunity to earn a profit. See "Business."
1
<PAGE> 5
Unless the context otherwise requires, all references to the Company or
Sonoma contained in this Prospectus shall be deemed to refer to the Company and
its subsidiaries, Key West and Jamestown. The Company's principal executive
offices are located at 3000 Lexington Financial Center, Lexington, Kentucky
40507, and its telephone number is (606) 281-0000.
THE OFFERING
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Offering Price..................................... $6.00 per share
Common Stock offered by the Company................ 3,000,000 shares
Common Stock to be outstanding after the
Offering(1)...................................... 5,300,000 shares
Use of proceeds by the Company..................... For general corporate purposes, including
$5,280,855 for the retirement of debt and
payment of accrued interest ($3,912,577 of which
is owed to insiders or affiliates of the
Company) and the balance of such net proceeds to
finance the expansion of the Company, primarily
through acquisition of similar businesses and
for working capital and general corporate
purposes. See "Use of Proceeds."
Proposed Nasdaq symbol............................. "SNMA"
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(1) Does not give effect to shares of Common Stock issuable upon exercise of the
Over-Allotment Option, exercise of the Representative's Warrants, or to the
350,000 shares of Common Stock reserved by the Company which may be issued
pursuant to the 1996 Long-Term Incentive Plan adopted by the Company. See
"Underwriting" and "Management -- Employee Benefit Plans."
RISK FACTORS AND DILUTION
Investment in the Common Stock offered hereby involves a high degree of
risk and immediate dilution. Investors should carefully consider the information
presented under the caption "Risk Factors" and "Dilution" in this Prospectus,
including risks related to the Company's limited operating history, future
business expansion and the risks inherent with the Company's business, among
others.
2
<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table summarizes certain selected consolidated financial data
of the Company and is qualified in its entirety by the more detailed
consolidated financial statements contained elsewhere in this Prospectus. The
summary consolidated financial data contained in the following table is derived
from and should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements and related notes thereto appearing elsewhere in this Prospectus. Pro
forma data is presented as if certain events occurred on the date(s) stated.
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TWELVE MONTHS ENDED DECEMBER 31,
----------------------------------------
HISTORICAL PROFORMA(1)(2)
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1995 1996 1996
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INCOME STATEMENT DATA:
Revenues........................................... $4,020,022 $4,157,734 $5,580,661
Costs and expenses
Cost of revenues................................ 1,876,491 1,765,250 2,574,541
Selling, general and administrative............. 1,278,390 1,331,226 1,550,889
Amortization of goodwill........................ 30,252 84,423 97,823
Depreciation and amortization................... 578,603 546,093 611,891
---------- ---------- ----------
Total costs and expenses................... 3,763,736 3,726,992 4,835,144
Interest expense................................... 867,346 1,025,784 915,485
Income taxes....................................... -- 453,560 453,560
---------- ---------- ----------
Net income (loss) before extraordinary item........ (611,060) (141,482) 283,592
Gain on reduction of obligations................... -- 2,518,486 --
---------- ---------- ----------
Net income (loss).................................. $ (611,060) $2,377,004 $ 283,592
========== ========== ==========
Net income (loss) per share before extraordinary
item............................................ $ (0.45) $ (0.10) $ 0.06
Net income (loss) per share........................ $ (0.45) $ 1.67 $ 0.06
Weight-average shares outstanding.................. 1,369,025 1,425,917 4,984,251
</TABLE>
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DECEMBER 31,
-------------------------------------------
PROFORMA
HISTORICAL AS ADJUSTED(3)
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1995 1996 1996
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BALANCE SHEET DATA:
Cash.............................................. $ 9,628 $ 104,353 $ 9,860,130
Current assets.................................... 240,009 377,572 10,133,349
Total assets...................................... 10,764,526 16,085,643 25,493,449
Current liabilities............................... 6,973,217 6,099,139 1,731,761
Long term debt.................................... 7,838,872 10,263,786 9,350,309
Stockholders' equity (deficit).................... (4,047,563) (277,282) 14,411,379
</TABLE>
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(1) The pro forma income statement data includes a $453,560 deferred income tax
benefit which results from the effective change of tax status of Jamestown
arising from the acquisition transactions as described in Note A to the
consolidated financial statements.
(2) Adjustment to reflect the full year of operations of Key West and 1996
activity of Sonoma. Also, reflects the $444,454 reduction of interest
expense resulting from the pay down of debt in accordance with the use of
proceeds. Further, reflects $11,339 of Key West goodwill amortization,
assuming the Company had acquired Key West at January 1, 1996.
(3) Adjusted to reflect the sale of the 3,000,000 shares of Common Stock offered
hereby, deduction of underwriting discounts and commissions and estimated
offering expenses and the application of the estimated net proceeds
therefrom (assuming an initial public offering price of $6.00 per share).
See "Capitalization" and "Use of Proceeds."
Unless otherwise indicated, all information in this Prospectus assumes that
there is no exercise of the Over-Allotment Option or the Representative's
Warrants and does not give effect to the 350,000 shares of Common Stock
which are reserved by the Company and may be issued pursuant to the 1996
Long-Term Incentive Plan. See "Underwriting" and "Management -- Employee
Benefit Plans."
3
<PAGE> 7
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK, INCLUDING THE RISKS DESCRIBED BELOW. IN ADDITION TO THE OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER
THE FOLLOWING RISK FACTORS RELATING TO THE BUSINESS OF THE COMPANY AND THE
OFFERING TOGETHER WITH ALL THE INFORMATION AND FINANCIAL DATA SET FORTH IN THIS
PROSPECTUS. COMMON STOCK SHOULD BE PURCHASED ONLY BY INVESTORS WHOSE FINANCIAL
POSITION AND RESOURCES ARE SUFFICIENT TO ENABLE THEM TO ASSUME SUCH RISKS OF
LOSS.
FINANCIAL CONDITION; EARLY STAGES OF DEVELOPMENT
The Company recently acquired Jamestown and Key West and intends to
continue to acquire primarily leisure oriented properties. As a result, the
Company is in the early stages of implementation of its business plan. In
addition, Key West is currently under continuing development with its commercial
dock and fueling facilities completed in 1996. Accordingly, it is anticipated
that, even upon repayment of certain debt and the corresponding decrease in the
interest expense, the Company expects to break even or make a small profit in
1997. However, there can be no assurance that the Company will ever generate
sufficient revenues to meet its operating expenses, to permit projected
expansion or to operate profitably. See "Business", "Financial Statements", and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
HISTORY OF LOSSES; ACCUMULATED DEFICIT
The Company incurred a net loss (before extraordinary items) of $611,060
for the year ended December 31, 1995 and a net loss of $141,482 for the year
ended December 31, 1996. The accumulated deficit has been reduced from
$4,048,932 as of December 31, 1995 to $1,671,928 as of December 31, 1996. There
can be no assurance that the Company will ever achieve or be able to sustain
profitability. See "Financial Statements."
LIMITED CAPITAL; NEED FOR SIGNIFICANT ADDITIONAL FINANCING; FUTURE DILUTION
The Company has met its capital and operating requirements to date through
private sales of equity, through borrowings from affiliates and unaffiliated
third parties and from operational cash flow. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Liquidity and
Capital Resources." Based upon the Company's business strategy, management
believes that the proceeds from the Offering will be sufficient to meet the
Company's cash requirements for at least twelve months following completion of
the Offering. See "Use of Proceeds." The Company's continued operations and
expansion plans thereafter will depend upon revenues, if any, from operations
and the availability of significant future private or public equity offerings or
debt financing. Any future equity offerings could result in substantial dilution
of the holdings of existing stockholders. Although the Company has met a
significant portion of its Capital and operating requirements in the past
through borrowings from affiliates (currently $3,912,577) there can be no
assurance that the Company may rely on such affiliates for loans in the future.
The Company has no commitments for additional financing and there can be no
assurance that the Company will have sufficient revenues or be able to obtain
additional financing on satisfactory terms or that it will be able to maintain
profitable operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations", "Business -- Business Strategy" and
"Financial Statements."
ENVIRONMENTAL REGULATIONS AND LIABILITY
The industry in which Sonoma operates is subject to numerous environmental
laws and regulations at federal, state and local government levels. Primary
among these are those which affect (i) the Company's fuel storage and retail
fueling operations and (ii) the Company's ability to develop additional
facilities, including increasing dockage may require permits or approval due to
the environmental impact on inland or coastal waterways. Key West has been
designated by the State of Florida as a potentially contaminated site; however
4
<PAGE> 8
no remedial action has been required. Should remedial action be required in the
future, Key West has been contractually indemnified by Chevron USA, Inc. for all
costs of such remedial action. However, there can be no assurance that no
remedial action will be required or that Chevron will be capable of honoring its
indemnification obligation to Key West. The Company's profitability and business
strategy are dependent upon the Company's ability to maintain its operations
within the confines of numerous environmental rules and regulations, including
any future changes in such rules and regulations. Should the Company be liable
for any significant fuel spill, fuel tank leakage or other environmental hazard
which in turn would require the Company to expend significant financial
resources to clean up or rectify such a problem or pay damages or substantial
fines, such expenditures could materially adversely affect the Company's
financial condition to the point that the Company could no longer continue to be
solvent. See "Government Regulations."
IMMEDIATE SUBSTANTIAL DILUTION; DISPROPORTIONATE RISK OF LOSS
Upon the completion of the Offering, there will be an immediate dilution to
public investors in that the net tangible book value of the Common Stock will be
approximately $2.47 per share, $3.53 per share less than the public offering
price of $6.00 per share. Accordingly, the public investors will bear the
preponderant part of the financial risk associated with the Company's business.
See "Dilution", "Description of Capital Stock" and "Capitalization."
RISKS ASSOCIATED WITH ACQUISITIONS
The Company intends to grow primarily from strategic acquisitions. There
can be no assurance that the Company will be able to identify, acquire or
profitably manage acquired companies or successfully integrate such operations
into the Company without substantial costs, delays or other problems. In
addition, there can be no assurance that companies acquired in the future will
be profitable at the time of their acquisition or will achieve levels of
profitability that justify the investment therein. Acquisitions may involve a
number of special risks, including adverse short-term effects on the Company's
reported operating results, diversion of management's attention, dependence on
retaining, hiring and training key personnel, and risks associated with
unanticipated problems or legal liabilities, some or all of which could have a
material adverse effect on the Company's financial condition and results of
operations. See "Business -- Business Strategy."
BROAD DISCRETION OVER APPLICATION OF PROCEEDS
The Company intends to use approximately $9,419,000 million or 64% of the
net proceeds of the Offering for working capital and future
acquisitions/expansion of the Company, however, there is no specific amount
allocated to these purposes. Consequently, management of the Company will have
broad discretion in determining the manner in which a substantial portion of the
net proceeds of the Offering are used or applied.
LEGAL LIABILITY AND INSURED RISKS
The Company's ownership, operation and management of all or a portion of
its resort and marina facilities including the Jamestown Queen paddle-wheel
excursion boat, its dock, fueling station and rental watercraft expose the
Company to potential third-party claims or litigation by the users of the
facilities for personal injury or other damages arising from their use of the
Company leased or owned facilities including possible damage to user owned
watercraft from the negligence of the Company's employees, agents or
contractors. The Company presently maintains in effect the types of insurance
customary to the leisure/marine industry including coverage for personal injury,
bodily injury, death or property damage to a third party where the Company is
found negligent and for property and casualty risks. There can be no assurance,
however, that the Company's insurance will be adequate to cover all potential
third party claims, all property or casualty losses, can be maintained
economically or will be adequate to cover all potential liabilities which the
Company may experience. To the extent the Company's insurance should prove to be
inadequate, any short fall would have a negative impact upon the Company's
financial condition and results of operations. See "Business."
5
<PAGE> 9
ECONOMIC AND SEASONAL CONDITIONS
The Company's business is seasonal in nature and is also subject to
economic fluctuations. Use of the Company's facilities and purchase of its
products and services is leisure oriented and thus discretionary and is likely
to decline during recessionary periods when disposable income is lower. Any
significant declines in general economic conditions or uncertainties regarding
future economic prospects affecting consumer spending habits could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Use of the Company's services declines during certain times of the year
depending upon weather conditions. The Company's operations at Jamestown
normally decline in the winter, while use of the Company's Key West facilities
normally declines slightly in the summer months. Such seasonal variations can
materially affect the Company's ability to sell its services, resulting in
uneven operational cash flow among fiscal quarters. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
WEATHER RISKS
The Company's current facilities are located on or near large bodies of
water which makes them subject to a substantial risk of damage due to adverse
weather, including storms. Key West is located in a geographical area which has
a significant history of hurricanes.
The potential damage to the Company from such adverse weather is both
physical and economic. The physical damage could consist of damage to a number
of the Company's properties and their improvements including but not limited to
docks, Company owned watercraft, guest accommodations, fuel pumps and storage
tanks. Economic damage would include lost revenues due to (i) damaged facilities
not being available for use and (ii) cancellation of accommodations, boat
reservations, and a decreased use of other facilities by customers in response
to the threat of bad weather or as a result of adverse weather. Such lost
revenues may adversely affect the Company's financial condition. Although the
Company currently maintains casualty insurance, there can be no assurance that
the Company will maintain such insurance in the future, that such insurance will
be available or that such insurance will have sufficient limits to adequately
cover the Company's cost and expenses to repair or replace damaged improvements
or personal property. Any significant damage over and above the Company's
insurance policy limits, if any, and any resultant reduction in revenues from
such damage whether covered by insurance or not, may have a substantial negative
impact on the Company's profitability or cause the Company to cease as a going
concern. See "Business."
ABSENCE OF PRIOR MARKET FOR COMMON STOCK
Prior to the Offering, there has been no active public market for the
Common Stock. There can be no assurance that an active public market for the
Common Stock will develop or be sustained after the Offering. If no active
market in the Common Stock develops, it may be difficult for investors to resell
their Common Stock. The initial public offering price has been determined by
negotiations between the Company and the Representative, and may bear no
relationship to the market price for the Common Stock after the Offering. Prices
for the Common Stock will be determined by the market and may be influenced by a
number of factors, including the depth and liquidity of the market for the
Company's Common Stock, investor perceptions of the Company and general economic
and other conditions. See "Underwriting."
POTENTIAL CONFLICTS OF INTEREST
R. Dudley Webb, Chairman of the Board of the Company, is the principal
shareholder, Chairman and Chief Executive Officer of the Webb Companies, a real
estate concern located in Lexington, Kentucky which develops, manages and owns
portions of a number of commercial real estate projects. Although the Company
and the Webb Companies have separate real estate objectives, there can be no
assurance that there may be a property or opportunity in which both companies
may be interested. In addition, there may be opportunities which the Company and
the Webb Companies may be jointly involved in and from which both companies will
expect to make a profit. Consequently should a conflict result or a joint
opportunity occur, Mr. Webb has
6
<PAGE> 10
orally agreed in statements to the Board of Directors of the Company, that the
Webb Companies will not pursue any conflicting property or opportunity and he
will abstain from any voting by the Board of Directors concerning such
opportunities or properties. However, there can be no assurance that other
conflicts of interest involving Mr. Webb or entities in which Mr. Webb owns a
substantial interest may not arise. See "Certain Transactions."
COMPETITION
The Company competes primarily on the basis of the quality and range of
services offered, desirability of its facilities, location to its customers, its
experience in managing its facilities and its ability to offer an economic value
to its customers. In any given market, the Company may have several direct
competitors offering similar services to those of the Company. Some of these
competitors may have greater financial, operating or management resources than
the Company. See "Competition."
SHARES ELIGIBLE FOR FUTURE SALE
An aggregate of 1,546,273 shares of Common Stock owned by the principal
stockholders of the Company and an aggregate of 453,727 shares of Common Stock
owned by a group of 26 stockholders are restricted securities and will be
eligible for sale in the public market pursuant to Rule 144 promulgated under
the Securities Act of 1933, as amended (the "Securities Act") in December, 1997.
An additional 207,893 shares are held by numerous stockholders and are
restricted shares currently eligible for sale in the public market pursuant to
Rule 144 of the Securities Act. Although the principal stockholders have advised
the Company that they have no present intention of disposing of any shares of
Common Stock, the principal stockholders may (either individually or as a group)
in the future seek to dispose of all or a portion of such shares through a
registered public offering or otherwise. The directors, officers and certain
other holders of the Common Stock (totaling 1,546,273 shares) have entered into
lock-up agreements whereby they have agreed not to, directly or indirectly,
agree or offer to sell, sell, transfer, assign, distribute, grant an option for
purchase or sale of, pledge, hypothecate or otherwise encumber or dispose of any
beneficial interest in such Common Stock for a period of 12 months following the
date of this Prospectus without the prior written consent of the Representative.
See "Shares Eligible for Future Sale." A decision by a significant number of
principal stockholders to effect a disposition of their shares could adversely
affect the prevailing market price of the Common Stock as well as impair the
Company's ability to raise capital through the issuance of additional equity or
debt securities. See "Principal Stockholders."
In addition, the Company has reserved 350,000 shares of Common Stock for
future issuance under the Company's 1996 Long-Term Incentive Plan. Sales of a
substantial number of shares issued under the Company's 1996 Long-Term Incentive
Plan could adversely affect the prevailing market price of the Common Stock and
cause further dilution. See "Management -- Compensation of Directors",
"Management -- Employee Benefit Plans" and "Dilution."
POSSIBLE VOLATILITY OF COMMON STOCK
From time to time after the Offering, there may be significant volatility
in the market place of the Common Stock. If the Company is unable to operate its
facilities profitably or develop facilities at a pace that reflects the
expectations of the market, investors could sell shares of the Common Stock at
or after the time that it becomes apparent that such expectations may not be
realized, resulting in a decrease in the market price of the Common Stock. In
addition to the operating results of the Company, changes in earnings estimated
by analysts, changes in general conditions in the economy or the financial
markets or other developments affecting the Company could cause the market price
of the Common Stock to fluctuate substantially. In recent years, the stock
market has experienced extreme price and volume fluctuations. This volatility
has had a significant effect on the market prices of securities issued by many
companies for reasons unrelated to their operating performance. See "Business."
7
<PAGE> 11
NO DIVIDENDS ANTICIPATED
The Company has never paid any cash dividends on its Common Stock. The
Company anticipates that in the future, earnings, if any, will be retained for
use in the business and that cash dividends with respect to the Common Stock
will not be paid. See "Dividend Policy."
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PROSPECTUS
This Prospectus contains forward-looking statements regarding the plans and
objectives of management for future operations including plans and objectives
relating to the acquisition of additional real property for the business. When
used in this Prospectus the words "anticipate", "believe", "estimate", "expect"
and "projected" and similar expressions as they relate to the Company or
management of the Company are intended to identify forward-looking statements.
Such statements reflect the current views of the Company with respect to future
events and are subject to certain risks, uncertainties and assumptions,
including, but not limited to, the risk factors described in this Prospectus.
Should one or more of these risks or uncertainties materialize, or should the
underlying assumptions prove to be incorrect, actual results may vary materially
from those described herein. The Company does not intend to update these
forward-looking statements.
8
<PAGE> 12
USE OF PROCEEDS
The net proceeds to be received by the Company from the sales of shares of
Common Stock offered hereby, after deducting the underwriting discount and the
estimated expenses of the Offering are expected to be approximately $14,700,000
($17,049,000 if the Over-allotment Option is exercised in full), assuming a
public offering price of $6.00 per share.
The Company anticipates that the proceeds of the Offering will be used as
follows:
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
APPLICATION OF NET PROCEEDS(1) AMOUNT PERCENT
------------------------------ ----------- -----------
<S> <C> <C>
Repayment of Long Term Debt(2).............................. $5,167,981 35%
Repayment of accrued interest on Long Term Debt............. 112,874 1
Expansion of Company's Business including Acquisitions and
Working Capital........................................... 9,419,145 64
</TABLE>
- ---------------
(1) The application of net proceeds entries listed above are in order of
priority. Any additional net proceeds realized from the exercise of the
Over-allotment Option will be added to the Company's working capital.
(2) The following table details the debt to be repaid from the net proceeds of
the Offering as of December 31, 1996:
<TABLE>
<CAPTION>
AMOUNT TO
DESCRIPTION MATURITY DATE INTEREST RATE BE REPAID
----------- ------------- ------------- ----------
<S> <C> <C> <C>
Jamestown:
Webb Family Trust............. On Demand 1 1/2% over prime $1,852,777
Bank of Mt. Vernon............ April 30, 2000 2% over prime 170,318
Webb Family Trust............. On Demand 11% 200,000
Jamestown former Limited
Partners................... On Demand 1% over prime 360,000
Caterpillar Financial......... October 22, 2001 7.4% 800,332
Webb Family Trust............. On Demand 10.0% 707,500
----------
4,090,927
Key West:
Marla Collins Webb............ On Demand 0% 517,300
Joseph H. Roth................ January 5, 2004 10.0% 140,201
Community Bank of
1 3/4% over the banks base
Homestead..................... February 3, 1999 rate 144,553
A. Frederick Skomp............ On Demand 0% 175,000
A. Frederick Skomp............ On Demand 1% over prime 100,000
----------
1,077,054
----------
TOTAL................. $5,167,981
==========
</TABLE>
The Company estimates that the indebtedness to be repaid with a portion of
the proceeds of the Offering will have a weighted average interest rate of
approximately 8.2% and a weighted average maturity of approximately 1.1 years as
of December 31, 1996. The amount of the above indebtedness due to affiliates and
insiders is $3,912,577 including the Webb Family Trust, Jamestown former Limited
Partners, Marla Collins Webb and A. Frederick Skomp. See "Certain Transactions."
Assuming the Over-allotment Option and Representative's Warrants are not
exercised, the Company intends to use approximately $5,167,981 of the proceeds
from the Offering to repay outstanding long term debt of the Company, $9,419,145
to finance expansion of the Company's business through additional development of
current properties or acquisition of additional facilities and properties and
for general working capital. The amount of the net proceeds to be used for
additional development of facilities is currently unknown as no actual building
plans from which estimates of such expenses could be calculated have been made
and may also
9
<PAGE> 13
be subject to negotiations with third parties who may be willing to pay a
portion or all the development cost. The Company, as part of its expansion
plans, may take advantage of future acquisition opportunities, although the
Company has not identified any specific businesses that it will seek to acquire
and has not entered into substantial negotiations with respect to any
acquisition. See "Business -- Business Strategy."
Until utilized for the above purposes the net proceeds from the Offering
will be invested in short-term investment grade securities.
DIVIDEND POLICY
The Company currently plans to retain all available earnings, if any,
generated by its operations for the future development and growth of its
business and does not anticipate paying cash dividends in the foreseeable
future. Any future determination as to dividend policy will be made at the
discretion of the Board of Directors of the Company and will depend on a number
of factors, including future earnings, capital requirements, cash availability,
financial condition, loan covenants and future prospects of the Company and such
other factors as the Board of Directors deems relevant.
DILUTION
As of December 31, 1996, the pro forma net tangible book value of the
Common Stock was $(0.84) per share. Net tangible book value per share is equal
to the Company's total tangible assets less liabilities, divided by the number
of outstanding shares of Common Stock. After giving effect to the sale by the
Company of the 3,000,000 shares of Common Stock offered hereby at the estimated
public offering price of $6.00 per share and the application of the net proceeds
as set forth under "Use of Proceeds", the pro forma net tangible book value of
the Common Stock at December 31, 1996 would have been $13,093,550 or $2.47 per
share. This represents an immediate increase in pro forma net tangible book
value of $3.31 per share to existing stockholders and an immediate dilution in
pro forma net tangible book value of $3.53 per share to persons purchasing
shares at the public offering price in the Offering ("New Stockholders"). The
following table illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price............................... $6.00
Pro forma net tangible book value per share before the
Offering............................................... $(0.84)
Increase in net tangible book value per share attributable
to New Stockholders.................................... $ 3.31
Pro forma net tangible book value per share after the
Offering.................................................. $2.47
-----
Dilution per share to New Stockholders(1)................... $3.53
=====
</TABLE>
- ---------------
(1) Dilution is determined by subtracting pro forma net tangible book value per
share, after giving effect to the Offering, from the assumed initial
offering price per share.
Assuming the Over-allotment Option is exercised in full, such pro forma net
tangible book value after the Offering would be $2.75 per share, the immediate
increase in pro forma net tangible book value of shares owned by the existing
stockholders would be $3.59 per share and the immediate dilution to the New
Stockholders would be $3.25 per share.
10
<PAGE> 14
The following table summarizes on a pro forma basis as of December 31,
1996, the difference between the existing stockholders and the New Stockholders
with respect to the number of shares purchased from the Company, the total
consideration paid and the average price per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT(S) PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders............ 2,300,000 43.4% $ 7,398,855(1) 33.5% $3.22
New Stockholders................. 3,000,000 56.6% $14,700,000 66.5% $6.00(2)
--------- ------ ----------- ------
Total.................. 5,300,000 100.0% $22,098,855 100.0%
========= ====== =========== ======
</TABLE>
- ---------------
(1) Includes original capital contribution to Jamestown ($2,000,000), and the
full paid-in capital of Sonoma ($4,744,153) and Key West ($654,702).
(2) Assuming a public offering price of $6.00 per share and no exercise of the
over-allotment option or exercise of the Representative's Warrants.
CAPITALIZATION
The following table sets forth the long-term debt and capitalization of the
Company as of December 31, 1996 on a historical basis and on a pro forma basis,
as adjusted to give effect to the sale of the 3,000,000 shares of Common Stock
offered by the Company hereby and the application of the estimated net proceeds
therefrom.
The table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements and related notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------
PRO FORMA
HISTORICAL AS ADJUSTED(1)
----------- --------------
<S> <C> <C>
Long Term Debt including current maturities:
Notes Payable............................................. $10,747,150 $ 9,491,746
Stockholder Notes......................................... 3,912,577 --
----------- -----------
Total Long-Term Debt.............................. 14,659,727 9,491,746
----------- -----------
Stockholders' Equity (Deficit)
Common Stock, par value $.001 per share; 20,000,000 shares
authorized
2,300,000 shares issued and outstanding; 5,300,000
pro forma as adjusted(2)............................... 2,300 5,300
Additional paid-in capital.................................. 1,392,346 16,089,346
Accumulated deficit......................................... (1,671,928) (1,683,267)
----------- -----------
Total Stockholders' Equity (Deficit).............. (277,282) 14,411,379
----------- -----------
Total Capitalization.............................. $14,382,445 $23,903,125
=========== ===========
</TABLE>
- ---------------
(1) Includes effect of the sale of the 3,000,000 shares offered hereby and the
application of the net proceeds therefrom (assuming public offering price of
$6.00 per share). See "Use of Proceeds."
(2) Excludes 350,000 shares of Common Stock to be reserved for issuance pursuant
to the Company's 1996 Long-Term Incentive Plan which the Company plans to
implement after completion of the Offering. See "Management -- Compensation
of Directors" and "Employee Benefit Plans."
11
<PAGE> 15
SELECTED CONSOLIDATED FINANCIAL DATA
Selected consolidated financial data shown below for the twelve months
ended December 31, 1995 and 1996 were derived from the audited consolidated
financial statements of the Company. This table should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and related notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
DECEMBER 31,
----------------------------
1995 1996
------------ ----------
<S> <C> <C>
INCOME STATEMENT DATA:
Revenues.................................................. $4,020,022 $4,157,734
Costs and expenses
Cost of revenues....................................... 1,876,491 1,765,250
Selling, general and administrative.................... 1,278,390 1,331,226
Amortization of goodwill............................... 30,252 84,423
Depreciation and amortization.......................... 578,603 546,093
---------- ----------
Total costs and expenses.......................... 3,763,736 3,726,992
Interest expense.......................................... 867,346 1,025,784
---------- ----------
Net loss before income taxes and extraordinary items...... (611,060) (595,042)
Income taxes.............................................. -- 453,560
---------- ----------
Net income (loss) before extraordinary item............... (611,060) (141,482)
Gain on reduction of obligations.......................... -- 2,518,486
---------- ----------
Net income (loss)......................................... $ (611,060) $2,377,004
========== ==========
Net income (loss) per share before extraordinary item..... $ (0.45) $ (0.10)
Net income (loss) per share............................... $ (0.45) $ 1.67
Weight-average shares outstanding......................... 1,369,025 1,425,917
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1996
------------ ------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash...................................................... $ 9,628 $ 104,353
Current assets............................................ 240,009 377,572
Total assets.............................................. 10,764,526 16,085,643
Current liabilities....................................... 6,973,217 6,099,139
Long term debt............................................ 7,838,872 10,263,786
Stockholders' equity (deficit)............................ (4,047,563) (277,282)
</TABLE>
12
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the consolidated financial condition and
results of operations of the Company for the years ended December 31, 1995 and
1996. This discussion should be read in conjunction with the consolidated
financial statements of the Company, and the separate financial statements of
Sonoma, and Key West and the related notes thereto appearing elsewhere in this
registration statement. In addition, this discussion contains forward-looking
statements. Such statements reflect the current views of the Company with
respect to future events and are subject to certain risks, uncertainties and
assumptions, including, but not limited to, the risk factors described in this
Prospectus. Should one or more of these risks or uncertainties materialize, or
should the underlying assumptions prove to be incorrect, actual results may vary
materially from those described herein.
OVERVIEW
Although the Company was formed in 1940, it has not had material operations
since 1988. Between 1988 and 1994 the Company's directors restructured the
Company with the purpose of making the Company attractive to potential merger or
acquisition candidates. In 1994 the Company began in earnest to search for
acquisition or merger candidates which would restore Sonoma to an operating
entity and in September 1996 entered into an agreement with the general partner
of Jamestown Resort & Marina, Ltd. to acquire all the capital stock of Jamestown
Resort & Marina, Inc. and a similar agreement with the limited partners to
acquire all of the limited partnership units in return for Common Stock. The
Company also entered into a similar agreement with stockholders of Key West
Conch Harbor, Inc. in October 1996 to acquire all of the outstanding common
stock of Key West in return for Common Stock. Both the Jamestown and Key West
acquisition transactions were closed on December 9, 1996.
For accounting purposes, as the Jamestown Limited Partners and its General
Partner end up with the majority of Sonoma's stock, the acquisition by Sonoma of
all of the limited partnership interests and general partnership interest was
accounted for as a recapitalization of Jamestown with Jamestown as the acquirer
(a reverse acquisition). Accordingly, the financial statements prior to the
acquisition of Sonoma and Key West included herein are those of Jamestown. The
transaction with Key West was accounted for using the purchase method. The
results of operations of Key West and Sonoma have been included in the
consolidated statements of operations from the acquisition dates.
FISCAL YEAR ENDED DECEMBER 31, 1995 COMPARED WITH THE YEAR ENDED DECEMBER 31,
1996
REVENUES
Revenues for the year ended December 31, 1996 increased $137,712 or 3% from
the same period in 1995. On December 9, 1996, Sonoma acquired Key West and
accordingly revenues include one month of Key West operations totaling $147,636.
If Key West revenue is excluded, Jamestown revenues are essentially the same for
1995 and 1996.
Slip rental fees increased by 3 1/2% for the 1997 calendar year at
Jamestown. Additional revenues are expected in 1997 due to a change in
management's marketing strategy by focusing on attracting tour groups and
conventions during the off boating season. The largest impact of this marketing
focus will be to increase lodging rentals and paddle boat revenues.
Revenue increases resulting from the acquisition of Key West are expected
to be approximately $1,836,000 during calendar 1997.
13
<PAGE> 17
COST OF REVENUES
During the year ended December 31, 1996, cost of revenues decreased
$111,241 ($204,105 excluding the Key West costs of revenues of $92,864).
Excluding the effect of Key West, the decrease in cost of revenues was 11%. The
primary reason for the decline in 1996 cost of revenues was a decrease of
$102,321 due to major repairs and maintenance in the rental boat department
incurred in 1995. Cost of revenues as a percentage of revenues declined from 47%
for the year ended December 31, 1995 to 42% compared to the same period in 1996.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased $52,836 or 4% over
1995 to $1,331,224. Included in this increase are $21,410 attributed to Key West
operations for December 1996. The costs of Jamestown utilities and lease expense
resulted in $50,247 of the increase. The increase was due to increased
consumption, higher rates and fewer recoveries from slip rentals. In addition
property taxes increased $11,597 due to increases in the tax base of certain
assets. These increases were off set by decreases in various fees totaling
$16,450 which are no longer payable after the consummation of the acquisition
transactions discussed previously.
As a result of Sonoma now providing management services to its
subsidiaries, Jamestown will not incur certain management fees in the future,
which amounted to approximately $194,000 in 1996. This reduction at Jamestown
will be off set by an increase in management salaries of approximately the same
amount at Sonoma.
INTEREST EXPENSE
Interest expense increased from $867,346 for the year ended December 31,
1995 to $1,025,784 for the year ended December 31, 1996. The increase of
$158,438 was due to an increase of $30,036 related to the Key West acquisition
with the majority of the remaining difference due to increases in interest rates
resulting from the refinancing of certain debt in January 1996. Interest expense
is expected to decrease to approximately $915,000 in 1997 after paying off
approximately $5,168,000 of debt with the proceeds from the Offering.
GAIN ON REDUCTION OF OBLIGATIONS
In January 1996 the Company refinanced its primary debt resulting in an
extraordinary gain of $2,518,486 (net of income taxes of zero).
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expenses increased $21,661 or 4% to $630,516
from 1995 to 1996, including the amortization of goodwill which increased
$54,171 in 1996. This increase was primarily due to an increase in the
amortization of deferred costs related to the loan refinancing in January, 1996.
The increase was partially offset by a decrease in depreciation of fixed assets
which are fully depreciated.
LIQUIDITY AND CAPITAL RESOURCES
The Company refinanced Jamestown's primary debt in January 1996 which
resulted in a reduction of indebtedness of approximately $2,518,000. The Company
believes this reduction and related decrease in interest payments will increase
cash available for operations and debt servicing.
Negative working capital at December 31, 1995 was $6,733,208 as compared to
negative working capital at December 31, 1996 of $5,721,567. The Company
believes that the net proceeds form the Offering will provide $14,700,000 in
funds. Of these proceeds approximately $4,090,000 and $1,077,000 will reduce the
secondary debt of Jamestown and Key West, respectively. The reduction of this
debt will further decrease interest payments and will increase cash available
for operations. The remaining funds will be used to satisfy the Company's
capital expansion, working capital requirements and future acquisitions. The
Company
14
<PAGE> 18
believes that the net proceeds from the Offering and cash provided by operating
activities will be sufficient to fund its operations through 1998.
The Company has a mortgage note amounting to $6,220,691 at December 31,
1996 on the Jamestown property with an interest rate of 4 1/4% over the
commercial paper lending rate. The mortgage matures on February 1, 2001 and
requires monthly payments of approximately $72,000 until maturity. These
payments include $8,000 per month for deposit into a property tax and capital
improvement escrow account. The Company has a mortgage note amounting to
$3,224,185 on the Key West property with an interest rate of 9%. The mortgage
matures on April 1, 2016 and requires monthly payments of approximately $30,000
during 1997. The Company has a note payable of $1,852,777 with a related party
with an interest rate of 1 1/2% over the prime lending rate, which is due on
demand, and is expected to be paid off from the offering proceeds.
The Company currently does not have a line of credit.
Cash flows provided by operations were $524,745 in 1995, compared to
$125,583 in 1996. This decrease was due to a number of factors, but was
significantly affected by deferral of payment of accrued interest and management
fees in 1996, which was offset by a combination of a number of other items. Cash
used in investing activities of $603,820 in 1995 and $32,224 in 1996 was
primarily used to purchase property and equipment. The decrease in 1996 was due
to major purchases and improvements being performed in 1995 at the Jamestown
facility. Cash provided by financing activities was $85,119 in 1995 and $1,366
in 1996. During 1995, the Company borrowed $1,250,700 from and repaid $844,175
to various entities. In addition, the Company repaid obligations under capital
leases and incurred refinancing costs. During 1996, the Company borrowed
$7,183,976 from and repaid $6,329,077 to various entities. Included in this
amount was a refinancing amount totaling $6,300,000 related to the Jamestown
debt refinancing in January 1996. In addition, the Company repaid obligations
under capital leases and incurred refinancing costs.
Management believes that the current facilities at Jamestown and Key West
are in excellent condition and will not require substantial capital renovations
in the near term.
The Company has identified some potential acquisition candidates but has
not entered into any negotiations, nor does it currently have plans to make any
specific acquisitions. It is the intention of management to seek viable
acquisitions and in the event a candidate is identified, the Company would,
depending on the size of the target company and other factors, consider using
the proceeds from the Offering or bank borrowings.
There can be no assurance that the Offering will be successful or that the
Company's operations will ever be profitable, nor can there be any assurance
that the Company will not require additional equity or debt financing in the
near future, and if needed, it will be available on terms satisfactory to the
Company or at all.
SEASONALITY
Jamestown's business is seasonal in nature with the peak boating season
falling in June, July and August. These months historically have accounted for
approximately 57.5% of the yearly revenue. The impact on liquidity and capital
resources of this seasonality is reduced by incentives offered to slip customers
to pre-pay their annual fees during the fall and winter seasons. In addition,
management believes the seasonal nature of Jamestown will be positively impacted
by the increased marketing efforts to provide off season tours and conventions.
Key West operations are impacted slightly by seasonality since boating
activity increases during the winter months due to winter vacations. However,
the majority of the business is commercial fuel sales which is not seasonal.
15
<PAGE> 19
BUSINESS
DEVELOPMENT OF THE COMPANY
Sonoma is a Nevada corporation formed in 1940 which principally engaged in
the quicksilver (mercury) mining business until the mid 1970s when its
operations ceased. Thereafter, the Company undertook several other operations
that did not materialize as anticipated. Since 1994, the Company primarily
focused on locating merger candidates or assets that could be acquired to allow
the Company to restart operations.
During 1996, the Company entered into an agreement with Clear Creek
Investments, L.L.C. to acquire all of the limited partnership interests of
Jamestown Resort & Marina, Ltd. and all the common stock of Jamestown Resort &
Marina, Inc. in return for 1,369,025 shares of Common Stock of the Company. In
addition and as a condition to the acquisition, pre-acquisition obligations of
Jamestown in the amount of $1,213,837 were relieved through the issuance of
330,975 shares of Common Stock of the Company. The creditors released their
Notes either through letter releases or by marking their obligations paid in
full. In October 1996, the Company also entered into an agreement with the
stockholders of Key West to acquire all of the capital stock of Key West. In
return for all the capital stock of Key West, the Key West stockholders received
300,000 shares of Common Stock and a demand note for $175,000. Both transactions
closed on December 9, 1996, with Jamestown and Key West becoming wholly owned
subsidiaries of the Company.
CURRENT BUSINESS
JAMESTOWN
Jamestown is located on the north shore of Lake Cumberland approximately
three miles east of Jamestown, Kentucky on 299 acres of land and water leased
from the U.S. Army Corps of Engineers (the "Corps"). Lake Cumberland is a 53,000
acre, 101 mile long lake situated in southern Kentucky with the Jamestown
facilities located within a two hour drive of the metropolitan areas of
Lexington and Louisville, Kentucky and Nashville, Tennessee.
Jamestown acquired the original lease comprising minimal facilities in
February 1988 with the original term of the lease ending in December 2012. The
lease was later amended by mutual agreement to allow the lease to be renewable
for an additional 25 year term subject to (i) Jamestown's satisfactory
compliance with all lease conditions during its original term and (ii) approval
by the U.S. Government. Since obtaining the lease, Jamestown has been under
development with a number of facilities and improvements being completed in 1988
and the 40 unit all-suite lodge being completed in 1989.
A portion of Jamestown is centered on an island around which the marina was
constructed. The island is connected to the mainland by a $2,000,000 causeway
built by the Commonwealth of Kentucky (the "Commonwealth") after Jamestown
entered into a development agreement with the Commonwealth in June 1988 whereby
Jamestown agreed to construct certain resort improvements and to pay the
Commonwealth 1% of its gross revenues annually.
Jamestown's facilities include:
MARINA
Jamestown has 805 total wet slips, 645 of which are subject to annual
rental, many of which are covered, and range in size from 22 feet by 70 feet to
10 feet by 20 feet. Most of the slips have separately metered water,
electricity, cable television and telephone connections. The remaining 160 slips
are used for temporary overnight ship rentals and Jamestown's rental fleet. The
marina is "U" shaped and is built around the island to maximize the use of the
available water acreage and is constructed using a floating dock system which
allows the facility to operate at all levels of the lake, which fluctuates as
much as 80 feet during the year. The average slip rents for $2,235 annually and
the marina is currently 90% occupied.
16
<PAGE> 20
SHIP'S STORE, RESTAURANT AND FUEL
The 8,000 square foot Ship's Store is part of the head boat facility which
is the main building on the floating dock, and is centered immediately off the
island. The ship's store derives its revenues principally from the sale of
groceries, marine supplies, clothing and gifts. The full service restaurant has
a 120 seat capacity and operates daily during the boating season. There are five
fueling slips which are located adjacent to the ship's store and are 20 feet by
60 feet in size and in aggregate contain eight fuel pump stations and a sanitary
sewer pump-out facility. Three fiberglass fuel tanks, two 12,000 gallon tanks
and one 6,000 gallon tank are installed in the ground on the island. The Company
operates each of these facilities.
YACHT CLUB AND SNACK BAR
Jamestown's Yacht Club facility, which is located near the ship's store,
has 2,500 square feet with an additional 900 square feet of covered patio for
outdoor dining and special events. The snack bar and ice cream store has 720
square feet and has open patio type seating.
GUEST ACCOMMODATIONS
Jamestown rents 40 suites in the all-suite Lodge and 18 individual cabins.
It also manages and currently has for sale, a two-story model condominium.
Currently the average nightly rental for the suites is $122.00 and for the
Cabins is $87.50. Occupancy rate in 1996 for both types of accommodations during
the season was 72%. The Corps has approved a development plan for 52 privately
owned condominiums which will be financed and built by a third party contractor
on land adjacent to Jamestown. The contractor has agreed to allow Jamestown to
sell and manage the condominiums in return for a fee equal to a net 40% of the
revenues from the condominium rentals. The condominium project is projected to
be completed within the next five to ten years, depending on marketing
conditions.
BOAT RENTALS
The Jamestown rental fleet consists of 19 pontoon boats and 30 houseboats,
with 27 of the houseboats being considered "luxurious" having amenities such as
air conditioning, complete kitchens and full service bathrooms and are operated
by the renters. The houseboat rental is $226.50 per night and were occupied
63.3% of the time during the normal summer season in 1996. The Jamestown Queen
is a 140 passenger stern paddle wheel boat which is chartered for sight seeing,
dinner and party cruises. The "Queen" is equipped for dining, dancing and is
marketed toward catered social events for groups rather than scheduled service
for the general public.
OTHER SERVICES
Jamestown also derives revenues from the maintenance and repair of boats,
boat brokering services, telephone service and miniature golf. Jamestown employs
20 full time employees throughout the year and augments its work force during
the most active seasons with approximately 30 additional employees on staff
during fall and spring and a total of 150 employees on staff during the summer
months (Memorial Day to Labor Day).
KEY WEST CONCH HARBOR MARINA
The Key West Conch Harbor Marina is located on the northwest corner of
Caroline and Grinnell Streets in the "Old Town" preservation district located in
Key West, Florida. The approximately two acre or 82,000 square foot site has an
estimated 251 feet of frontage on Caroline Street and 221 feet of shore line
along a waterway known as the Key West Bight.
Development of Key West began in May 1995 with construction of the dock and
the fueling facility including double wall fuel lines, the on-shore fuel
containment area and the new Texaco Star Port(R) fueling dock. The Marina has a
new 450 foot dock with two 100 foot finger piers. The fueling facility is
located at the end of a "T"-dock.
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<PAGE> 21
In August 1995, Key West entered into an agreement with the City of Key
West whereby Key West granted the City an easement to allow the proposed
"Harborwalk" (a pedestrian boardwalk encircling the Key West Bight) to proceed
without interruption across Key West's property. The Company believes that the
Harborwalk will enhance the marina property by providing customer access to and
from the marina and other sections of "Old Town" Key West.
Fueling operations began in February 1996, and marina rental operations
began in July 1996. Unlike Jamestown, which is primarily designated to service
personal watercraft, Key West was designed as a commercial dock servicing
commercial watercraft such as the Dixie Duck Gambling Boat, which rents
approximately 200 feet of dock space, and commercial day rate deep water fishing
boats. Key West's revenues result primarily from its fuel operations and
commercial slip rentals. The average slip rental for all leased slips is $747.00
per day and for all transit slips is $820.00 per day. The 1996 occupancy rate
for the Marina was 99% during the peak season of December to June.
A portion of the dock has been designated for "transient" slips which are
available at a day rental rate and cater to the non-commercial pleasure boat
customer. Key West recently completed construction of an 800 sq. ft. two story
building to be used for marina operations, restroom facility and a small
convenience store, which Key West operates. The project is still in development
with food and beverage service (restaurant), and small retail shops planned for
the future, however no specific construction plans or costs estimates have been
completed.
Key West employs six full time employees.
BUSINESS STRATEGY
The Company's business strategy is designed to achieve revenue and profit
growth by first completing development of Key West and by acquiring additional
leisure properties and commercial real estate which the Company will acquire
primarily for the income produced by such properties.
Key West has recently completed construction of (i) office space for marina
operations, (ii) restroom facilities and (iii) a small convenience store. Key
West plans future development of a restaurant and retail shop space however no
building plans have been drawn or costs estimated at this time. It is
anticipated that Key West will lease the restaurant and retail shop space to
third parties for a monthly rental plus a percentage of the lessee's gross
business. Jamestown's physical development will be minimal and primarily center
on its management of condominium units to be built on land not constituting part
of Jamestown (which will be financed and built by a third party contractor but
will be sold by Jamestown and for which Jamestown anticipates it will receive a
net 40% of the revenues from the condominium rentals in return for its
services), and marketing the Jamestown facilities for year around use by
corporate and convention business.
Further, Company growth, if any, will primarily come from the continued
acquisition of leisure properties and commercial real estate by the Company.
Although the Company has not yet entered into any agreements with specific
targets, the Company feels confident that it will be able to acquire properties
that meet its strategy in the future. The Company's growth will be financed from
the proceeds of the Offering, cash from operations (if the Company is
profitable), possible future offerings of debt or equity securities and possible
future lines of secured or unsecured credit. There can be no assurance that such
funding will be available to the Company or, if available, will be at
competitive rates. To the extent such funds are not available or are too
expensive for the Company to utilize, the Company's growth plans will not
materialize.
If the Company is successful in its growth strategy such success could
result in the issuance of additional Common Stock either for sale to finance
acquisitions or to be used in exchange for stock or assets of the acquired
companies. In either event, the then existing stockholders of the Company will
experience a dilution of their holdings in the Company with the extent of the
dilution dependent upon the number of shares sold or exchanged.
18
<PAGE> 22
FACILITIES AND LOCATION
The Company leases approximately 299 acres three miles east of Jamestown,
Kentucky, including water and land on which the Jamestown Resort is located,
from the Corps. The original term of the lease expires on December 31, 2012,
however, the original term may be renewed upon certain conditions for an
additional 25 year term. The Company may terminate the lease at any lease year
upon six months notice, and the Corps may terminate the lease if the Company
violates the lease and continues to do so for 60 days after notice of the
violation in writing.
Rent on the Jamestown lease is calculated based upon an assumed break even
point. The Company must pay 0.75% of all sales and 2.25% of all rents and
services below the assumed break even point. Gross income between the assumed
break even point and twice the assumed break even point requires the payment of
2.25% of sales and 6.75% of rents and services. Gross revenues in excess of
twice such break even point requires the payment of 3.00% of sales and 7.00% of
rents and services. For the calendar years ended December 31, 1995 and 1996, the
Company paid $70,000 and $68,000 in rent, respectively. The lease prohibits
gambling on the premises. The Company pays a one percent annual revenue fee to
the Commonwealth in exchange for improvements to the island and causeway, which
fee was $40,000 in both 1995 and 1996. The improvements to Jamestown are subject
to a first mortgage in a total amount $6,220,619 owed to NationsCredit
Commercial Corporation, with a variable rate equal to the commercial paper rate
plus 4.25% and which matures in 2001, and a second mortgage in the principal
amount of $1,852,777 with a interest rate of 1 1/2% over the variable prime
lending rate which is due on demand owed to the Webb Family Trust.
The Company owns approximately two acres of land in Key West, Florida where
the Key West facility is located. The Company purchased this land and original
improvements in 1994 and owns the land in fee simple subject to the
restrictions, easements and encumbrances of record. The Key West property is
subject to a first mortgage totalling $3,224,185 with a variable interest rate
of 1% over TIB Bank of the Keys N.A.'s index rate, (currently the interest rate
is 9.0%). The mortgage matures in April 2016.
The Company leases its corporate executive offices located in Lexington,
Kentucky on an annual basis and its current lease expires June 30, 1997 with
lease payments of $500.00 per month.
Management believes that the properties described above are adequately
insured.
COMPETITION
The Company has numerous competitors for both its marina properties.
Competition comes from direct competitors offering similar accommodations and
recreational opportunities located with in a short distance of the Company's
facilities and in the form of competitors who are located across the country who
offer either similar or alternative forms of recreation and compete for the same
vacation users.
With its direct competitors, the Company competes primarily on the basis of
quality and range of services offered, desirability of its facilities, ease of
access to the public, its experience and its ability to offer an economic value
to its customers. Some of the Company's competitors may have greater financial,
operating or management resources than the Company.
LEGAL PROCEEDINGS
The Company has no material legal proceedings pending, except that with the
acquisition of Jamestown Resort & Marina, Ltd., the Company became a defendant
in two lawsuits; one involving former employees and one liability claim.
Management believes that an adverse resolution of these lawsuits will not have a
material impact on the financial condition of the Company as almost all the
potential loss from said lawsuits is covered by insurance.
GOVERNMENT REGULATIONS
The Company's operations are subject to significant federal, state and
local government environmental regulations. By far the Company's most
significant regulated activities involve the permitting by the states of
19
<PAGE> 23
Kentucky and Florida for its fueling facilities, license tags for watercraft and
health certificates for its food and beverage facilities, although numerous
other parts of its facilities and operations are also regulated by a number of
other governmental entities such as sales tax permits by the respective state
revenue departments. The Company currently has all necessary permits and
licenses to operate its facilities and watercraft.
Of special concern are the various federal, state and local laws and
regulations relating to the environment, especially those dealing with the
storage and dispensing of motor fuels. Violation of any of these statutes,
regulations or orders issued thereunder could result in civil or criminal
enforcement actions including the closure of the fueling facilities. Closure of
the fueling facilities at either Jamestown or Key West would have a
significantly negative impact on the Company's revenues which most likely would
result in the insolvency of the Company.
In addition, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, provides for cleanup of geographical
locations upon which there has been a release or threatened release of hazardous
substances and authorizes the Environmental Protection Agency (EPA) to take any
necessary response including requiring potentially responsible parties to take
or pay for such actions.
The Company is not aware of any potentially material environmental
liability relating to any property in which the Company has an interest other
than the Key West real property being designated as a potentially contaminated
site by the State of Florida. Key West has not been required to take any
remedial action and if remedial action were required, Key West has been
indemnified for all costs of any remedial action by the property's former
owners, Chevron USA, Inc. However there can be no assurance that no remedial
action will be required in the future or that Chevron will be able to indemnify
the Company now or in the future. Currently, costs to the Company for
environmental compliance are not material; however, there can be no assurance
that this situation will continue in the future.
The Company is also subject to the regulations of the U.S. Coast Guard for
some of its facilities and operations but especially in its ownership and
operation of the Jamestown Queen, the 140-passenger paddle-wheel boat that is
rented by customers of the Company for sightseeing, dinner and party cruises. In
addition, the Company's food and beverage operations are subject to normal state
and local health and sanitation regulations. Failure of the Company to properly
observe such regulations could result in the offending facilities or operations
being shut down until such time as they are brought into proper compliance.
Should any significant delay occur, the revenues of the Company would be
adversely impacted.
Management believes that the Company's current facilities and operations
meet or exceed the requirements of all material federal, state or local statutes
and regulations and that all required licences or permits have been obtained.
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<PAGE> 24
MANAGEMENT
EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS
Set forth below are the names, ages and positions of the executive
officers, key employees and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
R. Dudley Webb........................... 53 Director and Chairman of the Board
Martha Layne Collins..................... 60 Director and Vice Chairman
Dr. Barrett Bernard, M.D................. 47 Director
Charles W. Henne......................... 58 Director
Dr. Edwin Nighbert, M.D.................. 56 Director
Irvin Stumler............................ 61 Director
James L. Frye............................ 37 Director, President and Chief Executive
Officer
Fred Skomp............................... 53 Director and Vice
President -- Development
Peter Sackmann........................... 55 Treasurer and Chief Financial Officer
Glenn Hoskins............................ 42 Director and Secretary
</TABLE>
The principal occupations and positions for the past five years of each of
the Directors and Executive Officers of the Company are as follows:
R. DUDLEY WEBB became a Director and Chairman of the Board on December 9,
1996. Mr. Webb has been a partner in the law firm of Webb, Hoskins, Glover &
Stafford, P.S.C. since 1972, which was the same year he, along with his brother,
Donald, founded a number of real estate ventures which eventually became The
Webb Companies, a consolidation of a number of real estate, construction and
commercial property management companies. Mr. Webb currently serves as Chairman
of the Board of The Webb Companies, a position which he has held since 1982, and
Chairman of the Board and Chief Executive Officer of Jamestown Resort & Marina,
Inc. In 1992 Mr. Webb became involved in several lawsuits and involved in a
controversy with the Rehabilitator/Liquidator of Kentucky Central Life Insurance
Company, which resulted in the reorganizational bankruptcy filings of several
real estate ventures which Mr. Webb was involved in with Kentucky Central in the
United States Bankruptcy District Court for the Eastern District of Kentucky.
The bankruptcies have since been dismissed although related non-bankruptcy
litigation continues. Mr. Webb holds a B.A. Degree from Georgetown College and a
J.D. Degree from the University of Kentucky College of Law.
MARTHA LAYNE COLLINS began serving as a Director and Vice-Chairman of the
Board on December 9, 1996. Ms. Collins is currently the Director of the
International Business & Management Center, University of Kentucky, a position
which she has held since July 1996, and beginning in January 1988 has served as
President of Martha Layne Collins & Associates, a consulting firm. Prior to her
current position at the University of Kentucky, she was the President of St.
Catherine College, Springfield, Kentucky from July 1990 to June 1996, and
Governor of the Commonwealth of Kentucky from December 1983 to December 1987.
Ms. Collins is currently serving as a director for Eastman Kodak Company,
Incorporated, R.R. Donnelley and Sons Company, Incorporated and the Bank of
Louisville, Louisville, Kentucky. She is also an Advisory Board Director for the
Norfolk Southern Corporation. She is a graduate of the University of Kentucky.
L. BARRETT BERNARD, M.D. joined the Company as a Director on December 9,
1996. Dr. Bernard is currently the Medical Director-Emergency Services,
Greenview Regional Hospital, Bowling Green, Kentucky and has held this position
since 1989. He holds a B.S. Degree from Western Kentucky University and received
his Doctorate of Medicine from the University of Louisville School of Medicine,
Louisville, Kentucky.
CHARLES W. HENNE has been a Director and served as interim President of the
Company since October 9, 1996. As of December 9, 1996, Mr. Henne resigned as
President but remains a Director of the Company. He is currently President of
C.W. Henne Companies, Inc., a real estate management and venture firm which has
had a direct involvement in a wide range of development projects including
office, industrial, shopping and
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<PAGE> 25
residential properties since 1973. Mr. Henne is a graduate of the University of
Louisville where he received his B.S. Degree.
EDWIN NIGHBERT, M.D., a Director of the Company since December 9, 1996, has
been a surgeon with Surgical Associates of Lexington, P.S.C. for the last 23
years. Dr. Nighbert was a director of Surgical Care Affiliates, Inc. from 1984
until its acquisition by Health South, Inc. in 1996 and a director of Healthwise
America, Inc. from 1993 until its acquisition by United Health Corporation in
1996. He received his Doctorate of Medicine from the University of Kentucky in
1966.
IRVIN STUMLER became a Director on December 9, 1996. He is currently a
Director and President of Eurotax Systems, Inc., positions he has held since
1994 and is also currently a Director and President of Profit Concepts, Inc., a
company which he has been with since 1983. Mr. Stumler holds a B.A. from
Bellarmine College which he received in 1962 and a J.D. degree from the
University of Louisville School of Law.
JAMES L. FRYE became a Director, Chief Executive Officer and President of
the Company on December 9, 1996. Prior to joining the Company Mr. Frye was Area
Vice President for the Southeast Region of Westrec Marina Management, Inc., a
position he has held since 1989. While with Westrec, Mr. Frye had responsibility
for marina properties located in Florida, Georgia, Alabama and Mississippi
including eight million dollars in development projects. The properties
generated twenty three million dollars in 1995 sales. Prior to joining Westrec,
Mr. Frye was employed by O'Connell Management Company as the Managing Director
of Marina Bay Yacht Basin in North Quincy, Massachusetts, a 440 acre facility
with 675 boat slips, residential and commercial retail space. Mr. Frye holds a
B.S. degree from the University of Massachusetts at Amherst.
A. FREDERICK SKOMP is a Director and Vice President of Development for the
Company. He began his current positions with the Company on December 9, 1996.
Since 1989 Mr. Skomp has been the owner/broker of Southernmost Real Estate,
Inc., a commercial real estate brokerage in Key West, Florida and has been the
President of Key West Conch Harbor, Inc. since December, 1993.
PETER SACKMANN serves as the Company Treasurer and Chief Financial Officer.
Mr. Sackmann was employed as Chief Financial Officer of The Webb Companies from
1990 until December, 1996 and as Vice President, Treasurer and CFO of The Sterns
Company, a real estate investment and development company, a position he held
from 1981 to 1990. Mr. Sackmann is a Certified Public Accountant receiving his
B.S. and M.B.A. from Florida State University. Mr. Sackmann has been with the
Company since December 9, 1996.
GLENN HOSKINS has been a Director and the Company's Secretary since
December 9, 1996. During the last five years Mr. Hoskins has been a lawyer in
private practice in Lexington, Kentucky and a Director and Secretary of
Lexington Building & Supply Co., Inc., positions he has held since 1978. He also
holds directorships in several other privately held companies located in
Kentucky. Mr. Hoskins has a B.S. degree from Vanderbilt University and a J.D.
degree from the University of Kentucky College of Law.
RELATIONSHIPS
None of the aforementioned directors and officers are related by blood,
however, Martha Lane Collins is the mother-in-law of R. Dudley Webb.
EMPLOYMENT CONTRACT
The Company has entered into an employment agreement with its President and
Chief Executive Officer, James L. Frye. The agreement provides for a two year
term ending December 31, 1998 with an annual salary of $100,000, medical and
health insurance and fringe benefits consistent with his position. He will be
eligible to receive additional incentives through the Company's 1996 Long-Term
Incentive Plan. The agreement also provides that he will serve as a director of
the Company.
The Company, as of the date of the Offering, does not intend to enter into
any employment agreements with any of its other officers.
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<PAGE> 26
INDEMNIFICATION ARRANGEMENTS
The Company's Bylaws provide for the indemnification of, and the
advancement of expenses to, the directors and officers of the Company in
connection with proceedings and claims arising out of their status as such to
the fullest extent permitted by the laws of the State of Nevada. In addition,
the Bylaws contain certain provisions intended to facilitate receipt of such
benefits. The Company also intends to purchase customary directors' and
officers' liability insurance policies for its directors and officers, if such
insurance is available at a cost that the Board of Directors deems prudent.
EXECUTIVE COMPENSATION
The Company has had no significant or material operations since 1985 and
consequently since that time has not compensated any employees or officers.
Sonoma intends to initially compensate its President and Chief Executive
Officer, James L. Frye and Treasurer and Chief Financial Officer, Peter
Sackmann, at an annual salary of $100,000 and $50,000 respectively. No other
compensation has been decided upon for any of the Company's other executive
officers by the Company's Board of Directors although it is anticipated that
other executive salaries will be added should the Company be successful in its
expansion plans.
COMPENSATION OF DIRECTORS
Directors of the Company do not currently receive compensation for their
services as directors, although they are reimbursed for travel and lodging
expenses in connection with their attendance at board meetings. The Company
expects to pay an annual fee in the amount of $1,000 and meeting fees of $500
per meeting plus reasonable travel expenses, to its directors who are not
employees or affiliates of the Company.
EMPLOYEE BENEFIT PLANS
1996 LONG-TERM INCENTIVE PLAN
As a performance incentive and in order to encourage ownership of Common
Stock, the Company adopted its 1996 Long-Term Incentive Plan ("Plan") as of
December 9, 1996. An aggregate of 350,000 shares of Common Stock has been
authorized and reserved for issuance under the Plan pursuant to the exercise of
options or the grant of restricted stock awards. The Plan is intended to qualify
for favorable treatment under Section 16 of the Securities Exchange Act of 1934,
as amended ("Exchange Act"), pursuant to Rule 16b-3 promulgated thereunder
("Rule 16B-3").
The Plan provides for the grant of "incentive stock options," as defined in
Section 442 of the Internal Revenue Code of 1986, as amended ("Code"),
nonqualified stock options, restricted stock awards and stock appreciation
rights (collectively referred to as "Awards"). The Plan will be administered by
a committee of the Board of Directors ("Committee"), which committee will
consist of two or more directors who are deemed "disinterested" within the
meaning of Rule 16b-3. The Committee has, subject to the terms of the Plan, the
sole authority to grant Awards under the Plan, to construe and interpret the
Plan and to make all other determinations and take any and all actions necessary
or advisable or the administration of the Plan.
All of the Company's employees, independent directors and advisors are
eligible to receive Awards under the Plan, but only employees of the Company are
eligible to receive incentive stock options. Options will be exercisable during
the period specified in each option agreement and will generally be exercisable
in installments pursuant to a vesting schedule to be designated by the
Committee. Restricted stock awards will give the recipient the right to receive
a specified number of shares of Common Stock contingent upon remaining a Company
employee for a specified period, as determined by the Committee. Notwithstanding
the provisions of any option agreement or restricted stock agreement, options
will become immediately exercisable and all restrictions will immediately lapse
with respect to any award of restricted stock in the event of a change or
threatened change in control of the Company and in the event of certain mergers
and reorganizations of the Company. No option will remain exercisable later than
ten years after the date of grant. In addition, options may be subject to early
termination within a designated period following the optionee's cessation of
service with the Company.
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<PAGE> 27
The aggregate fair market value of Common Stock with respect to which
incentive stock options are exercisable for the first time by any individual
during any calendar year may not exceed $100,000. The exercise price for
incentive stock options granted under the Plan may be no less than the fair
market value of the Common Stock on the date of grant (or 110% in the case of
incentive stock options granted to employees owning more than 10% of the Common
Stock). The exercise price for nonqualified options granted under the Plan will
be in the discretion of the Committee.
The Plan provides for automatic grants of nonqualified options to purchase
1,000 shares of Common Stock to independent directors upon each such director's
initial election to the Board of Directors and nonqualified options to purchase
1,000 shares of Common Stock annually thereafter. Each such option (i) entitles
the director to purchase shares of Common Stock at an exercise price equal to
the fair market value of the Common Stock on the date of grant, (ii) is
exercisable in three installments beginning on the first anniversary from the
date of grant and (iii) terminates on the tenth anniversary of the date of
grant.
CERTAIN TRANSACTIONS
PRE-ACQUISITION STOCKHOLDERS
Affiliates of Mr. Gary V. Sutley, the Company's sole director prior to May
1995, were issued an aggregate of 91,937 shares of Common Stock, and Mr. Sutley
directed the issuance of an additional 75,000 shares of Common Stock to
unaffiliated individuals or entities, in connection with approximately $310,000
in consulting services rendered to the Company. These shares were included in
the 1 for 200 reverse split and thus are a part of the 300,000 shares of Common
Stock being retained by the pre-acquisition Sonoma stockholders.
POST-ACQUISITION STOCKHOLDERS
As a result of the acquisition of Jamestown and Key West, the Company
issued (i) a total of 1,700,000 post split common shares to the holders of all
the limited partnership interests of Jamestown Resort & Marina, Ltd., the
members of Clear Creek Investments LLC and certain creditors of Jamestown in
return for those interests and (ii) 300,000 post split common shares to the
stockholders of Key West Conch Harbor, Inc. for all the outstanding and issued
common shares of that corporation.
CONFLICTS OF INTEREST
R. Dudley Webb, Chairman of the Board, is the principal shareholder,
Chairman and Chief Executive Officer of The Webb Companies, a real estate
concern located in Lexington, Kentucky which develops, manages and owns portions
of a number of commercial real estate projects. Although the Company and The
Webb Companies have separate real estate investment objectives with the
Company's objective being leisure oriented properties and The Webb Companies'
primarily being office buildings, there can be no assurance that there may be a
property or investment opportunity in which both companies may be interested. In
addition, there may be opportunities which the Company and the Webb Companies
may wish to be jointly involved in and from which both companies expect to make
a profit. Consequently, should either event occur, Mr. Webb has orally agreed in
statements to the Board of Directors of the Company that The Webb Companies will
not pursue any conflicting property or opportunity and that he will abstain from
any voting by the Board of Directors concerning such opportunities or
properties.
TRANSACTIONS WITH DIRECTORS AND OFFICERS
The Company does not currently engage in any transactions affiliated with
any of the directors or officers of the Company except the loans described below
and the Company's lease of space in an office building in which R. Dudley Webb,
the Company's Chairman of the Board, has an investment interest and which is
managed by the Webb Companies (a company owned by R. Dudley Webb). The Company
believes that all transactions involving The Webb Companies or their affiliates
are on terms substantially equivalent to those that could be obtained from
unaffiliated third parties.
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<PAGE> 28
The Company is obligated to repay indebtedness (i) to the Webb Family Trust
in the form of several notes in an approximate aggregate amount of $2,760,277
which are due on demand and are subject to varying interest rates with the
largest note bearing an interest rate of 1 1/2% over the prime lending rate and
is collateralized by a second mortgage on the Jamestown property improvements
and (ii) to Mr. A. Frederick Skomp in the approximate amount of $100,000,
payable upon demand at a variable interest rate of 1% over prime and a second
note in the principal of $175,000 payable on demand at no interest. Both
obligations are to be repaid with proceeds of the Offering. See "Use of
Proceeds."
FUTURE TRANSACTIONS
All future transactions and loans between the Company and officers,
directors or 5% or more stockholders will be on terms no less favorable than
could be obtained from independent third paries and will be approved by a
majority of the independent, disinterested directors of the Company.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the date of this Prospectus, and
after giving effect to the Offering, certain information regarding the
beneficial ownership of the Common Stock by (i) each person who is known to the
Company to beneficially own more than 5% of the Common Stock, (ii) each of the
directors and executive officers of the Company individually and (iii) by the
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THE OFFERING OWNED AFTER THE OFFERING
NAME OF BENEFICIAL ---------------------------- ------------------------
OWNER OR GROUP(1) NUMBER PERCENTAGE NUMBER PERCENTAGE
------------------ ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C>
The Webb Family Trust(2)..................... 915,197 39.8% 915,197 17.3%
Dawn Irrevocable Trust(2).................... 201,800 8.8% 201,800 3.8%
Frederick Skomp.............................. 117,300 5.1% 117,300 2.2%
L. Barrett Bernard........................... 91,081 4.0% 91,081 1.7%
Edwin Nighbert............................... 20,679 0.1% 20,679 0%
Irvin Stumler................................ 10,339 0.05% 10,339 0%
Glenn Hoskins................................ 9,977 0.04% 9,977 0%
Marla Collins Webb(2)........................ 182,700 7.9% 182,700 3.4%
Directors/Executive Officers as a Group (11
persons)................................... 1,546,273 67.2% 1,546,273 28.4%
</TABLE>
- ---------------
(1) The address for all the persons or entities named above is 3000 Lexington
Financial Center, Lexington, Kentucky 40507.
(2) Dawn Irrevocable Trust is a Cook Island Trust for which Marla Collins Webb,
spouse of R. Dudley Webb, Chairman of the Board, is the trustee and is
likely to vote its shares in a beneficial manner to R. Dudley Webb. The Webb
Family Trust, even though it is administered by an independent trustee, is
likely to vote its shares in a manner beneficial to R. Dudley Webb. Marla
Collins Webb is also the daughter of Martha Layne Collins, Vice Chairman of
the Company.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, par value $0.001 per share. Upon completion of the Offering
5,300,000 shares of common stock (without giving effect to the Over-Allotment
Option or exercise of the Representative's Warrants) will be outstanding.
COMMON STOCK
The holders of Common Stock of the Company are entitled to one vote per
share on all matters submitted to a vote of the stockholders. Cumulative voting
of shares of Common Stock is prohibited and there
25
<PAGE> 29
are no pre-emptive rights. The holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared from time to time by the
Board of Directors out of funds legally available therefore. Subject to the
prior rights of creditors, all shares of Common Stock are entitled in the event
of liquidation to participate ratably in the distribution of all remaining
assets of the Company.
LIMITATIONS ON DIRECTORS' AND OFFICERS' LIABILITY
The Company's Articles of Incorporation and Bylaws provide that the Company
will indemnify its directors and officers to the fullest extent provided by
Nevada law. In addition, the Articles of Incorporation contain a provision
limiting a director's and officer's liability for monetary damages to the
fullest extent permitted by Nevada law.
Furthermore, Section 78.751 of the Nevada General Corporation Law (the
"NGCL") contains provisions relating to indemnification of officers and
directors. Section 78.751(1) provides that a corporation may indemnify any
person who was or is a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except for an action by or in right of the corporation by reason of the fact
that he was a director, officer, employee or agent of the corporation. In order
to indemnify, it must be shown that he acted in good faith and in a manner he
reasonably believed to be in the best interest of the corporation. Generally, no
indemnification may be made where the person has been determined to be negligent
or guilty of misconduct in the performance of his duty to the corporation.
Section 78.751(2) of the NGCL further allows the corporation to indemnify
any person who was or is a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee, or agent
of the corporation, including amounts paid in settlement and attorneys' fees if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation. Indemnification may not be
made for any claim, issue or matter to which a court of competent jurisdiction
has adjudged an officer or director liable to the corporation, unless and only
to the extent that a court of competent jurisdiction determines that in view of
the circumstances of the case, the person is fairly and reasonably entitled to
indemnify for such expenses.
To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding discussed in the preceding paragraphs, Section 78.751(3) of the NGCL
provides that he must be indemnified by the corporation against expenses,
including attorney's fees, actually and reasonably incurred by him in connection
with the defense.
Except when indemnification is required by a court of competent
jurisdiction, Section 78.751(4) of the NGCL states that the corporation shall
only indemnify upon a determination of (i) the shareholders; (ii) majority vote
of the board that were not parties to the action; (iii) if ordered by a majority
vote of a quorum of directors who were not parties to the action, suit or
proceeding, by independent legal counsel in a written opinion; or (iv) by
independent legal counsel in a written opinion if no quorum of directors who
were not parties to the action may be obtained.
Unless ordered by a court of competent jurisdiction, indemnification may
not be made to or on behalf of any officer or director if a final adjudication
establishes that his acts or omissions involved intentional misconduct, fraud or
a knowing violation of the law and were material to the cause of action.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
as is therefore unenforceable.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 5,300,000 shares of
Common Stock outstanding. Of these shares, the 3,000,000 shares sold in the
Offering and a small number, approximately 92,207 from the Company's original
public offering will be freely tradable without restriction or further
26
<PAGE> 30
registration under the Securities Act, except for any shares purchased at any
time by an "affiliate" of the Company (as that term is defined in the rules and
regulations under the Securities Act). All of the remaining shares of Common
Stock outstanding (2,207,893) are held by existing stockholders and were sold
without registration under the Securities Act in reliance upon an exemption from
registration and will be "restricted" securities within the meaning of Rule 144,
2,000,000 of which will be eligible for sale in December of 1997, and the
remainder are currently eligible for sale. The directors and officers of the
Company, and certain other stockholders who in the aggregate own 1,546,273
shares of restricted Common Stock, have agreed with the Underwriters not to
offer, sell or otherwise dispose of any shares of Common Stock beneficially
owned or controlled by them (including subsequently acquired shares) for a
period of one year from the date of this Prospectus without the prior written
consent of the Representative.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned "restricted" shares for
at least one year is entitled to sell within any three-month period a number of
shares that does not exceed the greater of 1% of the then outstanding shares of
the Common Stock (53,000 shares immediately after the Offering) or the average
weekly trading volume in the Common Stock on the Nasdaq National Market during
the four calendar weeks preceding such sale. Sales under Rule 144 are also
subject to certain manner of sale provision, notice requirements and the
availability of current public information about the Company. Any person (or
persons whose shares are aggregated) who is not deemed to be an "affiliate" of
the Company at any time during the 90 days preceding a sale, and who has
beneficially owned "restricted" shares for at least two years, would be entitled
to sell such shares under Rule 144 without regard to the volume or manner of
sale limitations referred to above.
The Company can make no predictions as to the effect, if any, that sales of
shares or the availability of shares for sale will have on the market price for
the Common Stock prevailing from time to time. Nevertheless, sales of
substantial amounts of Common Stock in the public market could adversely affect
prevailing market prices.
The Company has not yet issued options to purchase shares of Common Stock
under its 1996 Long-Term Incentive Plan. However, 350,000 shares of Common Stock
are reserved by the Company for issuance under the Plan. See
"Management -- Employee Benefit Plans." The Company intends to file a
registration statement on Form S-8 covering sales of shares issued upon any
securities issued under the Plan.
The Company, as of the date of this Prospectus, has approximately 800
stockholders of record.
Although the Company is a reporting company pursuant the Securities Act,
its Common Stock is not actively traded and there does not currently exist any
market makers for the Common Stock of the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer and Trust Company, New York, New York.
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Effective September 12, 1996, the Company, by act of its board of
directors, engaged King Griffin & Adamson P.C. as its principal accountant to
audit the Company's financial statements, replacing Skeehan & Company in that
capacity. This decision was made in conjunction with the execution of certain
acquisition agreements and the acquisition by the Company of Jamestown and Key
West. The Company had not consulted with the newly engaged independent
accountant on accounting matters prior to its engagement.
27
<PAGE> 31
UNDERWRITING
The underwriters named below, (the "Underwriters") for whom National
Securities Corporation is acting as representative (in such capacity the
"Representative"), have severally agreed, subject to the terms and conditions of
the Underwriting Agreement, to purchase from the Company and the Company has
agreed to sell to the Underwriters on a firm commitment basis the respective
number of shares of Common Stock set forth opposite their names below:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
---- ----------------
<S> <C>
National Securities Corporation.............................
Total............................................. 3,000,000
</TABLE>
The Underwriters are committed to purchase all the shares of Common Stock
offered hereby, if any such securities are purchased. The Underwriting Agreement
provides that the obligations of the several Underwriters are subject to
conditions precedent specified therein.
The Company has been advised by the Representative that the Underwriters
propose initially to offer the Common Stock to the public at the initial
offering price set forth on the cover page of this Prospectus and to certain
dealers at such prices less a concession of not in excess of $ per share of
Common Stock. Such dealers may re-allow a concession not in excess of
$ per share of Common Stock to certain other dealers. After the
commencement of the Offering, the public offering prices, concession and
reallowance may be changed by the Representative.
The Representative has informed the Company that it does not expect sales
to discretionary accounts by the Underwriters to exceed five percent of the
Common Stock offered hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriter may be required to make. The Company has also
agreed to pay the Representative an expense allowance on a nonaccountable basis
equal to 3.0% of the gross proceeds derived from the sale of the Common Stock
underwritten, of which $33,000 has been paid to date.
The Company has granted the Underwriters an Over-Allotment Option,
exercisable within 45 days of the date of this Prospectus to purchase up to an
additional 450,000 shares of Common Stock at the public offering price per share
of Common Stock, offered hereby, less underwriting discounts and the
non-accountable expense allowance. Such option may be exercised only for the
purpose of covering overallotments, if any, incurred in the sale of the Common
Stock offered hereby. To the extent such option is exercised, in whole or in
part, each Underwriter will have a firm commitment, subject to certain
conditions, to purchase the number of the additional shares of Common Stock
proportionate to its initial commitment.
In connection with the Offering the Company has agreed to sell to the
Representative, for nominal consideration, warrants to purchase from the Company
up to 300,000 shares of Common Stock (the "Representatives Warrants"). The
Representative's Warrants are initially exercisable at a price of $7.20 per
share (120% of the initial offering price per share of Common Stock) for a
four-year period commencing on the first anniversary of the issuance of such
warrants. The Representative's Warrants may not be sold, transferred, assigned
or hypothecated for a period of one year following the date of this Prospectus,
except to officers of the Representative, Underwriters or members of the selling
group. The Representative's Warrants provide for adjustments in the number of
shares of Common Stock issuable upon the exercise thereof and in the exercise
price of the Representative's Warrants as a result of certain events, including
subdivisions and combinations of the Common Stock. The Representative's Warrants
grant to the holders thereof certain rights of registration for the Common Stock
issuable upon exercise of the Representative's Warrants.
All officers, directors and certain stockholders of the Company have agreed
not to, directly or indirectly, offer, agree or offer to sell, sell, transfer,
assign, encumber, grant an option for the purchase or sale of, pledge or
otherwise dispose of any beneficial interest in the Common Stock for a period of
12 months following the
28
<PAGE> 32
date of this Prospectus without the prior written consent of the Representative.
An appropriate legend shall be marked on the face of certificates representing
all such securities.
The Company has agreed not to, without the prior written consent of the
Representative, issue, sell, agree or offer to sell, grant an option for the
purchase or sale of, or otherwise transfer or dispose of any of its securities
for a period of 12 months following the effective date of the Registration
Statement of which this Prospectus is a part.
Prior to the Offering, there has been no active public market for the
Common Stock. Consequently, the initial public offering price of the Common
Stock has been determined by negotiation between the Company and the
Representative and does not necessarily bear any relationship to the Company's
asset value, net worth, and other established criteria of value. The factors
considered in such negotiations, in addition to prevailing market conditions,
include the history of and the prospects for the industry in which the Company
competes, an assessment of the Company's management and the prospects of the
Company, the Company's capital structure and certain other factors as were
deemed relevant.
In connection with this Offering certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase Common Stock for the purpose of stabilizing their respective market
prices. The Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the Offering than
they are committed to purchase from the Company, and in such case may purchase
Common Stock in the open market following completion of the Offering to cover
all or a portion of such short position. The Underwriters may also cover all or
a portion of such short position by exercising the Over-allotment Option
referred to above. In addition, the Representative, on behalf of the
Underwriters, may impose "penalty bids" under contractual arrangements with the
Underwriters whereby it may reclaim from an Underwriter (or dealer participating
in the Offering) for the account of other Underwriters, the selling concession
with respect to Common Stock that is distributed in the Offering but
subsequently purchased for the account of the Underwriters in the open market.
Any of the transactions described in this paragraph may result in the
maintenance of the price of the Common Stock at a level above that which might
otherwise prevail in the open market. None of the transactions described in this
paragraph is required, and, if they are undertaken, they may be discontinued at
any time.
The foregoing is a summary of all the material terms of the agreement
described above but does not purport to be complete in all respects. Reference
is made to a copy of each such agreement which are filed as exhibits to the
Registration Statement of which this Prospectus is a part. See "Additional
Information."
LEGAL MATTERS
The validity of the issuance of certain of the shares of Common Stock
offered hereby and certain other legal matters will be passed upon for the
Company by Jackson Walker, L.L.P., Dallas, Texas. Certain legal matters in
connection with the Offering with respect to Nevada law will be passed upon for
the Company by Marshall, Hill, Cassas & deLipkau, Reno, Nevada. Camhy Karlinsky
& Stein LLP, New York, New York has acted as counsel for the Underwriters in
connection with this Offering.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1995 and 1996 and for each of the years in the two-year period ended December
31, 1996, have been included herein and in the registration statement in
reliance upon the reports, included herein, of King Griffin & Adamson P.C.,
independent public accountants, and upon the authority of said firm as experts
in accounting and auditing.
29
<PAGE> 33
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). These materials can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's regional offices at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, New York, New York
10048. Copies of these materials can also be obtained from the Commission at
prescribed rates by writing to the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549. The Registration Statement may
also be accessed on the World Wide Web through the Commission's Internet address
at "http://www.sec.gov".
The Company will provide, without charge, to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all of the documents incorporated herein or in the Registration
Statement by reference (other than exhibits and schedules thereto, unless such
exhibits or schedules are specifically incorporated by reference into the
information that this Prospectus incorporates). Written or telephonic requests
for copies should be directed to the Company's principal office: 3000 Lexington
Financial Center Lexington, Kentucky 40507 (606) 281-0000.
30
<PAGE> 34
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Pro Forma Consolidated Financial Statements
Consolidated Balance Sheet................................ F-3
Consolidated Statement of Operations...................... F-4
Consolidated Financial Statements
Report of Independent Certified Public Accountants........ F-5
Consolidated Balance Sheets............................... F-6
Consolidated Statements of Operations..................... F-7
Consolidated Statements of Changes in Stockholders'
Deficit................................................ F-8
Consolidated Statements of Cash Flows..................... F-9
Notes to Consolidated Financial Statements................ F-10
Sonoma International
Report of Independent Certified Public Accountants........ F-20
Balance Sheets............................................ F-21
Statements of Operations.................................. F-22
Statements of Changes in Stockholders' Deficit............ F-23
Statements of Cash Flows.................................. F-24
Notes to Financial Statements............................. F-25
Key West Conch Harbor, Inc.
Report of Independent Certified Public Accountants........ F-29
Balance Sheets............................................ F-30
Statements of Operations.................................. F-31
Statements of Changes in Stockholders' Deficit............ F-32
Statements of Cash Flows.................................. F-33
Notes to Financial Statements............................. F-34
</TABLE>
F-1
<PAGE> 35
SONOMA INTERNATIONAL AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Effective December 9, 1996, Jamestown Resort and Marina Ltd., ("Jamestown")
completed a reverse acquisition of Sonoma International ("Sonoma") and an
acquisition of Key West Conch Harbor, Inc. ("Key West"). The historical
financial statements prior to the acquisition transactions are those of
Jamestown. Sonoma was a public company which has had no operations since 1988.
For accounting purposes, the acquisition between Sonoma and Jamestown is
regarded as an acquisition by Jamestown of substantially all of the outstanding
stock of Sonoma and is accounted for as a recapitalization of Jamestown with
Jamestown as the acquirer (a reverse acquisition). The subsequent transaction
with Key West is accounted for using the purchase method of accounting. See Note
A to the consolidated financial statements that includes a more complete
discussion of these transactions.
The pro forma unaudited consolidated balance sheet at December 31, 1996
gives effect to the sale of common stock per the offering and the application of
net proceeds therefrom, effective December 31, 1996. This includes the effect on
interest expense resulting from the pay down of debt as it relates to the pro
forma unaudited consolidated statement of operations for the year ended December
31, 1996.
The unaudited pro forma consolidated statement of operations for the year
ended December 31, 1996 also reflects the Key West and Sonoma transactions
described above as if they occurred on January 1, 1996.
The unaudited pro forma consolidated financial information is not
necessarily indicative of the results of operations that would have been
reported had such events occurred on the dates specified, nor is it necessarily
indicative of the future results of the consolidated entities. The unaudited
consolidated pro forma financial statements should be read in conjunction with
the historical financial statements of the Company.
F-2
<PAGE> 36
SONOMA INTERNATIONAL AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA
FOR THE
HISTORICAL PRO FORMA YEAR ENDED
1996 ADJUSTMENTS DECEMBER 31, 1996
----------- ----------- -----------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash.................................. $ 104,353(a)(b) $9,755,777 $ 9,860,130
Escrow funds.......................... 88,400 -- 88,400
Receivables:
Trade, net.......................... 54,492 -- 54,492
Other............................... 27,008 -- 27,008
Inventory............................. 85,668 -- 85,668
Prepaid expenses and other............ 17,651 -- 17,651
----------- ----------- -----------
Total current assets............ 377,572 9,755,777 10,133,349
PROPERTY AND EQUIPMENT
Buildings and improvements............ 2,599,885 -- 2,599,885
Land.................................. 3,150,000 -- 3,150,000
Land improvements..................... 311,326 -- 311,326
Docks and floating buildings.......... 8,314,944 -- 8,314,944
Boats and improvements................ 2,116,453 -- 2,116,453
Furniture, fixtures and equipment..... 1,709,673 -- 1,709,673
Boats under capital lease............. -- -- --
Computer equipment.................... 193,171 -- 193,171
Fuel tanks and containment building... 155,994 -- 155,994
Vehicles.............................. 22,482 -- 22,482
Construction in progress.............. 140,178 -- 140,178
----------- ----------- -----------
18,714,106 -- 18,714,106
Less accumulated depreciation and
amortization........................ 4,671,835 -- 4,671,835
----------- ----------- -----------
Net property and equipment.............. 14,042,271 -- 14,042,271
OTHER ASSETS
Deferred loan fees, net............... 322,858 -- 322,858
Deferred offering costs............... 336,632(b) (336,632) --
Goodwill, net......................... 1,006,310(c) (11,339) 994,971
----------- ----------- -----------
Total other assets.............. 1,665,800 (347,971) 1,317,829
----------- ----------- -----------
TOTAL ASSETS............................ $16,085,643 $9,407,806 $25,493,449
=========== =========== ===========
CURRENT LIABILITIES
Current portion of long-term debt..... $ 4,395,941(a) $(4,254,504) $ 141,437
Accounts payable...................... 453,522 -- 453,522
Accrued interest...................... 150,733(a) (112,874) 37,859
Accrued liabilities................... 299,802 -- 299,802
Security deposits..................... 49,319 -- 49,319
Payable to related party.............. 53,200 -- 53,200
Deferred revenue...................... 696,622 -- 696,622
----------- ----------- -----------
Total current liabilities....... 6,099,139 (4,367,378) 1,731,761
LONG-TERM LIABILITIES
Long term debt........................ 10,263,786(a) (913,477) 9,350,309
----------- ----------- -----------
Total long term liabilities..... 10,263,786 (913,477) 9,350,309
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock.......................... 2,300 3,000 5,300
Additional paid-in capital............ 1,392,346(a)(b) 14,697,000 16,089,346
Accumulated equity (deficit).......... (1,671,928)(c) (11,339) (1,683,267)
----------- ----------- -----------
Total stockholders' equity
(deficit)..................... (277,282) 14,688,661 14,411,379
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)...................... $16,085,643 $9,407,806 $25,493,449
=========== =========== ===========
</TABLE>
- ---------------
(a) To reflect the sale of 3,000,000 shares of common stock and the use of the
proceeds from the offering net of discounts to underwriter, commissions and
expenses of the offering.
(b) To net the deferred offering costs against the proceeds from the offering.
(c) To reflect the amortization of goodwill of Key West, assuming the Company
had acquired Key West at January 1, 1996.
F-3
<PAGE> 37
SONOMA INTERNATIONAL AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
(D)
ACQUIRED
OPERATIONS FOR THE
ELEVEN MONTHS
HISTORICAL ENDED PRO FORMA PRO FORMA
1996 NOVEMBER 30, 1996 ADJUSTMENTS 1996
---------- ------------------ ----------- ----------
<S> <C> <C> <C> <C>
REVENUES
Annual slip fees...................... 1,272,986 $ 292,108 $ -- $1,565,094
Boat rental........................... 667,750 -- -- 667,750
Lodge................................. 683,045 -- -- 683,045
Fuel.................................. 666,182 1,075,388 -- 1,741,570
Convenience store and merchandise..... 355,446 -- -- 355,446
Restaurant............................ 357,523 -- -- 357,523
Other................................. 154,802 55,431 -- 210,233
---------- ---------- --------- ----------
Total revenues................ 4,157,734 1,422,927 -- 5,580,661
COST OF REVENUES
Annual slip........................... 135,413 22,018 -- 157,431
Boat rental........................... 203,767 -- -- 203,767
Lodge................................. 224,243 -- -- 224,243
Fuel.................................. 467,323 787,273 -- 1,254,596
Convenience store and merchandise..... 284,986 -- -- 284,986
Restaurant............................ 287,856 -- -- 287,856
Other................................. 161,662 -- -- 161,662
---------- ---------- --------- ----------
Total cost of revenues........ 1,765,250 809,291 -- 2,574,541
---------- ---------- --------- ----------
GROSS PROFIT............................ 2,392,484 613,636 -- 3,006,120
SELLING, GENERAL AND ADMINISTRATIVE..... 1,331,224 219,665 1,550,889
GAIN ON REDUCTION OF OBLIGATIONS........ -- -- -- --
DEPRECIATION AND AMORTIZATION........... 630,518 67,857(c) 11,339 709,714
---------- ---------- --------- ----------
INCOME (LOSS) FROM OPERATIONS........... 430,742 326,114 (11,339) 745,517
INTEREST EXPENSE........................ 1,025,784 334,155(e) (444,454) 915,485
---------- ---------- --------- ----------
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS AND INCOME
TAXES.............................. (595,042) (8,041) 433,115 (169,968)
---------- ---------- --------- ----------
INCOME TAXES............................ 453,560 -- -- 453,560
NET INCOME (LOSS) BEFORE EXTRAORDINARY
ITEMS................................. $ (141,482) $ (8,041) $ 433,115 $ 283,592
========== ========== ========= ==========
</TABLE>
- ---------------
(d) To reflect the full year of operations of Key West and any activity in
Sonoma.
(e) To reflect the reduction in interest expense resulting from the pay down of
debt in accordance with the use of proceeds.
F-4
<PAGE> 38
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Stockholders
Sonoma International
We have audited the accompanying consolidated balance sheets of Sonoma
International and subsidiaries as of December 31, 1995 and 1996, and the related
consolidated statements of operations, stockholders' deficit, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 Sonoma
International and subsidiaries as of December 31, 1995 and 1996, and the
consolidated results of their operations and their cash flows for the years then
ended, in conformity with generally accepted accounting principles.
KING GRIFFIN & ADAMSON P.C.
Dallas, Texas
March 7, 1997
F-5
<PAGE> 39
SONOMA INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
YEARS ENDED DECEMBER 31, 1995 AND 1996
ASSETS
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash...................................................... $ 9,628 $ 104,353
Escrow funds.............................................. 26,673 88,400
Receivables:
Trade (net of allowance for doubtful accounts of $3,876
for each year)......................................... 47,653 54,492
Other................................................... 34,199 27,008
Inventory................................................. 75,400 85,668
Prepaid expenses.......................................... 46,456 17,651
----------- -----------
Total current assets................................ 240,009 377,572
----------- -----------
PROPERTY AND EQUIPMENT
Buildings and improvements................................ 2,352,561 2,599,885
Land...................................................... -- 3,150,000
Land improvements......................................... 79,737 293,831
Docks and floating buildings.............................. 7,180,728 8,220,250
Boats and improvements.................................... 782,105 2,116,453
Furnishings, fixtures and equipment....................... 1,640,722 1,692,566
Houseboats and pontoons under capital lease............... 1,373,649 --
Computers under capital lease............................. 161,734 193,171
Fuel tanks and containment buildings...................... -- 151,132
Vehicles.................................................. 22,482 22,482
Construction in progress.................................. 240,931 140,178
----------- -----------
13,834,649 18,579,948
Less accumulated depreciation and amortization.............. 3,987,745 4,537,677
----------- -----------
Net property and equipment.................................. 9,846,904 14,042,271
----------- -----------
OTHER ASSETS
Deferred loan fees, net of accumulated amortization of
$11,827 and $77,593..................................... 106,438 322,858
Goodwill, net of accumulated amortization of $165,825 and
$184,250................................................ 571,175 1,006,310
Deferred offering costs................................... -- 336,632
----------- -----------
Total other assets.................................. 677,613 1,665,800
----------- -----------
TOTAL ASSETS................................................ $10,764,526 $16,085,643
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Current portion of long-term debt (including $3,410,277
and $4,052,778 to related parties)...................... $ 3,819,067 $ 4,395,941
Current portion of obligations under capital leases....... 198,391 --
Accounts payable.......................................... 188,555 453,522
Accrued interest (including $272,272 and $57,240 to
related parties)........................................ 1,246,452 150,733
Accrued liabilities....................................... 141,387 299,802
Security deposits......................................... 29,074 49,319
Deferred revenue.......................................... 633,190 696,622
Payable to related party.................................. -- 53,200
Accrued management fees -- related party.................. 581,301 --
Accrued guarantee fees -- related party................... 60,000 --
Deferred gain on sale leaseback........................... 75,800 --
----------- -----------
Total current liabilities........................... 6,973,217 6,099,139
----------- -----------
LONG-TERM LIABILITIES
Long-term debt, less current maturities (including
$114,830 in 1996 due to related parties)................ 7,421,234 10,263,786
Obligations under capital leases, less current
obligations............................................. 417,638 --
----------- -----------
Total long-term liabilities......................... 7,838,872 10,263,786
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes D, E, F, G, H, I and M)
STOCKHOLDERS' DEFICIT
Common stock, $0.001 par value; authorized 20,000,000;
issued and outstanding shares 1,369,025 and 2,300,000... 1,369 2,300
Additional paid-in capital................................ -- 1,392,346
Accumulated deficit....................................... (4,048,932) (1,671,928)
----------- -----------
Total stockholders' deficit......................... (4,047,563) (277,282)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT................. $10,764,526 $16,085,643
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 40
SONOMA INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
REVENUES
Slip fees................................................. $ 1,168,041 $ 1,272,986
Boat rental............................................... 748,941 667,750
Lodge..................................................... 683,251 683,045
Fuel...................................................... 531,120 666,182
Convenience store and merchandise......................... 381,123 355,446
Restaurant................................................ 372,473 357,523
Other..................................................... 135,073 154,802
----------- -----------
Total revenues.................................... 4,020,022 4,157,734
----------- -----------
COST OF REVENUES
Slip...................................................... 165,634 135,413
Boat rental............................................... 396,916 203,767
Lodge..................................................... 235,082 224,243
Fuel...................................................... 351,029 467,323
Convenience store and merchandise......................... 288,498 284,986
Restaurant................................................ 329,982 287,856
Other..................................................... 109,350 161,662
----------- -----------
Total cost of revenues............................ 1,876,491 1,765,250
----------- -----------
GROSS PROFIT................................................ 2,143,531 2,392,484
SELLING, GENERAL AND ADMINISTRATIVE (including related
party amounts for management and guarantee fees of
$220,540 and $210,482)................................. 1,278,390 1,331,226
AMORTIZATION OF GOODWILL.................................... 30,252 84,423
DEPRECIATION AND AMORTIZATION............................... 578,603 546,093
----------- -----------
INCOME FROM OPERATIONS...................................... 256,286 430,742
INTEREST EXPENSE (including interest to related parties of
$260,716 and $293,430)................................. 867,346 1,025,784
----------- -----------
NET LOSS BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS........ (611,060) (595,042)
Income taxes........................................... -- 453,560
----------- -----------
NET LOSS BEFORE EXTRAORDINARY ITEMS......................... (611,060) (141,482)
EXTRAORDINARY ITEMS
Gain on extinguishment of debt, net of income tax of $0... -- 2,518,486
----------- -----------
NET INCOME (LOSS)........................................... $ (611,060) $ 2,377,004
=========== ===========
Net income (loss) per common share before extraordinary
items.................................................. $ (0.45) $ (0.10)
=========== ===========
Net income (loss) per common share.......................... $ (0.45) $ 1.67
=========== ===========
Weighted average shares outstanding......................... 1,369,025 1,425,917
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 41
SONOMA INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
ADDITIONAL
COMMON COMMON PAID-IN ACCUMULATED
SHARES STOCK CAPITAL DEFICIT TOTAL
--------- ------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Deficit at January 1, 1995......... 1,369,025 $1,369 $ -- $(3,437,872) $(3,436,503)
Net loss for the year ended
December 31, 1995................ -- -- -- (611,060) (611,060)
--------- ------ ---------- ----------- -----------
Deficit at December 31, 1995....... 1,369,025 1,369 -- (4,048,932) (4,047,563)
Acquisition transactions
Fair value of assets and
liabilities at date of
acquisition................... 600,000 600 178,840 -- 179,440
Issuance of stock to relieve
obligations...................... 330,975 331 1,213,506 -- 1,213,837
Net income for the year ended
December 31, 1996................ -- -- -- 2,377,004 2,377,004
--------- ------ ---------- ----------- -----------
Deficit at December 31, 1996....... 2,300,000 $2,300 $1,392,346 $(1,671,928) $ (277,282)
========= ====== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE> 42
SONOMA INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)......................................... $ (611,060) $ 2,377,004
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization of fixed assets.......... 578,603 546,093
Amortization of goodwill............................... 30,252 84,425
Deferred income taxes.................................. -- (453,560)
Amortization of deferred gain on sale leaseback........ (6,105) (75,800)
Gain on debt extinguishment............................ -- (2,518,486)
Non cash issuance of stock to the employee incentive
plan.................................................. -- 100,000
Non cash portion of guarantee and management fees...... -- 41,529
Changes in assets and liabilities (net of
acquisitions):
Decrease (increase) in escrow funds.................. 16,589 (61,727)
Decrease (increase) in trade receivables............. (854) 2,287
Decrease (increase) in other receivables............. (11,088) 7,191
Decrease (increase) in inventory..................... 6,911 25,906
Decrease (increase) in prepaid expenses.............. 25,463 58,205
Decrease (increase) in other assets.................. -- (90,864)
Increase (decrease) in accounts payable.............. (86,235) 99,432
Increase (decrease) in accrued interest.............. 450,506 19,625
Increase (decrease) in accrued liabilities........... (107,927) (26,491)
Increase (decrease) in security deposits............. (5,384) 20,245
Increase (decrease) in related party loan............ -- (53,242)
Increase (decrease) in deferred revenue.............. 101,779 23,811
Increase (decrease) in accrued guarantee fees........ 20,000 --
Increase (decrease) in accrued management fees....... 123,295
----------- -----------
Net cash provided by operating activities......... 524,745 125,583
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment....................... (603,820) (104,708)
Proceeds from the sale of property and equipment.......... -- 49,159
Balance of cash in Key West and Sonoma when acquired...... -- 23,325
----------- -----------
Net cash used by investing activities............. (603,820) (32,224)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank and related party loans................ 1,250,700 7,183,976
Repayments of borrowings.................................. (844,175) (6,329,077)
Repayments of obligation under capital lease.............. (202,601) (616,029)
Organization and loan costs Jamestown..................... (118,805) (237,504)
----------- -----------
Net cash provided by financing activities......... 85,119 1,366
----------- -----------
NET INCREASE IN CASH........................................ 6,044 94,725
Cash at beginning of the year............................. 3,584 9,628
----------- -----------
Cash at end of the year................................... $ 9,628 $ 104,353
=========== ===========
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for interest.................. $ 430,908 $ 948,689
=========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
Issuance of debt in connection with the acquisition of Key
West................................................... $ -- $ 175,000
=========== ===========
Stock issued to satisfy Jamestown obligations............. $ -- $ 1,213,506
=========== ===========
Stock issued to acquire Key West and Sonoma............... $ -- $ 178,840
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE> 43
SONOMA INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1996
NOTE A -- ORGANIZATION
Sonoma Quicksilver Mines, Inc., a public company, was incorporated under
the laws of the State of Nevada on June 10, 1940. The name was subsequently
changed to Sonoma International ("Sonoma"). Sonoma had several failed business
operations and since 1988 its only activity had been to search for a company or
assets to acquire.
September 12, 1996, Sonoma entered into an agreement (the "Agreement") with
Clear Creek Investments, LLC, a Kentucky Limited Liability Company ("Clear
Creek") and owner of the general partner of Jamestown Resort & Marina, LTD
("Jamestown"), and holders of the limited partnership interests in Jamestown.
The Agreement required the transfer and assignment to Sonoma of Jamestown's
general partner and all limited partnership interests. The Agreement, effective
on December 9, 1996, incorporates the payment of the preference payments due
(Note I) through the issuance of shares of Sonoma. In addition, the Agreement
required that Sonoma effect a one for two hundred reverse split (and increase
authorized shares to 20,000,000 (post split)), leaving 300,000 shares issued and
outstanding, and issue 1,700,000 shares to Clear Creek and affiliated and
related entities or individuals for the acquisition of Jamestown. The
consolidated financial statements including all references to the number of
shares of common stock and all per share information have been adjusted to
reflect the common stock reverse split and the revised authorized number of
shares on a retroactive basis.
October 31, 1996, Key West Conch Harbor, Inc. ("Key West"), by consent of
its shareholders, entered into an agreement (the "Agreement") with Sonoma. The
Agreement required the transfer and assignment to Sonoma of all of the common
stock of Key West in exchange for 300,000 shares of common stock of Sonoma and a
demand note for $175,000. The transaction was completed effective December 9,
1996.
For accounting purposes, as the Jamestown Limited partners and general
partner end up with the majority of Sonoma's stock, the acquisition by Sonoma of
all of the Jamestown limited partnership interests and general partnership
interest was accounted for as a recapitalization of Jamestown with Jamestown as
the acquirer (a reverse acquisition). Accordingly, the financial statements
prior to the acquisition of Sonoma and Key West included herein are those of
Jamestown. The transaction with Key West was accounted for using the purchase
method. The results of operations of Key West and Sonoma have been included in
the consolidated statements of operations from the acquisition dates.
Jamestown was formed as a limited partnership organized under the laws of
the State of Kentucky by Jamestown Resort & Marina, Inc., the general partner,
on November 1, 1987. It owns a resort and marina facility near Jamestown,
Kentucky on Lake Cumberland.
Key West was incorporated in the State of Florida on December 23, 1993 for
the purposes of acquiring, developing, and operating a marina facility in Key
West, Florida.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Sonoma
International and its subsidiaries ("the Company"). All significant intercompany
transactions and balances have been eliminated in consolidation.
Statement of Cash Flows
For purposes of the statement of cash flows, cash equivalents include time
deposits, certificates of deposit, and all highly liquid debt instruments with
original maturities of 3 months or less when purchased.
F-10
<PAGE> 44
SONOMA INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1996
Inventory
Inventory is stated at the lower of cost or market and consists of food,
beverages, clothing, fuel and boat parts. Cost is determined on the first-in,
first-out ("FIFO") method of accounting.
Property and Equipment
Property and equipment are stated at cost. The Company provides for
depreciation on the straight-line method over the estimated useful lives of the
related assets. Assets held under capital leases are amortized using the
straight-line method over the estimated useful lives of the related assets.
Major classes of property and equipment and their related lives are as follows:
<TABLE>
<CAPTION>
MAJOR CLASS LIFE IN YEARS
----------- -------------
<S> <C>
Docks, floating buildings and buildings on land............. 20 - 31.5
Houseboats and pontoons..................................... 20
Land improvements........................................... 15 - 20
Signage..................................................... 10
Furniture, fixtures and equipment........................... 7
Computers................................................... 5
</TABLE>
Maintenance and repairs are expensed as incurred. Replacements and
betterments are capitalized.
Goodwill
Goodwill relates to the original purchase in 1988 of the Jamestown marina
and the U.S. Army Corps of Engineers lease and the purchase of Key West
effective December 9, 1996 (see Note A) and represents the excess of cost over
fair value of net assets acquired and is being amortized using the straight-line
method over 40 years. Management reviews recoverability, the valuation and
amortization of goodwill on an on-going basis. As part of this review,
management considers the undiscounted projected future net earnings in
evaluating the value of goodwill. If the undiscounted projected future net
earnings were less than the stated value, the goodwill would be written down to
its fair value.
Deferred Loan Fees
Loan fees are capitalized and amortized over the life of the loan using the
straight-line method.
Deferred offering costs
Deferred offering costs are capitalized and will be recorded as a reduction
to stockholders equity upon completion of the Company's public offering or
expensed if the offering is unsuccessful (Note D).
Revenue Recognition
Annual or seasonal slip rentals received are recognized as deferred revenue
and amortized into income over the life of the rental contract using the
straight-line method. All other revenues are recognized at the time the rental
occurs or the delivery of the product or service takes place.
Use of Estimates and Assumptions
Management uses estimates and assumptions in preparing financial statements
in accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of
F-11
<PAGE> 45
SONOMA INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1996
assets and liabilities, the disclosure of contingent assets and liabilities, and
the reported amounts of revenues and expenses. Actual results could vary from
the estimates that were used.
Income Taxes
The Company accounts for income taxes in accordance with the asset and
liability approach. Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities.
Income (loss) per share
(Income) loss per share of common stock is based upon the weighted average
number of outstanding common shares for all periods presented after giving
retroactive effect to a one for two hundred reverse split of the Company's
common stock (See Note A).
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current year presentation.
NOTE C -- ACQUISITIONS
As discussed in Note A, Sonoma and Key West were acquired effective
December 9, 1996. The public company's stock is not considered to be actively
trading, therefore the assets and liabilities of Sonoma and Key West were valued
at fair market value.
A summary of the fair value of assets acquired and liabilities assumed is
as follows:
<TABLE>
<S> <C>
Current assets including cash of $23,325.................... $ 68,626
Land, docks and improvements and other fixed assets......... 4,675,905
Other assets................................................ 319,964
Goodwill.................................................... 453,560
Current liabilities......................................... (550,881)
Deferred tax liability...................................... (453,560)
Debt........................................................ (4,159,774)
----------
353,840
Less note issued in connection with acquisitions............ (175,000)
----------
Estimated fair value of common stock issued................. $ 178,840
==========
</TABLE>
Unaudited pro forma financial information for the years ended December 31,
1995 and 1996 as though the acquisitions had occurred on January 1, 1995 is as
follows:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Revenues.................................................... $4,674,000 $5,580,000
Net loss before extraordinary item.......................... (829,000) (159,000)
Net income (loss)........................................... (411,000) 2,464,000
Net loss per share before extraordinary item................ (0.42) (0.08)
Net income (loss) per share................................. (0.21) 1.24
</TABLE>
F-12
<PAGE> 46
SONOMA INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1996
NOTE D -- SUBORDINATION OF RELATED PARTY DEBT AND PUBLIC OFFERING
As reflected in the consolidated statements of operations, the Company
incurred net losses before extraordinary items of approximately $611,000 and
$141,000 in 1995 and 1996, respectively. At December 31, 1996 current
liabilities exceed current assets by approximately $5,722,000. During 1995 and
1996 respectively, the Company generated positive cash from operating activities
of approximately $525,000 and $126,000 and an overall increase in cash of
approximately $6,000 and $95,000. Net income (loss) before extraordinary items
and depreciation and amortization was approximately a loss of $2,000 for 1995
and $489,000 (including deferred tax benefit of 454,000) of income for 1996. In
addition, the Company has entered into an agreement with the holders of
$3,277,577 of the notes payable to defer payments of principal and interest if
necessary for the Company to meet other obligations.
The acquisition of Key West in December, 1996 and operational charges at
Jamestown, as well as economies of scale realized by the combined operations of
Jamestown and Key West is also expected to improve operating cash flows.
In addition, in January, 1997, the Company filed a registration statement
with the Securities and Exchange commission to raise $16,500,000 (not including
underwriters discounts and warrants) through a public offering, a portion of the
proceeds of which will be used to pay down debt and provide additional liquidity
to fund operations and growth.
The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts or classification of liabilities which may result from the possible
inability of the Company to meet its obligations.
NOTE E -- DEVELOPMENT AGREEMENT WITH THE TRANSPORTATION CABINET OF THE
COMMONWEALTH OF KENTUCKY
The Company and the Transportation Cabinet of the Commonwealth of Kentucky
("Transportation Cabinet") are parties to an agreement for development of the
Jamestown marina facilities. Jamestown agreed to construct a new resort and
marina and the Transportation Cabinet agreed to construct an extension of
Kentucky Highway 92 to the island upon which the Partnership constructed its
lodge.
Jamestown agreed to pay the Transportation Cabinet one percent of the gross
revenues received by the Jamestown resort and marina facilities in perpetuity.
The fees under the agreement totaled $40,000 in 1995 and 1996.
NOTE F -- LEASE RIGHTS
The Company leases approximately 299 acres of land and water from the U.S.
Army Corps of Engineers. The lease has a 25-year term beginning January 1, 1988
with the original term of the lease ending in December 2012. In August 1988 the
Company entered into a supplemental agreement renewing the lease for an
additional 25-years without interruption. The renewal is subjected to the
satisfactory compliance with all lease conditions during the original term and
approval by the Government. Rental amounts due under the lease are contingent
upon a variety of factors, primarily gross revenues. Rent expense was
approximately $70,000 in 1995 and $68,000 in 1996.
F-13
<PAGE> 47
SONOMA INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1996
NOTE G -- NOTES PAYABLE AND LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996
----------- -----------
<S> <C> <C>
Mortgage one................................................ $ 7,194,005 $ -
Note payable one............................................ -- 6,220,691
Mortgage two................................................ -- 3,224,185
Demand note -- related party................................ 1,852,777 1,852,777
Note payable three.......................................... -- 800,332
Former General Partner note................................. 1,197,500 707,500
Former Limited Partner notes................................ 360,000 360,000
Paddleboat notes............................................ 209,736 170,318
Yacht Club note -- related party............................ 223,624 200,000
Executive Boats note........................................ 159,671 --
Generators note............................................. 42,988 --
Note payable two............................................ -- 144,553
First note payable to stockholder........................... -- 175,000
Second notes payable to stockholder......................... -- 100,000
Third note payable to former stockholder.................... -- 140,201
Fourth note payable to stockholder.......................... -- 517,300
Other....................................................... -- 46,869
----------- -----------
Total............................................. 11,240,301 14,659,727
Less current maturities..................................... (3,819,069) (4,395,941)
----------- -----------
Long-term portion........................................... $ 7,421,234 $10,263,786
=========== ===========
</TABLE>
Mortgage one and note payable one. On December 31, 1988 Jamestown entered
into two notes with banks to finance the resort and marina project. The first
note was for $5,625,000 maturing on January 1, 1995. The note required monthly
payments of principal in the amount of $53,568 and interest at a rate of 11%,
adjusted to 3% above the weekly auction average rate of T-Securities, with a 3
year maturity on November 1. The second note was for $2,375,000 maturing on
January 1, 1995. The note required monthly payments of principal in the amount
of $6,000 and interest at a rate of 1% over the Base Lending rate as defined.
Both notes were secured by Jamestown property. Thereafter, the Company defaulted
on the notes, and the bank became insolvent. The loan was subsequently assumed
by the Resolution Trust Corporation ("RTC"). The note was consolidated with
several other notes and sold to a second bank in March, 1993.
On January 29, 1996, the Company refinanced the mortgage one note by
entering into a loan agreement for $6,300,000 maturing on February 1, 2001. The
agreement requires monthly payments of principal and interest at a variable rate
equal to the commercial paper rate plus 4.25%. Proceeds of $5,800,000 were used
to settle the $5,631,000 mortgage and to settle a boat lease obligation and
related loan origination fees in the amount of $678,000. Other short term
borrowings were obtained to finance the difference between amounts paid and the
$5,800,000 proceeds used from the $6,300,000 loan agreement. On March 28, 1996
the remaining $500,000 was drawn on the note. The lender requires the Company to
maintain an escrow cash account to pay for improvements and property taxes.
The Company recognized a $2,518,000 gain (net of income taxes of $0) on
debt extinguishment as a result of the mortgage one refinancing discussed above.
The extraordinary gain consisted primarily of forgiveness of $1,844,000 in
outstanding principal and $748,000 of accrued interest.
Mortgage Two. The note payable to a financial institution was assumed in
connection with the acquisition of Key West. The note requires monthly interest
payments only until May 1, 1998 at which time thirty-six
F-14
<PAGE> 48
SONOMA INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1996
principal plus interest payments are due totaling $30,208 per month with
interest at 9% for these 36 payments and at 1% over prime thereafter with
monthly payments increasing to $30,624 until maturity on April 1, 2016.
Demand Notes -- related party. Jamestown originally entered into a note
agreement with a bank for $2,000,000 on November 16, 1989, at 1 1/2% over the
prime lending rate which was collateralized by a second mortgage on the assets
of the marina and by certain items of the Webb Family Trust, an entity related
to the former general partner. A 1% guarantee amount based on the outstanding
balance was payable to the Webb Family Trust as compensation for pledging its
collateral (See Note I). The Company defaulted on the note several times and on
January 15, 1993 the note was converted to a demand note. In March 1994, the
Company again defaulted under the terms of the note and the Webb Family Trust
collateral was liquidated by the bank to satisfy the note. The Company
subsequently became obligated to the Webb Family Trust under the same terms as
the demand note. The Webb Family Trust has waived all defaults on this note.
Note payable three. On January 29, 1996, Jamestown assumed a 7.39% note to
a financial institution to satisfy obligations arising from funds provided to
the Company to cover differences in the mortgage refinancing discussed
previously. Interest expense was $54,558 during 1996 and accrued interest was
$24,286 at December 31, 1996. The note matures on October 22, 2001.
Former General Partner Note. The Webb Family Trust loaned the Company
$477,500 at various dates in 1995 and $750,000 in September 1995 at 10% under a
promissory note entered into on August 10, 1995. The note matured on May 1, 1996
and is due on demand. The Webb Family Trust has waived all defaults on this
note.
Former Limited Partner Notes. On March 6, 1992, loans totaling $360,000
were made by the original limited partners in Jamestown at 1% plus prime for
operating shortfalls and capital improvements. The notes are payable on demand.
The notes may be extended each year for a fee of 1% of the note balance.
Paddleboat Notes. Webb Cruise Lines, Inc. (WCL), an entity controlled by
the former general partner of Jamestown, originally purchased the Jamestown
Queen, a paddleboat, by obtaining financing from two banks. On April 21, 1989
WCL entered into the first note with a bank for $325,000. On October 30, 1994
the note was renewed for $251,303 at 2% plus prime maturing on April 30, 2000.
The note requires monthly payments of $5,309 of principal and interest. The loan
was collateralized by five (5.6%) of the limited Partnership units, the
Paddleboat and guaranteed by the Webb Family Trust. On May 8, 1989, WCL entered
into a 13.5% variable note with a second bank amounting to $75,000 with interest
and principal due on June 22, 1995. Jamestown assumed both notes and title to
the boat from WCL in May 1994 for the balance of both notes of $282,346 which
approximated the fair value of the Paddleboat.
Yacht Club Note -- related party. Webb Lexington Ventures, Inc., an entity
controlled by the former general partner of Jamestown, entered into a 11%
mortgage note with a bank for $278,000 to purchase the Yacht Club. The Yacht
Club was acquired by Jamestown by assuming the note, which approximated the fair
market value of the Yacht Club. The note was collateralized by property of the
former general partner and matured on July 1, 1996. The former general partner
of Jamestown funded the pay off of the note and assumed the obligation from the
Company. All defaults on this note have been waived.
Executive Boats Note. On February 8, 1990, Jamestown entered into a note
with a bank to finance its executive boats. The note is collateralized by the
two houseboats. The note was renewed on October 30, 1995 and provided for
monthly principal payments of $4,000, interest at 11%. The note was paid off in
connection with the refinancing discussed previously.
Generators Note. On May 26, 1995, Jamestown entered into a note with a bank
for $53,200 at a fixed rate of 10.5% maturing on October 1, 1997. The note was
collateralized by 12 boat generators. Interest and
F-15
<PAGE> 49
SONOMA INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1996
principal of $3,000 were paid monthly beginning on July 1, 1995 through October
1, 1995. The note was paid off on January 29, 1996 in connection with the
refinancing of the mortgage note discussed previously.
Note payable two. This $200,000 promissory note with a financial
institution was assumed in connection with the purchase of Key West and matures
on February 3, 1999, with a variable interest rate of 1 3/4% above the financial
institutions base rate. Monthly interest payments are required. Accrued interest
at December 31, 1996 was $1,348.
First Note payable to stockholder. The Company issued a $175,000 note
payable, which is due on demand and bears no interest, and 300,000 shares to
former owners of Key West to acquire all of the stock of Key West (Note A).
Second Notes Payable to stockholder. In connection with the acquisition of
Key West, the Company assumed a $100,000 note payable to a stockholder which
matured December 31, 1996 and is now due on demand, and bears interest at a
variable rate of 1% over prime. Accrued interest at December 31, 1996 was
$7,883.
Third note payable to former stockholder. In connection with the
acquisition of Key West, the Company assumed a note payable of $500,000 and a
note payable of $150,000. The $500,000 note payable which was due to a former
stockholder was paid off in October, 1996. The $150,000 note matures in August,
2001 and bears interest at 10%.
Fourth note payable to stockholder. In connection with the acquisition of
Key West, the Company assumed a note payable to a stockholder. The note was for
$900,000, is due on demand, and bears no interest. The note payable was reduced
by payments of $382,700 in 1996. Accrued interest at December 31, 1996 was
$29,250.
Aggregate maturities of long-term debt at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997............................................ $ 4,395,941
1998............................................ 493,403
1999............................................ 507,874
2000............................................ 446,047
2001............................................ 5,906,549
Thereafter...................................... 2,909,913
-----------
Total...................................... $14,659,727
===========
</TABLE>
NOTE H -- OBLIGATIONS UNDER CAPITAL LEASES
Jamestown leased certain boats and computer equipment under capital leases.
In 1991, Jamestown sold 25 houseboats and 20 pontoon boats for $1,374,000 to a
bank and subsequently leased back the boats under a capital lease. In connection
with this sale and lease-back transaction, the Company recorded a deferred gain
of $104,000. This gain was being amortized as a offset to amortization expense
over the term of the lease. On January 29, 1996, the Company settled the boat
lease obligation and took title of the boats. See Note G. The remaining deferred
gain of $75,800 was credited to income. Amortization expense was $65,000 and
$5,700 for 1995 and 1996, respectively.
NOTE I -- RELATED PARTY TRANSACTIONS
On December 9, 1996, in connection with the reverse acquisition transaction
with Sonoma, the Company issued 304,285 (included within the 330,975 shares
issued to relieve obligations in the accompanying consolidated statement of
changes in Stockholders' deficit) shares of Sonoma common stock to the
F-16
<PAGE> 50
SONOMA INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1996
Jamestown former general and limited partners and various other related parties
to satisfy accrued guarantee fees of $70,000, accrued management fees of
$622,355 and accrued interest of $421,482. The average effective share price for
the 304,285 common shares ranged from $3.57 to $3.78. After December 9, 1996, no
additional guarantee and management fees will be accrued or paid. Additional
interest of $20,107 on shareholder loans was accrued after December 9, 1996 and
will be paid using cash.
The former general partner of Jamestown had a management agreement with the
Partnership to provide management services to the Partnership for a fee equal to
5% of the annual gross revenues. Such fee was payable to the general partner at
a rate $4,000 per month, plus direct costs and expenses associated with its
management of the former Partnership. The remainder of the fee was accrued.
Accrued management fees at December 31, 1995 and 1996 were $581,000 and $0,
respectively. Management fees paid in 1995 and 1996 were $48,000 and management
fee expense was $201,000 and $195,636, respectively.
The former general partner of Jamestown guaranteed the Demand Note (Note G)
and prior to the acquisitions (See Note A) received as compensation a fee of 1%
of the outstanding note balance annually. Such fee amounted to $20,000 and
$10,000 during 1995 and 1996, respectively. The accrued guarantee fee was
$60,000 and $0 at December 31, 1995 and 1996, respectively. Subsequent to the
acquisitions, this fee is no longer payable.
Accrued interest due to the former partners of Jamestown was $272,000 and
$0 at December 31, 1995 and 1996, respectively. Interest expense to related
parties was $261,000 and $285,550 during 1995 and 1996, respectively.
Accrued interest due to the Key West stockholders was $37,133 at December
31, 1996. Interest expense in connection with notes subsequent to the
acquisition due to stockholders was $7,880.
Also see Note G.
NOTE J -- INCOME TAXES
Prior to the acquisition transactions described in Note A, Jamestown, a
limited partnership, and Key West, an S Corporation for Federal income tax
purposes, were not subject to income taxes at the entity level. Subsequent to
the acquisitions through December 31, 1996, the Company generated operating
losses for financial reporting and income tax reporting purposes. Any existing
available net operating losses of Sonoma were limited upon consummation of the
acquisition transactions described in Note A.
The components of the income tax benefit for the year ended December 31,
1996 are as follows:
<TABLE>
<S> <C>
Federal
Current tax expense (benefit)............................. $ --
Deferred tax (benefit).................................... (453,560)
---------
$ 453,560
---------
</TABLE>
F-17
<PAGE> 51
SONOMA INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1996
The Company's income tax benefit for the year ended December 31, 1996
differed from the statutory Federal rate of 34% as follows:
<TABLE>
<S> <C>
Statutory rate applied to net loss before income taxes and
extraordinary items....................................... $(202,314)
Increase in income tax benefit resulting from change in tax
status of Jamestown (Note A).............................. (476,000)
Decrease in income tax benefit resulting from net losses
generated prior to acquisition transactions which losses
are not deductible........................................ 161,846
Increase in valuation allowance............................. 62,908
---------
$(453,560)
=========
</TABLE>
Deferred tax assets and liabilities at December 31, 1996 are as follows:
<TABLE>
<S> <C>
Current deferred tax asset.................................. $ --
Current deferred tax liability.............................. --
--------
--
--------
Non-current deferred tax asset.............................. $505,669
Non-current deferred tax liability.......................... 453,560
Valuation allowance......................................... (52,109)
--------
Net non-current deferred taxes............................ $ --
========
</TABLE>
The non-current deferred tax asset consists primarily of the temporary
difference arising from the effective change of tax status of Jamestown upon
consummation of the transaction with Sonoma (see Note A) which results in
Jamestown being included in the Sonoma consolidated Federal income tax return
beginning December 9, 1996. This amount (net of a small valuation allowance) was
recorded as a benefit to deferred income taxes in the accompanying statement of
operations. The deferred tax asset also includes an insignificant amount of
net-operating losses. The non-current deferred tax liability consists
principally of differences for financial reporting and income tax reporting
purposes of assets and liabilities acquired of Key West. (see Note A).
NOTE K -- PARTNERSHIP AGREEMENT -- JAMESTOWN
The net loss for Jamestown for the year ended December 31, 1995 and for the
period in 1996 prior to the acquisition transaction described in Note A, was
allocated in accordance with the Partnership Agreement. No loss is allocated to
the special limited partners because of their nil capital account balances. In
accordance with the Partnership agreement, limited partners are allocated 80% of
net losses to the extent that they have positive capital account balances, and
the general partner is allocated the remaining loss.
NOTE L -- FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure About Fair
Value of Financial Instruments", requires disclosure about the fair value of all
financial assets and liabilities for which it is practicable to estimate. Cash
and escrow funds, accounts receivable, accounts payable and other liabilities
are carried at amounts that reasonably approximate their fair values.
F-18
<PAGE> 52
SONOMA INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1996
The carrying amount and fair value of notes payable and long-term debt are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------
CARRYING FAIR
AMOUNT VALUE
----------- -----------
<S> <C> <C>
Variable rate debt................................ $10,577,048 $10,577,048
Demand notes...................................... 3,120,277 3,120,277
Fixed rate debt................................... 962,402 744,460
</TABLE>
The fair values of the Company's fixed rate debt have been estimated based
upon relative changes in the Company's variable borrowing rates since
origination of the fixed rate debt. Fair values of variable rate debt and demand
notes are deemed to approximate the carrying amount.
NOTE M -- CONTINGENT LIABILITIES
In the normal course of its business, the Companies are subject to
litigation. Management of the Company, based on discussions with its outside
legal counsel, does not believe any claims, individually or in the aggregate,
will have a material adverse impact on the Company's financial position, results
of operations or cash flows.
F-19
<PAGE> 53
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Sonoma International
We have audited the accompanying balance sheets of Sonoma International as
of December 31, 1994 and 1995, and the related statements of operations,
stockholders' deficit, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sonoma International as of
December 31, 1994 and 1995, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
The financial statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note C to the financial statements,
the Company has no assets to pay its obligations and has been inactive for a
number of years. These factors raise substantial doubt as to the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note C. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
KING, GRIFFIN & ADAMSON P.C.
Dallas, Texas
September 6, 1996, except as to
Note H, which is as of December 9, 1996
F-20
<PAGE> 54
SONOMA INTERNATIONAL
BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1995
----------- -----------
<S> <C> <C>
TOTAL ASSETS................................................ $ -- $ --
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accrued liabilities....................................... $ 45,395 $ 5,633
Accrued interest.......................................... 224,031 252,435
Notes payable............................................. 674,336 262,391
----------- -----------
Total current liabilities......................... 943,762 520,459
----------- -----------
Total liabilities................................. 943,762 520,459
----------- -----------
Commitments and contingencies (Notes C and E)
Stockholders' deficit
Common stock, $.001 par value, 20,000,000 authorized,
127,899 and 300,000 issued and outstanding shares...... 128 300
Additional paid-in capital................................ 4,277,568 4,781,378
Accumulated deficit....................................... (5,221,458) (5,302,137)
----------- -----------
Total Stockholders' Deficit....................... (943,762) (520,459)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT....... $ -- $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE> 55
SONOMA INTERNATIONAL
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1995
--------- ---------
<S> <C> <C>
Revenue..................................................... $ -- $ --
--------- ---------
Expenses
Professional fees......................................... -- 13,975
Consulting fees........................................... 75,000 37,500
Interest.................................................. 34,200 28,404
State taxes............................................... 1,600 800
--------- ---------
Total expenses.................................... 110,800 80,679
--------- ---------
Net income (loss)........................................... $(110,800) $ (80,679)
========= =========
Net income (loss) per common share.......................... $ (0.86) $ (0.58)
========= =========
Weighted average shares outstanding......................... 127,899 138,442
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE> 56
SONOMA INTERNATIONAL
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
ADDITIONAL
NUMBER OF COMMON PAID-IN ACCUMULATED
SHARES STOCK CAPITAL DEFICIT TOTAL
--------- ------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994........... 127,899 $128 $4,277,568 $(5,110,658) $(832,962)
Net loss............................. -- -- -- (110,800) (110,800)
------- ---- ---------- ----------- ---------
Balance at December 31, 1994......... 127,899 128 4,277,568 (5,221,458) (943,762)
Stock issued for debt and other
obligations........................ 172,101 172 481,310 -- 481,482
Capital contributions resulting from
obligations settled by shareholders
on behalf of the Company........... -- -- 22,500 -- 22,500
Net loss............................. -- -- -- (80,679) (80,679)
------- ---- ---------- ----------- ---------
Balance at December 31, 1995......... 300,000 300 4,781,378 (5,302,137) (520,459)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE> 57
SONOMA INTERNATIONAL
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $(110,800) $(80,679)
Expenses paid through contributions of additional paid-in
capital................................................ 34,200 13,975
Increase (decrease) in accounts payable and taxes......... 1,600 800
Increase (decrease) in accrued interest................... -- 28,404
Increase in stockholder advances.......................... 75,000 37,500
--------- --------
Net cash provided by operations................... -- --
Cash at beginning of period....................... -- --
--------- --------
Cash at end of period............................. $ -- $ --
========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE> 58
SONOMA INTERNATIONAL
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
NOTE A -- ORGANIZATION
Sonoma Quicksilver Mines, Inc. was incorporated under the laws of the State
of Nevada on June 10, 1940. The name was subsequently changed to Sonoma
International (the "Company" or "Sonoma"). The Company had several failed
business operations and since 1988 its only activity has been to search for a
company or assets to acquire.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Income Taxes
The Company accounts for income taxes in accordance with the asset and
liability approach. Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities.
Income (loss) per share
Income (loss) per share of common stock is based upon the weighted average
number of common shares outstanding for all periods presented after giving
retroactive effect to a one for two hundred reverse split of the Company's
common stock (See Note H).
Use of Estimates and Assumptions
Management uses estimates and assumptions in preparing financial statements
in accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported amounts of
revenues and expenses. Actual results could vary from the estimates that were
used.
Accounting Standards Not Yet Adopted
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-based Compensation" ("SFAS 123"), was issued. This
statement requires the fair value of stock options and other stock-based
compensation issued to employees to either be included as compensation expense
in the income statement, or the pro forma effect on net income and earnings per
share of such compensation expense to be disclosed in the footnotes to the
Company's financial statements commencing with the Company's 1996 fiscal year.
The Company expects to adopt SFAS 123 on a disclosure basis only. As such,
implementation of SFAS 123 is not expected to impact the Company's balance sheet
or statement of operations.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current year presentation.
NOTE C -- GOING CONCERN UNCERTAINTY
Sonoma has been inactive for a number of years and its continued existence
is in doubt. The Company has no assets to pay its current obligations or
additional obligations arising from incidental administrative expenses and
interest expenses.
F-25
<PAGE> 59
SONOMA INTERNATIONAL
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994 AND 1995
The Company plans to reduce its liabilities and acquire income producing
assets through the issuance of additional stock and a merger with an operating
partnership (Note H). The ability of the Company to continue in existence is
dependent on the success of these plans.
NOTE D -- NOTES PAYABLE
Notes payable consists of the following at December 31, 1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Note payable dated June 12, 1991, due on demand to an
individual bearing interest at 15% per annum; unsecured.
Interest of $44,316 has been accrued through the
settlement date. On September 27, 1995 a conditional
settlement agreement was reached relieving Sonoma of the
principal and accrued interest in exchange for 4,000 (post
reverse split, see Note H) common shares of Sonoma. This
settlement agreement is contingent upon Sonoma stock
obtaining a market value and that the stock can be
liquidated................................................ $ 60,974 $ 60,974
Note payable to two individuals, due on demand and
unsecured. Interest of $15,861 has been accrued through
the settlement date. On July 25, 1995, a conditional
settlement agreement was reached releasing Sonoma of
principal and accrued interest in exchange for 1,000 (post
reverse split, see Note H) shares of the Company. This
settlement agreement is contingent upon Sonoma stock
obtaining a market value and that the stock can be
liquidated................................................ 45,861 45,861
Note payable to an individual settled in September, 1995.... 5,000 --
Note payable to Sunwest Bank, due on demand with interest
accruing at 10.5%; unsecured. Interest of $42,557 has been
accrued through the settlement date. On September 7, 1995,
a conditional settlement agreement was reached relieving
Sonoma of the outstanding principal and accrued interest
in exchange for a nominal cash amount and the issuance of
1,000 (post reverse split, see Note H) shares of Sonoma
common stock. This settlement is conditioned upon Sonoma
common stock being listed on the National Bulletin Board
and having a market value and that the stock can be
liquidated................................................ 43,556 43,556
Stockholders loans (see Notes E and F)...................... 406,945 --
Note payable to Garfield Bank, due on demand with interest
accruing at 16%; unsecured. Interest of $164,997 has been
accrued through the settlement date. On September 8, 1995,
a conditional settlement agreement had been reached
relieving Sonoma of the principal amount owed and all
accrued interest thereon conditioned on 4,250 (post
reverse split, see Note H) shares of Sonoma common stock
being transferred into the name of Garfield Bank (from
other shareholders) and Sonoma common stock having a
market value that can be liquidated....................... 112,000 112,000
-------- --------
Total notes payable......................................... $674,336 $262,391
======== ========
</TABLE>
NOTE E -- STOCKHOLDERS DEFICIT
In 1995, the Company entered into numerous conditional settlement
agreements with various creditors in an attempt to settle all long term debt of
Sonoma. Many of the settlement agreements are in the form of debt relief in
exchange for common stock of the Company and conditioned upon the Company's
common stock being listed on the National Bulletin Board and having a market
value so that the stock can be liquidated. The
F-26
<PAGE> 60
SONOMA INTERNATIONAL
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994 AND 1995
conditional settlement amounts are still pending. The following other
settlements which have no conditional elements have been concluded.
On July 18, 1995, a settlement agreement was reached related to the
unsecured 6% note payable that was in default with a former officer relieving
Sonoma of the principal amount owed of $5,000 with $2,700 accrued interest,
accounts payable of $22,000 with $7,335 of accrued interest by issuing 1,138
(post reverse split, see Note H) shares of Sonoma common stock, and was
accounted for as a contribution to additional paid-in capital.
During the year ended December 31, 1995 Sonoma reached agreements with two
shareholders who were prior officers of the Company to settle amounts due to
them approximating $444,445 through the issuance of 166,738 (post reverse split,
see Note H) shares of the Company's common stock, and was accounted for as a
contribution to additional paid-in capital.
During the year ended December 31, 1995, Sonoma reached agreements with two
individuals to settle amounts due to them approximating $8,800 through the
transfer of 200 (post reverse split, see Note H) of the Company's common stock
(transferred from other shareholders) and was accounted for as a contribution to
additional paid-in capital.
Professional fees of $13,700 were paid on behalf of Sonoma by certain
shareholders. These expenses paid on behalf of the Company were accounted for as
contributions to additional paid-in capital.
NOTE F -- RELATED PARTY TRANSACTIONS
From 1989 through December 31, 1995, officers of the Company paid expenses
and/or liabilities of Sonoma. Additionally, officers of Sonoma were owed
consulting fees from the Company for current and past services rendered. During
the year ended December 31, 1995, Sonoma and the officers have agreed to settle
the outstanding amounts owed to them of $444,445 through the issuance of common
stock. See Note E.
NOTE G -- INCOME TAXES
The Company generated negligible taxable income and/or net operating losses
during the years ended December 31, 1994 and 1995. Any existing available net
operating losses at December 31, 1995 would be lost upon consummation of the
acquisition transaction described in Note H. At December 31, 1995, the Company
has a deferred tax asset of approximately $86,000 relating to amounts deducted
for financial reporting losses not deducted for income tax reporting purposes.
This asset has a valuation allowance recorded against it due to the uncertainty
of generating future taxable income. There was no significant change in the
valuation allowance from 1994.
NOTE H -- SUBSEQUENT EVENT
As of September 12, 1996, the Company entered into an agreement (the
"Agreement") with Clear Creek Investments, LLC, a Kentucky Limited Liability
Company ("Clear Creek"), and holders of the limited partnership interests in
Jamestown Resort & Marina, Ltd, a Kentucky limited partnership ("JRML"). JRML
owns a resort and marina located on the Cumberland Lake in south central
Kentucky.
The Agreement requires the transfer and assignment to Sonoma of JRML's
general partner and all limited partnership interests. There are several
conditions to closing including the delivery to the Company of an appraisal
which states that the assets of JRML as of the date of the appraisal have a fair
market value of not less than $10,000,000. That appraisal has been delivered to
the Company. In addition, the Agreement requires that the Company effect a one
for two hundred reverse split, leaving 300,000 shares issued and outstanding,
and issue 1,700,000 shares to Clear Creek and affiliated and related entities or
individuals for the
F-27
<PAGE> 61
SONOMA INTERNATIONAL
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994 AND 1995
acquisition of JRML. The financial statements, including all references to the
number of shares of common stock and all per share information, have been
adjusted to reflect the common stock reverse split and the revised authorized
number of common shares on a retroactive basis.
NOTE I -- EVENT SUBSEQUENT TO THE DATE OF THE REPORT OF INDEPENDENT
AUDITOR (unaudited)
On December 9, 1996, the transaction described in Note H was consummated as
described.
F-28
<PAGE> 62
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Stockholders
Key West Conch Harbor, Inc.
We have audited the accompanying balance sheets of Key West Conch Harbor,
Inc. as of December 31, 1994 and 1995, and the related statements of operations,
stockholders' deficit, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Key West Conch Harbor, Inc.
as of December 31, 1994 and 1995, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
The financial statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note C to the financial statements,
the Company has incurred losses since its inception and at December 31, 1995,
its current liabilities exceeded current assets by approximately $2,107,802.
These factors raise substantial doubt as to the Company's ability to continue as
a going concern. Management's plans in regard to these matters are also
described in Note C. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
KING GRIFFIN & ADAMSON
Dallas, Texas
October 18, 1996
F-29
<PAGE> 63
KEY WEST CONCH HARBOR, INC.
BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1995
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash...................................................... $ 3,657 $ 20,899
Receivables............................................... 8,859 6,452
Notes receivable.......................................... -- --
Inventory................................................. -- 8,716
Prepaid expenses and other................................ 500 13,859
---------- ----------
Total current assets.............................. 13,016 49,926
---------- ----------
PROPERTY AND EQUIPMENT
Land...................................................... 1,786,640 1,810,818
Land improvements......................................... 101,265 121,805
Docks..................................................... 443,711 788,016
Fuel Tanks................................................ -- 72,609
Furniture, fixtures and equipment......................... 550 20,178
Construction in progress.................................. -- 171,233
---------- ----------
2,332,166 2,984,659
Less accumulated depreciation and amortization.............. 29,719 70,717
---------- ----------
Net property and equipment.................................. 2,302,447 2,913,942
---------- ----------
OTHER ASSETS
Deferred loan fees, net of accumulated amortization of
$1,002, $5,761
and $10,673............................................ 13,545 16,712
---------- ----------
Total other assets................................ 13,545 16,712
---------- ----------
TOTAL ASSETS...................................... $2,329,008 $2,980,580
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Current portion of long-term debt (including $148,700,
$378,584 and $196,041 to related parties).............. $1,248,700 $1,928,584
Accounts payable.......................................... 71,792 23,897
Accrued interest (including $71,798, $110,405 and $46,241
to related parties).................................... 71,798 137,354
Accrued liabilities....................................... 55,293 48,633
Security deposits......................................... 10,000 --
Deferred revenue.......................................... -- 19,260
---------- ----------
Total current liabilities......................... 1,457,583 2,157,728
---------- ----------
LONG-TERM LIABILITIES
Long-term debt, net of current maturities (including
$990,800, $908,711 and $673,959 to related parties)....... 990,800 1,108,711
---------- ----------
Total long-term liabilities....................... 990,800 1,108,711
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes C, D, G and H)
STOCKHOLDERS' DEFICIT
Common stock; $10 par value; 100 shares authorized, issued
and outstanding........................................ 1,000 1,000
Additional paid-in capital................................ -- --
Accumulated deficit....................................... (120,375) (286,859)
---------- ----------
Total stockholders' deficit....................... (119,375) (285,859)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT....... $2,329,008 $2,980,580
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE> 64
KEY WEST CONCH HARBOR, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1994 1995
---------- ----------
<S> <C> <C>
REVENUES
Slip fees................................................. $ 73,715 $ 143,442
Lease income from related party........................... 92,675 --
Fuel...................................................... -- 507,914
Other..................................................... -- 2,557
--------- ---------
Total revenues.................................... 166,390 653,913
--------- ---------
COST OF REVENUES
Slip...................................................... 11,091 10,981
Fuel...................................................... -- 372,660
--------- ---------
Total cost of revenues............................ 11,091 383,641
--------- ---------
GROSS PROFIT................................................ 155,299 270,272
SELLING, GENERAL AND ADMINISTRATIVE......................... 60,478 152,007
DEPRECIATION AND AMORTIZATION............................... 30,721 45,757
--------- ---------
INCOME FROM OPERATIONS...................................... 64,100 72,508
INTEREST EXPENSE (including interest to related parties of
$91,800, $94,350 and $66,014)............................. 184,475 238,992
--------- ---------
NET INCOME (LOSS)........................................... $(120,375) $(166,484)
========= =========
Net loss per common share................................... $ (1,204) $ (1,665)
========= =========
Weighted average shares outstanding......................... 100 100
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE> 65
KEY WEST CONCH HARBOR, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994................. 100 $1,000 $ -- $ -- $ 1,000
Net loss for the year ended December 31,
1994..................................... -- -- -- (120,375) (120,375)
--- ------ -------- --------- ---------
Balance at December 31, 1994............... 100 1,000 -- (120,375) (119,375)
Net loss for the year ended December 31,
1995..................................... -- -- -- (166,484) (166,484)
--- ------ -------- --------- ---------
Balance at December 31, 1995............... 100 1,000 -- (286,859) (285,859)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE> 66
KEY WEST CONCH HARBOR, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1994 1995
----------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. $ (120,375) $(166,484)
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
Depreciation and amortization............................. 29,719 40,998
Amortization of deferred loan fees........................ 1,002 4,759
Changes in assets and liabilities:
Receivables............................................... (8,859) 2,407
Inventory................................................. -- (8,716)
Prepaid expenses and other................................ (500) (13,359)
Notes receivable.......................................... -- --
Accounts payable.......................................... 71,792 (47,895)
Accrued interest.......................................... 71,798 65,556
Accrued liabilities....................................... 55,293 (6,660)
Security deposits......................................... 10,000 (10,000)
Deferred revenue.......................................... -- 19,260
----------- ---------
Net cash provided (used) by operating
activities...................................... 109,870 (120,134)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment....................... (2,332,166) (652,493)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank and related party loans................ 2,239,500 797,795
Repayments of borrowings.................................. -- --
Organization and loan costs............................... (14,547) (7,926)
Proceeds from capital contributions....................... -- --
Proceeds from issuance of common stock.................... 1,000 --
----------- ---------
Net cash provided by financing activities......... 2,225,953 789,869
----------- ---------
NET INCREASE IN CASH........................................ 3,657 17,242
Cash at beginning of the period............................. -- 3,657
----------- ---------
Cash at end of the period................................... $ 3,657 $ 20,899
=========== =========
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for interest.................... $ 112,674 $ 248,141
=========== =========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
Assumption of debt in connection with the purchase of
property and equipment.................................... $ 2,332,166 $ 652,493
=========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE> 67
KEY WEST CONCH HARBOR, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
NOTE A -- ORGANIZATION
General
Key West Conch Harbor, Inc. (the "Company") is a S-Corporation,
incorporated in the State of Florida on December 23, 1993 for the purposes of
acquiring, developing, and operating a marina facility in Key West, Florida.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Statement of Cash Flows
For purposes of the statement of cash flows, cash equivalents include time
deposits, certificates of deposits, and all highly liquid debt instruments with
original maturities of 3 months or less when purchased.
Inventory
Inventory is stated at the lower of cost or market and consists of fuel.
Cost is determined on the first-in, first-out ("FIFO") method of accounting.
Property and Equipment
Property and equipment are stated at cost. The Company provides for
depreciation on the straight-line method over the estimated useful lives of the
related assets. Major classes of property and equipment and their related useful
lives are as follows:
<TABLE>
<CAPTION>
LIFE IN
MAJOR CLASS YEARS
----------- -------
<S> <C>
Land improvements........................................... 20
Docks....................................................... 20
Furniture, fixtures and equipment........................... 7
Computer equipment.......................................... 5
</TABLE>
Maintenance and repairs are expensed as incurred. Replacements and
betterments are capitalized.
Deferred Loan Fees
Loan fees are capitalized and amortized over the life of the loan using the
straight-line method.
Revenue Recognition
Annual or seasonal slip rentals received are recognized as deferred revenue
and amortized into income over the life of the rental contract using the
straight-line method. All other revenues are recognized at the time the rental
occurs or the delivery of the product or service takes place.
Lease income
During 1994 all fuel operations where leased to a related party who made
lease payments of all interest on the first mortgage. Income recorded in 1994
from these payments was $92,675.
F-34
<PAGE> 68
KEY WEST CONCH HARBOR, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994 AND 1995
Loss per share
Loss per share of common stock is based upon the weighted average number of
common shares outstanding. There is no effect on loss per share after giving
effect to proforma income taxes as if the Company was taxed as a C-Corporation.
Use of Estimates and Assumptions
Management uses estimates and assumptions in preparing financial statements
in accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported amounts of
revenues and expenses. Actual results could vary from the estimates that were
used.
Income Taxes
Taxable income or loss of the S-Corporation is allocated to the
shareholders in accordance with the provisions of the Stockholders agreement.
The Company qualifies as a S-Corporation and as such, Federal income taxes
accrue to the shareholders rather than to the Company. Accordingly, the
accompanying statements of operations of the Company include no provision for
Federal income taxes.
NOTE C -- GOING CONCERN UNCERTAINTY
As reflected in the statements of operations, the Company incurred net
losses of $120,375 and $166,484 in 1994 and 1995, respectively. At December 31,
1995, current liabilities exceed current assets by $2,107,802. These factors,
among others, raise substantial doubt as to the Company's ability to continue as
a going concern.
Management has been successful in the past in negotiating delays in the
payment of the Company's loans and was successful in refinancing the mortgage
debt (Notes D and H) subsequent to December 31, 1995. Management is also
negotiating to transfer ownership and control of the Company to a public company
(Note H). The public company has plans to raise additional capital in the public
market after the acquisition.
The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts or classification of liabilities which may result from the possible
inability of the Company to continue as a going concern.
NOTE D -- NOTES PAYABLE AND LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1995
---------- ----------
<S> <C> <C>
First mortgage.............................................. $1,100,000 $1,550,000
Second mortgage -- stockholder.............................. 500,000 500,000
Third mortgage -- related party............................. 200,000 200,000
First note -- stockholder................................... 245,000 245,000
Second note -- stockholder.................................. 125,000 125,000
Working capital note -- stockholder......................... 69,500 57,295
First note payable.......................................... -- 200,000
Second note payable -- stockholders......................... -- 160,000
---------- ----------
2,239,500 3,037,295
Less current maturities..................................... 1,248,700 1,928,584
---------- ----------
Long-term portion........................................... $ 990,800 $1,108,711
========== ==========
</TABLE>
F-35
<PAGE> 69
KEY WEST CONCH HARBOR, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994 AND 1995
First Mortgage. On December 29, 1993 the Company entered into a note
payable for $1,100,000 with a financial institution to purchase the marina. The
note is collateralized by the property. The mortgage is at a variable rate of
1 1/2% above the banks prime rate and matures on June 29, 2010. Payments of
interest were required from January 29, 1994 through July 29, 1995, thereafter
monthly payment of principal and interest were required to fully amortize the
note through the maturity date.
On March 27, 1995 the Company renegotiated the variable rate note with the
financial institution for $1,550,000 (which included unpaid interest). This note
matures with all the principal due on October 1, 1996 and requires monthly
interest payments beginning on May 1, 1995, at a rate of 1% over the banks
index. (See Note H).
Prepaid interest on this note was $13,359 at December 31, 1995.
Second Mortgage. On December 28, 1993 the Company entered into a $500,000
promissory note with a stockholder, at a fixed rate of 8%, collateralized by a
second mortgage on the property. Annual payments are required for principal and
interest totaling $50,000 commencing on January 5, 1995 and continuing until the
maturity date of January 5, 2004. Principal and interest payments due on January
5, 1995, were deferred. Accrued interest was $40,000 and $44,257 at December 31,
1994 and 1995, respectfully.
Third Mortgage. As part of the original purchase the Company entered into a
$200,000 promissory note with a related party. This note had a fixed rate of 10%
and matures on March 15, 1997. (See Note H).
On January 13, 1995 the Company renewed the $200,000 promissory note,
subordinate to the first and second mortgage, with a stockholder, at a fixed
rate of 10%. The note matures on January 13, 1997 and requires monthly interest
payments.
First Note to Stockholder. On December 28, 1993 the Company entered into a
$245,000 promissory note with a stockholder, at a fixed rate of 8%. Annual
payments are required of $50,000 (principal and interest) commencing January 5,
1995 and continuing until the maturity date of January 5, 2004. Principal and
interest payments due on January 5, 1995, were deferred. At December 31, 1994
and 1995 accrued interest was $19,600 and $39,200, respectively. (See Note H).
Second Note to Stockholder. On December 28, 1993 the Company entered into a
$125,000 promissory note with a stockholder, at a fixed rate of 8% with a
maturity date in July 2001. Annual interest payments are required commencing on
January 5, 1995 and continuing until the maturity date in July 2001. Interest
due on January 5, 1995 was deferred. At December 31, 1994 and 1995 accrued
interest was $10,000 and $20,000, respectively. (See Note H).
Working Capital Note to Stockholder. During 1994, working capital of
$69,500 was provided to the Company by a stockholder at a fixed rate of 8%. The
timing of the repayment of the note payable is at the discretion of the Company
and is classified as current maturities in the accompanying balance sheets. The
balance outstanding at December 31, 1994 and 1995 was $69,500 and $57,295,
respectively. At December 31, 1994 and 1995 accrued interest was $2,198 and
$6,948, respectively.
First Note payable. On August 3, 1995 the Company entered into a $200,000
promissory note with a financial institution maturing on February 3, 1999, at a
variable rate of 1 3/4% above the financial institutions base rate. Monthly
interest payments are required.
Second Note Payable. The following two notes were entered into by
stockholders of the Company to provide operating funds.
On October 2, 1995 the stockholders entered into a note payable for
$100,000 with the principal maturing on October 2, 1996, at a variable rate of
1% over prime. Monthly interest payments commencing on November 2, 1995 are
required.
F-36
<PAGE> 70
KEY WEST CONCH HARBOR, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994 AND 1995
On December 27, 1995 the stockholders entered into a second note payable
for $100,000 with the principal maturing on November 27, 1996, at a variable
rate of 2% over prime. Monthly interest payments commencing on January 27, 1995
are required. At December 31, 1995 $60,000 had been drawn and is outstanding
under this note payable.
Aggregate maturities of long-term debt at December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996............................................. $1,928,584
1997............................................. 284,752
1998............................................. 87,636
1999............................................. 290,760
2000............................................. 94,143
Thereafter....................................... 351,420
----------
Total.................................. $3,037,295
==========
</TABLE>
NOTE E -- FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure About Fair
Value of Financial Instruments", requires disclosure about the fair value of all
financial assets and liabilities for which it is practicable to estimate. Cash,
accounts receivable, accounts payable and other liabilities are carried at
amounts that reasonably approximate their fair values.
The carrying amount and fair value of notes payable and long-term debt are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------
CARRYING FAIR
AMOUNT VALUE
---------- ----------
<S> <C> <C>
Variable rate debt.................................. $1,910,000 $1,910,000
Fixed rate debt..................................... 1,070,000 1,151,250
Demand note......................................... 57,296 57,296
</TABLE>
The fair value of the Company's fixed rate debt have been estimated based
upon relative changes in the Company's variable borrowing rates since
origination of the fixed rate debt. Fair values of variable rate debt and demand
notes are deemed to approximate carrying amount.
NOTE F -- RELATED PARTY TRANSACTIONS
The Company has a $9,381 payable to a stockholder related to commissions
earned in conjunction with the purchase of the marina on December 28, 1993. In
addition, the Company has a $30,000 payable to a stockholder for a finders fee
in conjunction with the purchase of the marina.
During 1994 and 1995, the Company entered into various notes payable with
stockholders of the Company. See Note D.
Accrued interest due to the stockholders was $71,798 and $110,405 at
December 31, 1994 and 1995, respectively. Interest expense in connection with
notes due to stockholders was $91,800 and $94,350 during 1994 and 1995,
respectively.
Upon formation of the S Corporation, the Company purchased the Key West
facility for approximately $2,300,000 from a stockholder. This purchase price
approximated the fair market value of the property.
F-37
<PAGE> 71
KEY WEST CONCH HARBOR, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994 AND 1995
NOTE G -- CONTINGENT LIABILITIES
In the normal course of its business, the Company is subject to litigation.
Management of the Company, based on discussions with its outside legal counsel,
does not believe any claims, individually or in the aggregate, will have a
material adverse impact on the Company's financial position, results of
operations or cash flows.
NOTE H -- SUBSEQUENT EVENTS
On July 25, 1996 the majority stockholder sold 73.625 shares to a third
party which resulted in a change in control of the Company in exchange for
$1,700,000.
On April 8, 1996, the Company entered into a loan agreement for $2,724,185
maturing on April 1, 2016. This agreement renewed and consolidated the first
mortgage of $1,550,000 with an additional amount of $1,174,185 which was used to
pay off the third mortgage, the second note payable, to provide operating funds
and to fund expansion of the fuel system. The agreement requires twenty-four
monthly interest payments beginning May 1, 1996 at a rate of 9% and two hundred
and sixteen monthly principal and interest payments of $25,510 beginning May 1,
1998 at a rate of 9% during the first 36 payments and 1% over prime thereafter.
Effective of October 31, 1996, the Company, by consent of the stockholders,
entered into an agreement (the "Agreement") with Sonoma International
("Sonoma"), a public company. The Agreement requires the transfer and assignment
to Sonoma of all of the common stock of the Company in exchange for 300,000
shares of common stock of Sonoma.
NOTE I -- EVENT SUBSEQUENT TO THE DATE OF THE REPORT OF INDEPENDENT AUDITOR
(unaudited)
On December 9, 1996, the transaction described in Note H was consummated as
described.
F-38
<PAGE> 72
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR ANY
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 4
Use of Proceeds....................... 9
Dividend Policy....................... 10
Dilution.............................. 10
Capitalization........................ 11
Selected Consolidated Financial
Information......................... 12
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 13
Business.............................. 16
Management............................ 21
Certain Transactions.................. 24
Principal Stockholders................ 25
Description of Capital Stock.......... 25
Underwriting.......................... 28
Legal Matters......................... 29
Experts............................... 29
Additional Information................ 30
Index to Financial Statements......... F-1
</TABLE>
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
3,000,000 SHARES
SONOMA
INTERNATIONAL
COMMON STOCK
---------------------------------
PROSPECTUS
---------------------------------
NATIONAL SECURITIES CORPORATION
, 1997
======================================================
<PAGE> 73
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation and Bylaws provide that the Company
will indemnify its directors and officers to the fullest extent provided by
Nevada law. In addition, the Articles of Incorporation contain a provision
limiting a director's and officer's liability for monetary damages to the
fullest extent permitted by Nevada law.
Furthermore, Section 78.751 of the Nevada General Corporation Law (the
"NGCL") contains provisions relating to indemnification of officers and
directors. Section 78.751(1) provides that a corporation may indemnify any
person who was or is a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except for an action by or in right of the corporation by reason of the fact
that he was a director, officer, employee or agent of the corporation. In order
to indemnify, it must be shown that he acted in good faith and in a manner he
reasonably believed to be in the best interest of the corporation. Generally, no
indemnification may be made where the person has been determined to be negligent
or guilty of misconduct in the performance of his duty to the corporation.
Section 78.751(2) of the NGCL further allows the corporation to indemnify
any person who was or is a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee, or agent
of the corporation, including amounts paid in settlement and attorneys' fees if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation. Indemnification may not be
made for any claim, issue or matter to which a court of competent jurisdiction
has adjudged an officer or director liable to the corporation, unless and only
to the extent that a court of competent jurisdiction determines that in view of
the circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses.
To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding discussed in the preceding paragraphs, Section 78.751(3) of the NGCL
provides that he must be indemnified by the corporation against expenses,
including attorney's fees, actually and reasonably incurred by him in connection
with the defense.
Except when indemnification is required by a court of competent
jurisdiction, Section 78.751(4) of the NGCL states that the corporation shall
only indemnify upon a determination of (i) the shareholders; (ii) majority vote
of the board that were not parties to the action; (iii) if ordered by a majority
vote of a quorum of directors who were not parties to the action, suit or
proceeding, by independent legal counsel in a written opinion; or (iv) by
independent legal counsel in a written opinion if no quorum of directors who
were not parties to the action may be obtained.
Unless ordered by a court of competent jurisdiction, indemnification may
not be made to or on behalf of any officer or director if a final adjudication
establishes that his acts or omissions involved intentional misconduct, fraud or
a knowing violation of the law and were material to the cause of action.
II-1
<PAGE> 74
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses to be incurred in connection with the issuance and
distribution of the Common Stock covered by this Registration Statement, all of
which will be paid by the Company are as follows:
<TABLE>
<S> <C>
Registration Fees........................................... $ 6,928.00
Accounting Fees and Expenses................................ 150,000.00
Printing Expenses........................................... 150,000.00
Legal Fees and Expenses..................................... 300,000.00
Miscellaneous............................................... $325,000.00
-----------
Total............................................. $931,928.00
===========
</TABLE>
ITEM 26. UNREGISTERED SECURITIES ISSUED OR SOLD WITHIN ONE YEAR.
As a result of the closing of the acquisition of Jamestown and Key West, a
total of 2,000,000 shares of Common Stock were issued on December 9, 1996. The
Company issued 1,700,000 of the aforementioned shares to the holders of all the
limited partnership interests of Jamestown Resort & Marina, Ltd. in exchange for
those limited partnership interests and all the outstanding shares of Jamestown
Resort & Marina, Inc. A total of 300,000 of the above described shares were
issued to the stockholders of Key West Conch Harbor, Inc. in exchange for all
the issued and outstanding shares of common stock in Key West. In September 1995
a total of 172,101 shares of Common Stock were issued to Gary V. Sutley for
management services rendered to the Company and in lieu of salary. The
securities issued above were not registered and the Company is relying upon Rule
145 for an exemption therefrom as the Common Stock was issued and acquired as a
result of a merger or acquisition.
ITEM 27. INDEX TO EXHIBITS.
The following is a list of all exhibits filed as a part of this
Registration Statement on Form SB-1, including those incorporated herein by
reference.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1.1 -- Underwriting Agreement*
1.2 -- Representative's Warrant Agreement*
3.1 -- Articles of Incorporation of the Company, as amended to
date.*
3.2 -- Bylaws of the Company.*
4.1 -- Specimen Common Stock Certificate.*
5.1 -- Opinion re: legality.**
10.1 -- Jamestown Lease with Corps including amendments.*
10.2 -- Texaco Star Port Franchise Agreement.*
10.3 -- Jamestown/Commonwealth of Kentucky Development
Agreement.*
10.4 -- NationsCredit Promissory Note.*
10.5 -- James Frye Employment Agreement.*
10.6 -- Purchase and Sale Agreement between Key West and Chevron
U.S.A. Inc.*
10.7 -- Special Warranty Deed -- Key West.*
10.8 -- Quit Claim Deed -- Key West.*
10.9 -- Promissory Note TIB Bank of the Keys.*
10.10 -- Securities Exchange Agreement between Sonoma and Key West
Conch Harbor, Inc.*
</TABLE>
II-2
<PAGE> 75
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.11 -- Securities Exchange Agreement between Sonoma and
Jamestown Harbor & Resort.*
21.1 -- Subsidiaries*
23.1 -- Consent of Jackson Walker, L.L.P.**
23.2 -- Consent of Camhy Karlinsky & Stein LLP.**
23.3 -- Consent of King Griffin & Adamson P.C.*
24.1 -- Power of Attorney (Included on II-5 and II-6).*
27.1 -- Financial Data Schedule.*
</TABLE>
- ---------------
* Filed herewith.
** To be filed by Amendment.
ITEM 28. UNDERTAKINGS.
The Registrant hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement;
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE> 76
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form SB-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Lexington, State of Kentucky, on January 17, 1997.
SONOMA INTERNATIONAL
By: /s/ JAMES L. FRYE
----------------------------------
James L. Frye,
President and Chief Executive
Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form SB-2 has been signed below by the following
persons on behalf of the Registrant in the capacities indicated on January 17,
1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ JAMES L. FRYE President and Chief Executive Office and
- -------------------------------------------- Director (Principal Executive Officer)
James L. Frye
/s/ PETER SACKMANN Chief Financial Officer (Principal Financial
- -------------------------------------------- and Accounting Officer)
Peter Sackmann
/s/ R. DUDLEY WEBB Director, Chairman of Board
- --------------------------------------------
R. Dudley Webb
/s/ MARTHA LAYNE COLLINS Director, Vice Chairman of Board
- --------------------------------------------
Martha Layne Collins
/s/ DR. BARRETT BERNARD, M.D. Director
- --------------------------------------------
Dr. Barrett Bernard, M.D.
/s/ CHARLES W. HENNE Director
- --------------------------------------------
Charles W. Henne
/s/ GLENN HOSKINS Director, Secretary
- --------------------------------------------
Glenn Hoskins
/s/ DR. EDWIN NIGHBERT, M.D. Director
- --------------------------------------------
Dr. Edwin Nighbert, M.D.
/s/ FRED SKOMP Director, Vice President -- Development
- --------------------------------------------
Fred Skomp
/s/ IRVIN STUMLER Director
- --------------------------------------------
Irvin Stumler
</TABLE>
II-4
<PAGE> 77
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned Officers and
Directors of Sonoma International (the "Company") hereby constitutes and
appoints James L. Frye or Peter Sackmann (with full power to act alone), his
true and lawful attorney-in-fact and agent, with full power of substitution, for
him and on his behalf and in his name, place and stead, in any and all
capacities, to sign, execute, and file any and all documents relating to this
Registration Statement, including any and all amendments, exhibits and
supplements thereto, with any regulatory authority, granting unto said attorney
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as he himself might or
could do if personally present, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute or substitutes, may lawfully do or
cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on January 17, 1997.
SONOMA INTERNATIONAL
By: /s/ JAMES L. FRYE
----------------------------------
James L. Frye
President and Chief Executive
Officer
By: /s/ PETER SACKMANN
----------------------------------
Peter Sackmann
Chief Financial Officer (Principal
Financial and Accounting
Officer)
By: /s/ R. DUDLEY WEBB
----------------------------------
R. Dudley Webb
Director, Chairman of Board
By: /s/ MARTHA LAYNE COLLINS
----------------------------------
Martha Layne Collins
Director, Vice Chairman of Board
By: /s/ DR. BARNETT BERNARD,
M.D.
----------------------------------
Dr. Barnett Bernard, M.D.
Director
By: /s/ CHARLES W. HENNE
----------------------------------
Charles W. Henne
Director
II-5
<PAGE> 78
By: /s/ GLENN HOSKINS
--------------------------------
Glenn Hoskins
Director, Secretary
By: /s/ DR. EDWIN NIGHBERT,
M.D.
----------------------------------
Dr. Edwin Nighbert, M.D.
Director
By: /s/ FRED SKOMP
----------------------------------
Fred Skomp
Director, Vice
President -- Development
By: /s/ IRVIN STUMLER
----------------------------------
Irvin Stumler
Director
II-6
<PAGE> 79
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1.1 -- Underwriting Agreement*
1.2 -- Representative's Warrant Agreement*
3.1 -- Articles of Incorporation of the Company, as amended to
date.*
3.2 -- Bylaws of the Company.*
4.1 -- Specimen Common Stock Certificate.*
5.1 -- Opinion re: legality.**
10.1 -- Jamestown Lease with Corps including amendments.*
10.2 -- Texaco Star Port Franchise Agreement.*
10.3 -- Jamestown/Commonwealth of Kentucky Development
Agreement.*
10.4 -- NationsCredit Promissory Note.*
10.5 -- James Frye Employment Agreement.*
10.6 -- Purchase and Sale Agreement between Key West and Chevron
U.S.A. Inc.*
10.7 -- Special Warranty Deed -- Key West.*
10.8 -- Quit Claim Deed -- Key West.*
10.9 -- Promissory Note TIB Bank of the Keys.*
10.10 -- Securities Exchange Agreement between Sonoma and Key West
Conch Harbor, Inc.*
10.11 -- Securities Exchange Agreement between Sonoma and
Jamestown Harbor & Resort.*
21.1 -- Subsidiaries*
23.1 -- Consent of Jackson Walker, L.L.P.**
23.2 -- Consent of Camhy Karlinsky & Stein LLP.**
23.3 -- Consent of King Griffin & Adamson P.C.*
24.1 -- Power of Attorney (Included on II-5 and II-6).*
27.1 -- Financial Data Schedule.*
</TABLE>
- ---------------
* Filed herewith.
** To be filed by Amendment.
II-7
<PAGE> 1
EXHIBIT 1.1
DRAFT 02/24/97
[ ] SHARES OF COMMON STOCK
SONOMA INTERNATIONAL
UNDERWRITING AGREEMENT
Denver, Colorado
March ______, 1997
National Securities Corporation
As Representative of the Several Underwriters
1001 Fourth Avenue, Suite 2200
Seattle, Washington 98154
Ladies and Gentlemen:
Sonoma International, a Nevada corporation (the "Company"), hereby
agrees with National Securities Corporation ("National") and each of the
underwriters named in Schedule A hereto (collectively, the "Underwriters,"
which term shall also include any underwriter substituted as hereinafter
provided in Section 11), for whom National is acting as representative (in such
capacity, National shall hereinafter be referred to as "you" or the
"Representative") with respect to the sale by the Company and the purchase by
the Underwriters, acting severally and not jointly, of the respective amount of
shares (the "Shares") set forth in said Schedule A of the Company's common
stock, par value $.001 per share (the "Common Stock"). The aggregate [ ] Shares
are hereinafter referred to as the "Firm Securities."
Upon your request, as provided in Section 2(b) of this Agreement, the
Company shall also issue and sell to the Underwriters, acting severally and not
jointly, up to an additional [ ] shares of Common Stock for the purpose of
covering over-allotments, if any. Such [ ] shares of Common Stock are
hereinafter collectively to as the "Option Securities." The Company also
proposes to issue and sell to you warrants (the "Representative's Warrants")
pursuant to the Representative's Warrant Agreement (the "Representative's
Warrant Agreement") for the purchase of an additional [ ] shares of Common
Stock. The shares of Common Stock issuable upon exercise of the
Representative's Warrants are hereinafter referred to as the "Representative's
Securities." The Firm Securities, the Option Securities, the Representative's
Warrants and the Representative's Securities (collectively, hereinafter
referred to as the "Securities") are more fully described in the Registration
Statement and the Prospectus referred to below.
<PAGE> 2
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each of the Underwriters as of the
date hereof, and as of the Closing Date and the Option Closing Date, if any, as
follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form SB-2 (No.333-20037), including any
related preliminary prospectus (the "Preliminary Prospectus"), for the
registration of the Firm Securities, the Option Securities and the
Representative's Securities under the Securities Act of 1933, as amended (the
"Act"), which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the Act, and the
Regulations (as defined below) of the Commission under the Act. The Company
will not file any other amendment thereto to which the Underwriters shall have
objected in writing after having been furnished with a copy thereof. Except as
the context may otherwise require, such registration statement, as amended, on
file with the Commission at the time the registration statement becomes
effective (including the prospectus, financial statements, schedules, exhibits
and all other documents filed as a part thereof or incorporated therein and all
information deemed to be a part thereof as of such time pursuant to paragraph
(b) of Rule 430(A) of the Regulations), is hereinafter called the "Registration
Statement, " and the form of prospectus in the form first filed with the
Commission pursuant to Rule 424(b) of the Regulations, is hereinafter called
the "Prospectus. " For purposes hereof, "Regulations" mean the rules and
regulations adopted by the Commission under either the Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or the Prospectus and no proceedings for
a stop order suspending the effectiveness of the Registration Statement have
been instituted, or, to the Company's knowledge, are threatened. Each of the
Preliminary Prospectus, the Registration Statement and the Prospectus at the
time of filing thereof conformed in all material respects with the requirements
of the Act and Regulations, and none of the Preliminary Prospectus, the
Registration Statement or the Prospectus at the time of filing thereof
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein and necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that this representation and warranty does not apply to
statements made in reliance upon and in conformity with written information
furnished to the Company with respect to the Underwriters by or on behalf of
the Underwriters expressly for use in such Preliminary Prospectus, Registration
Statement or Prospectus.
(c) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date (as defined in Section 2(c)
hereof) and each Option Closing Date (as defined in Section 2(b) hereof), if
any, and during such longer period as the
- 2 -
<PAGE> 3
Prospectus may be required to be delivered in connection with sales by the
Underwriters or a dealer, the Registration Statement and the Prospectus, as
amended or supplemented as required, will contain all statements which are
required to be stated therein in accordance with the Act and the Regulations,
and will conform in all material respects to the requirements of the Act and
the Regulations; neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, provided, however, that this
representation and warranty does not apply to statements made or statements
omitted in reliance upon and in conformity with information furnished to the
Company in writing by or on behalf of any Underwriter expressly for use in the
Registration Statement or the Prospectus or any amendment thereof or supplement
thereto.
(d) The Company and each of its subsidiaries have been duly
organized and are validly existing as corporations in good standing under the
laws of the respective states of their incorporation. The Company does not own
or control, directly or indirectly, any corporation, partnership, trust, joint
venture or other business entity other than the subsidiaries listed in Exhibit
21 of the Registration Statement. Each of the Company and its subsidiaries is
duly qualified and licensed and in good standing as a foreign corporation in
each jurisdiction in which its ownership or leasing of any properties or the
character of its operations require such qualification or licensing, except
where the failure to be so qualified or licensed would not have a material and
adverse effect on the condition, financial or otherwise, or the business
affairs, operations, properties, or results of operations of the Company and
its subsidiaries, taken as a whole (the "Business"). Each of the Company and
its subsidiaries has all requisite power and authority (corporate and other),
and has obtained any and all necessary authorizations, approvals, orders,
licenses, certificates, franchises and permits of and from all governmental or
regulatory officials and bodies (including, without limitation, those having
jurisdiction over environmental or similar matters), to own or lease its
properties and conduct its business as described in the Prospectus; the Company
and each of its subsidiaries have been doing business in compliance in all
material respects with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits and all federal, state, local and foreign
laws, rules and regulations; and neither the Company nor any of its
subsidiaries have received any notice of proceedings relating to the revocation
or modification of any such authorization, approval, order, license,
certificate, franchise, or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would materially and
adversely affect the Business. The disclosures in the Registration Statement
concerning the effects of federal, state, local, and foreign laws, rules and
regulations on the Company's business as currently conducted and as
contemplated are correct in all material respects and do not omit to state a
material fact necessary to make the statements contained therein not misleading
in light of the circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under the headings
"Capitalization" and "Description of Capital Stock" and will have the adjusted
capitalization set forth therein on the Closing Date and the
- 3 -
<PAGE> 4
Option Closing Date, if any, based upon the assumptions set forth therein, and
neither the Company nor any of its subsidiaries are parties to or bound by any
instrument, agreement or other arrangement providing for it to issue any
capital stock, rights, warrants, options or other securities, except for this
Agreement and as described in the Prospectus. The Securities and all other
securities issued or issuable by the Company conform or, when issued and paid
for, will conform, in all material respects to all statements with respect
thereto contained in the Registration Statement and the Prospectus. All issued
and outstanding shares of capital stock of each subsidiary of the Company have
been duly authorized and validly issued and are fully paid and nonassessable.
Except as disclosed in or contemplated by the Prospectus and the financial
statements of the Company and the related notes thereto included in the
Prospectus, neither the Company nor any subsidiary has outstanding any options
to purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such options,
rights, convertible securities or obligations. The description of the Company's
stock option, stock bonus and other stock plans or arrangements and the options
or other rights granted and exercised thereunder as set forth in the Prospectus
conforms in all material respects with the requirements of the Act. All issued
and outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and nonassessable, and the holders thereof have no
rights of rescission with respect thereto and are not subject to personal
liability by reason of being such holders; and none of such securities were
issued in violation of the preemptive rights of any holders of any security of
the Company or similar contractual rights granted by the Company.
(f) The Securities are not and will not be subject to any
preemptive or other similar rights of any stockholder, have been duly
authorized and, when issued, paid for and delivered in accordance with the
terms hereof, will be validly issued, fully paid and nonassessable and will
conform in all material respects to the description thereof contained in the
Prospectus; the holders thereof will not be subject to any liability solely as
such holders; all corporate action required to be taken for the authorization,
issue and sale of the Securities has been duly and validly taken; and the
certificates representing the Securities will be in due and proper form. Upon
the issuance and delivery pursuant to the terms hereof of the Securities to be
sold by the Company hereunder, the Underwriters or the Representative, as the
case may be, will acquire good and marketable title to such Securities free and
clear of any lien, charge, claim, encumbrance, pledge, security interest,
defect, or other restriction or equity of any kind whatsoever. No stockholder
of the Company has any right which has not been waived in writing to require
the Company to register the sale of any shares owned by such stockholder under
the Act in the public offering contemplated by this Agreement. No further
approval or authority of the stockholders or the Board of Directors of the
Company will be required for the issuance and sale of the Shares, the Option
Shares and the Representative's Warrants to be sold by the Company as
contemplated herein.
(g) The financial statements of the Company, together with the
related notes and schedules thereto, included in the Registration Statement,
each Preliminary Prospectus and
- 4 -
<PAGE> 5
the Prospectus fairly present the financial position, changes in stockholders'
equity and the results of operations of the Company at the respective dates and
for the respective periods to which they apply and such financial statements
have been prepared in conformity with generally accepted accounting principles
and the Regulations, consistently applied throughout the periods involved.
There has been no material adverse change or development involving a material
prospective change in the Business, whether or not arising in the ordinary
course of business since the date of the financial statements included in the
Registration Statement and the Prospectus and the outstanding debt, the
property, both tangible and intangible, and the business of the Company and its
subsidiaries taken as a whole conform in all material respects to the
descriptions thereof contained in the Registration Statement and the
Prospectus. Financial information set forth in the Prospectus under the
headings "Prospectus Summary - Selected Financial Data," "Capitalization," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," fairly present, on the basis stated in the Prospectus, the
information set forth therein and have been derived from or compiled on a basis
consistent with that of the audited financial statements included in the
Prospectus.
(h) The Company (i) has paid all federal, state, local,
franchise, and foreign taxes for which it is liable, including, but not limited
to, withholding taxes and amounts payable under Chapters 21 through 24 of the
Internal Revenue Code of 1986, as amended (the "Code"), and has furnished all
information returns it is required to furnish pursuant to the Code, (ii) has
established adequate reserves for such taxes which are not due and payable, and
(iii) does not have any tax deficiency or claims outstanding, proposed or
assessed against it.
(i) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriters in connection with (i) the issuance
by the Company of the Securities, (ii) the purchase by the Underwriters of the
Firm Securities and the Option Securities from the Company and the purchase by
the Representative of the Representative's Warrants from the Company, (iii) the
consummation by the Company of any of its obligations under this Agreement, or
(iv) resales of the Firm Securities and the Option Securities in connection
with the distribution contemplated hereby.
(j) There is no action, suit, proceeding, inquiry,
arbitration, mediation, investigation, litigation or governmental proceeding
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or threatened against (or
circumstances that may give rise to the same), or involving the properties or
businesses of, the Company which (i) questions the validity of the capital
stock of the Company, this Agreement or the Representative's Warrant Agreement,
or of any action taken or to be taken by the Company pursuant to or in
connection with this Agreement or the Representative's Warrant Agreement, (ii)
is required to be disclosed in the Registration Statement which is not so
disclosed (and such proceedings as are summarized in the Registration Statement
are accurately summarized in all material respects), or (iii) might materially
and adversely affect the condition, financial or otherwise, or the business,
affairs, position, stockholders' equity,
- 5 -
<PAGE> 6
operation, properties, or results of operations of the Company and its
subsidiaries taken as a whole.
(k) The Company has the corporate power and authority to
authorize, issue, deliver, and sell the Securities and to enter into this
Agreement and the Representative's Warrant Agreement, and to consummate the
transactions provided for in such agreements; and this Agreement and the
Representative's Warrant Agreement have each been duly and properly authorized,
executed, and delivered by the Company. Each of this Agreement, the Warrant
Agreement and the Representative's Warrant Agreement constitutes a legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its respective terms (except as the enforceability thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution may be
limited by applicable law), and none of the issue and sale of the Securities,
execution by the Company, delivery or performance of this Agreement and the
Representative's Warrant Agreement, the consummation by the Company of the
transactions contemplated herein and therein, or the conduct of the Company's
businesses as described in the Registration Statement, the Prospectus, and any
amendments or supplements thereto, conflicts with or will conflict with or
results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or result in
the creation or imposition of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever
upon, any property or assets (tangible or intangible) of the Company pursuant
to the terms of (i) the articles of incorporation or by-laws of the Company, as
amended and restated, (ii) any license, contract, indenture, mortgage, deed of
trust, voting trust agreement, stockholders agreement, note, loan or credit
agreement or any other agreement or instrument to which the Company is a party
or by which it is or may be bound or to which its properties or assets
(tangible or intangible) is or may be subject, or any indebtedness, or (iii)
any statute, judgment, decree, order, rule or regulation applicable to the
Company of any arbitrator, court, regulatory body or administrative agency or
other governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign,
having jurisdiction over the Company of any of their activities or properties.
(l) No consent, approval, authorization or order of, and no
filing with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the issuance of the Securities pursuant to
the Prospectus and the Registration Statement, the performance of this
Agreement, the Representative's Warrant Agreement, and the transactions
contemplated hereby and thereby, including without limitation, any waiver of
any preemptive, first refusal or other rights that any entity or person may
have for the issue and/or sale of any of the Securities, except such as have
been or may be obtained under the Act or may be required under state securities
or Blue Sky laws in connection with the Underwriters' purchase and distribution
of the Firm Securities, the Option Securities, and the Representative's
Warrants to be sold by the Company hereunder.
- 6 -
<PAGE> 7
(m) All executed agreements, contracts or other documents or
copies of executed agreements, contracts or other documents filed as exhibits
to the Registration Statement to which the Company is a party or by which it
may be bound or to which its assets, properties or businesses may be subject
have been duly and validly authorized, executed and delivered by the Company
and constitute the legal, valid and binding agreements of the Company
enforceable against the Company in accordance with their respective terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and the application
of equitable principles in any action, legal or equitable, and except as rights
to indemnity or contribution may be limited by applicable law). The
descriptions in the Registration Statement of such agreements, contracts and
other documents are accurate in all material respects and fairly present the
information required to be shown with respect thereto by Form SB-2, and there
are no contracts or other documents which are required by the Act to be
described in the Registration Statement or filed as exhibits to the
Registration Statement which are not described or filed as required, and the
exhibits which have been filed are complete and correct copies of the documents
of which they purport to be copies.
(n) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as described in
or specifically contemplated by the Prospectus (i) the Company has not incurred
any material liabilities or obligations, indirect, direct or contingent, or
entered into any material verbal or written agreement or other transaction
which is not in the ordinary course of business or which could result in a
material reduction in the future earnings of the Company; (ii) the Company has
not sustained any material loss or interference with its business or properties
from fire, flood, windstorm, accident or other calamity, whether or not covered
by insurance; (iii) the Company has not paid or declared any dividends or other
distributions with respect to its capital stock, and the Company is not in
default in the payment of principal or interest on any outstanding debt
obligations; (iv) there has not been any change in the capital stock (other
than upon the sale of the Firm Securities, the Option Securities and the
Representative's Warrants hereunder and upon the exercise of options and
warrants described in the Registration Statement) of, or indebtedness material
to, the Company (other than in the ordinary course of business); (v) the
Company has not issued any securities or incurred any liability or obligation,
primary or contingent, for borrowed money; and (vi) there has not been any
material adverse change in the condition (financial or otherwise), business,
properties, results of operations, or prospects of the Company and its
subsidiaries.
(o) Except as disclosed in or specifically contemplated by the
Prospectus, (i) the Company has sufficient trademarks, trade names, patent
rights, copyrights, licenses, approvals and governmental authorizations to
conduct its business as now conducted; (ii) the expiration of any trademarks,
trade names, patent rights, copyrights, licenses, approvals or governmental
authorizations would not have a material adverse effect on the condition
(financial or otherwise), business, results of operations or prospects of the
Company; (iii) the Company has no knowledge of any infringement by it or its
subsidiaries of trademark, trade name rights, patent rights, copyrights,
licenses, trade secret or other similar rights of others; and (iv) there
- 7 -
<PAGE> 8
is no claim being made against the Company regarding trademark, trade name,
patent, copyright, license, trade secret or other infringement which could have
a material adverse effect on the condition (financial or otherwise), business,
results of operations or prospects of the Company.
(p) No default exists in the due performance and observance of
any term, covenant or condition of any material license, contract, indenture,
mortgage, installment sale agreement, lease, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement, or any other
material agreement or instrument evidencing an obligation for borrowed money,
or any other material agreement or instrument to which the Company is a party
or by which the Company may be bound or to which the property or assets
(tangible or intangible) of the Company is subject or affected, except for such
defaults, if any, which individually and in the aggregate would not have a
material adverse effect on the Business.
(q) To the Company's knowledge, there are no pending
investigations involving the Company by the U.S. Department of Labor, or any
other governmental agency responsible for the enforcement of such federal,
state, local, or foreign laws and regulations. There is no unfair labor
practice charge or complaint against the Company pending before the National
Labor Relations Board or any strike, picketing, boycott, dispute, slowdown or
stoppage pending or to its knowledge threatened against or involving the
Company. No representation question exists respecting the employees of the
Company. No collective bargaining agreement, or modification thereof is
currently being negotiated by the Company. No grievance or arbitration
proceeding is pending under any expired or existing collective bargaining
agreements of the Company. No labor dispute with the employees of the Company
exists or to its knowledge is imminent.
(r) Except as described in the Prospectus, the Company does
not maintain, sponsor or contribute to any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan," or a
"multiemployer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). The Company does not maintain or contribute
to a defined benefit plan, as defined in Section 3(35) of ERISA. No ERISA Plan
(or any trust created thereunder) has engaged in a "prohibited transaction"
within the meaning of Section 406 of ERISA or Section 4975 of the Code, which
could subject the Company to any tax penalty on prohibited transactions and
which has not adequately been corrected. Each ERISA Plan is in compliance with
all material reporting, disclosure and other requirements of the Code and ERISA
as they relate to any such ERISA Plan. Determination letters have been received
from the Internal Revenue Service with respect to each ERISA Plan which is
intended to comply with Code Section 401(a), stating that such ERISA Plan and
the attendant trust are qualified thereunder. The Company has never completely
or partially withdrawn from a "multiemployer plan."
- 8 -
<PAGE> 9
(s) None of the Company, nor any of its employees, directors,
stockholders, or affiliates (within the meaning of the Regulations) of any of
the foregoing has taken or will take directly or indirectly, any action
designed to or which has constituted or which might be expected to cause or
result in unlawful stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of the Securities.
(t) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property
stated in the Prospectus to be owned or leased by it, free and clear of all
liens, charges, claims, encumbrances, pledges, security interests, or other
restrictions or equities of any kind whatsoever, other than those referred to
in the Prospectus and liens for taxes not yet due and payable.
(u) Kings, Burns & Company, PC ("King & Burns"), whose report
is filed with the Commission as a part of the Registration Statement, are
independent certified public accountants as required by the Act and the
Regulations.
(v) The Company has caused to be duly executed legally binding
and enforceable agreements pursuant to which all persons or entities, that
directly or beneficially own Common Stock, as of the effective date of the
Registration Statement, have agreed not to, directly or indirectly, offer,
offer to sell, sell, grant any option for the sale of, transfer, assign,
pledge, hypothecate or otherwise encumber or dispose of any shares of Common
Stock or securities convertible into Common Stock, exercisable or exchangeable
for or evidencing any right to purchase or subscribe for any shares of Common
Stock (either pursuant to Rule 144 of the Regulations or otherwise) or dispose
of any interest therein for a period from the date of the Prospectus until
twelve (12) months following the date that the Registration Statement becomes
effective, without the prior written consent of National (the "Lock-up
Agreements"). The Company will cause the Transfer Agent (as defined herein) to
place "stop transfer" orders on the Company's stock ledgers in order to effect
the Lock-up Agreements.
(w) There are no claims, payments, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities
hereunder or any other arrangements, agreements, understandings, payments or
issuance with respect to the Company or any of its officers, directors,
stockholders, employees or affiliates that may affect the Underwriters'
compensation as determined by the Commission and the National Association of
Securities Dealers, Inc. (the "NASD").
(x) The Securities have been approved for quotation on the
[LIST RELEVANT EXCHANGES].
(y) Neither the Company nor any of its officers, employees,
agents or any other person acting on behalf of the Company has, directly or
indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of business)
to any customer, supplier, employee or agent of a customer or
- 9 -
<PAGE> 10
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction) which might subject the Company or any other such person to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign). The Company's internal accounting controls
are sufficient to cause the Company to comply with the Foreign Corrupt
Practices Act of 1977, as amended.
(z) Except as set forth in the Prospectus, no officer,
director or stockholder of the Company, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Regulations) of any
of the foregoing persons or entities has or has had, either directly or
indirectly, (i) an interest in any person or entity which (A) furnishes or
sells services or products which are furnished or sold or are proposed to be
furnished or sold by the Company, or (B) purchases from or sells or furnishes
to the Company any goods or services, or (ii) a beneficiary interest in any
contract or agreement to which the Company is a party or by which it may be
bound or affected. Except as set forth in the Prospectus there are no existing
agreements, arrangements, understandings or transactions, or proposed
agreements, arrangements, understandings or transactions, between or among the
Company, and any officer, director, principal shareholder (as such term is used
in the Prospectus) of the Company, or any affiliate or associate of any of the
foregoing persons or entities which are required to be disclosed in the
Prospectus.
(aa) The Company is not, and does not intend to conduct its
business in a manner in which it would become an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(ab) Any certificate signed by any officer of the Company and
delivered to the Underwriters or to the Underwriters' Counsel (as defined in
Section 4(d) herein) shall be deemed a representation and warranty by the
Company to the Underwriters as to the matters covered thereby.
(ac) The minute books of the Company have been made available
to the Underwriters and contain a complete summary of all meetings and actions
of the directors and stockholders of the Company, since the time of its
incorporation, and reflect all transactions referred to in such minutes
accurately in all material respects.
(ad) The Company has not distributed and will not distribute
prior to the Closing Date any offering material in connection with the offering
and sale of the Shares in this offering other than the Prospectus, the
Registration Statement and the other materials permitted by the Act. Except as
described in the Prospectus, no holders of any securities of the Company or of
any options, warrants or other convertible or exchangeable securities of the
Company have the right to include any securities issued by the Company as part
of the Registration Statement
- 10 -
<PAGE> 11
or to require the Company to file a registration statement under the Act and no
person or entity holds any anti-dilution rights with respect to any securities
of the Company.
(ae) Each of the Company and its subsidiaries maintains
insurance by insurers of recognized financial responsibility of the types and
in the amounts as the Company believes are prudent and adequate for the
business in which it is engaged, including, but not limited to, insurance
covering real and personal property owned or leased by the Company and its
subsidiaries against theft, damage, destruction, acts of vandalism and all
other risks customarily insured against, all of which insurance is in full
force and effect. The Company has delivered to the Underwriter's Counsel
satisfactory summaries of these insurance policies. The Company has no reason
to believe that it will not be able to renew existing insurance coverage with
respect to the Company as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business, in
either case, at a cost that would not have a material adverse effect on the
financial condition, operations, business, assets or properties of the Company.
The Company has not failed to file any material claims, has no material
disputes with its insurance company regarding any claims submitted under its
insurance policies, and has complied in material respects with all material
provisions contained in its insurance policies.
2. Purchase, Sale and Delivery of the Securities.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to each Underwriter, and each
Underwriter, severally and not jointly agrees to purchase from the Company, at
a price equal to $______ per Share, that number of Firm Securities set forth in
Schedule A opposite the name of such Underwriter, subject to such adjustment as
the Representative in its discretion shall make to eliminate any sales or
purchases of fractional shares, plus any additional numbers of Shares which
such Underwriter may become obligated to purchase pursuant to the provisions of
Section 11 hereof.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements, herein contained, but subject to the
terms and conditions herein set forth, the Company hereby grants an option to
the Underwriters, severally and not jointly, to purchase all or any part of an
additional [ ] shares of Common Stock at a price of $_____ per share of Common
Stock. The option granted hereby will expire 45 days after (i) the date the
Registration Statement becomes effective, if the Company has elected not to
rely on Rule 430A under the Regulations, or (ii) the date of this Agreement if
the Company has elected to rely upon Rule 430A under the Regulations, and may
be exercised in whole or in part from time to time (but not on more than two
(2) occasions) only for the purpose of covering over-allotments which may be
made in connection with the offering and distribution of the Firm Securities
upon notice by the Representative to the Company setting forth the number of
Option Securities as to which the several Underwriters are then exercising the
option and the time and date of payment and delivery for any such Option
Securities. Any such time and date of delivery (an "Option Closing
- 11 -
<PAGE> 12
Date") shall be determined by the Representative, but shall not be later than
three full business days after the exercise of said option, nor in any event
prior to the Closing Date, as hereinafter defined, unless otherwise agreed upon
by the Representative and the Company. Nothing herein contained shall obligate
the Underwriters to exercise the over-allotment option described above. No
Option Securities shall be delivered unless the Firm Securities shall be
simultaneously delivered or shall theretofore have been delivered as herein
provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of National,
at 1001 Fourth Avenue, Suite 2200, Seattle, Washington, or at such other place
as shall be agreed upon by the Representative and the Company. Such delivery
and payment shall be made at 9:00 a.m. (New York time) on __________________,
1997, or at such other time and date as shall be agreed upon by the
Representative and the Company, but no more than four (4) business days after
the date hereof (such time and date of payment and delivery being herein called
the "Closing Date"). In addition, in the event that any or all of the Option
Securities are purchased by the Underwriters, payment of the purchase price
for, and delivery of certificates for, such Option Securities shall be made at
the above mentioned office of National or at such other place as shall be
agreed upon by the Representative and the Company on each Option Closing Date
as specified in the notice from the Representative to the Company. Delivery of
the certificates for the Firm Securities and the Option Securities, if any,
shall be made to the Underwriters against payment by the Underwriters, of the
purchase price for the Firm Securities and the Option Securities, if any, to
the order of the Company. In the event such option is exercised, each of the
Underwriters, acting severally and not jointly, shall purchase that proportion
of the total number of Option Securities then being purchased which the number
of Firm Securities set forth in Schedule A hereto opposite the name of such
Underwriter bears to the total number of Firm Securities, subject in each case
to such adjustments as the Representative in their discretion shall make to
eliminate any sales or purchases of fractional shares. Certificates for the
Firm Securities and the Option Securities, if any, shall be in definitive,
fully registered form, shall bear no restrictive legends and shall be in such
denominations and registered in such names as the Underwriters may request in
writing at least three (3) business days prior to Closing Date or the relevant
Option Closing Date, as the case may be. The certificates for the Firm
Securities and the Option Securities, if any, shall be made available to the
Representative at such office or such other place as the Representative may
designate for inspection, checking and packaging no later than 9:30 a.m. on the
last business day prior to Closing Date or the relevant Option Closing Date, as
the case may be.
(d) On the Closing Date, the Company shall issue and sell to
the Representative Representative's Warrants at a purchase price of [$0.0001]
per warrant, which warrants shall entitle the holders thereof to purchase an
aggregate of [ ] shares of Common Stock. The Representative's Warrants shall
expire five (5) years after the effective date of the Registration Statement
and shall be exercisable for a period of four (4) years commencing one (1) year
from the effective date of the Registration Statement at [A PRICE EQUALING ONE
HUNDRED TWENTY PERCENT (120%)] of the initial public offering price of the
Shares. The Representative's
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<PAGE> 13
Warrant Agreement and form of Warrant Certificate shall be substantially in the
form filed as Exhibit 4.2 to the Registration Statement. Payment for the
Representative's Warrants shall be made on the Closing Date.
3. Public Offering of the Shares and the Redeemable Warrants. As
soon after the Registration Statement becomes effective as the Representative
deems advisable, the Underwriters shall make a public offering of the Shares
(other than to residents of or in any jurisdiction in which qualification of
the Shares is required and has not become effective) at the price and upon the
other terms set forth in the Prospectus. The Representative may from time to
time increase or decrease the public offering price after distribution of the
Shares has been completed to such extent as the Representative, in its sole
discretion, deems advisable. The Underwriters may enter into one or more
agreements as the Underwriters, in each of their sole discretion, deem
advisable with one or more broker-dealers who shall act as dealers in
connection with such public offering.
4. Covenants of the Company. The Company covenants and agrees with
each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Act or Exchange Act before termination of the offering of the Shares
by the Underwriters of which the Representative shall not previously have been
advised and furnished with a copy, or to which the Representative shall have
objected or which is not in compliance with the Act, the Exchange Act or the
Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Representative and confirm the notice in
writing, (i) when the Registration Statement, as amended, becomes effective, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective, (ii)
of the issuance by the Commission of any stop order or of the initiation, or
the threatening, of any proceeding, suspending the effectiveness of the
Registration Statement or any order preventing or suspending the use of the
Preliminary Prospectus or the Prospectus, or any amendment or supplement
thereto, or the institution of proceedings for that purpose, (iii) of the
issuance by the Commission or by any state securities commission of any
proceedings for the suspension of the qualification of any of the Securities
for offering or sale in any jurisdiction or of the initiation, or the
threatening, of any proceeding for that purpose, (iv) of the receipt of any
comments from the Commission; and (v) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to the
Prospectus or for additional information. If the Commission or any state
securities commission authority shall
- 13 -
<PAGE> 14
enter a stop order or suspend such qualification at any time, the Company will
use its best efforts to obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Representative) in accordance with the
requirements of the Act.
(d) The Company will give the Representative notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriters in connection with the offering of the Securities which
differs from the corresponding prospectus on file at the Commission at the time
the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Regulations),
and will furnish the Representative with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file any such amendment or supplement to which
the Representative or Camhy Karlinsky & Stein LLP ("Underwriters' Counsel")
shall reasonably object.
(e) The Company shall endeavor in good faith, in cooperation
with the Representative, at or prior to the time the Registration Statement
becomes effective, to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as the Representative may reasonably
designate to permit the continuance of sales and dealings therein for as long
as may be necessary to complete the distribution, and shall make such
applications, file such documents and furnish such information as may be
required for such purpose; provided, however, the Company shall not be required
to qualify as a foreign corporation or become subject to service of process in
any such jurisdiction. In each jurisdiction where such qualification shall be
effected, the Company will, unless the Representative agree that such action is
not at the time necessary or advisable, use all reasonable efforts to file and
make such statements or reports at such times as are or may reasonably be
required by the laws of such jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act, as now and hereafter amended,
and by the Regulations, as from time to time in force, so far as necessary to
permit the continuance of sales of or dealings in the Securities in accordance
with the provisions hereof and the Prospectus, or any amendments or supplements
thereto. If at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event shall have occurred as a
result of which, in the opinion of counsel for the Company or Underwriters'
Counsel, the Prospectus, as then amended or supplemented, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
at any time to amend or supplement the Prospectus to comply with the Act, the
Company will notify the Representative promptly and
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<PAGE> 15
prepare and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act, each such amendment or supplement to be
satisfactory to Underwriters' Counsel, and the Company will furnish to the
Underwriters copies of such amendment or supplement as soon as available and in
such quantities as the Underwriters may request.
(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Regulations, and to the Representative, an earnings statement
which will be in the detail required by, and will otherwise comply with, the
provisions of Section 11(a) of the Act and Rule 158(a) of the Regulations,
which statement need not be audited unless required by the Act, covering a
period of at least 12 consecutive months after the effective date of the
Registration Statement.
(h) During a period of five (5) years after the date hereof,
the Company will furnish to its stockholders, as soon as practicable, annual
reports (including financial statements audited by independent public
accountants) and will make available to its stockholders unaudited quarterly
reports of earnings, and will deliver to the Representative:
(i) concurrently with furnishing such quarterly reports to
its stockholders, statements of income of the Company for each quarter
in the form furnished to the Company's stockholders;
(ii) concurrently with furnishing such annual reports to
its stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company for such fiscal
year, accompanied by a copy of the report thereon of independent
certified public accountants;
(iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all reports
and financial statements furnished to or filed with the Commission, the
Nasdaq SmallCap Market or any securities exchange;
(v) every press release and every material news item or
article of interest to the financial community in respect of the Company
or its affairs which was released or prepared by or on behalf of the
Company; and
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<PAGE> 16
(vi) any additional information of a public nature
concerning the Company (and any future subsidiaries) or its businesses
which the Representative may reasonably request.
During such five-year period, if the Company has active
subsidiaries, the foregoing financial statements will be on a consolidated
basis to the extent that the accounts of the Company and its subsidiaries are
consolidated, and will be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
(i) The Company will maintain a transfer agent (the "Transfer
Agent") and, if necessary under the jurisdiction of incorporation of the
Company, a registrar (which may be the same entity as the transfer agent) for
the Common Stock and the Representative's Warrants.
(j) The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative may
designate, copies of each Preliminary Prospectus, the Registration Statement
and any pre-effective or post-effective amendments thereto (two of which copies
will be signed and will include all financial statements and exhibits), each
Preliminary Prospectus, the Prospectus, and all amendments and supplements
thereto, including any prospectus prepared after the effective date of the
Registration Statement, in each case as soon as available and in such
quantities as the Representative may reasonably request.
(k) On or before the effective date of the Registration
Statement, the Company shall provide the Representative with true copies of
duly executed Lock-up Agreements. On or before the Closing Date, the Company
shall deliver instructions to the Transfer Agent authorizing it to place
appropriate stop transfer orders on the Company's ledgers.
(l) The Company shall use its best efforts to cause its
officers, directors, stockholders or affiliates (within the meaning of the
Regulations) not to take, directly or indirectly, any action designed to, or
which might in the future reasonably be expected to cause or result in,
unlawful stabilization or manipulation of the price of any securities of the
Company.
(m) The Company shall apply the net proceeds from the sale of
the Securities substantially in the manner, and subject to the conditions, set
forth under "Use of Proceeds" in the Prospectus.
(n) The Company shall timely file all such reports, forms or
other documents as may be required (including, but not limited to, a Form SR as
may be required pursuant to Rule 463 under the Act) from time to time, under
the Act, the Exchange Act, and the Regulations, and all such reports, forms and
documents filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act, and the Regulations.
- 16 -
<PAGE> 17
[(o) THE COMPANY SHALL CAUSE THE SECURITIES TO BE QUOTED ON THE
[BOSTON STOCK EXCHANGE,] AND FOR A PERIOD OF TWO (2) YEARS FROM THE DATE HEREOF
SHALL USE ITS BEST EFFORTS TO MAINTAIN THE QUOTATION OF THE SECURITIES TO THE
EXTENT OUTSTANDING.]
(p) For a period of two (2) years from the Closing Date, the
Company shall furnish to the Representative, at the Company's sole expense,
monthly consolidated transfer sheets relating to the Common Stock.
(q) For a period of five (5) years after the effective date of
the Registration Statement the Company shall, at the Company's sole expense,
take all necessary and appropriate actions to further qualify the Company's
securities in all jurisdictions of the United States in order to permit
secondary sales of such securities pursuant to the Blue Sky laws of those
jurisdictions which do not require the Company to qualify as a foreign
corporation or to file a general consent to service of process.
(r) The Company (i) prior to the effective date of the
Registration Statement, has filed a Form 8-A with the Commission providing for
the registration of the Common Stock under the Exchange Act and (ii) as soon as
practicable, will use its best efforts to take all necessary and appropriate
actions to be included in Standard and Poor's Corporation Descriptions and
Moody's OTC Manual and to continue such inclusion for a period of not less than
five (5) years.
(s) The Company agrees that for a period of twelve (12) months
following the effective date of the Registration Statement it will not, without
the prior written consent of National, offer, issue, sell, contract to sell,
grant any option for the sale of or otherwise dispose of any Common Stock, or
securities convertible into Common Stock, except for the issuance of the Option
Securities, the Representative's Warrants, and shares of Common Stock issued
upon the exercise of currently outstanding warrants or options, or options and
warrants granted in the ordinary course of business consistent with prior
practice.
(t) Until the completion of the distribution of the
Securities, the Company shall not without the prior written consent of National
or Underwriters' Counsel, issue, directly or indirectly any press release or
other communication or hold any press conference with respect to the Company or
its activities or the offering contemplated hereby, other than trade releases
issued in the ordinary course of the Company's business consistent with past
practices with respect to the Company's operations.
(u) For a period equal to the lesser of (i) five (5) years
from the date hereof, and (ii) the sale to the public of the Representative's
Securities, the Company will not take any action or actions which may prevent
or disqualify the Company's use of an appropriate form for the registration
under the Act of the Representative's Securities.
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<PAGE> 18
(v) The Company agrees that it shall use its best efforts,
which shall include, but shall not be limited to, the solicitation of proxies,
to elect one (1) designee of National to the Company's Board of Directors for a
period of five (5) years following the Closing, provided that such designee is
reasonably acceptable to the Company and that such director may be excluded
from consideration of certain confidential matters which, in the good faith
judgment of a majority of the other directors, such director's presence would
not be appropriate.
(w) The Company agrees that within forty-five (45) days after
the Closing it shall retain a public relations firm which is reasonably
acceptable to National. The Company shall keep such public relations firm, or
any replacement, for a period of two (2) years from the Closing. Any
replacement public relations firm shall be retained only with the consent of
National, which shall not be unreasonably withheld.
(x) The Company agrees that any and all future transactions
between the Company and its officers, directors, principal stockholders and the
affiliates of the foregoing persons will be on terms no less favorable to the
Company than could reasonably be obtained in arm's length transactions with
independent third parties, and that any such transactions also be approved by a
majority of the Company's outside independent directors disinterested in the
transaction.
(y) The Company shall prepare and deliver, at the Company's
sole expense, to National within the one hundred and twenty (120) day period
after the later of the effective date of the Registration Statement or the
latest Option Closing Date, as the case may be, one bound volume containing all
correspondence with regulatory officials, agreements, documents and all other
materials in connection with the offering as requested by the Underwriters'
Counsel.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the Closing
Date and each Option Closing Date (to the extent not previously paid) all
expenses and fees (other than fees of Underwriters' Counsel, except as provided
in (iv) below) incident to the performance of the obligations of the Company
under this Agreement, and the Representative's Warrant Agreement, including,
without limitation, (i) the fees and expenses of accountants and counsel for
the Company, (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing, filing, delivery and mailing (including the
payment of postage with respect thereto) of the Registration Statement and the
Prospectus and any amendments and supplements thereto and the duplication,
mailing (including the payment of postage with respect thereto) and delivery of
this Agreement, the Agreement Among Underwriters, the Selected Dealers
Agreements, the Powers of Attorney, and related documents, including the cost
of all copies thereof and of the Preliminary Prospectuses and of the Prospectus
and any amendments thereof or supplements thereto supplied to the Underwriters
and such dealers as the Underwriters may request, in quantities as hereinabove
stated, (iii) the printing, engraving, issuance and delivery of the
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<PAGE> 19
certificates representing the Securities, (iv) the qualification of the
Securities under state or foreign securities or "Blue Sky" laws and
determination of the status of such securities under legal investment laws,
including the costs of word processing and mailing the "Preliminary Blue Sky
Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal Investments
Survey," if any, and reasonable disbursements and fees of counsel in connection
therewith, (v) advertising costs and expenses, including but not limited to the
costs and expenses incurred by the Company and the Representative in connection
with the "road show," information meetings and presentations, bound volumes and
prospectus memorabilia and reasonable "tombstone" advertisement expenses, (vi)
experts, (vii) fees and expenses of the transfer agent and registrar, (viii)
the fees payable to the Commission and the NASD, (ix) issue and transfer taxes,
if any and (x) the fees and expenses incurred in connection with the listing of
the Common Stock on the [BOSTON STOCK EXCHANGE] and any other market or
exchange.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 6, Section 10(a) or Section 11, the
Company shall reimburse and indemnify the Representative for all of its actual
out-of-pocket expenses on an accountable basis, including the fees and
disbursements of Underwriters' Counsel, less any amounts already paid pursuant
to Section 5(c) hereof provided that National shall notify the Company of any
single expense or any series of similar expenses which in the aggregate exceed
$5,000 (provided further that such notice requirement shall not apply to
National's actual out-of-pocket legal expenses).
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 5, it will pay to
the Representative on the Closing Date by certified or bank cashier's check or,
at the election of the Representative, by deduction from the proceeds of the
offering contemplated herein a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of the
Firm Securities, [ ] of which has been paid to date. In the event the
Representative elects to exercise the over-allotment option described in
Section 2(b) hereof, the Company further agrees to pay to the Representative on
the Option Closing Date (by certified or bank cashier's check or, at the
Representative's election, by deduction from the proceeds of the offering) a
non-accountable expense allowance equal to three percent (3%) of the gross
proceeds received by the Company from the sale of the Option Securities.
6. Conditions of the Underwriters' Obligations. The obligations of
the Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, as if they had
been made on and as of the Closing Date or each Option Closing Date, as the
case may be; the accuracy on and as of the Closing Date or Option Closing Date,
if any, of the statements of officers of the Company made pursuant to the
provisions hereof; and the performance by the Company on and as of the Closing
Date and each Option Closing Date, if any, of its covenants and obligations
hereunder and to the following further conditions:
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<PAGE> 20
(a) The Registration Statement shall have become effective not
later than 5:00 p.m., New York City time, on the date prior to the date of this
Agreement or such later date and time as shall be consented to in writing by
the Representative, and, at Closing Date and each Option Closing Date, if any,
no stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been instituted
or shall be pending or contemplated by the Commission and any request on the
part of the Commission for additional information shall have been complied with
to the reasonable satisfaction of Underwriters' Counsel. If the Company has
elected to rely upon Rule 430A of the Regulations, the price of the Shares and
any price-related information previously omitted from the effective
Registration Statement pursuant to such Rule 430A shall have been transmitted
to the Commission for filing pursuant to Rule 424(b) of the Regulations within
the prescribed time period, and prior to Closing Date the Company shall have
provided evidence satisfactory to the Representative of such timely filing, or
a post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A
of the Regulations.
(b) The Representative shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Representative's opinion, is material, or omits
to state a fact which, in the Representative's opinion, is material and is
required to be stated therein or is necessary to make the statements therein
not misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Representative's reasonable opinion, is
material, or omits to state a fact which, in the Representative's reasonable
opinion, is material and is required to be stated therein or is necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
(c) On or prior to the Closing Date, the Underwriters shall
have received from Underwriters' Counsel such opinion or opinions with respect
to the organization of the Company, the validity of the Securities, the
Registration Statement, the Prospectus and other related matters as the
Representative may request and Underwriters' Counsel shall have received from
the Company such papers and information as they request to enable them to pass
upon such matters.
(d) At Closing Date, the Underwriters shall have received the
favorable opinion of Jackson & Walker LLP ("Jackson & Walker"), counsel to the
Company, dated the Closing Date, addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel, to the effect that:
[(i) THE COMPANY (A) HAS BEEN DULY ORGANIZED AND IS
VALIDLY EXISTING AS A CORPORATION IN GOOD STANDING UNDER THE LAWS
OF ITS JURISDICTION OF INCORPORATION,] (B) is duly qualified and
licensed and in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of any properties
or the character of its operations requires such qualification or
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<PAGE> 21
licensing, and (C) to the best of such counsel's knowledge, has
all requisite corporate power and authority and has obtained any
and all necessary authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental
or regulatory officials and bodies (including, without
limitation, those having jurisdiction over environmental or
similar matters), to own or lease its properties and conduct its
business as described in the Prospectus.
(ii) except as described in the Prospectus, and to the
best of such counsel's knowledge after reasonable investigation,
the Company does not own an interest in any corporation, limited
liability company, partnership, joint venture, trust or other
business entity;
(iii) the Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, and
any amendment or supplement thereto, under "Capitalization" and
"Description of Capital Stock," and to the knowledge of such
counsel, the Company is not a party to or bound by any
instrument, agreement or other arrangement providing for it to
issue any capital stock, rights, warrants, options or other
securities, except for this Agreement, the Representative's
Warrant Agreement, and as described in the Prospectus. The
Securities and all other securities issued or issuable by the
Company conform in all material respects to the statements with
respect thereto contained in the Registration Statement and the
Prospectus. All issued and outstanding securities of the Company
have been duly authorized and validly issued and are fully paid
and nonassessable; the holders thereof are not subject to
personal liability by reason of being such holders; and none of
such securities were issued in violation of the preemptive rights
of any holders of any security of the Company. The Securities to
be sold by the Company hereunder and under the Representative's
Warrant Agreement are not and will not be subject to any
preemptive or other similar rights of any stockholder, have been
duly authorized and, when issued, paid for and delivered in
accordance with their terms, will be validly issued, fully paid
and nonassessable and will conform in all material respects to
the description thereof contained in the Prospectus; the holders
thereof will not be subject to any liability solely as such
holders; all corporate action required to be taken for the
authorization, issue and sale of the Securities has been duly and
validly taken; and the certificates representing the Securities
are in due and proper form. The Representative's Warrants
constitute valid and binding obligations of the Company to issue
and sell, upon exercise thereof and payment therefor, the number
and type of securities of the Company called for thereby (except
as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors'
rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or
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<PAGE> 22
contribution may be limited by applicable law). Upon the issuance
and delivery pursuant to this Agreement of the Securities to be
sold by the Company, the Company will convey, against payment
therefor as provided herein, to the Underwriters and the
Representative, respectively, good and marketable title to the
Securities free and clear of all liens and other encumbrances;
(iv) the Registration Statement is effective under the
Act, and, if applicable, filing of all pricing information has
been timely made in the appropriate form under Rule 430A, and no
stop order suspending the use of the Preliminary Prospectus, the
Registration Statement or Prospectus or any part of any thereof
or suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been
instituted or are pending or, to the best of such counsel's
knowledge, threatened or contemplated under the Act;
(v) each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements
thereto (other than the financial statements and other financial
and statistical data included therein as to which no opinion need
be rendered) comply as to form in all material respects with the
requirements of the Act and the Regulations. Such counsel shall
state that such counsel has participated in conferences with
officers and other representatives of the Company and the
Representative and representatives of the independent public
accountants for the Company, at which conferences the contents of
the Preliminary Prospectus, the Registration Statement, the
Prospectus, and any amendments or supplements thereto were
discussed, and, although such counsel is not passing upon and
does not assume any responsibility for the accuracy, completeness
or fairness of the statements contained in the Preliminary
Prospectus, the Registration Statement and Prospectus, and any
amendments or supplements thereto, on the basis of the foregoing,
no facts have come to the attention of such counsel which lead
them to believe that either the Registration Statement or any
amendment thereto, at the time such Registration Statement or
amendment became effective or the Preliminary Prospectus or
Prospectus or amendment or supplement thereto as of the date of
such opinion contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading (it being
understood that such counsel need express no opinion with respect
to the financial statements and schedules and other financial and
statistical data included in the Preliminary Prospectus, the
Registration Statement or Prospectus, and any amendments or
supplements thereto);
(vi) to the best of such counsel's knowledge after
reasonable investigation, (A) there are no agreements, contracts
or other documents required by the Act to be described in the
Registration Statement and the Prospectus and filed as
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<PAGE> 23
exhibits to the Registration Statement other than those described
in the Registration Statement and the Prospectus and filed as
exhibits thereto; (B) the descriptions in the Registration
Statement and the Prospectus and any supplement or amendment
thereto of contracts and other documents to which the Company is
a party or by which it is bound are accurate in all material
respects and fairly represent the information required to be
shown by Form SB-2; (C) there is not pending or threatened
against the Company any action, arbitration, suit, proceeding,
litigation, governmental or other proceeding (including, without
limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or threatened
against the Company which (x) is required to be disclosed in the
Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are
accurately summarized in all material respects), (y) questions
the validity of the capital stock of the Company or this
Agreement or the Representative's Warrant Agreement, or of any
action taken or to be taken by the Company pursuant to or in
connection with any of the foregoing; and (D) there is no action,
suit or proceeding pending or threatened against the Company
before any court or arbitrator or governmental body, agency or
official in which there is a reasonable possibility of an adverse
decision which may result in a material adverse change in the
financial condition, business, affairs, stockholders' equity,
operations, properties, business or results of operations of the
Company, which could adversely affect the present or prospective
ability of the Company to perform its obligations under this
Agreement or the Representative's Warrant Agreement, or which in
any manner draws into question the validity or enforceability of
this Agreement or the Representative's Warrant Agreement;
(vii) the Company has the corporate power and authority to
enter into each of this Agreement and the Representative's
Warrant Agreement and to consummate the transactions provided for
therein; and each of this Agreement and the Representative's
Warrant Agreement has been duly authorized, executed and
delivered by the Company. Each of this Agreement and the
Representative's Warrant Agreement, assuming due authorization,
execution and delivery by each other party thereto, constitutes a
legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms (except as the
enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors'
rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or
contribution may be limited by applicable law), and none of the
Company's execution, delivery or performance of this Agreement
and the Representative's Warrant Agreement, the consummation by
the Company of the transactions contemplated herein or therein,
or the conduct of the Company's business as described in the
Registration Statement, the Prospectus, and any amendments or
- 23 -
<PAGE> 24
supplements thereto conflicts with or results in any breach or
violation of any of the terms or provisions of, or constitutes a
default under, or result in the creation or imposition of any
lien, charge, claim, encumbrance, pledge, security interest,
defect or other restriction or equity of any kind whatsoever
upon, any property or assets (tangible or intangible) of the
Company pursuant to the terms of (A) the articles of
incorporation or by-laws of the Company, as amended, (B) any
license, contract, indenture, mortgage, deed of trust, voting
trust agreement, stockholders' agreement, note, loan or credit
agreement or any other agreement or instrument known to such
counsel to which the Company is a party or by which it is bound,
or (C) any federal, state or local statute, rule or regulation
applicable to the Company or any judgment, decree or order known
to such counsel of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body
(including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its activities or
properties;
(viii) no consent, approval, authorization or order, and
no filing with, any court, regulatory body, government agency or
other body (other than such as may be required under Blue Sky
laws, as to which no opinion need be rendered or under federal
securities laws, as to which no opinion need be rendered pursuant
to this subsection (viii) is required in connection with the
issuance of the Securities pursuant to the Prospectus, and the
Registration Statement, the performance of this Agreement and the
Representative's Warrant Agreement, and the transactions
contemplated hereby and thereby;
(ix) to the best of such counsel's knowledge after
reasonable investigation, the properties and business of the
Company conform in all material respects to the description
thereof contained in the Registration Statement and the
Prospectus;
(x) to the best knowledge of such counsel, and except as
disclosed in Registration Statement and the Prospectus, the
Company is not in breach of, or in default under, any term or
provision of any license, contract, indenture, mortgage,
installment sale agreement, deed of trust, lease, voting trust
agreement, stockholders' agreement, note, loan or credit
agreement or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which the
Company is bound or to which the property or assets (tangible or
intangible) of the Company is subject; and the Company is not in
violation of any term or provision of its articles of
incorporation or by-laws, as amended, and to the best of such
counsel's knowledge after reasonable investigation, not in
violation of any franchise, license, permit, judgment, decree,
order, statute, rule or regulation;
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<PAGE> 25
(xi) the statements in the Prospectus under "Dividend
Policy, " "Description of Capital Stock," and "Shares Eligible
for Future Sale" have been reviewed by such counsel, and insofar
as they refer to statements of law, descriptions of statutes,
licenses, rules or regulations or legal conclusions, are correct
in all material respects;
[(xii) THE COMMON STOCK HAS BEEN ACCEPTED FOR QUOTATION ON
THE BOSTON STOCK EXCHANGE;]
(xiii) to the best of such counsel's knowledge and based
upon a review of the outstanding securities and the contracts
furnished to such counsel by the Company, no person, corporation,
trust, partnership, association or other entity has the right to
include and/or register any securities of the Company in the
Registration Statement, require the Company to file any
registration statement or, if filed, to include any security in
such registration statement;
(xiv) assuming due execution by the parties thereto other
than the Company, each Lock-up Agreement is a legal, valid and
binding obligation of the party thereto, enforceable against the
party and any subsequent holder of the securities subject thereto
in accordance with its terms (except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and
except as rights to indemnity or contribution may be limited by
applicable law);
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws, rules and
regulations of the United States and the laws, rules and regulations of the
State of Nevada, to the extent such counsel deems proper and to the extent
specified in such opinion, if at all, upon an opinion or opinions (in form and
substance satisfactory to Underwriters' Counsel) of other counsel acceptable to
Underwriters' Counsel, familiar with the applicable laws; (B) as to matters of
fact, to the extent they deem proper, on certificates and written statements of
responsible officers of the Company and certificates or other written
statements of officers of departments of various jurisdictions having custody
of documents respecting the corporate existence or good standing of the
Company, provided that copies of any such statements or certificates shall be
delivered to Underwriters' Counsel if requested. The opinion of such counsel
shall state that knowledge shall not include the knowledge of a director or
officer of the Company who is affiliated with such firm in his or her capacity
as an officer or director of the Company. The opinion of such counsel for the
Company shall state that the opinion of any such other counsel is in form
satisfactory to such counsel.
At each Option Closing Date, if any, the Underwriters shall have
received the favorable opinion of Jackson & Walker, counsel to the Company,
dated the Option Closing
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<PAGE> 26
Date, addressed to the Underwriters and in form and substance satisfactory to
Underwriters' Counsel confirming as of such Option Closing Date the statements
made by Jackson & Walker in its opinion delivered on the Closing Date.
(e) On or prior to each of the Closing Date and the Option
Closing Date, if any, Underwriters' Counsel shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company or herein contained.
(f) Prior to each of the Closing Date and each Option Closing
Date, if any, (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects, stockholders' equity or the business activities of the
Company, whether or not in the ordinary course of business, from the latest
dates as of which such condition is set forth in the Registration Statement and
Prospectus; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company, from the latest date as of
which the financial condition of the Company is set forth in the Registration
Statement and Prospectus which is adverse to the Company; (iii) the Company
shall not be in default under any provision of any instrument relating to any
outstanding indebtedness which default has not been waived; (iv) the Company
shall not have issued any securities (other than the Securities) or declared or
paid any dividend or made any distribution in respect of its capital stock of
any class and there has not been any change in the capital stock, or any
material increase in the debt (long or short term) or liabilities or
obligations of the Company (contingent or otherwise) except for the issuance of
the Option Securities, the Representative's Warrants, and shares of Common
Stock issued upon the exercise of currently outstanding warrants or options, or
options and warrants granted in the ordinary course of business consistent with
prior practice; (v) no material amount of the assets of the Company shall have
been pledged or mortgaged, except as set forth in the Registration Statement
and Prospectus; (vi) no action, suit or proceeding, at law or in equity, shall
have been pending or threatened (or circumstances giving rise to same) against
the Company, or affecting any of its respective properties or businesses before
or by any court or federal, state or foreign commission, board or other
administrative agency wherein an unfavorable decision, ruling or finding may
materially adversely affect the business, operations, prospects or financial
condition or income of the Company, except as set forth in the Registration
Statement and Prospectus; and (vii) no stop order shall have been issued under
the Act and no proceedings therefor shall have been initiated, threatened or
contemplated by the Commission.
(g) At each of the Closing Date and each Option Closing Date, if
any, the Underwriters shall have received a certificate of the Company signed
on behalf of the Company by the principal executive officer of the Company,
dated the Closing Date or Option Closing Date, as the case may be, to the
effect that such executive has carefully examined the Registration Statement,
the Prospectus and this Agreement, and that:
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<PAGE> 27
(i) The representations and warranties of the Company in
this Agreement are true and correct, as if made on and as of the
Closing Date or the Option Closing Date, as the case may be, and
the Company has complied with all agreements and covenants and
satisfied all conditions contained in this Agreement on its part
to be performed or satisfied at or prior to such Closing Date or
Option Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and
no proceedings for that purpose have been instituted or are
pending or, to the best of each of such person's knowledge after
due inquiry, are contemplated or threatened under the Act;
(iii) The Registration Statement and the Prospectus and,
if any, each amendment and each supplement thereto, contain all
statements and information required by the Act to be included
therein, and none of the Registration Statement, the Prospectus
nor any amendment or supplement thereto includes any untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading and neither the Preliminary Prospectus or
any supplement, as of their respective dates, thereto included
any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, (a) the Company has not incurred up to and including
the Closing Date or the Option Closing Date, as the case may be,
other than in the ordinary course of its business, any material
liabilities or obligations, direct or contingent; (b) the Company
has not paid or declared any dividends or other distributions on
its capital stock; (c) the Company has not entered into any
transactions not in the ordinary course of business; (d) there
has not been any change in the capital stock as described in the
Registration Statement and Prospectus or material increase in
long-term debt or any increase in the short-term borrowings
(other than any increase in the short-term borrowings in the
ordinary course of business) of the Company, (e) the Company has
not sustained any loss or damage to its property or assets,
whether or not insured, (f) there is no litigation which is
pending or threatened (or circumstances giving rise to same)
against the Company or any affiliated party of any of the
foregoing which is required to be set forth in an amended or
supplemented Prospectus which has not been set forth, and (g)
there has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been set forth.
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<PAGE> 28
References to the Registration Statement and the Prospectus in this subsection
(g) are to such documents as amended and supplemented at the date of such
certificate.
(h) By the Closing Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or payable
to the Underwriters.
(i) At the time this Agreement is executed, the Underwriters
shall have received a letter, dated such date, addressed to the Underwriters in
form and substance satisfactory in all respects (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
to the Underwriters and Underwriters' Counsel, from King & Burns:
(i) confirming that they are independent certified public
accountants with respect to the Company within the meaning of the
Act and the applicable Rules and Regulations;
(ii) stating that it is their opinion that the financial
statements and supporting schedules of the Company included in
the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Act
and the Regulations thereunder and that the Representative may
rely upon the opinion of King & Burns with respect to the
financial statements and supporting schedules included in the
Registration Statement;
(iii) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim
financial statements of the Company (with an indication of the
date of the latest available unaudited interim financial
statements), a reading of the latest available minutes of the
stockholders and board of directors and the various committees of
the board of directors of the Company, consultations with
officers and other employees of the Company responsible for
financial and accounting matters and other specified procedures
and inquiries, nothing has come to their attention which would
lead them to believe that (A) the unaudited financial statements
and supporting schedules of the Company included in the
Registration Statement, if any, do not comply as to form in all
material respects with the applicable accounting requirements of
the Act and the Regulations or are not fairly presented in
conformity with generally accepted accounting principles applied
on a basis substantially consistent with that of the audited
financial statements of the Company included in the Registration
Statement, or (B) at a specified date not more than five (5) days
prior to the effective date of the Registration Statement, there
has been any change in the capital stock or material increase in
long-term debt of the Company, or any material decrease in the
stockholders' equity or net current assets or net assets of the
Company as compared with amounts shown in the most recent balance
sheet
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<PAGE> 29
included in the Registration Statement, other than as set forth
in or contemplated by the Registration Statement, or, if there
was any change or decrease, setting forth the amount of such
change or decrease.
(iv) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings,
statements and other financial information pertaining to the
Company set forth in the Prospectus in each case to the extent
that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records,
including work sheets, of the Company and excluding any questions
requiring an interpretation by legal counsel, with the results
obtained from the application of specified readings, inquiries
and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted
auditing standards) set forth in the letter and found them to be
in agreement; and
(v) statements as to such other material matters incident
to the transaction contemplated hereby as the Representative may
reasonably request.
(j) At the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received from King & Burns a letter, dated as of
the Closing Date or the Option Closing Date, as the case may be, to the effect
that they reaffirm that statements made in the letter furnished pursuant to
Subsection (i) of this Section 6, except that the specified date referred to
shall be a date not more than five (5) days prior to Closing Date or the Option
Closing Date, as the case may be, and, if the Company has elected to rely on
Rule 430A of the Rules and Regulations, to the further effect that they have
carried out procedures as specified in clause (iv) of Subsection (i) of this
Section 6 with respect to certain amounts, percentages and financial
information as specified by the Representative and deemed to be a part of the
Registration Statement pursuant to Rule 430A(b) and have found such amounts,
percentages and financial information to be in agreement with the records
specified in such clause (iv).
(k) On each of Closing Date and Option Closing Date, if any,
there shall have been duly tendered to the Representative for the several
Underwriters' accounts the appropriate number of Securities.
(l) No order suspending the sale of the Securities in any
jurisdiction designated by the Representative pursuant to subsection (e) of
Section 4 hereof shall have been issued on either the Closing Date or the
Option Closing Date, if any, and no proceedings for that purpose shall have
been instituted or shall be contemplated.
(m) On or before the Closing Date, the Company shall have
executed and delivered to the Representative, (i) the Representative's Warrant
Agreement, substantially in the form filed as Exhibit 4(b), to the Registration
Statement, in final form and substance satisfactory
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<PAGE> 30
to the Representative, and (ii) the Representative's Warrants in such
denominations and to such designees as shall have been provided to the Company.
[(n) ON OR BEFORE THE CLOSING DATE, THE COMMON STOCK SHALL HAVE
BEEN DULY APPROVED FOR QUOTATION ON THE STOCK EXCHANGE.]
(o) On or before the Closing Date, there shall have been
delivered to the Representative all of the Lock-up Agreements in final form and
substance satisfactory to Underwriters' Counsel.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Representative may terminate this
Agreement or, if the Representative so elect, they may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of
the Underwriters (for purposes of this Section 7 "Underwriters" shall include
the officers, directors, partners, employees, agents and counsel of the
Underwriters, including specifically each person who may be substituted for an
Underwriter as provided in Section 11 hereof), and each person, if any, who
controls the Underwriter ("controlling person") within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, from and against any and
all loss, liability, claim, damage, and expense whatsoever (including, but not
limited to, reasonable attorneys' fees and any and all reasonable expense
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or litigation provided that the
indemnified persons may not agree to any such settlement without the prior
written consent of the Company), as and when incurred, arising out of, based
upon or in connection with (i) any untrue statement or alleged untrue statement
of a material fact contained (A) in any Preliminary Prospectus, the
Registration Statement or the Prospectus (as from time to time amended and
supplemented); or (B) in any application or other document or communication (in
this Section 7 collectively called "application") executed by or on behalf of
the Company or based upon written information furnished by or on behalf of the
Company in any jurisdiction in order to qualify the Securities under the
securities laws thereof or filed with the Commission, any state securities
commission or agency, [THE BOSTON STOCK EXCHANGE] or any securities exchange;
or any omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading (in
the case of the Prospectus, in the light of the circumstances under which they
were made), unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company with respect to
any Underwriter by or on behalf of such Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment thereof or supplement thereto, or in
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<PAGE> 31
any application, as the case may be; or (ii) any breach of any representation,
warranty, covenant or agreement of the Company contained in this Agreement. The
indemnity agreement in this subsection (a) shall be in addition to any
liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not
jointly, to indemnify and hold harmless the Company, each of its directors,
each of its officers who has signed the Registration Statement, and each other
person, if any, who controls the Company, within the meaning of the Act, to the
same extent as the foregoing indemnity from the Company to the Underwriters but
only with respect to statements or omissions, if any, made in any Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof
or supplement thereto or in any application made in reliance upon, and in
strict conformity with, written information furnished to the Company with
respect to any Underwriter by such Underwriter or the Representative expressly
for use in such Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment thereof or supplement thereto or in any such
application, provided that such written information or omissions only pertain
to disclosures in the Preliminary Prospectus, the Registration Statement or
Prospectus directly relating to the transactions effected by the Underwriters
in connection with this Offering. The Company acknowledges that the statements
with respect to the public offering of the Securities set forth under the
heading "Underwriting" and the stabilization legend in the Prospectus have been
furnished by the Underwriters expressly for use therein and constitute the only
information furnished in writing by or on behalf of the Underwriters or the
Representative for inclusion in the Prospectus.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against
one or more indemnifying parties under this Section 7, notify each party
against whom indemnification is to be sought in writing of the commencement
thereof (but the failure to so notify an indemnifying party shall not relieve
it from any liability which it may have otherwise or which it may have under
this Section 7, except to the extent that it has been prejudiced in any
material respect by such failure). In case any such action is brought against
any indemnified party, and it notifies an indemnifying party or parties of the
commencement thereof, the indemnifying party or parties will be entitled to
participate therein, and to the extent it may elect by written notice delivered
to the indemnified party promptly after receiving the aforesaid notice from
such indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action at the expense of the
indemnifying party, (ii) the indemnifying parties shall not have employed
counsel reasonably satisfactory to such indemnified party to have charge of the
defense of such action within a reasonable time after notice of commencement of
the action, or (iii) such indemnified party or parties shall have reasonably
concluded that there may be defenses available
- 31 -
<PAGE> 32
to it or them which are different from or additional to those available to one
or all of the indemnifying parties (in which case the indemnifying parties
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events the reasonable fees and
expenses of one additional counsel shall be borne by the indemnifying parties.
In no event shall the indemnifying parties be liable for fees and expenses of
more than one counsel (in addition to any local counsel) separate from their
own counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. Anything in this Section 7 to
the contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its written consent;
provided, however, that such consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that the express provisions of this Section 7 provide for indemnification in
such case, or (ii) contribution under the Act may be required on the part of
any indemnified party, then each indemnifying party shall contribute to the
amount paid as a result of such losses, claims, damages, expenses or
liabilities (or actions in respect thereof) (A) in such proportion as is
appropriate to reflect the relative benefits received by each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand, from the offering of the Securities or (B) if the allocation
provided by clause (A) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of each of the contributing
parties, on the one hand, and the party to be indemnified on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where the Company is a contributing party
and the Underwriters are the indemnified party, the relative benefits received
by the Company on the one hand, and the Underwriters, on the other, shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Securities (before deducting expenses other than underwriting discounts
and commissions) bear to the total underwriting discounts received by the
Underwriters hereunder, in each case as set forth in the table on the Cover
Page of the Prospectus. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriters, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages,
expenses or liabilities (or actions in respect thereof to above in this
subdivision (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subdivision (d) the Underwriters shall not be required to
- 32 -
<PAGE> 33
contribute any amount in excess of the underwriting discount applicable to the
Securities purchased by the Underwriters hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 12(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person, if
any, who controls the Company within the meaning of the Act, each officer of
the Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect to which a claim for contribution may
be made against another party or parties under this subparagraph (d), notify
such party or parties from whom contribution may be sought, but the omission so
to notify such party or parties shall not relieve the party or parties from
whom contribution may be sought from any obligation it or they may have
hereunder or otherwise than under this subparagraph (d), or to the extent that
such party or parties were not adversely affected by such omission. The
contribution agreement set forth above shall be in addition to any liabilities
which any indemnifying party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements of the Company
at the Closing Date and the Option Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and the respective
indemnity and contribution agreements contained in Section 7 hereof shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any Underwriter, the Company, any controlling person of
either the Underwriter or the Company, and shall survive termination of this
Agreement or the issuance and delivery of the Securities to the Underwriters
and the Representative, as the case may be.
9. Effective Date.
(a) This Agreement shall become effective at 5:00 p.m., New
York City time, on the date hereof. For purposes of this Section 9, the
Securities to be purchased hereunder shall be deemed to have been so released
upon the earlier of dispatch by the Representative of telegrams to securities
dealers releasing such shares for offering or the release by the Representative
for publication of the first newspaper advertisement which is subsequently
published relating to the Securities.
10. Termination.
(a) Subject to subsection (b)of this Section 10, the
Representative shall have the right to terminate this Agreement, if between the
date of this Agreement and the Closing Date or the Option Closing Date, as the
case may be, (i) if any domestic or international event or act or occurrence
has materially disrupted, or in the Representative's reasonable opinion will
- 33 -
<PAGE> 34
in the immediate future materially disrupt the financial markets; or (ii) any
material adverse change in the financial markets shall have occurred; or (iii)
if trading on the New York Stock Exchange, the American Stock Exchange, or in
the over-the-counter market shall have been suspended, or minimum or maximum
prices for trading shall have been fixed, or maximum ranges for prices for
securities shall have been required on the over-the-counter market by the NASD
or by order of the Commission or any other government authority having
jurisdiction; or (iv) if the United States shall have become involved in a war
or major hostilities, or if there shall have been an escalation in an existing
war or major hostilities or a national emergency shall have been declared in
the United States; or (v) if a banking moratorium has been declared by a state
or federal authority; or (vi) if the Company shall have sustained a loss
material or substantial to the Company by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act which, whether
or not such loss shall have been insured, will, in the Representative's
opinion, make it inadvisable to proceed with the delivery of the Securities; or
(viii) if there shall have been such a material adverse change in the prospects
or conditions of the Company, or such material adverse change in the general
market, political or economic conditions, in the United States or elsewhere as
in the Representative's judgment would make it inadvisable to proceed with the
offering, sale and/or delivery of the Securities.
(b) If this Agreement is terminated by the Representative in
accordance with any of the provisions of Section 6, Section 10(a) or Section
11, the Company shall promptly reimburse and indemnify the Underwriters
pursuant to Section 5(b) hereof. Notwithstanding any contrary provision
contained in this Agreement, any election hereunder or any termination of this
Agreement (including, without limitation, pursuant to Sections 6, 10, 11 and 12
hereof, and whether or not this Agreement is otherwise carried out, the
provisions of Section 5 and Section 7 shall not be in any way affected by such
election or termination or failure to carry out the terms of this Agreement or
any part hereof.
11. Substitution of the Underwriters. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 6, Section 10 or
Section 12 hereof to purchase the Securities which it or they are obligated to
purchase on such date under this Agreement (the "Defaulted Securities"), the
Representative shall have the right, within 24 hours thereafter, to make
arrangement for one or more of the non-defaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth. If, however, the Representative shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the total number of Firm Securities to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
- 34 -
<PAGE> 35
(b) if the number of Defaulted Securities exceeds 10% of the
total number of Firm Securities to be purchased on such date, this Agreement
shall terminate without liability on the part of any nondefaulting
Underwriters.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of any default by such
Underwriter under this Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the Representative shall have the right to
postpone the Closing Date for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements.
12. Default by the Company. If the Company shall fail at the Closing
Date or any Option Closing Date, as applicable, to sell and deliver the number
of Securities which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Securities to be purchased on an Option Closing Date, the Underwriters
may at the Representative's option, by notice from the Representative to the
Company, terminate the Underwriters' obligation to purchase Option Securities
from the Company on such date) without any liability on the part of any
non-defaulting party other than pursuant to Section 5, Section 7 and Section 10
hereof. No action taken pursuant to this Section shall relieve the Company from
liability, if any, in respect of such default.
13. Notices. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be deemed
to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representative, c/o National Securities Corporation, 1001 Fourth Avenue, Suite
2200, Seattle, Washington 98154, Attention: Steven A. Rothstein, with a copy,
which shall not constitute notice, to Camhy Karlinsky & Stein LLP, 1740
Broadway, 16th Floor, New York, New York 10019, Attention: Alan I. Annex, Esq.
Notices to the Company shall be directed to the Company, Sonoma International,
3000 Lexington Financial Center, Lexington, Kentucky 40507, Attention: James L.
Frye with a copy, which shall not constitute notice, to Jackson & Walker,
L.L.P., 901 Main Street, Suite 6000, Dallas, Texas 75202, Attention: Richard F.
Dahlson.
14. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or
claim under or in respect of or by virtue of this Agreement or any provisions
herein contained. No purchaser of Securities from any Underwriter shall be
deemed to be a successor by reason merely of such purchase.
- 35 -
<PAGE> 36
15. Construction. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York without
giving effect to the choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
17. Entire Agreement: Amendments. This Agreement and the
Representative's Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in a writing, signed by the Representative
and the Company.
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
among us.
Very truly yours,
SONOMA INTERNATIONAL
By:
--------------------------------------
Name: James L. Frye
Title: President and Chief Executive
Officer
- 36 -
<PAGE> 37
CONFIRMED AND ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN:
NATIONAL SECURITIES CORPORATION
By:
---------------------------------------
Name: Steven A. Rothstein
Title: Chairman
For itself and as Representative of the Underwriters named in Schedule A
hereto.
- 37 -
<PAGE> 38
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON
NAME OF UNDERWRITERS STOCK TO BE PURCHASED
-------------------- ---------------------
<S> <C>
National Securities Corporation
TOTAL . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
SCH. A-38
<PAGE> 1
EXHIBIT 1.2
CKS DRAFT OF
02/24/97
_______________________________
SONOMA INTERNATIONAL
AND
NATIONAL SECURITIES CORPORATION
REPRESENTATIVE'S
WARRANT AGREEMENT
DATED AS OF MARCH _____, 1997
_______________________________
<PAGE> 2
REPRESENTATIVE'S WARRANT AGREEMENT dated as of March ___, 1997, between
SONOMA INTERNATIONAL, a Nevada corporation (the "Company"), and NATIONAL
SECURITIES CORPORATION and its assignees or designees (each hereinafter
referred to variously as a "Holder" or "Representative").
WITNESSETH:
WHEREAS, the Representative has agreed pursuant to the underwriting
agreement (the "Underwriting Agreement") dated as of the date hereof and
entered into between the Company and the Representative, to act as the
representative of the several underwriters listed therein (the "Underwriters")
in connection with the Company's proposed public offering of [_______] shares
of Common Stock (as hereinafter defined) at a public offering price of $______
per share to purchase one (1) share of Common Stock at an exercise price of
$____________ per share [120% of the initial public offering price per share of
Common Stock] (the "Public Offering").
WHEREAS, pursuant to the Underwriting Agreement, the Company proposes to
issue warrants (the "Representative's Warrants") to the Representative to
purchase up to an aggregate of [______] shares of Common Stock of the Company.
WHEREAS, the Representative's Warrants to be issued pursuant to this
Agreement will be issued on the Closing Date (as such term is defined in the
Underwriting Agreement) by the Company to the Representative in consideration
for, and as part of the Underwriters' compensation in connection with, the
Representative acting as the representative pursuant to the Underwriting
Agreement.
<PAGE> 3
NOW, THEREFORE, in consideration of the premises, the payment by the
Representative to the Company of an aggregate of [__________ DOLLARS ($ )],
the agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Grant. The Representative is hereby collectively granted the
right to purchase, at any time from March _, 1998 (one year from the Effective
Date of the Registration Statement) until 5:30 p.m., New York time, on February
_, 2002 (5 years from the Effective Date of the Registration Statement), at
which time the Representative's Warrants expire, up to an aggregate of [_____]
shares of Common Stock, $.001 par value (the "Common Stock"), at an initial
exercise price (subject to adjustment as provided in Section 11 hereof) of
$____ per share of Common Stock [120% of the initial public offering price per
share], (the "Exercise Price"). Except as set forth herein, the shares of
Common Stock issuable upon exercise of the Representative's Warrants are in all
respects identical to the shares of Common Stock being purchased by the
Underwriters for resale to the public pursuant to the terms and provisions of
the Underwriting Agreement. The shares of Common Stock issuable upon exercise
of the Representative's Warrants are sometimes hereinafter referred to as the
"Securities."
2. Representative's Warrant Certificates. The Representative's
warrant certificates (the "Warrant Certificates") delivered and to be delivered
pursuant to this Agreement shall be in the form set forth in Exhibit A,
attached hereto and made a part hereof, with such appropriate insertions,
omissions, substitutions, and other variations as required or permitted by this
Agreement.
-2-
<PAGE> 4
3. Registration of Warrant. The Representative's Warrants shall be
numbered and shall be registered on the books of the Company when issued.
4. Exercise of Representative's Warrant.
4.1 Method of Exercise. The Representative's Warrants
initially are exercisable at an aggregate Exercise Price (subject to adjustment
as provided in Section 11 hereof) per share of Common Stock as set forth in
Section 8 hereof payable by certified or official bank check in New York
Clearing House funds. Upon surrender of a Representative's Warrant Certificate
with the annexed Form of Election to Purchase duly executed, together with
payment of the Exercise Price for the Securities purchased at the Company's
principal offices in Colorado presently located at 3000 Lexington Financial
Center, Lexington, Kentucky 40507 the registered holder of a Representative's
Warrant Certificate ("Holder" or "Holders") shall be entitled to receive a
certificate or certificates for the shares of Common Stock so purchased. The
purchase rights represented by each Representative's Warrant Certificate are
exercisable at the option of the Holder thereof, in whole or in part (but not
as to fractional shares of Common Stock underlying the Representative's
Warrants). Representative's Warrants may be exercised to purchase all or part
of the shares of Common Stock represented thereby. In the case of the purchase
of less than all of the shares of Common Stock purchasable under any
Representative's Warrant Certificate, the Company shall cancel said
Representative's Warrant Certificate upon the surrender thereof and shall
execute and deliver a new Representative's Warrant Certificate of like tenor
for the balance of the shares of Common Stock purchasable thereunder.
-3-
<PAGE> 5
4.2 Exercise by Surrender of Warrant. In addition to the
method of payment set forth in Section 4.1 and in lieu of any cash payment
required thereunder, the Holder(s) of the Warrants shall have the right at any
time and from time to time to exercise the Warrants in full or in part by
surrendering the Warrant Certificate in the manner specified in Section 4.1 in
exchange for the number of shares of Common Stock equal to the product of (x)
the number of shares of Common Stock as to which the Warrants are being
exercised, multiplied by (y) a fraction, the numerator of which is the Market
Price (as defined in Section 4.3 hereof) of the shares of Common Stock minus
the Exercise Price of the shares of Common Stock and the denominator of which
is the Market Price per share of Common Stock. Solely for the purposes of this
Section 4.2, Market Price shall be calculated either (i) on the date on which
the form of election attached hereto is deemed to have been sent to the Company
pursuant to Section 15 hereof ("Notice Date") or (ii) as the average of the
Market Price for each of the five trading days immediately preceding the Notice
Date, whichever of (i) or (ii) results in a greater Market Price.
4.3 Definition of Market Price.
(a) As used herein, the phrase "Market Price" of the
Common Stock at any date shall be deemed to be the last reported sale price,
or, in case no such reported sale takes place on such day, the average of the
last reported sale prices for the last three (3) trading days, in either case
as officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading or by the Nasdaq National Market
("Nasdaq/NM") or the Nasdaq Small Cap Market ("Nasdaq Small Cap"), or, if the
Common Stock is not listed or admitted to trading on any national securities
-4-
<PAGE> 6
exchange or quoted by the National Association of Securities Dealers Automated
Quotation System ("Nasdaq"), the average closing bid price as furnished by the
National Association of Securities Dealers, Inc. ("NASDQ") through Nasdaq or
similar organization if Nasdaq is no longer reporting such information
(collectively, the "Appropriate Market Price").
(b) If the Market Price of the Common Stock cannot be
determined pursuant to Section 4.3(a) above, the Market Price of the Common
Stock shall be determined in good faith (using customary valuation methods) by
resolution of the members of the Board of Directors of the Company, based on
the best information available to it.
5. Issuance of Certificates. Upon the exercise of the
Representative's Warrant, the issuance of certificates for shares of Common
Stock or other securities, properties or rights underlying such
Representative's Warrant shall be made forthwith (and in any event within five
(5) business days thereafter) without charge to the Holder thereof including,
without limitation, any tax which may be payable in respect of the issuance
thereof, and such certificates shall (subject to the provisions of Sections 7
and 9 hereof) be issued in the name of, or in such names as may be directed by,
the Holder thereof; provided, however, that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificates in a name other than that of the
Holder and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
-5-
<PAGE> 7
The Representative's Warrant Certificates and the certificates
representing the shares of Common Stock or other securities, property or rights
issued upon exercise of the Representative's Warrant shall be executed on
behalf of the Company by the manual or facsimile signature of the then present
President or any Vice President of the Company under its corporate seal
reproduced thereon, attested to by the manual or facsimile signature of the
then present Secretary or any Assistant Secretary of the Company.
Representative's Warrant Certificates shall be dated the date of execution by
the Company upon initial issuance, division, exchange, substitution or
transfer.
6. Transfer of Representative's Warrant. The Representative's
Warrant shall be transferable only on the books of the Company maintained at
its principal office, where its principal office may then be located, upon
delivery thereof duly endorsed by the Holder or by its duly authorized attorney
or representative accompanied by proper evidence of succession, assignment or
authority to transfer. Upon any registration transfer, the Company shall
execute and deliver the new Representative's Warrant to the person entitled
thereto.
7. Restriction On Transfer of Representative's Warrant. The Holder
of a Representative's Warrant Certificate, by its acceptance thereof, covenants
and agrees that the Representative's Warrant is being acquired as an investment
and not with a view to the distribution thereof, and that the Representative's
Warrant may not be sold, transferred, assigned, hypothecated or otherwise
disposed of, in whole or in part, for the term of the Representative's Warrant,
except to officers or partners of the Underwriters, or by operation of law.
-6-
<PAGE> 8
8. Exercise Price.
8.1 Initial and Adjusted Exercise Price. Except as otherwise
provided in Section 11 hereof, the initial exercise price of each
Representative's Warrant shall be $_____ per share of Common Stock [120% of the
initial public offering price per share of Common Stock]. The adjusted
exercise price shall be the price which shall result from time to time from any
and all adjustments of the initial exercise price in accordance with the
provisions of Section 11 hereof. Any transfer of a Representative's Warrant
shall constitute an automatic transfer and assignment of the registration
rights set forth in Section 9 hereof with respect to the Securities or other
securities, properties or rights underlying the Representative's Warrants.
8.2 Exercise Price. The term "Exercise Price" herein shall
mean the initial exercise price or the adjusted exercise price, depending upon
the context or unless otherwise specified.
9. Registration Rights.
9.1 Registration Under the Securities Act of 1933. Each
Representative's Warrant Certificate and each certificate representing shares
of Common Stock and any of the other securities issuable upon exercise of the
Representative's Warrant (collectively, the "Warrant Shares") shall bear the
following legend unless (i) such Representative's Warrant or Warrant Shares are
distributed to the public or sold to the underwriters for distribution to the
public pursuant to Section 9 hereof or otherwise pursuant to a registration
statement filed under the Securities Act of 1933, as amended (the "Act"), or
(ii) the Company has
-7-
<PAGE> 9
received an opinion of counsel, in form and substance reasonably satisfactory
to counsel for the Company, that such legend is unnecessary for any such
certificate:
THE REPRESENTATIVE'S WARRANT REPRESENTED BY THIS CERTIFICATE AND
THE OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE EXTENT
APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER
SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN
OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY
SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE REPRESENTATIVE'S WARRANT
REPRESENTED BY THE CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH
THE REPRESENTATIVE'S WARRANT AGREEMENT REFERRED TO HEREIN.
9.2 Piggyback Registration. If, at any time commencing after
the effective date of the Registration Statement and expiring five (5) years
thereafter, the Company proposes to register any of its securities under the
Act (other than in connection with a merger or pursuant to Form S-4 or Form S-
8) it will give written notice by registered mail, at least twenty (20) days
prior to the filing of each such registration statement, to the Holders of the
Representative's Warrants and/or the Warrant Shares of its intention to do so.
If any of the Holders of the Representative's Warrants and/or Warrant Shares
notify the Company within ten (10) days after mailing of any such notice of its
or
-8-
<PAGE> 10
their desire to include any such securities in such proposed registration
statement, the Company shall afford such Holders of the Representative's
Warrants and/or Warrant Shares the opportunity to have any such
Representative's Warrants and/or Warrant Shares registered under such
registration statement. In the event that the managing underwriter for said
offering advises the Company in writing that in its opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering without causing a diminution in the offering
price or otherwise adversely affecting the offering, the Company will include
in such registration (a) first, the securities the Company proposes to sell,
(b) second, the securities held by the entities, if any, that made the demand
for registration, (c) third, the Representative's Warrants and/or Warrant
Shares requested to be included in such registration which in the opinion of
such underwriter can be sold, pro rata among all proposed selling shareholders.
Notwithstanding the provisions of this Section 9.2, the Company
shall have the right at any time after it shall have given written notice
pursuant to this Section 9.2 (irrespective of whether a written request for
inclusion of any such securities shall have been made) to elect not to file any
such proposed registration statement or to withdraw the same after the filing
but prior to the effective date thereof.
9.3 Demand Registration.
(a) At any time commencing one (1) year after the
effective date of the Registration Statement and expiring five (5) years from
the effective date of the Registration Statement, the Holders of the
Representative's Warrants and/or Warrant Shares representing a "Majority" (as
hereinafter defined) of the Representative's Warrants and/or
-9-
<PAGE> 11
Warrant Shares shall have the right (which right is in addition to the
registration rights under Section 9.2 hereof), exercisable by written notice to
the Company, to have the Company prepare and file with the Securities and
Exchange Commission (the "Commission"), on one occasion, a registration
statement and such other documents, including a prospectus, as may be necessary
in the opinion of both counsel for the Company and counsel for the Holders, in
order to comply with the provisions of the Act, so as to permit a public
offering and sale by such Holders and any other Holders of the Representative's
Warrant and/or Warrant Shares who notify the Company within fifteen (15) days
after the Company mails notice of such request pursuant to Section 9.3(b)
hereof (collectively, the "Requesting Holders") of their respective Warrant
Shares for the earlier of (i) nine (9) consecutive months or (ii) until the
sale of all of the Warrant Shares requested to be registered by the Requesting
Holders.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 9.3 by any Holder or Holders
representing a Majority of the Representative's Warrants and/or Warrant Shares
to all other registered Holders of the Representative's Warrants and the
Warrant Shares within ten (10) days from the date of the receipt of any such
registration request.
(c) Intentionally omitted.
(d) Notwithstanding anything to the contrary contained herein, if the
Company shall not have filed a registration statement for the Warrant Shares
within the time period specified in Section 9.4(a) hereof pursuant to the
written notice specified in Section 9.3(a) of the Holders of a Majority of the
Representative's Warrants and/or Warrant Shares, the Company, at its option,
may repurchase (i) any and all Warrant Shares at the higher of the
-10-
<PAGE> 12
Market Price (as defined in Section 4.3 per share of Common Stock on (x) the
date of the notice sent pursuant to Section 9.3(a) or (y) the expiration of the
period specified in Section 9.4(a) and (ii) any and all Representative's
Warrant at such Market Price less the exercise price of such Representative's
Warrant. Such repurchase shall be in immediately available funds and shall
close within two (2) days after the later of (i) the expiration of the period
specified in Section 9.4(a) or (ii) the delivery of the written notice of
election specified in this Section 9.3(d).
9.4 Covenants of the Company With Respect to Registration. In
connection with any registration under Sections 9.2 or 9.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within one hundred and twenty (120) days of receipt of any demand
therefor, and to have any registration statements declared effective at the
earliest possible time, and shall furnish each Holder desiring to sell Warrant
Shares such number of prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and expenses of a
single counsel for all Holders up to a maximum of $25,000 of legal fees and
costs and any underwriting or selling commissions), fees and expenses in
connection with all registration statements filed pursuant to Sections 9.2 and
9.3(a) hereof including, without limitation, the Company's legal and accounting
fees, printing expenses, blue sky fees and expenses. The Holder(s) will pay
all costs, fees and expenses (including those of the Company) in connection
with the registration statement filed pursuant to Section 9.3(c).
-11-
<PAGE> 13
(c) The Company will use its commercially reasonable efforts to take
all necessary action which may be required in qualifying or registering the
Warrant Shares included in a registration statement for offering and sale under
the securities or blue sky laws of such states as reasonably are requested by
the Holder(s), provided that the Company shall not be obligated to execute or
file any general consent to service of process or to qualify as a foreign
corporation to do business under the laws of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Warrant Shares
to be sold pursuant to any registration statement and each person, if any, who
controls such Holders within the meaning of Section 15 of the Act or Section
20(a) of the Securities Exchange Act of 1934, as amended ("Exchange Act"),
against all loss, claim, damage, expense or liability (including all expenses
reasonably incurred in investigating, preparing or defending against any claim
whatsoever) to which any of them may become subject under the Act, the Exchange
Act or otherwise, arising from such registration statement but only to the same
extent and with the same effect as the provisions pursuant to which the Company
has agreed to indemnify each of the Underwriters contained in Section 7 of the
Underwriting Agreement.
(e) The Holder(s) of the Warrant Shares to be sold pursuant to a
registration statement, and their successors and assigns, shall severally, and
not jointly, indemnify the Company, its officers and directors and each person,
if any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against all loss, claim, damage or expense
or liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may
-12-
<PAGE> 14
become subject under the Act, the Exchange Act or otherwise, arising from
information furnished by or on behalf of such Holders, or their successors or
assigns, for specific inclusion in such registration statement to the same
extent and with the same effect as the provisions contained in Section 7 of the
Underwriting Agreement pursuant to which the Underwriters have agreed to
indemnify the Company.
(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Representative's Warrant prior to the
initial filing of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities
other than the Warrant Shares to be included in any registration statement
filed pursuant to Section 9.3 hereof, or permit any other registration
statement (other than a registration statement on Form S-4 or S-8) to be or
remain effective during a ninety (90) day period following the effectiveness of
a registration statement filed pursuant to Section 9.3 hereof, without the
prior written consent of National Securities Corporation or as otherwise
required by the terms of any existing registration rights granted prior to the
date of this Agreement by the Company to the holders of any of the Company's
securities.
(h) The Company shall furnish to each Holder participating in the
offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an
-13-
<PAGE> 15
underwritten public offering, a letter dated the date of the closing under the
underwriting agreement) signed by the independent public accountants who have
issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
(i) The Company shall as soon as practicable after the effective date
of the registration statement, and in any event within 15 months thereafter,
make "generally available to its security holders" (within the meaning of Rule
158 under the Act) an earnings statement (which need not be audited) complying
with Section 11(a) of the Act and covering a period of at least 12 consecutive
months beginning after the effective date of the registration statement.
(j) The Company shall enter into an underwriting agreement with the
managing underwriters selected for such underwriting by Holders holding a
Majority of the Warrant Shares requested to be included in such underwriting,
which may be the Representative. Such agreement shall be satisfactory in form
and substance to the Company, each Holder and such managing underwriters, and
shall contain such representations, warranties and covenants by the Company and
such other terms as are customarily contained in agreements of that type used
by the managing underwriter. The Holders shall be parties to any underwriting
agreement relating to an underwritten sale of their Warrant Shares and may, at
their option,
-14-
<PAGE> 16
require that any or all the representations, warranties and covenants of the
Company to or for the benefit of such underwriters shall also be made to and
for the benefit of such Holders. Such Holders shall not be required to make
any representations or warranties to or agreements with the Company or the
underwriters except as they may relate to such Holders and their intended
methods of distribution.
(k) For purposes of this Agreement, the term "Majority" in reference
to the Representative's Warrants or Warrant Shares, shall mean in excess of
fifty percent (50%) of the then outstanding Representative's Warrants or
Warrant Shares that (i) are not held by the Company, an affiliate, officer,
creditor, employee or agent thereof or any of their respective affiliates,
members of their family, persons acting as nominees or in conjunction therewith
or (ii) have not been resold to the public pursuant to a registration statement
filed with the Commission under the Act.
10. Obligations of Holders. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 9 hereof that
each of the selling Holders shall:
(a) Furnish to the Company such information regarding themselves, the
Warrant Shares held by them, the intended method of sale or other disposition
of such securities, the identity of and compensation to be paid to any
underwriters proposed to be employed in connection with such sale or other
disposition, and such other information as may reasonably be required to effect
the registration of their Warrant Shares.
(b) Notify the Company, at any time when a prospectus relating to the
Warrant Shares covered by a registration statement is required to be delivered
under the Act, of the
-15-
<PAGE> 17
happening of any event with respect to such selling Holder as a result of which
the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing.
11. Adjustments to Exercise Price and Number of Securities. The
Exercise Price in effect at any time and the number and kind of securities
purchased upon the exercise of the Representative's Warrant shall be subject to
adjustment from time to time only upon the happening of the following events:
11.1 Stock Dividend, Subdivision and Combination. In case the
Company shall (i) declare a dividend or make a distribution on its outstanding
shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify
its outstanding shares of Common Stock into a greater number of shares, or
(iii) combine or reclassify its outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price in effect at the time of the
record date for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that it shall
equal the price determined by multiplying the Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event listed above
shall occur.
-16-
<PAGE> 18
11.2 Adjustment in Number of Securities. Upon each adjustment
of the Exercise Price pursuant to the provisions of this Section 11, the number
of Warrant Shares issuable upon the exercise at the adjusted Exercise Price of
each Representative's Warrant shall be adjusted to the nearest number of whole
shares of Common Stock by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
issuable upon exercise of the Representative's Warrant immediately prior to
such adjustment and dividing the product so obtained by the adjusted Exercise
Price.
11.3 Definition of Common Stock. For the purpose of this
Agreement, the term "Common Stock" shall mean (i) the class of stock designated
as Common Stock in the [Articles of Incorporation] of the Company as amended as
of the date hereof, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value.
11.4 Merger or Consolidation. In case of any consolidation of
the Company with, or merger of the Company into, another corporation (other
than a consolidation or merger which does not result in any reclassification or
change of the outstanding Common Stock), the corporation formed by such
consolidation or merger shall execute and deliver to the Holder a supplemental
warrant agreement providing that the Holder of each Representative's Warrant
then outstanding or to be outstanding shall have the right thereafter (until
the expiration of such Representative's Warrant) to receive, upon exercise of
such Representative's Warrant, the kind and amount of shares of stock and other
securities and
-17-
<PAGE> 19
property receivable upon such consolidation or merger by a holder of the number
of shares of Common Stock for which such Representative's Warrant might have
been exercised immediately prior to such consolidation, merger, sale or
transfer. Such supplemental warrant agreement shall provide for adjustments
which shall be identical to the adjustments provided in Section 11. The above
provision of this subsection shall similarly apply to successive consolidations
or mergers.
11.5 No Adjustment of Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Representative's Warrant
or the Warrant Shares;
(b) Upon the issuance or sale of Common Stock (or any other
security convertible, exercisable, or exchangeable into shares of Common Stock)
upon the direct or indirect conversion, exercise, or exchange of any options,
rights, warrants, or other securities or indebtedness of the Company
outstanding as of the date of this Agreement or granted pursuant to any stock
option plan of the Company in existence as of the date of this Agreement,
pursuant to the terms thereof; or
(c) If the amount of said adjustment shall be less than two
cents ($.02) per share, provided, however, that in such case any adjustment
that would otherwise be required then to be made shall be carried forward and
shall be made at the time of and together with the next subsequent adjustment
which, together with any adjustment so carried forward, shall amount to at
least two cents ($.02) per Representative's Warrant.
-18-
<PAGE> 20
12. Exchange and Replacement of Representative's Warrant
Certificates. Each Representative's Warrant Certificate is exchangeable,
without expense, upon the surrender thereof by the registered Holder at the
principal executive office of the Company for a new Representative's Warrant
Certificate of like tenor and date representing in the aggregate the right to
purchase the same number of Warrant Shares in such denominations as shall be
designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Representative's Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Representative's Warrant, if mutilated, the Company will make and deliver a
new Warrant Certificate of like tenor, in lieu thereof.
13. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Representative's Warrant, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the intent of
the parties that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number of shares of Common Stock or other
securities, properties or rights.
14. Reservation and Listing of Securities. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Representative's
Warrant, such number of shares of Common Stock or other securities, properties
or rights as shall be issuable upon the exercise
-19-
<PAGE> 21
thereof. Every transfer agent ("Transfer Agent") for the Common Stock and
other securities of the Company issuable upon the exercise of the
Representative's Warrant will be irrevocably authorized and directed at all
times to reserve such number of authorized shares of Common Stock and other
securities as shall be requisite for such purpose. The Company will keep a
copy of this Agreement on file with every Transfer Agent for the Common Stock
and other securities of the Company issuable upon the exercise of the
Representative's Warrant. The Company will supply every such Transfer Agent
with duly executed stock and other certificates, as appropriate, for such
purpose. The Company covenants and agrees that, upon exercise of the
Representative's Warrant and payment of the Exercise Price therefor, all shares
of Common Stock and other securities issuable upon such exercise shall be duly
and validly issued, fully paid, non-assessable and not subject to the
preemptive rights of any stockholder. As long as the Representative's Warrant
shall be outstanding, the Company shall use its best efforts to cause all
shares of Common Stock issuable upon the exercise of the Representative's
Warrant to be listed (subject to official notice of issuance) on all securities
exchanges on which the Common Stock issued to the public in connection herewith
may then be listed and/or quoted on Nasdaq SmallCap Market.
15. Notices to Representative's Warrant Holders. Nothing contained
in this Agreement shall be construed as conferring upon the Holders the right
to vote or to consent or to receive notice as a stockholder in respect of any
meetings of stockholders for the election of directors or any other matter, or
as having any rights whatsoever as a stockholder of the Company. If, however,
at any time prior to the expiration of the Representative's Warrants and their
exercise, any of the following events shall occur:
-20-
<PAGE> 22
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on the
books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed;
then in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of closing the transfer books, as the case
may be. Failure to give such notice or any defect therein shall not affect the
validity of any action taken in connection with the declaration or payment of
any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
-21-
<PAGE> 23
16. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made and sent when delivered, or mailed by registered or certified mail,
return receipt requested:
(a) if to the registered Holder of the Representative's
Warrant, to the address of such Holder as shown on the books of the Company; or
(b) if to the Company, to the address set forth in Section 4
hereof or to such other address as the Company may designate by notice to the
Holders.
17. Supplements; Amendments; Entire Agreement. This Agreement
(including the Underwriting Agreement to the extent portions thereof are
referred to herein) contains the entire understanding between the parties
hereto with respect to the subject matter hereof and may not be modified or
amended except by a writing duly signed by the party against whom enforcement
of the modification or amendment is sought. The Company and the Representative
may from time to time supplement or amend this Agreement without the approval
of any holders of Representative's Warrant Certificates (other than the
Representative) in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Representative may deem
necessary or desirable and which the Company and the Representative deem shall
not adversely affect the interests of the Holders of Representative's Warrant
Certificates.
-22-
<PAGE> 24
18. Successors. All of the covenants and provisions of this
Agreement shall be binding upon and inure to the benefit of the Company, the
Holders and their respective successors and assigns hereunder.
19. Survival of Representations and Warranties. All statements in
any schedule, exhibit or certificate or other instrument delivered by or on
behalf of the parties hereto, or in connection with the transactions
contemplated by this Agreement, shall be deemed to be representations and
warranties hereunder. Notwithstanding any investigations made by or on behalf
of the parties to this Agreement, all representations, warranties and
agreements made by the parties to this Agreement or pursuant hereto shall
survive.
20. Governing Law. This Agreement and each Representative's Warrant
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the [State of New York and for all purposes shall be construed in
accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.]
21. Severability. If any provision of this Agreement shall be held
to be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
22. Captions. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive
effect.
23. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Representative and any other registered Holder(s) of the Representative's
Warrant Certificates or Warrant Shares any
-23-
<PAGE> 25
legal or equitable right, remedy or claim under this Agreement; and this
Agreement shall be for the sole and exclusive benefit of the Company and the
Underwriters and any other Holder(s) of the Representative's Warrant
Certificates or Warrant Shares.
24. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
IN WITNESS OF, the parties hereto have caused this Agreement to be duly
executed, as of the day and year first above written.
ATTEST: SONOMA INTERNATIONAL
By:
- ---------------------------- ------------------------------
Secretary Name: James L. Frye
Title: President and Chief
Executive Officer
NATIONAL SECURITIES CORPORATION
By:
------------------------------
Name: Steven A. Rothstein
Title: Chairman
-24-
<PAGE> 26
EXHIBIT A
[FORM OF REPRESENTATIVE'S WARRANT CERTIFICATE]
THE REPRESENTATIVE'S WARRANT REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN
OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL
FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE REPRESENTATIVE'S WARRANT REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO
HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, MARCH__, 2002
Representative's Warrant No. ___
___ Shares of Common Stock
WARRANT CERTIFICATE
This Warrant Certificate certifies that ___________________, or
registered assigns, is the registered holder of Warrants to purchase initially,
at any time from February _, 1998 until 5:30 p.m., New York time on March 2002
("Expiration Date"), up to shares of fully-paid and non-assessable common
stock, no par value ("Common Stock") of Sonoma International, a Nevada
corporation (the "Company"), at the initial exercise price, subject to
adjustment in certain events, of $____________ per Share [120% of initial
offering price per Share] (the "Exercise Price") upon surrender of this
Representative's Warrant Certificate and payment of the Exercise Price at an
office or agency of the Company, but subject to the conditions set forth herein
and in the Representative's Warrant Agreement dated as of March ______, 1997
among the Company and National Securities Corporation (the "Warrant
Agreement"). Payment of the Exercise Price shall be made by certified or
official bank check in New York Clearing House funds payable to the order of
the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Representative's Warrant evidenced hereby,
unless exercised prior thereto, shall thereafter be void.
EXH. A-1
<PAGE> 27
The Representative's Warrant evidenced by this Warrant Certificate are
part of a duly authorized issue of Representative's Warrant issued pursuant to
the Warrant Agreement, which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the
Representative's Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the
Representative's Warrant; provided, however, that the failure of the Company to
issue such new Warrant Certificates shall not in any way change, alter, or
otherwise impair, the rights of the holder as set forth in the Warrant
Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Representative's Warrant shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Representative's Warrant
evidenced by this Certificate, the Company shall forthwith issue to the holder
hereof a new Warrant Certificate representing such numbered unexercised
Representative's Warrant.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
EXH. A-2
<PAGE> 28
This Warrant Certificate does not entitle any holder thereof to any of
the rights of a shareholder of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of March ______, 1997.
ATTEST: SONOMA INTERNATIONAL
By:
- ---------------------------- ------------------------------
Secretary Name: James L. Frye
Title: President and Chief
Executive Officer
EXH. A-3
<PAGE> 29
FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 4.1
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase shares of Common Stock and
herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House Funds to the order of Sonoma
International (the "Company") in the amount of $____________ all in accordance
with the terms of Section 4.1 of the Representative's Warrant Agreement dated
as of ________________, 1997 among the Company and National Securities
Corporation. The undersigned requests that a certificate for such securities
be registered in the name of ________________________, whose address is
_____________________________________ and that such certificate be delivered to
______________________, whose address is __________________________________,
and if said number of shares shall not be all the shares purchasable hereunder,
that a new Warrant Certificate for the balance of the shares purchasable under
the within Warrant Certificate be registered in the name of the undesigned
warrant holder or his assignee as below indicated and delivered to the address
stated below.
Dated:
---------------
Signature:
----------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
Address:
-------------------------------------
-------------------------------------
---------------------------------------------
(Insert Social Security or Other Identifying
Number of Holder)
Signature Guaranteed:
----------------------------------------------------------
(Signature must be guaranteed by a bank savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
EXH. A-4
<PAGE> 30
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ________________________________________ here sells, assigns
and transfers unto [NAME OF TRANSFEREE] this Warrant Certificate, together with
all right, title and interest therein, and does hereby irrevocably constitute
and appoint ______________________ Attorney, to transfer the within Warrant
Certificate on the books of the within-named Company, with full power of
substitution.
Dated:
---------------
Signature:
----------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
Address:
------------------------------------
------------------------------------
---------------------------------------------
(Insert Social Security or Other Identifying
Number of Holder)
Signature Guaranteed:
----------------------------------------------------------
(Signature must be guaranteed by a bank savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
EXH. A-5
<PAGE> 31
RIDER A
FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 4.21
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ____________ Shares all in
accordance with the terms of Section 4.2 of the Underwriter's Warrant Agreement
dated as of February __, 1997 between Sonoma International and National
Securities Corporation. The undersigned requests that certificates for such
securities be registered in the name of _______________________ whose address
is ____________________________________________________________ and that such
certificates be delivered to ________________________________________ whose
address is _____________________________________________________.
Dated:
---------------
Signature:
----------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
Address:
------------------------------------
------------------------------------
---------------------------------------------
(Insert Social Security or Other Identifying
Number of Holder)
Signature Guaranteed:
----------------------------------------------------------
(Signature must be guaranteed by a bank savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
EXH. A-6
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
SONOMA QUICKSILVER MINES, INC.
* * * *
KNOW ALL MEN BY THESE PRESENTS;
That the undersigned do hereby associate themselves into a corporation
under and by virtue off an Act of the Legislature of the State of Nevada,
entitled "An Act Providing a General Corporation Law", approved March 21, 1925,
and all acts mandatory hereof and/or additional thereto, and do hereby certify
and adopt the following Articles of Incorporation.
ARTICLE I.
The name of the corporation is:
SONOMA QUICKSILVER MINES, INC.
ARTICLE II.
The location of the principal office of the company in the State of
Nevada is Room 211, No. 205 North Virginia Street, Reno, Nevada. Branch
offices may hereafter be established at such other place or places, either
within or without the State of Nevada, as may from time to time be determined
on by the Board of Directors.
ARTICLE III.
The purposes for which said corporation is formed are:
(a) To carry on the business of mining, milling, concentrating,
converting, smelting, preparing for market, manufacturing,
buying, selling, exchanging and otherwise producing and
dealing in gold, silver, copper, lead, zinc, brass, iron,
steel,
<PAGE> 2
quicksilver, tungsten and all kinds of ores, metals and minerals, and
the products and by-products thereof, of every kind and description
and by whatsoever process the same can or may hereafter be produced,
and generally and without limit as to amount, to buy, sell, exchange,
lease, acquire and deal in lands, mines and mineral rights and claims,
and to conduct all business appertaining thereto; to locate, purchase,
lease or otherwise acquire, mining rights, timber rights, oil and gas
rights, mines, buildings, dwellings, reduction plants and/or smelters,
machinery, tools and other properties whatsoever which this
corporation may from time to time find to be for its advantage and
purposes; to mine and market any mineral or other product that may be
found in or on such lands, and to explore, work, exercise, develop or
turn to account the same; to construct and operate railways and
tramways for mining and moving said ores and the products thereof; to
build and lease houses for the use of miners and others, including the
purchase and sale of same;
(b) To subscribe for or cause to be subscribed for, to purchase or
otherwise acquire; to undertake and/or assume; to guarantee, hold,
own, control and/or manage; to sell, assign, transfer, exchange and/or
otherwise dispose of the whole or any part of the shares of the
capital stock, bonds, coupons, mortgages, deeds of trust, debentures,
securities, collateral, obligations, evidences of indebtedness, notes,
good will, rights, assets and property of any and every kind or
description, or any part thereof, of any other person or persons, firm
or firms, government or governments, corporation or corporations,
association or associations, and also shares, rights, units or
interest in or in respect of any trust estate now or hereafter
existing, and whether created by or under the laws of the State of
Nevada, or any other state, territory or country; and to operate,
manage and control such properties, or any of them, either in the name
of such firms, corporations, associations, persons and trust estates,
or the trustees thereof, or in the name of this corporation, and while
the owner, holder, assignee, underwriter or manager thereof, to
exercise all the rights, powers and privileges of ownership thereof of
every kind and description, including any right to vote thereon, or
respecting the same, with power to designate same person or persons
for that purpose from time to time, and to the same extent as natural
persons might or could do;
(c) To own, acquire, buy and sell real estate and any interest of any
kind whatsoever therein and to carry on a general real estate and
construction business in connection therewith;
(d) To do each and every thing necessary, suitable or proper for the
accomplishment of any of the purposes, or the attainment of any one or
more of the objects herein enumerated, or which shall at any time
appear conducive to or expedient for the protection or benefit of this
corporation;
2
<PAGE> 3
The enumeration of the foregoing powers shall not in anywise be deemed
to be a limitation upon the powers of the corporation, but shall be in
furtherance of and in addition to the powers which it is authorized to exercise
under "An Act to Provide a General Corporation Law", approved March 21, 1925,
and acts amendatory and supplemental thereto.
ARTICLE IV.
The total authorized capital stock of the corporation is Twenty
Thousand Dollars ($20,000.00), divided into two hundred thousand (200,000)
shares of the par value of Ten Cents (10c.) each.
ARTICLE V.
The capital stock of this corporation, after the amount of the
subscription price has been fully paid in, shall be non-assessable and shall
not be subject to assessment to pay the debts of the corporation.
ARTICLE VI.
Members of the Governing Board shall be known as "Directors" and the
number thereof shall be not less than three nor more than seven, the exact
number to be fixed by the By-Laws of the corporation, provided that the number
so fixed by the By-Laws may be increased or decreased from time to time.
The names and addresses of the first Board of Directors are as
follows:
NAME ADDRESS
---- -------
H. D. Tudor 35 Congress Street
Boston, Massachusetts
C. Loring 206 N. Virginia St.
Reno, Nevada
V. Birks 206 N. Virginia St.
Reno, Nevada
3
<PAGE> 4
ARTICLE VII.
The names and post office addresses of each of the subscribers signing
the Articles of Incorporation are as follows:
NAME ADDRESS
---- -------
C. Loring 206 N. Virginia St.
Reno, Nevada
V. Birks 206 N. Virginia St.
Reno, Nevada
P. R. Weber 206 N. Virginia St.
Reno, Nevada
ARTICLE VIII.
A resolution in writing, signed by all the members of the Board of
Directors, shall be and constitute action by the said Board of Directors to the
effect therein expressed, with the same force and effect as though such
resolution had been passed at a duly convened meeting, and it shall be the duty
of the secretary to record every such resolution in the minute book of the
company, under its proper date.
ARTICLE IX.
This corporation is to have perpetual existence.
ARTICLE X.
The directors shall have the power to make and alter the By-Laws of
the corporation. By-Laws made by the directors under the power so conferred
may be altered, amended or repealed by the directors or by the stockholders at
any meeting called and held for that purpose.
4
<PAGE> 5
ARTICLE XI.
All treasury stock of this corporation may be sold by the Board of
Directors of the company at either public or private sale or by offering the
same for subscription upon such terms, conditions and at such price as the
Board of Directors shall from time to time deem proper, and it shall not be
necessary for the Board of Directors to offer to the stockholders of the
corporation any new stock of the company, and a stockholder shall not have the
right to purchase his pro rata share of any new stock or of treasury stock of
the company at the price at which it is offered to others, unless the Board of
Directors shall deem such action advisable.
IN WITNESS WHEREOF, we have hereunto set our hands and seals, and
executed these presents, this 10th day of June, 1940.
/s/ C. Loring (SEAL)
-------------------------
/s/ V. Birks (SEAL)
-------------------------
/s/ P. R. Weber (SEAL)
-------------------------
5
<PAGE> 6
STATE OF NEVADA, )
) SS:
COUNTY OF WASHOE. )
On this 10th day of June, 1940, before me the undersigned, Audrey
Annetti a Notary Public in and for the County and State aforesaid, personally
appeared C. LORING, V. BIRKS and P. R. WEBER, know to me to be the persons
described in and who executed the foregoing Articles of Incorporation, who
acknowledged to me that they executed the same freely and voluntarily and for
the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Audrey Annetti
---------------------------
6
<PAGE> 7
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION
OF
SONOMA QUICKSILVER MINES, INC.
------------------------------------
-----------------------------
FILED AT THE REQUEST OF
WOODBURN, FORMAN AND WOODBURN
-----------------------------
ATTORNEYS AT LAW
#206 W. VA. ST.
RENO, NEVADA
FEB. 21, 1955
(DATE)
/S/ JOHN KOONTZ
---------------------------------------
JOHN KOONTZ, SECRETARY OF STATE
BY
-----------------------------------
DEPUTY SECRETARY OF STATE
NO 214-60
-----------
FILING FEE $ 50.00
-------
<PAGE> 8
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
SONOMA QUICKSILVER MINES, INC.
The undersigned, H.D. TUDOR and K.R. MENARY, do hereby certify
that they are, respectively, and have been at all times herein mentioned, the
duly elected and acting President and Secretary of SONOMA QUICKSILVER MINES,
INC., a Nevada corporation, and further that:
At a special meeting of the Board of Directors of said
corporation, duly held at the office of the corporation at 41 Setter Street,
San Francisco, California, at 10:00 o'clock a.m. on January 20, 1955, at which
meeting there was at all times present and acting a quorum of the members of
said Board, the following resolutions were duly adopted:
"RESOLVED; that an endorsement to Article 4 of the Articles of
Incorporation is advisable and a special meeting of the stockholders
is hereby ordered to be called for February 11, 1955 at the hour of
10:00 o'clock a.m. thereof to be held at the Company's office at 206
North Virginia Street, Reno, Nevada, to vote to amend Article 4 of the
Articles of Incorporation and for the purpose of considering the
transfer of certain amounts from surplus accounts of the company to
its capital account, the purpose being to enable the increase in
authorized shares of stock from 200,000 to 2,000,000 shares at a par
value of ten cents each, the affect of which would be to split the
outstanding shares on a ten for one basis; said resolution and
amendment to read as follows:
"That $20,604.99 now in the Donated Surplus Account and that
$87,395.01 now in the Reserve Surplus Account be transferred
to Capital Account.
"Article 4. The total authorized capital stock of the
Corporation is Two Hundred Thousand Dollars divided into two
million shares of the par value of ten cents each."
<PAGE> 9
That at a special meeting of the stockholders of SONOMA
QUICKSILVER MINES, INC. held at the office of the corporation at 206 North
Virginia Street, Reno, Nevada, at 10:00 o'clock a.m. on February 11, 1955, held
and noticed in accordance with Section 7 and Section 27 of the Domestic and
Foreign Corporation Laws of the State of Nevada, at which 112,312 shares out of
120,000 shares then outstanding and entitled to vote were present in person or
by proxy, 112,312 shares voted in favor of the amendment to the Articles of
Incorporation of the corporation as hereinafter set forth:
"RESOLVED, That Article 4 of the Articles of Incorporation be
amended to read as follows:
"The total authorized capital stock of the corporation is Two
Hundred Thousand Dollars divided into two million shares of
the par value of ten cents each."
IN WITNESS WHEREOF, the undersigned have executed this
Certificate of Amendment this 17th day of February, 1955.
SONOMA QUICKSILVER MINES, INC.
By /s/ H.D. Tudor
--------------------------
President
By /s/ E.R. Menary
--------------------------
Secretary
<PAGE> 10
STATE OF CALIFORNIA )
CITY AND ) SS.
COUNTY OF SAN FRANCISCO )
On this 17th day of February, 1955, personally appeared before
me, a Notary Public in and for said county and state, H.D. TUDOR and E.R.
MENARY, known to me to be the President and Secretary of the corporation that
executed the foregoing instrument, and upon oath, did depose that they are the
officers of said corporation as above designated that they are acquainted with
the seal of said corporation and that the seal affixed to said instrument is
the corporation seal of said corporation; that the signatures to said
instrument were made by officers of said corporation as indicated after said
signatures; and that the said corporation executed the said instrument freely
and voluntarily and for the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Louis M. Reincke
-----------------------------
Notary Public
[Notary Seal]
<PAGE> 11
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION
OF
SONOMA QUICKSILVER MINES, INC.
------------------------------
---------------------------
FILED AT THE REQUEST OF
MCCUTCHEN, THOMAS, MATTHEW,
---------------------------
GRIFFITHS & GREENE
COUNSELORS AT LAW
---------------------------
BALFOUR BUILDING
SAN FRANCISCO 4, CALIF.
---------------------------
SEP. 18, 1956
-------------
(DATE)
/S/ JOHN KOONTZ
-----------------------------------
JOHN KOONTZ, SECRETARY OF STATE
BY
---------------------------------
DEPUTY SECRETARY OF STATE
NO 214-40
---------
FILING FEE $ 35.00
--------
<PAGE> 12
SONOMA QUICKSILVER MINES, INC.
CERTIFICATE OF AMENDMENT
OF
AMENDED ARTICLES OF INCORPORATION
SONOMA QUICKSILVER MINES, INC., a corporation duly organized
and existing under and by virtue of the laws of the State of Nevada, does
hereby certify and state the adoption and manner of adoption of an amendment of
the Amended Articles of Incorporation of the corporation as follows:
(1) That a special meeting of the Board of Directors of
the corporation was duly and regularly held at 10:00 o'clock in the forenoon on
Wednesday, August 8, 1956 at the then principal office for the transaction of
business of the corporation in the State of California, 41 Sutter Street, San
Francisco, California, at which meeting there were present and acting a quorum
and a majority of the said Board of Directors, the full number of which Board
comprises five (5) members; that said meeting was duly and regularly adjourned
to 10:00 o'clock in the forenoon on Thursday, August 9, 1956, at said office,
at which adjourned meeting there were present and acting a quorum and a
majority of the said Board of Directors.
(2) That at said adjourned meeting certain resolutions
were adopted with reference to the amendment of Article IV of the Amended
Articles of Incorporation of the corporation; that a full, true and correct
copy of said resolutions is as follows:
WHEREAS, the Amended Articles of Incorporation of this
corporation, as amended by Certificate of Amendment filed in the
office of the Secretary of State of the State of Nevada on February
21, 1955, authorize this corporation to issue 2,000,000 shares of
capital stock of the par value of ten cents (10c.) per
<PAGE> 13
share; and
WHEREAS, it is deemed desirable and in the best interest of
this corporation to amend Article IV of its Amended Articles of
Incorporation to increase the authorized number of shares of capital
stock by 3,000,000;
NOW, THEREFORE, BE IT RESOLVED and it is hereby provided that
Article IV of the Amended Articles of Incorporation of this
corporation shall be amended to read as hereinafter set forth in full
as follows:
"IV. The total authorized capital stock of the corporation is
Five Hundred Thousand Dollars ($500,00) divided into five million
(5,000,000) shares of the par value of ten cents (10c.) each."
FURTHER RESOLVED that the Board of Directors of this
corporation hereby approves and adopts said amendment of Article IV of
said Amended Articles of Incorporation.
FURTHER RESOLVED that the President or Vice-President of this
corporation be and he hereby is authorized and directed to submit or
cause to be submitted these resolutions and the foregoing amendment of
Article IV of the Amended Articles of Incorporation of this
corporation to the shareholders of this corporation for their approval
and adoption at the regular annual meeting of shareholders to be held
on Monday, September 10, 1956.
(3) That all of the directors present and acting at said
adjourned meeting, to wit, four (4) directors, voted in favor of said
resolutions; that said vote of four (4) directors constituted the vote of a
majority of directors of the corporation in favor of said resolutions.
(4) That said resolutions of said Board of Directors and
said amendment of Article IV of the Amended Articles of Incorporation of the
corporation thereby adopted were approved and adopted by the vote of the
shareholders holding at least a majority of the voting power of the
corporation, namely the holders of at least a majority of the total of all
outstanding shares of capital stock of the corporation; that such vote was
taken at the annual meeting of the shareholders of the corporation duly and
regularly held and noticed in accordance with the laws of the State of Nevada
at the hour of 11:00 o'clock in the forenoon on Monday, the 10th day of
September, 1956, at Room 1209, De Young Building, Market and Kearny Streets,
San
<PAGE> 14
Francisco, California; that a full, true and correct copy of the resolutions
adopted by such votes at said annual meeting of the shareholders of the
corporation is as follows:
WHEREAS, at a special adjourned meeting of the Board of
Directors of this corporation duly and regularly held at the then
principal office for the transaction of the business of the
corporation in the State of California, 41 Sutter Street, San
Francisco, California, on Thursday, August 9, 1956 at 10:00 o'clock in
the forenoon, at which meeting a quorum of said board of Directors was
present and acting, said Board of Directors did adopt certain
resolutions providing for and approving and adopting an amendment of
Article IV of the Amended Articles of Incorporation of the
corporation, which said resolutions and said amendment were and are in
the words and figures followings:
(Here in the original appears verbatim a copy of the
resolutions of the Board of Directors of this corporation which are
set forth in full in paragraph (2) hereof.)
NOW THEREFORE BE IT RESOLVED and it is hereby provided that
the foregoing resolutions of the Board of Directors be and they hereby
are adopted and approved by the shareholders of this corporation; that
Article IV of the Amended Articles of Incorporation of this
corporation be amended in the manner provided by said resolutions of
the board of Directors hereinabove set forth; that said amendment of
Article IV of the Amended Articles of Incorporation be and it is
hereby adopted and approved by the shareholders of this corporation;
that the shareholders of this corporation hereby consent to said
amendment of Article IV of the Amended Articles of Incorporation of
this corporation and that the wording of Article IV of the Amended
Articles of Incorporation is hereby established by providing that
Article IV of the Amended Articles of Incorporation shall be amended
so as to read as hereinabove set forth in full.
That said amendment was approved and adopted by the vote of
1,437,863 shares of capital stock of the corporation out of a total of
1,____________ shares then issued and outstanding and entitled to vote and
represented in person or by proxy at said annual meeting.
<PAGE> 15
IN WITNESS WHEREOF, the said Sonoma Quicksilver Mines, Inc.
has caused this certificate to be executed by its Vice-President and Assistant
Secretary thereunto duly authorized, and its corporate seal to be hereunto
affixed this 10th day of September, 1956.
SONOMA QUICKSILVER MINES, INC.
By /s/ S. R. Smith
-----------------------------------
Its Vice-President
By /s/ A. C. Greene, Jr.
------------------------------------
(Corporate Seal) Its Assistant Secretary
<PAGE> 16
STATE OF CALIFORNIA )
) ss.
City and County of San Francisco )
On this 10th day of September, 1956, before me, HAZEL
TROWBRIDGE, a Notary Public in and for the said City and County and State,
residing therein, duly commissioned and sworn, personally appeared S.R. Smith
and A.C. Greene, Jr., known to me to be the Vice-President and Assistant
Secretary, respectively, of Sonoma Quicksilver Mines, Inc., the corporation
named in and which executed the within and foregoing instrument, and known to
me to be the persons who executed the within instrument on behalf of the said
corporation therein named, and acknowledged to me that such corporation
executed the same pursuant to its by-laws or a resolution of its board of
directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed by
official seal, at my office in the City and County and State aforesaid, the day
and year in this certificate first above written.
/s/ Hazel Trowbridge
----------------------------------------------
NOTARY PUBLIC
in and for the City and County of
San Francisco, State of California
My Commission Expires October 4, 1956
(Notarial Seal)
<PAGE> 17
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION
OF
SONOMA INTERNATIONAL, INC.
--------------------------
------------------------------------
FILED AT THE REQUEST OF
RICHARD L. GREENE, ATTORNEY AT LAW
----------------------------------
BRONSON, BRONSON & MCKINNON
255 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA
NOVEMBER 13, 1968
-----------------
(DATE)
/S/ JOHN KOONTZ
---------------------------------------
JOHN KOONTZ, SECRETARY OF STATE
BY /S/
-------------------------------------
(BY) DEPUTY SECRETARY OF STATE
NO 214-40
---------
FILING FEE $ 50.00
-------
<PAGE> 18
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
SONOMA INTERNATIONAL, INC.
SONOMA INTERNATIONAL, INC., a Nevada corporation, by its
President, C.O. REED, and its Secretary, EDWARD T. KOFORD, does hereby certify:
1. That at a meeting of the Board of Directors of said
corporation duly held at San Francisco, California, on August 17, 1968, the
board passed resolutions declaring that the changes and amendments in the
Articles of Incorporation hereinafter set forth are each advisable, and called
a special meeting of the shareholders entitled to vote for the consideration
thereof.
2. That on October 28, 1968, pursuant to such call of the board
of Directors, and upon notice given to each shareholder of record entitled to
vote upon amendment to the Articles of Incorporation as provided by law, a
special meeting of the shareholders of the corporation was held, at which
meeting shareholders holding 2,288,895 shares of capital stock, entitling them
to exercise at least a majority of the voting power, were present in person or
represented by proxy, and that the following occurred:
(a) Shareholders holding 2,258,895 shares of capital
stock, entitling them to exercise at least a majority of the voting power,
voted in favor of the following amendment to the Articles of Incorporation:
That Article I of said Articles of Incorporation be amended to
read as follows:"
ARTICLE I
The name of the corporation is SONOMA MINES, INC."
<PAGE> 19
(b) Shareholders holding 2,191,942 shares of capital
stock, entitling them to exercise at least a majority of the voting power,
voted in favor of the following amendment to the Articles of Incorporation:
That Article IV of said Articles of Incorporation be amended
to read as follows:
" ARTICLE IV
The total authorized capital stock of the corporation
is Eight Hundred Thousand Dollars ($800,000.00),
divided into Two Million (2,000,000) shares of the
par value of Forty Cents (40c.) each. "
3. The total number of shares of said corporation, having voting
power, issued and outstanding at the time of the above mentioned special
meeting of shareholders was 4,361,348.
IN WITNESS WHEREOF, SONOMA INTERNATIONAL, INC. has caused this
certificate to be signed by its President and its Secretary, and its corporate
seal to be affixed hereto this 3rd day of October, 1968, at Guernville,
California.
SONOMA INTERNATIONAL, INC.
By /s/ C. D. Reed
---------------------------------
President
(SEAL) By /s/ Edward T. Koford
---------------------------------
Secretary
<PAGE> 20
STATE OF CALIFORNIA )
) ss.
COUNTY OF SONOMA )
On this 28th day of October, in year one thousand nine hundred
and sixty-eight, before me, DWIGHT S. ALLEN, a Notary Public, State of
California, duly commissioned and sworn, personally appeared C. O. REED and
EDWARD T. KOFORD, known to me to be the President and Secretary, respectively,
of the corporation described in and that executed the within instrument, and
also known to me to be the persons who executed the within instrument on behalf
of the corporation therein named, and acknowledged to me that such corporation
executed the same.
IN WITNESS WHEREOF I have hereunder set my hand and affixed my
official seal in the City and County of San Francisco the day and year in this
certificate first above written.
/s/ Dwight S. Allen
----------------------------------
Notary Public in and for the
[Notary Seal]
County of Sonoma, State of California
<PAGE> 21
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
SONOMA MINES, INC.
Filed at the Request of
Bronson, Bronson & McKinnon
Law Offices
555 California St.
San Francisco, California 94104
June 25, 1971
/s/ John Koontz
-------------------------------
John Koontz, Secretary of State
/s/
------------------------------
(ET) Deputy Secretary of State
No.: 214-40
Filing Fee: $150.00
<PAGE> 22
CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION OF
SONOMA MINES, INC.
SONOMA MINES, INC., a Nevada corporation, by its president, C.O. Reed,
and its assistant secretary, Jean Hembre, does hereby certify:
1. That at a meeting of the Board of Directors of said
corporation duly held at San Francisco, California, on April 23, 1971, the
Board of Directors passed resolutions declaring that the changes and amendments
in the Articles of Incorporation hereinafter set forth are each advisable, and
called a special meeting of the shareholders entitled to vote for the
consideration thereof.
2. That on June 23, 1971, pursuant to such call of the Board of
Directors, and upon notice given to each shareholder of record entitled to vote
upon amendment to the Articles of Incorporation as provided by law, a special
meeting of the shareholders of the corporation was held, at which meeting
shareholders holding 695,114 shares of capital stock, entitling them to
exercise at least a majority of the voting power, were present in person or
represented by proxy, and that the following occurred:
a. Shareholders holding 654,081 1/2 shares of capital
stock entitling them to exercise at least a majority of the voting
power, voted in favor of the following amendment to the Articles of
Incorporation:
That Article I of said Articles of Incorporation be
amended to read as follows:
"ARTICLE I
The name of this corporation
is SONOMA INTERNATIONAL."
b. Shareholders holding 663,103 shares of capital stock,
entitling them to exercise at least a majority of the voting power,
voted in favor of the following amendment to the Articles of
Incorporation:
<PAGE> 23
That Article IV of said Articles of
Incorporation be amended to read as follows:
"ARTICLE IV
The total authorized capital stock of the corporation
is Two Million Dollars ($2,000,000.00), divided into five
million ($5,000,000.00) shares of the par value of Forty Cents
($.40) each."
3. The total number of shares of said corporation having voting
power, issued and outstanding at the time of the above mentioned special
meeting of shareholders was 1,090,100.
IN WITNESS WHEREOF, Sonoma Mines, Inc. has caused this certificate to
be signed by its President and its Assistant Secretary, and its corporate seal
to be affixed hereto this 23rd day of June, 1971, at San Francisco, California.
SONOMA MINES, INC.
By: /s/ C.O. Reed
---------------------------
President
By: /s/ Jean Hembre
---------------------------
(Seal) Assistant Secretary
<PAGE> 24
STATE OF CALIFORNIA )
) SS
CITY AND COUNTY OF SAN FRANCISCO )
On this 23rd day of June, in the year One Thousand Nine Hundred and
Seventy-one, before me, Jean A. Ross, a Notary Public, State of California,
duly commissioned and sworn, personally appeared C.O. Reed and Jean Hembre,
known to me to be the President and Assistant Secretary, respectively, of the
corporation described in and that executed the within instrument, and also
known to me to be the persons who executed the stated instrument on behalf of
the corporation therein named, and acknowledged to me that such corporation
executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal in the City and County of San Francisco the day and year in this
certificate first above written.
(Notary Seal) /s/ Jean A. Ross
----------------------------------
Notary Public in and for the
City and County of San Francisco
State of California
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
SONOMA INTERNATIONAL
ARTICLE I
OFFICES
SECTION 1 Principal Office. The principal office shall be in the City
of Reno, County of Washoe, State of Nevada.
SECTION 2 Other Offices. The Corporation may also have offices at such
other places both within and without the State of Nevada as the Board of
Directors may from time to time determine or the business of the Corporation
may require.
ARTICLE II
MEETING OF STOCKHOLDERS
SECTION 1 Place of Annual Meeting. All annual meetings of the
stockholders shall be held in San Francisco, California, at such place as may
be designated by the Board of Directors. Special meetings of the stockholders
may be held at such time and place within or without the State of Nevada as
shall be stated in the notice of the meeting, or in a duly executed waiver of
notice thereof.
SECTION 2 Time of Annual Meeting. Annual meetings of stockholders,
commencing with the year 1969, shall be held on the second Monday of October,
if not a legal holiday, and if a legal holiday, then on the next secular day
following, at 1:30 P.M., at which they shall elect by a plurality vote a Board
of Directors, and transact such other business as may properly be brought
before the meeting.
SECTION 3 Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Articles of Incorporation, may be called by the President and shall be called
by the President or Secretary at the request in writing of a majority of the
Board of Directors, or at the request in writing of stockholders owning a
majority in amount of the capital stock of the Corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
SECTION 4 Notice of Meetings. Notices of meetings shall be in writing
and signed by the President or a Vice President, or the Secretary, or an
Assistant Secretary, or by such other person or persons as the Board of
Directors shall designate. Such notice shall state the purpose or purposes for
which the meeting is called
<PAGE> 2
and the time when, and the place where it is to be held. A copy of such notice
shall be either delivered personally to or shall be mailed, postage prepaid, to
each stockholder of record entitled to vote at such meeting not less than ten
nor more than sixty days before such meeting. If mailed, it shall be directed
to a stockholder at his address as it appears upon the records of the
Corporation and upon such mailing of any such notice, the service thereof shall
be complete, and the time of the notice shall begin to run from the date upon
which such notice is deposited in the mail for transmission to such
stockholder. Personal delivery of any such notice to any officer of a
corporation or association, or to any member of a partnership shall constitute
delivery of such notice to such corporation, association or partnership. In
the event of the transfer of stock after delivery or mailing of the notice of
and prior to the holding of the meeting it shall not be necessary to deliver or
mail notice of the meeting to the transferee.
SECTION 5 Limitation on Business Transacted. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice.
SECTION 6 Quorum. The holders of one third of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Articles of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders; the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally notified.
SECTION 7 Majority Decision. When a quorum is present or represented at
any meeting, the vote of the holders of a majority of the stock having voting
power present in person or represented by proxy shall decide any question
brought before such meeting, unless the question is one upon which by express
provision of the statutes or of the Articles of Incorporation, a different vote
is required in which case such express provision shall govern and control the
decision of such question.
SECTION 8 Stockholders of Record. Every stockholder of record of the
Corporation shall be entitled at each meeting of stockholders to one vote for
each share of stock standing in his name on the books of the Corporation.
2
<PAGE> 3
SECTION 9 Proxies. At any meeting of the stockholders, any stockholder
may be represented and vote by a proxy or proxies appointed by an instrument in
writing. In the event that any such instrument in writing shall designate two
or more persons to act as proxies, a majority of such persons present at the
meeting, or, if only one shall be present, then that one shall have and may
exercise all of the powers conferred by such written instrument upon all of the
persons so designated unless such instrument shall otherwise provide. No such
proxy shall be valid after the expiration of six months from the date of its
execution, unless coupled with an interest, or unless the person executing it
specifies therein the length of time for which it is to continue in force,
which in no case shall exceed seven years from the date of its execution.
Subject to the above, any proxy duly executed is not revoked and continues in
full force and effect until an instrument revoking it or a duly executed proxy
bearing a later date is filed with the Secretary of the Corporation.
SECTION 10 Action without Meeting. Any action, except election of
Directors, which may be taken by the vote of the shareholders at a meeting, may
be taken without a meeting if authorized by the written consent of shareholders
holding at least a majority of the voting power, unless the provisions of the
statutes or of the Articles of Incorporation require a greater proportion of
voting power to authorize such action in which case such greater proportion of
written consents shall be required.
ARTICLE III
DIRECTORS
SECTION 1 Number of Directors. The number of Directors which shall
constitute the whole board shall be six, all of whom shall be of full age and
at least one of whom shall be a citizen of the United States. The number of
Directors may from time to time be increased or decreased to not less than
three by amending this Section of the By-Laws. The Directors shall be elected
at the annual meeting of the stockholders, and except as provided in Section 2
of this Article III, each Director elected shall hold office until his
successor is elected and qualified. Directors need not be stockholders.
SECTION 2 Vacancies. Vacancies, including those caused by an increase
in the number of Directors, may be filled by a majority of the remaining
Directors though less than a quorum. When one or more Directors shall give
notice of his or their resignation to the Board of Directors, effective at a
future date, the Board of Directors shall have power to fill such vacancy or
vacancies to take effect when such resignation or resignations shall become
effective, each Director so appointed to hold office during the remainder of
the term of office of the resigning Director or Directors.
3
<PAGE> 4
SECTION 3 Management by Board of Directors. The business of the
Corporation shall be managed by its Board of Directors which may exercise all
such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Articles of Incorporation or by these By-Laws directed
or required to be exercised or done by the stockholders.
SECTION 4 Organization Meeting. The first meeting of each newly elected
Board of Directors shall be held at such time and place as shall be fixed by
the vote of the stockholders at the annual meeting and no notice of such
meeting shall be necessary to the newly elected Directors in order legally to
constitute the meeting, provided a quorum shall be present. In the event of
the failure of the stockholders to fix the time or place of such first meeting
of the newly elected Board of Directors, or in the event such meeting is not
held at the time and place so fixed by the stockholders, the meeting may be
held at such time and place as shall be specified in a notice given as
hereinafter provided for special meetings of the Board of Directors, or as
shall be specified in a written waiver signed by all of the Directors.
SECTION 5 Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
SECTION 6 Special Meetings. Special meetings of the Board of
Directors.may be called by the President or Secretary and must be called by the
President on the written request of two Directors. Written notice of special
meetings of the Board of Directors shall be given to each Director at least
five days before the date of the meeting.
SECTION 7 Quorum. Three members of the Board of Directors, at a meeting
duly assembled, shall be necessary to constitute a quorum for the transaction
of business and the act of a majority of the Directors present at any meeting
at which a quorum is present shall be the act of the Board of Directors, except
as may be otherwise specifically provided by statute or by the Articles of
incorporation. Any action of a majority, although not at a regularly called
meeting, and the record thereof, if assented to in writing by all the other
members of the Board of Directors shall be as valid and effective in all
respects as if passed by the Board of Directors in regular meeting.
SECTION 8 Committees of Directors. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, designate one
or more committees, each committee to consist of one or more Directors, which,
to the extent provided in the resolution, shall have and may exercise the
powers of the Board of Directors in the management of the business and affairs
of the Corporation, and may have power to authorize the seal of the Corporation
to be affixed to all papers which may require it. Such committee or
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<PAGE> 5
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors, shall keep regular minutes of
their proceedings and shall report the same to the Board of Directors when
required.
SECTION 9 Compensation. Directors may be paid their expenses, if any,
of attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated salary
as Director. No such payment shall preclude any Director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for
attending committee meetings.
ARTICLE IV
NOTICES
SECTION 1 Notices. Notices to Directors and stockholders shall be in
writing and delivered personally or mailed to the Directors or stockholders at
their addresses appearing on the books of the Corporation. Notice by mail
shall be deemed to be given at the time when the same shall be mailed. Notice
to Directors may also be given by telegram.
SECTION 2 Meeting without Notice. Whenever all parties entitled to vote
at any meeting, whether of Directors or stockholders, consent, either by a
writing on the records of the meeting or filed with the Secretary, or by
presence at such meeting and oral consent entered on the minutes, or by taking
part in the deliberations at such meeting without objection, the doings of such
meeting shall be as valid as if had at a meeting regularly called and noticed,
and at such meeting any business may be transacted which is not excepted from
the written consent or to the consideration of which no objection for want of
notice is made at the time, and if any meeting be irregular for want of notice
or of such consent, provided a quorum was present at such meeting, the
proceedings of said meeting may be ratified and approved and rendered likewise
valid and the irregularity or defect therein waived by a writing signed by all
parties having the right to vote at such meeting; and such consent or approval
of stockholders may be by proxy or attorney, but all such proxies and powers of
attorney must be in writing.
SECTION 3 Waiver of Notice. Whenever any notice whatever is required to
be given under the provisions of the statutes, of the Articles of Incorporation
or of these By-Laws, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
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<PAGE> 6
ARTICLE V
OFFICERS
SECTION 1 Officers. The officers of the Corporation shall be chosen by
the Board of Directors and shall be a President, a Vice President, a Secretary
and a Treasurer. Any person may hold two or more offices except that the
offices of President and Secretary shall not be held by the same person.
SECTION 2 Appointment by Board of Directors. The Board of Directors at
its first meeting after each annual meeting of stockholders shall choose a
President from among the Directors, and shall choose a Vice President, a
Secretary and a Treasurer, none of whom need be a member of the Board of
Directors,
SECTION 3 Other Officers. The Board of Directors may appoint additional
Vice Presidents, and Assistant Secretaries and Assistant Treasurers and such
other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties
as shall be determined from time to time by the Board of Directors.
SECTION 4 Officers' Salaries. The salaries of all officers and agents
of the Corporation shall be fixed by the Board of Directors.
SECTION 5 Tenure of Office. The officers of the Corporation shall hold
office until their successors are chosen and qualify. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. Any vacancy
occurring in any office of the Corporation by death, resignation, removal or
otherwise shall be filled by the Board of Directors,
SECTION 6 The President. The President shall be the chief executive
officer of the Corporation, shall preside at all meetings of the stockholders
and the Board of Directors, shall be ex officio a member of all standing
committees, shall have general and active management of the business of the
Corporation, and shall see that all orders and resolutions of the Board of
Directors are carried into effect. The President shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation.
SECTION 7 The Vice President. The Vice President shall, in the absence
or disability of the President, perform the duties and exercise the powers of
the President and shall perform such other duties as the Board of Directors may
from time to time prescribe.
6
<PAGE> 7
SECTION 8 The Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committee when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the
Board of Directors or President, under whose supervision he shall be. He shall
keep in safe custody the seal of the Corporation and, when authorized by the
Board of Directors, affix the same to any instrument requiring it and, when so
affixed, it shall be attested by his signature or by the signature of the
Treasurer or an Assistant Secretary,
SECTION 9 The Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation, and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
the regular meetings of the Board of Directors, or when the Board of Directors
so requires, an account of all his transactions as Treasurer and of the
financial condition of the Corporation. If required by the Board of Directors,
he shall give the Corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
ARTICLE VI
STOCK CERTIFICATES
SECTION 1 Stock Certificates. Every stockholder shall be entitled to
have a certificate, signed by the President or a Vice President and the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the Corporation, certifying the number of shares owned by him in the
Corporation. If the Corporation shall be authorized to issue more than one
class of stock or more than one series of any class, the designations,
preferences and relative, participating, optional, or other special rights of
the various classes of stock or series thereof and the qualifications,
limitations or restrictions of such rights, shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such
7
<PAGE> 8
stock, and, if the Corporation shall be authorized to issue only special stock,
such certificate shall set forth in full or summarize the rights of the holders
of such stock.
SECTION 2 Facsimile Signatures, Whenever any certificate is
countersigned or otherwise authenticated by a transfer agent or transfer clerk,
and by a registrar, then a facsimile of the signatures of the officers or
agents of the Corporation may be printed or lithographed upon such certificate
in lieu of the actual signatures. In case any officer or officers who shall
have signed, or whose facsimile signature or signatures shall have been used
on, any such certificate or certificates shall cease to be such officer or
officers of the Corporation, whether because of death, resignation or
otherwise, before such certificate or certificates shall have been delivered by
the Corporation, such certificate or certificates may nevertheless be adopted
by the Corporation and be issued and delivered as though the person or persons
who signed such certificate or certificates, or whose facsimile signature or
signatures shall have been used thereon, had not ceased to be the officer or
officers of such Corporation.
SECTION 3 Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost or
destroyed, upon the taking of an affidavit of that fact by the person claiming
the certificate of stock to be lost or destroyed. When authorizing such issue
of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or
give the Corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost or destroyed.
SECTION 4 Transfer of Stock. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
SECTION 5 Record Date. The Board of Directors may prescribe a period
not exceeding forty days prior to any meeting of the stockholders during which
no transfer of stock on the books of the Corporation may be made, or may fix a
day not more than forty days prior to the holding of any such meeting as the
day as of which stockholders entitled to notice of and to vote at such meeting
shall be determined; and only stockholders of record on such day shall be
entitled to notice or to vote at such meeting.
8
<PAGE> 9
SECTION 6 Stockholders of Record. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of the State of
Nevada.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1 Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Articles of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of capital stock of the Corporation, subject to the provisions of the
Articles of Incorporation.
SECTION 2 Reserves. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the Board of Directors shall think conducive to the
interest of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
SECTION 3 Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
SECTION 4 Fiscal Year. The fiscal year of the Corporation shall begin
on the first day of July and end on the thirtieth day of June.
SECTION 5 Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation and the word "Corporate
Seal, Nevada."
SECTION 6 Amendments. These By-Law may be altered or repealed at any
meeting of the stockholders or of the Board of Directors or at any special
meeting of the stockholders or of the Board of Directors if notice of such
alteration or repeal be contained in the notice of such special meeting.
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<PAGE> 10
SECRETARY'S CERTIFICATE
The undersigned hereby certifies:
1. That she is the duly elected and acting Secretary of Sonoma
International, a Nevada corporation (the "Corporation"); and
2. That the foregoing By-Laws, comprising 20 pages, including this
page, constitute the By-Laws of the Corporation as duly adopted and as from
time to time duly amended by the Board of Directors of the Corporation.
DATED: October 28, 1974
/s/
------------------------------
Secretary
10
<PAGE> 1
EXHIBIT 4.1
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM -
TEN ENT -
JT TEN -
as tenants in common
as tenants by the entireties
as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT # Custodian
(Cust) (Minor)
under Uniform Gifts to Minors
Act
(State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF
ASSIGNEE)
<PAGE> 2
shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated,
X
NOTICE:
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE> 3
Sonoma International
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
20,000,000 SHARES COMMON STOCK AUTHORIZED, $.001 PAR VALUE
CUSIP 835585 10 0
SEE REVERSE FOR
CERTAIN DEFINITIONS
This certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF
SONOMA INTERNATIONAL
transferable on the books of the corporation in person or by duly authorized
attorney upon surrender of this certificate properly endorsed. This certificate
and the shares represented hereby are subject to the laws of the State of
Nevada, and to the Certificate of Incorporation and Bylaws of the Corporation,
as now or hereafter amended. This certificate is not valid unless countersigned
by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
DATED
PRESIDENT
SECRETARY
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE> 1
EXHIBIT 10.1
DEPARTMENT OF THE ARMY
LEASE OF UNITED STATES PROPERTY FOR COMMERCIAL CONCESSION
PURPOSES (MAJOR CONCESSIONS)
Lease No. DACW62-1-88-83
THIS LEASE, made between the Secretary of the Army, of the first part, and
Jamestown Resort and Marina, LTD, party of the second part, WITNESSETH:
That the Secretary of the Army, by virtue of the authority conferred on him by
Section 4 of the Act of Congress approved 22 December 1944, as amended (16
U.S.C. 460d), and for the consideration hereinafter set forth, hereby leases to
the party of the second part, hereinafter designated as the Lessee, the
following described premises, hereinafter referred to as the premises, for
commercial concession purposes:
Said premises are designated in red on the map labeled Exhibit "A," attached
hereto and made a part hereof.
THIS LEASE is granted subject to the following terms and conditions:
1. TERM.
a. Said premises are hereby leased for a term of 25 years
beginning January 1988, and ending 31 December 2012.
b. This lease may be relinquished by the Lessee at the end of any
lease year by giving six (6) months prior notice to the District Commander,
U.S. Army Engineer District, Corps of Engineers, P.O. Box 1070, Nashville,
Tennessee 37202-1070.
c. The Government may revoke this lease in the event the Lessee
violates any of the terms and conditions of this lease and continues and
persists in such violation for a period of sixty (60) days after the District
Commander has advised the Lessee of such violation in writing.
2. RENTAL.
a. The annual rent due the United States in consideration of the
grant of this lease will be a combination of fixed rent and graduated rent.
The amount of the rent will depend on the relationship of the total receipts
(gross income) from the business operations conducted on
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<PAGE> 2
the premises to the cost of providing all structures and equipment used for the
production of that income, called "Gross Fixed Assets" (GFA). For the purposes
of collecting the rent, the following shall not be included in gross income:
the cost of hunting and fishing license; taxes collected for direct remittance
to the taxing authority; that portion of income from guide service paid
directly to the guides; and the exact amount collected from customers for
electrical service which is metered to the customer and collected by the Lessee
as the servicing agent and paid to the power company. Increases or decreases
in the GFA reported during the first six (6) months of each year will be
effective on 1 January of the following year. As to structures (not
equipment), the GFA will be modified annually to reflect application of the
Composite Construction Cost Index (CCCI) in effect on 1 January of the current
lease year as published by the Department of Commerce, Bureau of Census.
Business operations shall include both GFA located on and gross income produced
from lessee's private property when such private property is used as an
integral part of this concession. A percentage of the rental commensurate with
the percentage of GFA on private land or the percentage of gross income (when
over 50%) generated on private land, whichever is a greater percentage, will be
deducted from the rental.
b. The rental will be calculated according to the following:
<TABLE>
<CAPTION>
Breakeven Point Base Balance of
(Income to GFA) Rate Income Rate
Kind of Business % % %
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Sales 70 1.50 3.00
2. Rents and Services 30 4.50 7.00
- --------------------------------------------------------------------------------
</TABLE>
A weighted average Breakeven Point (called the Breakeven Point) and a weighted
average Base Rate (called the Base Rate) will be calculated and used when
applying the schedule to mixed business. The rent on gross income below the
Breakeven Point will be calculated using 50% of the base rate. The rent on
gross income between the Breakeven Point and twice the Breakeven Point will be
calculated using 150% of the base rate. The rent on gross income above twice
the Breakeven Point will be calculated using the Balance of Income Rate.
License fees and taxes collected from customers for direct remittance to a
taxing authority will not be considered as receipts from the business
operations conducted on the leased premises. Likewise, monies collected from
customers by the Lessee for electric bills arising from individual meters where
the Lessee is acting only as a servicing agent will not be considered as
receipts from the business operations conducted on the leased premises provided
the customer reimburses the
2
<PAGE> 3
Lessee for the exact amount of the electric bill. A sample calculation of rent
and the form to be used for calculating rent is attached hereto as Exhibit "B."
c. It is desirable that the payment of rental be on as current a
basis as possible. Reports of income will be quarterly (cumulative on an
annual basis). Rental will be calculated and payment made by the tenth (10th)
day of the month following the reporting period. Since rental is calculated on
an annual basis, the total income for the first reporting period will be
applied to the total GFA for,rental computation purposes. Income for the
second and subsequent reporting periods will be added to that previously
reported and used for computation purposes, ie., the total income (cumulative)
through the reporting period for the year will be used. The final (year end)
rental report and payment will be due no later than thirty (30) days after the
end of the business year as defined in the annual report.
d. As a part of the annual rental, the Lessee shall pay Four
Thousand Dollars ($4,000.00), as a fixed minimum rental which shall be payable
semiannually on or before 1 April and 1 October of each year, except the first
payment shall be made upon delivery of the lease and, if applicable, prorated
in proportion to the period involved. The last payment shall, if applicable,
also be prorated for the period involved. The fixed minimum rental, while not
refundable, will be offset against rental resulting from computations set out
in Conditions 2a, b, and c above. The fixed minimum annual rental is
determined by the amount of GFA and will be adjusted on 1 January each year
based on the following:
FIXED MINIMUM RENTAL
<TABLE>
<CAPTION>
GROSS FIXED ASSETS ANNUAL PAYMENT
<S> <C>
$150,000 to $200,000 $1,200
$200,001 to $250,000 $1,500
$250,001 to $300,000 $1,800
$300,001 to $400,000 $2,000
$400,001 to $500,000 $2,500
$500,001 to $600,000 $3,000
$600,001 to $700,000 $3,500
$700,0001 or more $4,000
</TABLE>
The fixed minimum rental, while not refundable, will be offset against rental
payments in preparing the reports of income required by c. above.
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<PAGE> 4
e. The United States will impose a charge, the amount to be
determined by law or regulation, on late payment of rent or other payments due
under this agreement for each 30-day period that the payment is overdue. The
full late charge will also be applicable to periods of less than thirty (30)
days.
f. The Lessee shall also pay to the United States, on demand, any
sum which may be expended after the expiration, revocation, or termination of
this lease in restoring the premises as provided by Condition 21 hereof.
g. In addition to the right of revocation, if the rent or other
payments hereinabove provided to be paid by the Lessee or any part thereof
shall be in arrears and unpaid for thirty (30) days after the same shall become
due, then and in such case the United States may, through said District
Commander, elect to terminate this lease by notification in writing to the
Lessee; in event of such termination, the Lessee shall be required to promptly
vacate and restore the premises in accordance with Condition 21 hereof.
h. All tents or other payments pursuant to this lease shall be
made payable to FAO, U.S. Army Engineer Division, Ohio River, and shall be
forwarded directly to the District Commander, Nashville District, or to a
representative designated by him.
i. Notwithstanding the above, the gross receipts from the sale of
boats (including launches, cruisers, or other floating craft) and motors, and
the fixed assets (or an appropriate proportion thereof which contributes solely
to the production of income from the sale of boats and motors), shall not be
taken into consideration in computing the graduated rental. Such sales shall
be treated separately and the Lessee shall pay to the United States, as a part
of the rental, one percent (1%) of the gross receipts from such sales resulting
from the Lessee or any subsidiary doing business on the lake, whether or not
the boats or motors sold where displayed on the leased premises. In
determining gross receipts, the full contract price, less any allowance for a
trade-in, shall apply in each sale transaction. The amount of commission
received from the sale of boats and motors for the account of others will be
reported as income quarterly along with graduated rental reports. The Lessee
shall maintain complete and accurate records of all receipts from the sale of
boats and motors separate and apart from other records required under the
lease, and shall furnish such additional records as the District Commander
deems necessary to adequately reflect the boat and motor sales operations
conducted by the Lessee or subsidiary.
3. USE AND DEVELOPMENT OF PREMISES. The premises may be occupied and
used by the Lessee solely for the conduct of business in connection with the
recreational development of the premises for the general use of the public as
follows:
4
<PAGE> 5
a. Said business may include the following activities:
(1) Furnishing facilities, maintaining or docking
privately-owned boats.
(2) Servicing, maintaining and caring for privately-owned
boats.
(3) Sale of gasoline and oil.
(4) Sale of boat accessories.
(5) Transportation of passengers by boat for hire.
(6) Hiring boats (with or without motors).
(7) Sale of food, refreshments, fishing tackle, bait and
other supplies.
(8) Vacation cabins and motel accommodations for
transient use only.
(9) Recreational facilities - swimming pool, tennis and
badminton courts, etc.*
(10) Furnishing of services, utilities, and special
facilities for short-term camping and transient
trailer parking.
(11) Guide service.*
*At the option of the Lessee.
b. The Lessee shall provide the facilities in accordance with the
Development Plan (Facility Requirements), designated Exhibit "C" attached
hereto and made a part hereof.
c. The Lessee shall commence the development of the premises
within six (6) months after the date of delivery of this lease to the Lessee,
and shall have the facilities and services enumerated on Exhibit "C" available
to the general public within the periods of time stated on said Exhibit "C."
The Lessee shall, upon completion of all proposed development covered in this
lease, submit to the District Commander a complete "as built" site plan and "as
built" construction plan for all facilities.
d. The District Commander may agree in writing to an extension of
time for providing the facilities and services designated in Exhibit "C" or may
waive the providing thereof for other than those specified for the first lease
year as designated in Exhibit "C" whenever, in his opinion, the public demand
does not reach the anticipated level at the time stated, or when a delay in
providing the facilities and services is beyond the control of the Lessee.
e. The Lessee may provide additional facilities and services at
any time after obtaining the written approval of the District Commander.
f. Upon completion of said facilities, documentation of the costs
to the satisfaction of the District Commander shall be furnished to him for
adjustment of the GFA and fixed minimum rental as provided above.
5
<PAGE> 6
4. STRUCTURES AND EQUIPMENT. The Lessee shall have the right, during the
term of the lease, to erect such structures and to provide such equipment upon
the premises as may be necessary to furnish the facilities and services
authorized under Condition 3 of this lease, which structures and equipment
shall be and remain the property of the Lessee, except as otherwise provided in
Condition No. 21 below, and may be removed therefrom by the Lessee as provided
in Condition No. 21. Provided however, that no structure may be erected or
altered upon the premises unless and until the design and proposed location or
alteration thereof shall have been approved in writing by the District
Commander.
5. INSURANCE. At the commencement of this lease, the Lessee will obtain
from a reputable insurance company, and carry liability or indemnity insurance
providing for minimum limits of $500,000 per person in any one claim, and
aggregate limit of $1,000,000 for any number of periods or claims arising from
any one incident with respect to bodily injuries or death resulting therefrom,
and $100,000 for damage to property suffered or alleged to have been suffered
by any person or persons resulting from the operations of the Lessee under the
terms of this lease.
6. TRANSFERS, ASSIGNMENTS, SUBLEASES. The Lessee shall neither transfer
nor assign this lease nor sublet the premises or any part thereof, nor grant
any interest, privilege, or license whatsoever in connection with this lease,
nor shall this lease be assignable or transferable by process or operation of
law including, but not limited to, insolvency proceedings, bankruptcy, or
intestacy, or in any other manner without permission in writing from the
District Commander. Should the Lessee be a corporation, said corporation shall
keep the District Commander informed of the current officers of the
corporation, as well as any changes in the major stockholders, and changes to
cost of GFA resulting from such transactions, which costs will be used in
rental computations. The provisions of any subleases shall be subject to prior
written approval of the District Commander. The Government reserves the right
to immediately terminate any lease which is transferred or assigned or sublet
in whole or in part without prior written approval of the District Commander,
and the Lessee forfeits any claim against the Government for such action.
7. SUBJECT TO EASEMENTS. This lease is subject to all existing
easements, and easements subsequently granted, for roadways and utilities
located or to be located on the premises.
8. SUPERVISION OF DISTRICT COMMANDER. The use and occupation of the
premises shall be subject to the general supervision and approval of the
District Commander or his authorized representative and to such rules and
regulations as may be prescribed from time to time.
9. RATES AND PRICES. The rates and prices charged by the Lessee or its
grantees for accommodation, food (except packaged goods), and services
furnished or sold to the public shall be reasonable and comparable to rates
charged for similar goods and services by others in the community and on the
lake. The Government shall have the right to review
6
<PAGE> 7
such rates and prices and require an increase or reduction where it finds the
objection of this paragraph has been violated. The Lessee shall keep a
schedule of such rates and prices posted at all times in an appropriate and
conspicuous place on the premises. The District Commander may request
submission of rates and prices on an as requested basis.
10. ACCOUNTS AND RECORDS. The Lessee shall maintain complete and accurate
records of all receipts and disbursements and such additional records as the
District Commander deems necessary to adequately reflect the operations
conducted on the premises. The Lessee shall furnish to the District Commander,
on or before 15 April following each operating or calendar year, certified true
copies of his balance sheet, profit and loss statement, and a statement of the
total compensation (salaries, wages, bonuses, and dividends) paid from the
operations authorized by this lease. All accounts and records of the Lessee
involving the operations conducted on the premises will be subject to
inspection and audit at any convenient time by the District Commander or his
duly authorized representatives.
11. PROTECTION OF PROPERTY. The Lessee shall be responsible for any
damage that may be caused to Government property by the activities of the
Lessee under this lease, and shall exercise due diligence in the protection of
all improvements, timber, and property of the United States which may be
located on the premises, against fire or damage from any and all other causes.
12. RIGHT TO ENTER. The right it hereby reserved to the United States,
its officers, agents, and employees, to enter upon the premises at any time and
for any purpose in connection with Government work, including the following:
health and safety inspections; to remove therefrom timber or other material,
except property of the Lessee: to flood premises, to manipulate the level of
the lake or pool in any manner whatsoever; and/or to make any other use thereof
as may be necessary in connection with project purposes; and the Lessee shall
have no claim for damages on account thereof against the United States or any
officer, agent, or employee thereof.
13. MAINTENANCE. The Lessee shall keep the premises in good order and in
a clean, sanitary, and safe condition, and shall at all times maintain all
structures and equipment in a condition satisfactory to said District
Commander.
14. HEALTH AND SAFETY. In addition to the rights of revocation previously
stated, the District Commander or his representative upon discovery will notify
the Lessee of any health or hazardous conditions within the area covered by the
lease which present an immediate threat to health and/or danger to life or
property. If the condition is not corrected within the time specified by the
District Commander, the District Commander will have the option to (1) correct
the health or hazardous conditions and collect the cost of repairs from the
Lessee, or (2) suspend the Lessee's use of the premises or the Lessee's
operation where the health or hazardous condition exists until such condition
is corrected. The Lessee will be obligated to pay rental, notwithstanding any
interruption or suspension of his activities, as
7
<PAGE> 8
may be required under (1) and (2) above. The Lessee shall have no claim for
damages against the United States, or any officer, agent, or employee thereof
on account of action taken pursuant to this condition. The Lessee shall:
a. Rent watercraft with a minimum of ten cubic feet of
displacement space per passenger; marked with passenger capacity; with
capability to remain afloat with capacity load when overturned or swamped; with
additional oars and paddles in case of accident or failure of ordinary
propelling force; with rescue equipment and a United States Coast
Guard-approved life preserver for each passenger. The Lessee shall comply with
the provisions of State boating laws and the Federal Boat Safety Act of 1971
(P.L. 92-75), as amended (46 U.S.C. 1451 et seq.) with regard to rentals of
boats and motors.
b. Install fire safety equipment as required by the District
Commander. This equipment shall be in readiness at all times for immediate use
and shall be tested in accordance with applicable laws, rules and regulations.
c. Fully comply with Nashville District Safety Directive, ORNR
405-2-4, dated 15 May 1982, as may be amended.
15. LIGHTS AND SIGNALS. If the display of lights and signals on any work
hereby authorized is not otherwise provided for by law, such lights and signals
as may be prescribed by the Coast Guard or by the District Commander shall be
installed and maintained by and at the expense of the Lessee.
16. PUBLIC USE. No attempt shall be made by the Lessee to forbid the full
and free use by the public of the water areas of the project.
17. HUNTING AND TRAPPING. The Lessee shall not hunt or trap or allow
hunting or trapping on the premises.
18. PROHIBITED USES. The Lessee shall not permit gambling on the
premises, or install or operate, or permit to be installed or operated thereon,
any device which, in the opinion of the District Commander is contrary to good
morals or is otherwise objectionable; use the premises, or permit them to be
used for any illegal or immoral business or purpose; there shall not be carried
on or permitted upon the premises any activity which would constitute a
nuisance. The Lessee shall not sell, store, or dispense, or permit the sale,
storage, or dispensing of beer or other intoxicating liquors on the premises
without prior written approval of the District Commander.
8
<PAGE> 9
19. TIMBER. The Lessee shall cut no timber, conduct no mining operations,
remove no sand, gravel, or kindred substances from the ground, commit no waste
of any kind, nor in any manner substantially change the contour or condition of
the premises, except as may be authorized under and pursuant to Condition 4
hereof; but the Lessee may salvage such fallen or dead timber as may be
required for use as firewood.
20. NAVIGATION. There shall be no unreasonable interference with
navigation by the exercise of the privileges hereby granted.
21. RESTORATION. On or before the date of expiration of this lease or its
termination by the Lessee, the Lessee shall vacate the premises, remove the
property of the Lessee therefrom, and restore the premises to a condition
satisfactory to the District Commander. If, however, this lease is revoked,
the Lessee shall vacate the premises, remove said property therefrom, and
restore the premises to the condition aforesaid within such time as the
District Commander may designate. In either event, if the Lessee shall fail or
neglect to remove said property and so restore the premises, then, at the
option of the Secretary of the Army, said property shall either become the
property of the United States without compensation therefor, or the Secretary
of the Army may cause it to be removed and the premises to be restored at the
expense of the Lessee, and no claim for damages against the United States or
its officers or agents shall be created by or made on account of such removal
and restoration work.
22. APPLICABLE LAWS AND REGULATIONS. The Lessee shall comply with all
Federal laws and regulations and with all applicable laws, ordinances, and
regulations of the state, county, and municipality wherein the premises are
located, with regard to construction, health, safety, food-service, water
supply, sanitation, licenses or permits to do business and all other matters.
The Lessee shall not discharge waste or effluent from the property in such a
manner that the discharge will contaminate streams or other bodies of water, or
otherwise become a public nuisance.
23. TAXES. Any and all taxes imposed by the State or its political
subdivisions, upon the property or business of the Lessee on the premises shall
be paid promptly by the Lessee.
24. WATER POLLUTION. The Lessee shall comply with any regulations,
conditions or instructions affecting the activity hereby authorized if and when
issued by the Environmental Protection Agency and/or a state, interstate or
local governmental water pollution control agency having jurisdiction to abate
or prevent water pollution. Such regulations, conditions, or instructions in
effect or prescribed by the Environmental Protection Agency, state, interstate
or local governmental agency are hereby made a condition of this lease. All
sanitation facilities on boats moored at the concession, including rental
boats, shall be in accordance with Federal, state, and local laws and
regulations.
25. PRESERVATION. The Lessee shall not remove or disturb, or cause or
permit to be removed or disturbed, any historical, archeological, architectural
or other cultural artifacts, relics, vestiges, remains or objects of antiquity.
In the event such items are discovered on
9
<PAGE> 10
the premises, the Lessee shall immediately notify the District Commander,
Nashville District, and the Kentucky Heritage Commission, State Historical
Preservation Officer, 104 Ridge Street, Frankfort, Kentucky 40601, and the site
and material shall be protected by the Lessee from further disturbance until a
professional examination of them can be made, or until clearance to proceed is
authorized by the District Commander.
26. INDEMNITY. The United States shall not be responsible for damages to
property or injuries to persons which may arise from or be incident to the
exercise of the privileges herein granted, or for damages to the property of
the Lessee, or for damages to the property or injuries to the person of the
Lessee's officers, agents, servants, or employees or others who may be on the
premises at their invitation or the invitation of any one of them, arising from
or incident to any governmental activities on the premises, and the Lessee
shall hold the United States harmless from any and all such claims.
27. NON-DISCRIMINATION. The Lessee shall not discriminate against any
person or persons because of race, color, age, sex, handicap, or national
origin in the conduct of operations on the leased premises.
28. OFFICIALS NOT TO BENEFIT. No Member of or Delegate to Congress or
Resident Commissioner shall be admitted to any share or part of this lease or
to any benefits to arise therefrom. Nothing, however, herein contained shall
be construed to extend to any incorporated company if the lease be for the
general benefit of such corporation or company.
29. COVENANT AGAINST CONTINGENT FEES. The Lessee warrants that no person
or selling agency has been employed or retained to solicit or secure this lease
upon an agreement or understanding for a commission, percentage, brokerage, or
contingent fee, excepting bona fide employees or bona fide established
commercial or selling agencies maintained by the Lessee for the purpose of
securing business. For breach or violation of this warranty, the Government
shall have the right to annul this lease without liability, or, in its
discretion, to require the Lessee to pay, in addition to the lease rental or
consideration, the full amount of such commission, percentage, brokerage, or
contingent fee.
30. SEVERAL LESSEES. If more than one Lessee is named in this lease, the
obligations of said Lessees herein contained shall be joint and several
obligations.
31. DISPUTES CLAUSE.
a. Except as otherwise provided in this lease, any dispute
concerning a question of fact arising under this lease, which is not disposed
of by agreement, shall be decided by the District Commander, who shall reduce
his decision to writing and mail or otherwise furnish a copy thereof to the
Lessee. The decision of the District Commander shall be final and conclusive
unless, within thirty (30) days from the date of receipt of such copy, the
Lessee mails or otherwise furnishes to the District Commander a written appeal
addressed to the Secretary of the Army. The decision of the Secretary or his
duly authorized
10
<PAGE> 11
representative for the determination of such appeals shall be final and
conclusive unless determined by a court of competent jurisdiction to have been
fraudulent, or capricious, or arbitrary, or so grossly erroneous as necessarily
to imply bad faith, or not supported by substantial evidence. In connection
with any appeal proceeding under this condition, the Lessee shall be afforded
an opportunity to be heard and to offer evidence in support of its appeal.
Pending final decision of a dispute hereunder, the Lessee shall proceed
diligently with the performance of the contract and in accordance with the
District Commander's decision.
b. This Condition does not preclude consideration of law
questions in connection with decisions provided for in paragraph a. above:
provided, that nothing in this Condition shall be construed as making final the
decision of any administrative official, representative, or board on a question
of law.
32. NOTICES. All notices to be given pursuant to this lease shall be
addressed, if to the Lessee, to
Mr. Frank Barker, Secretary
Jamestown Resort and Marina, LTD.
Lexington Financial Center
Suite 3000
Lexington, Kentucky 40507
and if to the Government, to the District Commander, Nashville District, Corps
of Engineers, PO Box 1070, Nashville, TN 37202-1070, or as may from time to
time otherwise be directed by the parties. Notice shall be deemed to have been
duly given if and when enclosed in a properly sealed envelope or wrapper,
addressed as aforesaid, and deposited postage prepaid (or, if mailed by the
Government, deposited under its franking privilege) in a post office or branch
post office regularly maintained by the United States Government.
33. SUCCESSION OF LEASE. This lease supersedes and is in lieu of Lease
No. DACW62-1-72-221, dated 28 March 1972, having a term beginning 1 January
1972 and ending 31 December 1996.
IN WITNESS WHEREOF I have hereunto set my hand by authority of the
Secretary of the Army this 1st day of February 1988.
/s/ Charles B. Hooper
-----------------------------------
CHARLES B. HOOPER
Chief, Real Estate Division
11
<PAGE> 12
THIS LEASE is also executed by the Lessee this 27th day of January, 1988.
JAMESTOWN RESORT AND MARINA, LTD.
BY: JAMESTOWN RESORT AND MARINA,
INC., GENERAL PARTNER
/s/ Dudley Webb
--------------------------------------------
CHAIRMAN - ASSIGNEE
I, Glenn A. Hoskins, certify that I am the Secretary of Jamestown Resort and
Marina, Inc. that Dudley Webb, who executed this assignment on behalf of said
corporation was then chairman of same; that this instrument was duly signed for
and in behalf of said corporation by authority of its governing body, and is
within the scope of its corporate powers.
/s/ Glenn A. Hoskins
--------------------------------------------
- SECRETARY
12
<PAGE> 13
Graduated Rent System
INSTRUCTIONS TO LESSEE
Fill out Concession Name, period covered by the computation form and the
correct amount of Gross Fixed Assets (G.F.A.).
In Column (1) insert the amounts, divide as between Sales and Rents and
Services. Convert these amounts to percentage of the total and insert in
Column (2).
Multiply Column (3) by Column (2) and enter the products in Column (4) without
decimals. Show a total for the Column at the bottom. Point off two places.
Round off this figure (Composite Break-Even Point) to the nearest whole
percent, dropping any amount less than 0.5 percent, and enter on line 1 under
Rate.
Multiply Column (5) by Column (2) and enter the products in Column (6) without
decimals. Show a total for the column at the bottom. Point off four places.
Round off this figure (Composite Base Rate) to the nearest hundredth of a
percent and enter on line 2 under Rate.
Enter 50% of line 2 rate on line 3 under Rate and enter 150% of line 2 rate on
line 4 under Rate.
Multiply Gross Fixed Assets by the percentage on line 1, Composite Break-Even
Point. If the product is greater than Total Income enter Total Income on line
3 under Income. If less than Income enter the product on line 3 under Income.
Subtract the entry just made on line 3 from Total Income. If the difference is
equal to line 3 entry or less, post the difference directly below on line 4.
If grater than the line 3 entry duplicate the line 3 entry on line 4 and post
any Balance of Income to line 5.
If an entry is made under Income on line 5, multiply Column (7) by Column (2)
and enter the product in Column (8) without decimals. Show a total for the
column at the bottom. Point off four places. Round off this figure (Composite
Balance of Sales Rate) to the nearest hundredth of a percent and enter on line
5 under Rate.
Multiply line 3 Income by line 3 Rate and post the product to line 3, Rent.
Follow the same procedure for lines 4 and 5 as appropriate.
Add all items of Rent on line 6. Divide the Total by Total Income and show the
percentage of Total Income on line 6.
Enter Rent Paid to Date on line 7 including Fixed Minimum Rental and any
Percentage Rental.
Enter Balance on line 8.
EXHIBIT "B" TO LEASE
13
<PAGE> 14
DEVELOPMENT PLAN
EXHIBIT "C"
1. Continued maintenance and operation of the following existing
facilities:
<TABLE>
<CAPTION>
ITEM VALUE
---- -----
<S> <C>
Manager's Residence $50,000.00
Assistant Manager's Residence 30,000.00
17 Cottages 275,000.00
Swimming Pool 10,000.00
Restaurant 50,000.00
54 Houseboat Slips 172,800.00
3 Rental Pontoon Boats 9,000.00
19 Rental Fishing Boats 22,800.00
5 - 15 hp Rental Motors 6,000.00
Public Restrooms & Related Facilities 15,000.00
Shop Building (48'x80') 75,000.00
Miscellaneous Equipment, Furnishings
and Related Facilities 574,400.00
----------
TOTAL $1,290,000.00
</TABLE>
2. Facilities and services to be provided during the first year of the
lease:
<TABLE>
<CAPTION>
ITEM PROJECTED COST
---- --------------
<S> <C>
Remove Some Existing Facilities
380 Additional Boat Slips
of varied sizes $2,365,000.00
Service Dock 727,000.00
Parking Lot 330,500.00
25 Rental Houseboats 1,000,000.00
------------
$4,422,500.00
</TABLE>
3. Beyond first year development:
<TABLE>
<CAPTION>
ITEM PROJECTED COST
---- --------------
<S> <C> <C>
RV Park $ 126,150.00
Camping Area 224,875.00
Island Parking & Causeway
(subject to obtaining permit) 2,007,650.00
------------
TOTAL $2,358,675.00
</TABLE>
4. Additional overnight accommodations if demand justifies, no projected
cost. Total Existing Facilities, First-Year Development and Beyond =
$8,071,175.
14
<PAGE> 15
<TABLE>
============================================================================================================
<S> <C> <C>
Corps of Engineers Concession Name District
-----------------------------
Graduated Rent System Location
Rent Computation Form
- ------------------------------------------------------------------------------------------------------------
Period Gross Fixed Assets (G F A)
1 April 1969 - 31 March 1970 $100,000
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Classification of Income Break-even point Base Rate Balance of Income Rate
(Percent of G F A)
- ------------------------------------------------------------------------------------------------------------
Amounts % % % %
- ------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5) (6) (7) (8)
- ------------------------------------------------------------------------------------------------------------
Sales $ 72,000 60 70 .4200 1.50 .90 3.00 1.80
- ------------------------------------------------------------------------------------------------------------
Rents & 48,000 40 30 .1200 4.50 1.80 7.00 2.80
Services
- ------------------------------------------------------------------------------------------------------------
Total $120,000 100 .5400 2.70 4.60
- ------------------------------------------------------------------------------------------------------------
# Item Rate % Income Rent
- ------------------------------------------------------------------------------------------------------------
1 Composite Break-even point 54
(of G F A)
- ------------------------------------------------------------------------------------------------------------
2 Composite Base Rent 2.7
- ------------------------------------------------------------------------------------------------------------
3 Income below 1.4 $54,000 $756
Rent Computations Break-even
Point
- ------------------------------------------------------------------------------------------------------------
4 Income from 4.1 54,000 2,214
Break-even to
twice break-
even
- ------------------------------------------------------------------------------------------------------------
5 Balance of 4.6 12,000 552
Income
- ------------------------------------------------------------------------------------------------------------
6 Total Rent Due % of total income 2.9 $3,522
- ------------------------------------------------------------------------------------------------------------
7 Rent paid to Date (Fixed Minimum Rental, plus
percentage rental)
- ------------------------------------------------------------------------------------------------------------
8 Balance Due $
============================================================================================================
</TABLE>
EXHIBIT "B"
TO LEASE
SAMPLE RENTAL FORM
15
<PAGE> 16
DEPARTMENT OF THE ARMY
Corps of Engineers
Nashville District
Lease No. DACW62-1-88-83
Project: Wolf Creek Dam and
Lake Cumberland
FIRST SUPPLEMENTAL AGREEMENT
THIS SUPPLEMENTAL AGREEMENT, made and entered into by and between the Secretary
of the Army, of the first part, and Jamestown Resort and Marina, LTD, the
second part,
W I T N E S S E T H
WHEREAS, by Lease No. DACW62-1-88-83, dated 1 February 1988, the party of the
first part leased to the party of the second part approximately 287.45 acres,
more or less, for commercial concession purposes; and,
WHEREAS, the party of the first part has requested a modification of the rental
payment procedures as specified by Condition 2d of the subject lease; and,
WHEREAS, it is to the mutual advantage of the parties hereto that this
modification be approved;
NOW, THEREFORE, for and in consideration of the above premises and for other
good and valuable considerations, said lease is amended in the following
respect but in no others:
The lease is amended by changing the semiannual rental payment dates from 1
April and 1 October of each year to 1 January and 1 July of each year.
It is mutually understood and agreed between the parties hereto that all other
terms and conditions of said Lease No. DACW62-1-88-83 shall be and remain the
same.
<PAGE> 17
IN WITNESS WHEREOF, I have hereunto set my hand by authority of the Secretary
of the Army this 29th day of March, 1988.
/s/ Charles B. Hooper
-------------------------------------
CHARLES B. HOOPER
Chief, Real Estate Division
THIS LEASE is also executed by the lessee this 7th day of March, 1988.
BY: JAMESTOWN RESORT AND MARINA, LTD
JAMESTOWN RESORT AND MARINA, INC.,
GENERAL PARTNER
/s/ R. Dudley Webb
-------------------------------------
Chairman
I Glenn A. Hoskins, certify that I am the Secretary of Jamestown Resort and
Marina, Inc.; that R. Dudley Webb, who executed this assignment on behalf of
said corporation was then Chairman of same; that this instrument was duly
signed for and in behalf of said corporation by authority of its governing
body, and is within the scope of its corporate powers.
/s/ Glenn A. Hoskins
-------------------------------------
GLENN A. HOSKINS Secretary
-2-
<PAGE> 18
DEPARTMENT OF THE ARMY
NASHVILLE DISTRICT
CORPS OF ENGINEERS
Lease No. DACW62-1-88-83
Project: Wolf Creek Dam and
Lake Cumberland
SECOND SUPPLEMENTAL AGREEMENT
THIS SUPPLEMENT AGREEMENT, made and entered into between the Secretary
of the Army, of the first part, and Jamestown Resort and Marina, LTD, of the
second part,
W I T N E S S E T H
WHEREAS, by Lease No. DACW62-1-88-83, dated 1 February 1988, the party
of the first part leased to the party of the second part approximately 287.45
acres, more or less, for commercial concession purposes, for a term of 25
years; and
WHEREAS, the party of the second part has requested that a lease term
renewal clause be added allowing for a 25-year extension, assuming the party of
the second part is in satisfactory compliance with all lease conditions; and
WHEREAS, it is to the mutual advantage of the parties hereto that the
term renewal condition be added to said lease:
NOW THEREFORE, for and in consideration of the above premises and for
good and valuable considerations, said lease is amended in the following
respects, but in no others:
It is understood that said lease, upon expiration, shall be renewable
for an additional 25-year term without interruption. Said renewal, however,
shall be subject to the satisfactory compliance with all lease conditions
during its original term and subject to approval by the Government.
<PAGE> 19
IN WITNESS WHEREOF I have hereunto set my hand by authority of the Secretary of
the Army this 8th day of August, 1988.
/s/ D. Ray
------------------------
For CHARLES B. HOOPER
Chief, Real Estate Division
THIS LEASE is also executed by the lessee this 5th day of August 1988.
BY: JAMESTOWN RESORT AND MARINA, LTD
JAMESTOWN RESORT AND MARINA, INC.,
GENERAL PARTNER
/s/ R. Dudley Webb
------------------------------------
Chairman
I, Glenn A. Hoskins, certify that I am the Secretary of Jamestown Resort and
Marina, Inc.; that R. Dudley Webb, who executed this assignment on behalf of
said corporation was then Chairman of same; that this instrument was duly
signed for and in behalf of said corporation by authority of its governing
body, and is within the scope of its corporate powers.
/s/ Glenn A. Hoskins
-------------------------------------
GLENN A. HOSKINS - Secretary
STATE OF KENTUCKY )
) SCT
COUNTY OF RUSSELL )
I, Terry L. Stephens, Clerk of the Russell County Court, do hereby
certify that the foregoing supplemental Agreement was produced to me and lodged
for record in my said office on the 9th day of December, 1988 at 3:02 p.m.;
whereupon, I have recorded the same, the foregoing, and this certificate in
Deed Book 115, Page 207. Given under my hand this 9th day of December, 1988.
TERRY L. STEPHENS, CLERK:
BY: Jodie ________________, D.C.
<PAGE> 20
It was noted during the on-site inspection that a majority of the items
required within the first year development plan were under construction. A
more thorough review of items required within the first year will be conducted
on the next scheduled inspection in August of 1988 approximately eight months
within the first year of the lease.
4. Condition 5 states that at the commencement of this lease, the lessee
will obtain from a reputable insurance company and carry liability or indemnity
insurance providing for minimum limits of $500,000 per person in any one claim,
and aggregate limit of $1,000,000 for any number of periods on claims arising
from any one incident with respect to bodily injuries or death resulting
therefrom, and $100,000 for damage to property suffered or alleged to have been
suffered by any person or persons resulting from the operations of the lessee
under the terms of this lease. The present certificate on file has an
expiration date of 3-2-88. Please contact your insurance agent and have a
certificate of insurance with minimum limits of coverage forwarded to this
office.
5. Condition 10 states, in part, that the lessee shall maintain complete
and accurate records of all receipts and disbursements and such additional
records as the District Commander deems necessary to adequately reflect the
operations conducted on the premises. The lessee shall furnish to the District
Commander on or before 15 April following each operating or calendar year,
certified copies of his balance sheet, profit and loss statement, and a
statement of the total compensation (salaries, wages, bonuses, and dividends)
paid from the operations authorized by this lease. A financial statement from
the period 1-1-87 through 11-3-87 is due from the former lessee, the present
owners are required to submit a statement for the period 11-14-87 through
12-31-87.
6. Construction has also begun on the car and trailer parking and the
cabin/office building.
7. The inspection was conducted with Wallace Halcomb, Park Ranger, Lake
Cumberland Resource Manager's office.
8. The weather on the day of the inspection was sunny and mild.
*No unauthorized use of Government property was observed
DISK NO. 10A (CUMB-20)
<PAGE> 21
DEPARTMENT OF THE ARMY
CORPS OF ENGINEERS
NASHVILLE DISTRICT
Lease No DACW62-1-0083
Wolf Creek and Lake Cumberland
SECOND SUPPLEMENTAL AGREEMENT
THIS SUPPLEMENTAL AGREEMENT, made and entered into by and between the Secretary
of the Army of the first part, and Jamestown Resort and Marina, LTD, the second
part.
WHEREAS, by Lease No. DACW62-1-0083, dated 27 January, 1988, made and
entered into by the Secretary of the Army of the first part, and Jamestown
Resort and Marina, LTD, the second part, permission to use approximately 296.60
acres of land and water within the Wolf Creek and Lake Cumberland Project Area
for commercial concession purposes; and
WHEREAS, by First Supplement Agreement, dated 7 March, 1988, the party
of the first part modified the rental procedures as specified in Condition 2d
of the subject lease; and
WHEREAS, the party of the second part has requested that an additional
3.21 acres of land and water area be added to said lease area for commercial
concession purposes;
WHEREAS, the party of the first part has been directed to modify
Condition 9 of the subject lease to include a condition on fees charged at
commercial concessions;
WHEREAS, it has been administratively determined that the additional
acreage and lease modification is to be mutually beneficial to the parties
hereto, and in the public interest, and will not interfere with the primary
purpose of the project;
NOW THEREFORE, for and in consideration of the above premises and for
other good and valuable considerations, Lease No. DACW62-1-88-0083, is amended,
effective as of the date of execution of this Second Supplemental Agreement, in
the following particular but no others;
1. A Preliminary Assessment Screening (PAS) documenting the known
history of the additional land and water areas with regard to the storage,
release or disposal of hazardous substances thereon, is attached hereto and
made a part hereof as Exhibit "B-1". Upon expiration, revocation or
termination of this easement, another PAS shall be prepared which will document
the environmental condition of the property at that time.
<PAGE> 22
A comparison of the two assessments will assist the said officer in
determining any environmental restoration requirements. Any such requirements
will be completed by the lessee in accordance with Condition 18 on Restoration.
2. Designation of the Exhibit on page 1, line 9 of the granting
clause is amended by deleting from the words Exhibit "A" and substituting in
lieu thereof the following, "as shown on Exhibit "A-1", containing
approximately 299.81 acres of land and water" before the words "attached
hereto".
3. Condition 9 of the lease is amended by adding the following
paragraph after the word "basis". "Fees may be charged by the lessee for the
entrance to or use of the premises of any facilities, however, no user fees may
be charged by the lessee or its subleases for use of facilities developed in
whole or part with Federal funds if prohibited by 16 U.S.C. 460d-3, as
amended."
It is understood and agreed that all other terms and conditions of Lease
No. DACW62-1-88-0083 as supplemented, shall be and remain the same.
This Supplemental Agreement is not subject to Title 10, United States
Code, Section 2662.
IN WITNESS WHEREOF, I have hereunto set my hand this ____ day of
_______________, 1994, by direction of the Secretary of the Army.
----------------------------
WENDELL W. WILKINSON
Chief, Real Estate Division
<PAGE> 23
THIS AGREEMENT is also executed by the lease this ____ day of
__________________, 1994.
BY: JAMESTOWN RESORT AND MARINA, LTD
JAMESTOWN RESORT AND MARINA, INC.,
GENERAL PARTNER
/s/ R. Dudley Webb, Chmn.
----------------------------------
Chairman
I, Frank Barker, certify that I am the Assistant Secretary of Jamestown Resort
and Marina, Inc., and R. Dudley Webb, who executed this assignment on behalf of
said corporation was then Chairman of same; that this instrument was duly
signed for and in behalf of said corporation by authority of its governing
body, and is within the scope of its corporate powers.
<PAGE> 24
<TABLE>
<CAPTION>
=============================================================================================================================
REPORT OF COMPLIANCE INSPECTION OF ARMY AND AIR FORCE PROPERTY OCCUPIED UNDER
LEASE, LICENSE, EASEMENT OR PERMIT
(ER 405-1-11 and EP 405-1-2)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
PROJECT LOCATION DATE OF INSPECTION
Lake Cumberland 22 March 1988
- -----------------------------------------------------------------------------------------------------------------------------
PROPERTY NAME OR DESCRIPTION
Jamestown Resort and Marina, LTD
- -----------------------------------------------------------------------------------------------------------------------------
NAME OF LESSEE, LICENSE, USER OR PERMITTEE
Jamestown Resort and Marina, LTD (Mr. Dudley Webb, Chairman)
- -----------------------------------------------------------------------------------------------------------------------------
INSTRUMENT INTEREST OR RIGHT GRANTED
- ----------------------------------------------------------------- Commercial Consession
- -----------------------------------------------------------------
TYPE [x] LEASE [ ] EASEMENT
[ ] LICENSE [ ] PERMIT
- -----------------------------------------------------------------
NUMBER
DACW62-1-88-83
- -----------------------------------------------------------------
EFFECTIVE DATE EXPIRATION DATE
1-1-1988 12-31-2012
- -----------------------------------------------------------------------------------------------------------------------------
ANNUAL RENTAL COMPLIANCE WITH TERMS OF ASSIGNMENT
4,000 + GRS [x] SATISFACTORY [ ] UNSATISFACTORY
- -----------------------------------------------------------------------------------------------------------------------------
RECOMMENDATIONS AND REMARKS
1. Condition 2c of this lease states, in part, that payment of rental be on as current a basis as possible. Reports of
income will be quarterly (cumulative on an annual basis). Rental will be calculated and payment made by the 10th day of
the month following the reporting period. Rental reports of income are current.
2. Condition 2d of this lease states, in part, that the lessee shall pay $4,000 as a fixed minimum rental which shall be
payable semi-annually on or before 1 January and 1 July of each year. The semi-annual rental is current.
3. Condition 3c states, in part, that the lessee shall commence the development of the premises within six months after
the date of delivery of this lease to the lessee, and shall have the facilities and services enumerated on Exhibit "C"
available to the general public within the periods of time stated on said Exhibit "C".
Facilities and services to be provided during the first year of the lease (1 Jan 88 through 31 Dec 88):
Items
Remove some existing facilities
380 additional boat slips of varied sizes
Service dock
Parking Lot
25 rental houseboats
- -----------------------------------------------------------------------------------------------------------------------------
SIGNATURE OF INSPECTOR
JOE R. PENDERGRAST /s/ Joe R. Pendergrast
- -----------------------------------------------------------------------------------------------------------------------------
DISTRICT REPORT APPROVED (Signature of Chief Real Estate
Division)
/s/ Charles B. Hooper
NASHVILLE CHARLES B. HOOPER
=============================================================================================================================
</TABLE>
ENG FORM 3131 1 JUN 60 DISK NO. 10A (CUMB-20)
<PAGE> 25
ARTICLES OF INCORPORATION
OF
SONOMA QUICKSILVER MINES, INC.
* * * * * *
KNOW ALL MEN BY THESE PRESENTS;
That the undersigned do hereby associate themselves into a corporation
under and by virtue of an Act of the Legislature of the State of Nevada,
entitled "An Act Providing a General Corporation Law", approved March 21, 1925,
and all acts amendatory thereof and/or additional thereto, and do hereby
certify and adopt the following Articles of Incorporation.
ARTICLE I.
The name of the corporation is:
SONOMA QUICKSILVER MINES, INC.
ARTICLE II.
The location of the principal office of the company in the State of
Nevada is Room 211, No. 206 North Virginia Street, Reno, Nevada. Branch
offices may hereafter be established at such other place or places, either
within or without the State of Nevada, as may from time to time be determined
by the Board of Directors.
ARTICLE III.
The purposes for which said corporation be formed are:
(a) To carry on the business of mining, milling,
concentrating, converting, smelting, preparing for market,
manufacturing, buying, selling, exchanging and otherwise producing and
dealing in gold, silver, copper, lead, zinc, brass, iron, steel,
quicksilver, tungsten and all kinds of ores, metals and minerals, and
the products and by-products
- 1 -
<PAGE> 26
thereof of every kind and description and by whatsoever process the same
can or may hereafter be produced, and generally and without limit as to
amount, to buy, sell, exchange, lease, acquire and deal in lands, mines
and mineral rights and claims, and to conduct all business appertaining
thereto; to locate, purchase, lease or otherwise acquire, mining rights,
timber rights, oil and gas rights, mines, buildings, dwellings,
reduction plants and/or smelters, machinery, tools and other properties
whatsoever which this corporation may from time to time find to be for
its advantage and purposes; to mine and market any mineral or other
product that may be found in or on such lands, and to explore, work,
exercise, develop or turn to account the same; to construct and operate
railways and tramways for mining and moving said ores and the products
thereof, to build and lease houses for the use of miners and others,
including the purchase and sale of same;
(b) To subscribe for or cause to be subscribed for, to
purchase or otherwise acquire; to undertake and/or assume; to guarantee,
hold, own, control and/or manage; to sell, assign, transfer, exchange
and/or otherwise dispose of the whole or any part of the shares of the
capital stock, bonds, coupons, mortgages, deeds of trust, debentures,
securities, collateral, obligations, evidence of indebtedness, notes,
good will, rights, assets and property of any and every kind or
description, or any part thereof, of any other person or persons, firm
or firms, government or governments, corporation or corporations,
association or associations, and also shares, rights, units or interest
in or in respect of any trust estate now or hereafter existing, and
whether created by or under the laws of the State of Nevada, or any
other state, territory or country; and to operate, manage and control
such properties, or any of them, either in the name of such firms,
corporations, associations, persons and trust estates, or the trustees
thereof, or in the name of this corporation, and while the owner,
holder, assignee, underwriter or manager thereof, to exercise all the
rights, powers and privileges of ownership thereof of every kind and
description, including any right to vote thereon, or respecting the
same, with power to designate some person or persons for that purpose
from time to time, and to the same extent as natural persons might or
could do;
(c) To own, acquire, buy and sell real estate and any interest
of any kind whatsoever therein and to carry on a general real estate and
construction business in connection therewith;
(d) To do each and every thing necessary, suitable or proper
for the accomplishment of any of the purposes, or the attainment of any
one or more of the objects herein enumerated, or which shall at any time
appear conducive to or expedient for the protection or benefit of this
corporation;
The enumeration of the foregoing powers shall not in anywise be deemed
to be a limitation upon the powers of the corporation, but shall be in
furtherance of and in addition to
- 2 -
<PAGE> 27
the powers which it is authorized to exercise under "'An Act to Provide a
General Corporation Law", approved March 21, 1925, and acts amendatory and
supplemental thereto.
ARTICLE IV.
The total authorized capital stock of the corporation is Twenty Thousand
Dollars ($20,000.00), divided into two hundred thousand (200,000) shares of the
par value of Ten Cents (10c.) each.
ARTICLE V.
The capital stock of this corporation, after the amount of the
subscription price has been fully paid in, shall be non-assessable and shall
not be subject to assessment to pay the debts of the corporation.
ARTICLE VI.
Members of the Governing Board shall be known as "Directors" and the
number thereof shall be not less than three nor more than seven, the exact
number to be fixed by the By-Laws of the corporation, provided that the number
so fixed by the By-Laws may be increased or decreased from time to time.
The name and addresses of the first Board of Directors are as follows:
NAME ADDRESS
---- -------
H.D. Tudor 35 Congress Street,
Boston, Massachusetts
C. Loring 206 N. Virginia St.,
Reno, Nevada
V. Birks 206 N. Virginia St.,
Reno, Nevada
- 3 -
<PAGE> 28
ARTICLE VII.
The name and post office addresses of each of the subscribers signing
the Article of Incorporation are as follows:
NAME ADDRESS
---- -------
C. Loring 206 N. Virginia St.,
Reno, Nevada
V. Birks 206 N. Virginia St.,
Reno, Nevada
P. R. Weber 206 N. Virginia St.,
Reno, Nevada
ARTICLE VIII.
A resolution in writing, signed by all the members of the Board of
Directors, shall be and constitute action by the said Board of Directors to the
effect therein expressed, with the same force and effect as though such
resolution had been passed at a duly convened meeting, and it shall be the duty
of the secretary to record every such resolution in the minute book of the
company, under its proper date.
ARTICLE IX.
This corporation is to have perpetual existence.
ARTICLE X.
The directors shall have the power to make and alter the By-Laws of the
corporation. By-Laws made by the directors under the power so conferred may be
altered, amended or repealed by the directors or by the stockholders at any
meeting called and held for that purpose.
- 4 -
<PAGE> 29
ARTICLE XI.
All treasury stock of this corporation may be sold by the Board of
Directors of the company at either public or private sale or by offering the
same for subscription upon such terms, conditions and at such price as the
Board of Directors shall from time to time deem proper, and it shall not be
necessary for the Board of Directors to offer to the stockholders of the
corporation any new stock of the company, and a stockholder shall not have the
right to purchase his pro rata share of any new stock or of treasury stock of
the company at the price at which it is offered to others, unless the Board of
Directors shall deem such action advisable.
IN WITNESS WHEREOF, we have hereunto set our hands and seals, and
executed these presents, this 10th day of June, 1940.
/s/ C. Loring (SEAL)
------------------------
/s/ V. Birks (SEAL)
------------------------
/s/ P. R. Weber (SEAL)
------------------------
- 5 -
<PAGE> 30
STATE OF NEVADA, )
) SS.
COUNTY OF WASHOE. )
On this 10th day of June, 1940, before me the undersigned, Audrey
Annetti, a Notary Public in and for the County and State aforesaid, personally
appeared C. LORING, V. BIRKS and P. R. WEBER, known to me to be the persons
described in and who executed the foregoing Articles of Incorporation, who
acknowledged to me that they examined the same freely and voluntarily and for
the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Audrey Annetti
-------------------------------
- 6 -
<PAGE> 31
DEPARTMENT OF THE ARMY
NASHVILLE DISTRICT
CORPS OF ENGINEERS
Lease No. DACW61-1-88-83
Project: Wolf Creek - Lake Cumberland
THIRD SUPPLEMENTAL AGREEMENT
THIS SUPPLEMENTAL AGREEMENT, made between the Secretary of the Army of the
first part, and the Jamestown Resort and Marina, LTD, of the second part,
W I T N E S S E T H:
WHEREAS, by Lease No. DACW62-1-88-83, dated 1 February, 1988, the party of the
first part leased unto the party of the second part, approximately 287.45 acres
of land and water areas, more or less, for commercial concession purposes.
WHEREAS, due to the current public demand for expanding facilities, it is to
the mutual advantage of the parties hereto that the lease area be increased to
allow for additional facilities;
NOW THEREFORE, said lease is amended in the following respects, but in no
others:
The parcel description on page 1 of the basic lease, the survey
description in Exhibit "A" are deleted in their entirety and substituted in
lieu thereof the following:
A tract of land containing 296.60 acres of land and water, more or less,
situated in Russell County, Kentucky, said tracts of land being portions
of the Corps of Engineers, Real Estate Segment Map O, being land
acquired in fee by the United States of America for the Wolf Creek -
Lake Cumberland Project. Said tracts of land are as more particularly
shown on Exhibit "A-1", attached hereto and made a part hereof.
It is mutually understood and agreed by the parties hereto that all other terms
and conditions of the lease shall be and remain the same and no oral or other
promise of any character made by an individual allegedly speaking for the
Government shall be binding under this Supplemental Agreement unless expressly
stated herein.
<PAGE> 32
IN WITNESS WHEREOF I have hereunto set my hand by authority of the Secretary of
the Army this 10th day of October, 1989.
/s/ Charles B. Hooper
---------------------------------------------
CHARLES B. HOOPER
Chief, Real Estate Division
THIS AGREEMENT is also executed by the lessee this 28th day of September 1989.
BY: JAMESTOWN RESORT AND MARINA, LTD
JAMESTOWN RESORT AND MARINA, INC.,
GENERAL PARTNER
/s/ R. Dudley Webb
---------------------------------------------
CHAIRMAN
I, Glenn A. Hoskins, certify that I am the Secretary of Jamestown Resort and
Marina, Inc.; that R. Dudley Webb, who executed this assignment on behalf of
said corporation was then Chairman of same; that this instrument was duly
signed for and in behalf of said corporation by authority of its governing
body, and is within the scope of its corporate powers.
/s/ Glenn A. Hoskins
---------------------------------------------
GLENN A. HOSKINS - Secretary
2
<PAGE> 33
[NOTE: ATTACHED TO THIS ORIGINAL DOCUMENT WAS THE FOURTH SUPPLEMENTAL
AGREEMENT WITH PRELIMINARY ASSESSMENT SCREENING NOTICE OF FINDINGS.
THE FOURTH SUPPLEMENT AGREEMENT AND ATTACHED HAS CREATED IN DOCUMENT NO.
1550734.01]
3
<PAGE> 34
DEPARTMENT OF THE ARMY
CORPS OF ENGINEERS
NASHVILLE DISTRICT
Lease No. DACW62-1-88-0083
Wolf Creek and Lake Cumberland
FOURTH SUPPLEMENTAL AGREEMENT
THIS SUPPLEMENTAL AGREEMENT, made and entered into by and between the Secretary
of the Army of the first part, and Jamestown Resort and Marina, LTD, the second
part.
WHEREAS, by Lease No. DACW62-1-88-0083, dated 27 January, 1988, made and
entered into by the Secretary of the Army of the first part, and Jamestown
Resort and Marina, LTD, the second part, permission to use approximately 296.60
acres of land and water within the Wolf Creek and Lake Cumberland Project Area
for commercial concession purposes; and
WHEREAS, the party of the second part has requested that an additional
3.21 acres of land and water area be added to said lease area for commercial
concession purposes;
WHEREAS, the party of the first part has been directed to modify
Condition 9 of the subject lease to include a condition on fees charged at
commercial concessions;
WHEREAS, it has been administratively determined that the additional
acreage and lease modification is to be mutually beneficial to the parties
hereto, and in the public interest, and will not interfere with the primary
purpose of the project;
NOW, THEREFORE, for and in consideration of the above premises and for
other good and valuable considerations, Lease No. DACW62-1-88-0083, is amended,
effective as of the date of execution of this Fourth Supplemental Agreement, in
the following particular but no others:
1. A Preliminary Assessment Screening (PAS) documenting the known
history of the additional land and water areas with regard to the storage,
release or disposal of hazardous substances thereon, is attached hereto and
made a part hereof as Exhibit "B-1". Upon expiration, revocation or termination
of this lease, another PAS shall be prepared which will document the
environmental condition of the property at this time.
A comparison of the two assessments will assist the said officer in
determining any environmental restoration requirements. Any such requirements
will be completed by the lessee in accordance with Condition 18 on Restoration.
<PAGE> 35
2. Designation of the Exhibit on page 1, line 9 of the granting
clause is amended by deleting from the words Exhibit "A" and substituting in
lieu thereof the following, " as shown on Exhibit "A-1", containing
approximately 299.81 acres of land and water" before the words " attached
hereto".
3. Condition 9 of the lease is amended by adding the following
paragraph after the word "basis". " Fees may be charged by the lessee for the
entrance to or use of the premises or any facilities, however, no user fees may
be charged by the lessee or its subleases for use of facilities developed in
whole or part with Federal funds if prohibited by 16 U. S. C. 460d-3, as
amended."
It is understood and agreed that all other terms and conditions of Lease
No. DACW62-1-88-0083 as supplemented, shall be and remain the same.
This Supplemental Agreement is not subject to Title 10, United States
Code, Section 2662.
IN WITNESS WHEREOF, I have hereunto set my hand this 15th day of
September 1994, by direction of the Secretary of the Army.
/s/ W. W. Wilkinson
---------------------------------------------
WENDELL W. WILKINSON
Chief, Real Estate Division
THIS AGREEMENT is also executed by the lease this 15th day of September 1994.
/s/ R. Dudley Webb, Chmn.
---------------------------------------------
BY: JAMESTOWN RESORT AND MARINA, LTD
JAMESTOWN RESORT AND MARINA, INC.,
GENERAL PARTNER
I, Frank Barber, certify that I the Asst. Secretary of Jamestown Resort
and Marina, Inc., and R. Dudley Webb, who executed this assignment on behalf of
said corporation was then Chairman of the same; that this instrument was duly
signed for and in behalf of said corporation by authority of its governing
body, and is within the scope of its corporate powers.
2
<PAGE> 36
PRELIMINARY ASSESSMENT SCREENING
NOTICE OF FINDINGS
The information contained in this notice is required under the authority of
regulations promulgated under section 120(h) of the Comprehensive Environmental
Response, Liability, and Compensation Act, as amended (CERCLA) 42 U.S.C.
9620(h).
1. REAL PROPERTY TRANSITION: Supplemental Agreement to Lease No.
DACW62-1-88-0083, Jamestown Resort and Marina, LTD, encumbering 3.21 acres of
land and water, more or less, on the waters of Greasy Creek, a tributary of
Cumberland River, Wolf Creek Reservoir, Ohio River Division, County of Russell,
State of Kentucky.
2. COMPREHENSIVE RECORDS SEARCH: The Grantor has made a complete search of
its records concerning the property subject to this contract. The records
search, completed on June 1, 1994, consisting of the tracts indicated on the
Supplemental Agreement, Tract Numbers O-1535 and O-1536. The following is a
summary of the records searched:
Final Environmental Impact Statement, Wolf Creek Dam, Lake Cumberland,
Kentucky, dated March 1976
Forest, Fish, and Wildlife Management Plan, Lake Cumberland, dated August 1977
Master Plan, Wolf Creek Dam, Lake Cumberland Project, Kentucky, dated September
1987
Operational Management Plan, Part II, Lake Cumberland, dated July 1989
Contract No. DACW62-1-88-0083, Jamestown Resort and Marina, LTD, dated January
1, 1988
Review of the records and files in the Operations, Construction, and Readiness
Division, Safety and Occupational Health Office, Logistics Management Office,
Environmental Resource Branch, and the Real Estate Division including but not
limited to area and tract maps, titles, deeds, descriptions, leases, and other
historical data.
3. SITE DESCRIPTION: Jamestown Resort and Marina is located approximately
13 miles upstream of the Wolf Creek Dam at the mouth of the Greasy Creek
Embayment. It is directly across from the Lake Cumberland State Park Dock.
Water service is provided by the City of Jamestown. Sewage is pumped to two
state-approved septic systems. The marina provides vessel pump-out facilities
without charge to the public with purchase of fuel, or for a fee without fuel
purchase. Solid waste is compacted on-site and disposed of through a contract.
Used oil is recycled by providing the oil to an oil company at no charge. Any
required pest control services
EXHIBIT B-1 1
<PAGE> 37
are provided under contract. The marina operates four underground storage tanks
(USTs) and one above ground tank (AST).
An on site environmental evaluation was completed by Mr. Gary L. Davis, Park
Ranger, Wolf Creek Dam and Lake Cumberland Project on March 31, 1994. The
visual topography of the area is described as steep and precipitous. Tract
O-1535 includes approximately two-thirds of an island connected by a man-made
causeway and some shoreline; the rest inundated by the waters of Lake
Cumberland. This tract contains sewer pipelines, gasoline lines, and underwater
telephone lines. Fill material was used to create the man-made causeway and
boat ramp. Tract O-1536 is inundated by the waters of Lake Cumberland and some
shoreline.
4. ON SITE ASSESSMENT: An Environmental Review for Operations (ERGO) was
conducted on August 4, 1992 by Kathryn Lachicotte, Realty Specialist,
CEORN-RE-M, Maurice Simpson, CEORN-CO-R, Craig Shoe, Assistant Resource
Manager, Lake Cumberland, and Mr. Ronnie Keith, Project Environmental
Compliance Coordinator for Wolf Creek Dam and Lake Cumberland Project. The
existing leased area to Jamestown Resort and Marina, LTD presently includes
portions of Tract Numbers O-1535 and O-1536. Concerns which were discussed are
as follows:
The marina operates four underground storage tanks (USTs), totalling 30,500
gallon capacity, and one 10,000 gallon above ground tank (AST). The USTs are
properly registered with the state of Kentucky. Phase-in requirements will have
to be installed prior to the appropriate deadline dates. The manager has access
to UST regulations and requirements.
The above ground storage tank is located in an earthen containment area with
concrete walls. Spills or leaks from this tank would likely be absorbed into
the soil, and migrate down the steep slope to the lake. While the tank meets
current State Fire Marshall requirements for containment, it would not meet
proposed new federal Environmental Protection Agency requirements for
impermeable containment, nor does it meet the intent of various regulations
designed to minimize the potential for environmental contamination. Facilities
with above-ground storage tanks larger than 660 gallons are required to have a
site-specific Spill Control and Countermeasures (SPCC) Plan in accordance with
40 CFR 112. This plan is to outline measures to prevent, contain, and respond
to a spill from an AST. Jamestown Resort had not prepared the required SPCC
Plan. The marina did not have absorbent booms, pad, or pillows to respond to a
spill of petroleum or other hazardous liquids.
Personnel employed by Jamestown Resort and Marina, LTD lack awareness of
environment laws and regulations which resulted in a number concerns. Strong
corrosive liquids, such as hydrochloric acid, sulfuric acid, bleach, and
phosphoric acid were intermixed with flammable materials and pesticides. Some
corrosive materials were stored above eye level, resulting in potential eye
hazards to employees removing these chemicals from the shelves. No eyewash
facilities were available in most instances to respond to contact with harmful
chemicals.
EXHIBIT B-1 2
<PAGE> 38
Pesticides and other hazardous chemicals were stored directly adjacent
to foods, or food preparation, storage, and eating areas. The marina did not
maintain Material Safety Data Sheets (MSDS) for commonly used chemicals. Used
oil was stored randomly in unmarked, deteriorated containers, or in containers
marked with other contents. Gasoline was stored in a 55-gallon drum marked
"Penzoil" at the boat rental shop. Pesticide sprayers were observed without
labeling. All containers should be clearly labeled with current contents.
Pesticide (Dursban), highly toxic to fish and aquatic life, was stored in
overwater storage areas, where spills would fall through cracks in the dock
floor directly into the lake. Batteries were scattered in various areas, and
were not stored above or within acid proof containers or flooring. Neutralizing
agents, such as baking soda, should be kept in a convenient location to
neutralize potential spills or leak of battery acid. Compressed gas cylinders
(C02) were stored unsecured in a main entryway. All gas cylinders should be
chained or otherwise secured in an upright position, away from flammable
materials, and away from doorways or main walkways.
Potentially hazardous materials are likely to be stored and used at most
any developed property. Items such as household cleaners, used oils, etc.,
could be expected to be found routinely. These often would not be a factor in a
site review because quantities would be small and depleted as a part of normal
daily operations. Jamestown Resort and Marina personnel should achieve
adequate knowledge required in the management of potentially hazardous
materials and chemical material management. Evidence of waste streams for the
area were surveyed during the Corps environmental review, such as those
generated through maintenance and repair activities, gasoline dock, tanks,
restaurant, and solid waste. Boats stored at marinas undergo periodic cleaning
and maintenance while in the water and parking areas. Such activities utilize
cleaners, solvents, and chemicals that runoff or leach into the waterway.
Increased usage will result in increased water pollution if certain guidelines
and controls are not implemented. Management was not aware of specific
requirements for identifying hazardous waste streams or disposal of hazardous
wastes. A number of apparently old containers of paints, solvents, and other
chemicals were observed which may no longer be usable. Spent solvents, spent
batteries, waste oil-based paints, pesticide wastes, etc. may be generated on
site. Waste created through such activities shall be controlled and placed in
an area specifically designated for the collection of suspected hazardous waste
for removal. No records were available of any disposal of hazardous wastes.
The visual site inspection reflected no other unnatural land or surface
features.
5. FINDINGS: A PAS was performed on July 6, 1994 to determine if any
hazardous substances were stored or released that would prohibit the transfer
of the aforementioned tract. The conclusion of this PAS is that:
In addition to known potential contaminants, it is likely that former
owners/operators stored and handled various hazardous materials and substances.
Spills and releases may have occurred within the vicinity of the above
referenced area. There are no known problems on Tract Nos. O-1535 and O-1536
resulting from this activity. The Government, since acquisition, has
EXHIBIT B-1 3
<PAGE> 39
exercised adequate controls over the land, water, and other resource use. The
conclusion of this PAS is that no specific environmental concerns have been
identified that would significantly affect the outgranting of this property.
6. This PAS serves as documentation for the known and suspected hazardous
substance contamination conditions of the property scheduled for lease to
Jamestown Resort and Marina, LTD. The proposed real estate transaction of
leasing these government lands should proceed as planned.
SIGNED: /s/ Kathryn Lachicotte Date: 7 July 94
------------------------------------- ----------------
Prepared by: Kathryn Lachicotte
Realty Specialist
Management and Disposal Branch
SIGNED: /s/ William O. Barnes Date: 7/7/94
------------------------------------- ----------------
Prepared by: William O. Barnes
Chief, Management and Disposal Branch
Real Estate Division
SIGNED: /s/ William W. Wilkinson Date: 7-8-94
------------------------------------- ----------------
Approved by: Wendell W. Wilkinson
Chief, Real Estate Division
SIGNED: /s/ Date: 8/1/94
------------------------------------- ----------------
President
Jamestown Resort and Marina, LTD
Jamestown, Kentucky
EXHIBIT B-1 4
<PAGE> 40
DEPARTMENT OF THE ARMY
CORPS OF ENGINEERS
NASHVILLE DISTRICT
Lease No. DACW62-1-88-83
Wolf Creek Dam - Lake Cumberland
FIFTH SUPPLEMENTAL AGREEMENT
THIS SUPPLEMENTAL AGREEMENT, (the "Agreement") made and entered into by
and between the Secretary of the Army ("SA") and Jamestown Resort & Marina,
Ltd. ("JSM").
WITNESSETH:
WHEREAS, the parties hereto entered into Lease No. DACW62-1-88-83 dated
February 1, 1988, ("Original Lease") a First Supplemental Agreement dated March
7, 1988 by JSM and March 29, 1988 by SA, ("First Sup") a Second Supplemental
Agreement signed August 5, 1988 by JSM and August 8, 1988 by SA, ("Second Sup")
and Third Supplemental Agreement signed September 28, 1989 by JSM and October
10, 1989 by SA, ("Third Sup") a Fourth Supplemental Agreement signed by JSM and
SA on September 15, 1994, ("Fourth Sup") (all of which are hereinafter
collectively sometimes referred to as the "Lease"); and
WHEREAS, JSM has caused to be made a new Survey of the demised property
by GRW Engineers, Inc., Lexington, Kentucky, dated March, 1996, (the "Survey")
and thereby ascertained that the demised premises contains approximately 9
acres less than contemplated by the Original Lease, the Third Sup and the
Fourth Sup; and
WHEREAS, the parties hereto are desirous of clarifying and correcting
the legal description of the demised premises to accurately reflect the correct
legal description; and
<PAGE> 41
WHEREAS, the parties hereto accept the Survey for all purposes,
including, without limitation, transferring the leasehold interest of JSM; and
WHEREAS, it has been administratively determined that the correction of
acreage and the execution, delivery and recording of this Agreement is mutually
beneficial to the parties hereto and in the public interest and will not
interfere with the primary purpose of the Lease,
NOW, THEREFORE, in consideration of the above premises and for other
good and valuable consideration, the receipt, sufficiency and adequacy of which
is hereby acknowledged, the parties hereto agree as follows:
1. A copy of said Survey is marked as Exhibit A-1 and is attached
hereto and incorporated by reference herein. The parties recognize that the
size of the Survey necessitates that the copy attached to this Agreement for
recording purposes will be greatly reduced in size and clarity.
2. The demised premises as described in the Original Lease, the
First Sup, Second Sup, Third Sup and Fourth Sup is hereby deleted in their
entirety and the legal description contained on Exhibit B attached hereto and
incorporated by reference herein is substituted in lieu thereof.
3. Multiple copies of this Agreement may be executed, each of which
shall be deemed an original.
4. All other terms and conditions of the Original Lease, the First
Sup, Second Sup, Third Sup and Fourth Sup shall be and remain the same.
IN WITNESS WHEREOF, I have hereto set my hand by authority of the
Secretary of Army this 13th day of March, 1996. For purposes of certain
documents recorded subsequent
<PAGE> 42
to the recording of this Agreement, the date of this Agreement may be referred
to as March 21, 1996.
/s/ William O. Barnes
-------------------------------------
William O. Barnes
Acting Chief, Real Estate Division
THIS AGREEMENT is also executed by JSM this 4th day of March, 1996.
JAMESTOWN RESORT & MARINA, LTD.
By: JAMESTOWN RESORT & MARINA, INC.,
GENERAL PARTNER OF JAMESTOWN RESORT &
MARINA, LTD.
By:/s/ R. Dudley Webb
----------------------------------
R. DUDLEY WEBB
Its: Chairman
I, Glenn A. Hoskins, certify that I am the Secretary of Jamestown Resort
& Marina, Inc.; that R. Dudley Webb, who executed this Fifth Supplemental
Agreement on behalf of Jamestown Resort & Marina, Inc., General Partner of
Jamestown Resort & Marina, Ltd., was then Chairman of said corporation; that
this instrument was duly signed for and on behalf of said corporation by
authority of its governing body, and is in within the scope of its corporation
powers.
/s/ Glenn A. Hoskins
-------------------------------------
GLENN A. HOSKINS, Secretary
<PAGE> 43
STATE OF TENNESSEE
COUNTY OF DAVIDSON
BEFORE ME, Patricia W. Cheny, a Notary Public in and for the State of
Tennessee at Large, personally appeared William O. Barnes, Acting Chief, Real
Estate Division, U.S. Army Corps of Engineers, Nashville District, to me known
to be the identical person and officer whose name is subscribed to the
foregoing instrument, and acknowledged to me that he executed the said
instrument by authority of the Secretary of the Army for the purposes therein
expressed as the act and deed of the United States of America.
Given under my hand and seal, this 13th day of March, 1996
Patricia W. Cheny
Notary Public
State of Tennessee at Large
My Commission Expires:
July 27, 1996
<PAGE> 44
EXHIBIT B
BEING a tract of land and water containing 291 acres, more or less, situated in
Russell County, Kentucky, said tract being portions of the Corps of Engineers,
Real Estate Segment map O, being leased to Jamestown Resort and Marina, Ltd. by
the Secretary of the Army by Lease No. DACW62-1-88-83, dated February 1, 1988,
as amended by that First Supplemental Agreement dated March 29, 1988, both
instruments being attached to that "Notice of Lease and First Supplemental
Agreement", of record in Deed Book 112, Page 426, in the Russell County Clerk's
Office, as modified by (i) that "Second Supplemental Agreement" dated August 8,
1988, of record in Deed Book 115, page 207, (ii) that "Third Supplemental
Agreement" dated October 10, 1989, of record in Lease Book 42, Page 185, in the
aforesaid clerk's office, and (iii) that "Fourth Supplemental Agreement" dated
September 15, 1994, of record in Lease Book 42, Page 187, in the aforesaid
clerk's office, and being more particularly described as follows, to-wit:
Beginning at Corps of Engineers (COE) monument number 0-1533-1, a
point in the United States Department of the Army, Corps of
Engineers boundary located approximately 3 miles south along
State Route 92 from its intersection with U.S. Route 127 in
Jamestown, Kentucky;
Thence along said boundary for three calls as follows: North 80
degrees 57 minutes 27 seconds East a distance of 712.52 feet to a
COE monument no. 0-1533-2, North 86 degrees 40 minutes 10 seconds
East a distance of 269.22 feet to a COE monument no. 0-1533-3,
and South 07 degrees 13 minutes 18 seconds East a distance of
884.25 feet to a point in the COE boundary, thence leaving said
boundary South 41 degrees 00 minutes 00 seconds West a distance
of approximately 205.78 feet to a point at the maximum power pool
level (723 Mean Sea Level) of Lake Cumberland on the east side of
an embayment near the mouth of Greasy Creek;
Thence south along said pool level (723 Mean Seal Level)
approximately 4,100 feet;
Thence across the lake for two calls as follows: South 64
degrees 00 minutes 00 seconds West a distance of approximately
2226.52 feet, and North 40 degrees 00 minutes 00 seconds West a
distance of approximately 594.95 feet to a point at the maximum
power pool level (723 M.S.L.) on the west side of the embayment;
Thence northwest along said pool level approximately 4,650 feet;
thence for four calls as follows: North 01 degrees 00 minutes 00
seconds West a distance of 739.42 feet, North 71 degrees 15
minutes 00 seconds East a distance of 800.00 feet, North 12
degrees 12 minutes 15 seconds East a distance of 450.00 feet, and
<PAGE> 45
North 75 degrees 00 minutes 00 seconds East a distance of 708.43
feet to a point in the Corps of Engineers boundary;
Thence along said boundary for seven calls as follows: South 08
degrees 43 minutes 02 seconds West a distance of 61.91 feet to a
COE monument no. 0-1539-A7, South 10 degrees 09 minutes 37
seconds East a distance of 136.44 feet to a COE monument no. 0-
1539-A6, South 52 degrees 44 minutes 40 second East a distance of
122.31 feet to a COE monument no. 0-1539-A5, North 51 degrees 44
minutes 37 seconds East a distance of 149.35 feet to a COE
monument no. 01-1539-A4, North 31 degrees 24 minutes 54 seconds
East a Distance of 71.87 feet to a COE monument no. 0-1539-A3,
North 12 degrees 54 minutes 11 seconds West a distance of 76.97
feet to a COE monument no. 0-1539-A2, and North 14 degrees 09
minutes 30 seconds East a distance of 119.00 feet to a point in
the COE boundary; thence leaving said Corps of Engineers boundary
North 75 degrees 00 minutes 00 seconds East for a distance of
303.05 feet to a point in the Corps of Engineers boundary; thence
along said boundary south 80 degrees 45 minutes 20 seconds East
for a distance of 180.00 feet to the point of beginning and
containing approximately 291 acres;
including in the lease area are Kentucky Department of Highways
right of ways associated with KY 92 and easements assumed by the
City of Jamestown for their water lines and by the South Kentucky
Rural Electric Cooperative Corporation for their power lines.
<PAGE> 46
BEING a portion of the same property conveyed to the United States of American
for the Wolf Creek Dam-Lake Cumberland Project, through the following
instruments:
<TABLE>
<CAPTION>
DATE OF DEED PAGE C/A D/T
TRACT NO. FORMER OWNER DEED OR D/T BOOK NO. NO. NO.
--------- ------------ ----------- ---- ---- --- ---
<S> <C> <C> <C> <C> <C> <C>
0-1533 E.E. Cook 7/17/48 25 386
0-1534 Russell Co. B. of Educ. 6/24/48 284 1
0-1535 Edna Canada, et vir 6/26/48 25 343
0-1536 J.D. Miller, et ux 5/22/48 25 259
0-1537A Mary A. Beck 5/30/48 25 248
0-1539 Mattie Cook et al 9/1/48 293 1
0-1547 Thenora Humble, et vir 6/25/48 25 338
0-1574 Florence Walters 5/29/48 25 276
0-1580 M.C. Topping, et ux 6/11/48 25 302
0-1581 Melvin A. Smith et ux 8/17/48 25 490
</TABLE>
STATE OF KENTUCKY, COUNTY OF RUSSELL _____SCT
I, Brigette Popplewell, Clerk of Russell County, certify that on the 21
day of March, 1996 the foregoing Lease was produced to me certified as above
and lodged for record at ___________ whereupon I have recorded the same,
together with this certificate the 21 day of March 1996 in Lease Book 42, Page
269.
<PAGE> 1
EXHIBIT 10.2
KEY WEST CONCH HARBOR
INDEX TO STAR DEALER CONTRACT PACKAGE
1. GUIDELINES FOR PRODUCT SALES AGREEMENT
2. PRODUCT SALES AGREEMENT {FORM NA-101-MFR (REV. 3/93)}
1. SALE
2. POINT OF DELIVERY
3. PRICES AND TERMS OF PAYMENT
4. OTHER PROVISIONS
5. DURATION OF AGREEMENT
6. PRACTICALITY & PRODUCT GRADES
7. TAXES
8. TRADEMARKS AND BRANDS
9. PRODUCT QUALITY MAINTENANCE
10. COMPLIANCE WITH LAWS
11. ENVIRONMENTAL PROTECTION, INVENTORY
CONTROLS & SPILL RESPONSE
12. GOVERNMENT PRICE CONTROLS
13. CLAIMS
14. WARRANTIES & DISCLAIMERS
15. LIMITATION OF DAMAGES
16. HEALTH & SAFETY
17. MINIMUM STANDARDS
18. INSURANCE REQUIREMENTS
19. FORCE MAJEURE
20. MARKET WITHDRAWAL
21. CUSTOMER COMPLAINTS
22. CREDIT CARDS
23. TERMINATION OR NONRENEWAL BY
SELLER
24. INDEMNITY
25. INDEPENDENT STATUS OF PURCHASER
26. ASSIGNMENT & DELEGATION
27. ADDITIONAL PROVISIONS
28. APPROVAL AND SIGNING BY SELLER
EXHIBIT A DEALER INVENTORY CONTROL PROGRAM
EXHIBIT B UNLEADED MOTOR FUELS
EXHIBIT B(i) DIESEL FUELS
EXHIBIT B(ii) RVP
EXHIBIT C(i)-C(iv) MINIMUM STANDARDS
EXHIBIT D INSURANCE ENDORSEMENT
3. INSTRUCTIONS FOR TEXACO RETAILER CREDIT CARD AGREEMENT
4. TEXACO RETAILER CREDIT CARD AGREEMENT
5. INSTRUCTIONS FOR MUTUAL CANCELLATION AGREEMENT
6. MUTUAL CANCELLATION AGREEMENT (FORM NA-103-SAC)
7. SUMMARY OF TITLE I OF THE PMPA
<PAGE> 2
GUIDELINES FOR PRODUCT SALES AGREEMENT
(FORM NA-101 MFR- 3/93 REV)
IMPORTANT NOTE: The following information is provided in order for you and
your dealers to better understand the provisions of the more complicated
aspects of the Product Sales Agreement (NA-101-MFR). It should be pointed out
to dealers that the most stringent provisions contained in your Sales
Agreement with them are also in your contract with Star and that is the
reason you must, in turn, hold them responsible.
You may delete any clause inappropriate to your situation by crossing out the
inappropriate clause and having both parties (you and your dealer) initial
each crossed out clause. For example, certain parts of the Agreement on image
requirements will not be applicable to a service station that you own.
Clauses should be deleted if you, or both your dealer and you, believe the
clause serves no useful purpose and would cause difficulties for you in the
future.
It is recommended that you first have your dealers read the contract, then
use these guidelines as an aid in answering their questions. Provisions not
summarized in these guidelines should be sufficiently clear in the Sales
Agreement to allow you to explain them to your dealers.
1. Paragraph 5, DURATION OF AGREEMENT: Provides for cancellation of Sales
Agreement by either Seller or Dealer if provisions of Agreement are not carried
out. Paragraph 5(b) contains an acknowledgment by the Dealer that he/she
received a copy of the Summary of the PMPA which is enclosed in this packet.
(You should read the Summary before presenting the Dealer with the Agreement).
Paragraph 5(c) points out that if the Sales Agreement covers delivery at
premises leased by the Seller to the Dealer, the Sales Agreement will terminate
upon termination of that lease. Seller must inform the Dealer of any underlying
lease with a third party and when the lease expires (paragraph 5 (c)(i) ).
Paragraph 5(d) states that Seller may terminate Agreement, on 90 days notice,
if Seller cannot perform because of laws, etc. pertaining to rationing or
allocation.
2. Paragraph 6(a), PRACTICALITY: States that if it becomes impracticable
(from Seller's viewpoint) for Seller to perform under the provisions of this
Agreement, Seller will be relieved of his/her obligations and shall not be held
liable for any damages incurred by Dealer as a result thereof. Seller will
notify Dealer of any allocation formula to be used and it will be the same for
all dealers of the same class of trade (6(a)(1)). Seller may suspend agreement
with 10 days notice to Dealer until Seller determines it can perform. Seller
will not be required to make up shipments (6(a)(2)).
3. Paragraph 6(b), PRODUCT GRADES: Purchaser shall make available for
sale to its customers, representative quantities of all grades of gasoline
offered for sale by Seller. Seller reserves the right to substitute products or
product grades different from those provided in
<PAGE> 3
paragraph 1, or discontinue supplying any such product provided for in the
Agreement. Seller is relieved of all responsibility to furnish replaced or
discontinued product in the future.
4. Paragraph 7, TAXES: Dealer assumes liability for payment of all taxes
imposed on the goods and services covered by this Agreement.
5. Paragraph 8, TRADEMARKS AND BRANDS.
(a) Advises Dealer that Star has the right to disallow the use of
the name Texaco or sale of its products if the Dealer's retail facilities do
not comply with the provisions hereunder.
(b) Grants Dealer the right to use identification of Texaco for
properly identifying and advertising Texaco brand motor fuels in geographic
areas in which Seller markets motor fuels through Texaco-branded retail outlets
in a manner satisfactory to Seller. Texaco branded retail facilities must meet
minimum standards of paragraph 17. Seller will notify Dealer, in writing, of
deficiencies and Dealer must correct deficiencies within 120 days or de-brand
facility. All identification must be removed from permanently de-branded
facilities and covered for temporarily closed locations.
(c) If Texaco identification is not removed as required, Seller
may cause removal at Dealer's expense and/or may terminate or fail to renew
Agreement.
(d) Dealer agrees to promote Texaco tradenames and trademarks and
shall not operate business in a manner detrimental to trademarks or brand name
of Texaco.
(e) Dealer agrees to not sell non-Texaco brand motor fuel under
the trademarks or brand names of Texaco and to sell Texaco motor fuels only
through Texaco-branded retail outlets.
(f) Dealer must seek written approval of Seller in order to brand a
retail facility under Texaco brand name and trademarks.
6. Paragraph 9, PRODUCT QUALITY MAINTENANCE. Prohibits commingling,
mislabeling, misbranding, misgrading, and sale of contaminated product. Leaded
and unleaded fuel may not be commingled nor may grades of gasoline. Allows
Seller and/or Star to inspect and sample product at any time.
7. Paragraph 10, COMPLIANCE WITH LAWS.
(a) Requires compliance by Dealer with all applicable laws, rules
and regulations of federal, state, and local governments concerning the
receipt, handling, storage, dispensing, packaging, labeling, advertising,
promotion, and sale of products; including EPA Reid Vapor
3 - STAR GUIDELINES
<PAGE> 4
Pressure (RVP) oversight, reformulated gasoline, unleaded gasoline, and diesel
requirements. (See Exhibits B, B(i), & B(ii)).
(b) Contains provision to allow Seller and/or Star, its employees,
agents, and designees to enter Dealer's place of business at any time to take
samples, conduct tests, or inspections to determine whether Dealer is in
compliance with all laws.
8. Paragraph 11, ENVIRONMENTAL PROTECTION, INVENTORY CONTROLS, AND SPILL
RESPONSE
(a) Dealer agrees and warrants that all equipment and facilities
comply with applicable laws and regulations and are capable of safely handling
motor fuels without leaking.
(b) Includes comprehensive requirement for Dealer to maintain and
reconcile inventory records to detect and prevent motor fuel releases, leaks,
discharges, and losses. Requires daily recordkeeping for each grade and type of
motor fuel. Dealer agrees to retain, inventory records for a minimum of two (2)
years. Storage and handling facilities must be inspected weekly and should
include:
(1) fuel dispensers (around & under)
(2) inside remote pump access boxes,
(3) inside fuel fill boxes,
(4) diked areas around storage tanks,
(5) transport truck loading and unloading areas,
(6) piping and pumps, and
(7) low areas (sumps, hillsides, & culverts).
Particular attention should be given to this paragraph as it contains detailed
inventory control requirements for dealers. Refers to 40 CFR Part 280,
Underground Storage Tank regulations and API Publication 1621, Recommended
Practices for Bulk Liquid Stock Control at Retail Outlets.
(c) Dealer must comply with spill and release requirements of the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)
and Oil Pollution Act of 1990 (OPA). Dealer is held responsible for all spill
response and disposal action, at its sole cost, for any fuel handled by the
Dealer.
(d) Refers to Dealer (Purchaser) Inventory Control Program Exhibit
(A) which must be acknowledged and signed by Purchaser.
4 - STAR GUIDELINES
<PAGE> 5
9. Paragraph 13, CLAIMS:
(a) VARIANCE: Any claims for defect or variance in quality or
shortage in quantity shall be made, and the Seller shall be notified and given
an opportunity to inspect, within two (2) days after the product or goods are
delivered, except that if delivery is made in equipment furnished by the
Seller, such notice and opportunity shall be given before the product or goods
are unloaded, and if piece count, after unloading. If delivery is made in
equipment furnished by the Purchaser, such notice and opportunity shall be
given before the product or goods move from point of shipment. Failure of
Dealer to comply with requirements of this section shall operate as a waiver of
any and all claims by Dealer.
(b) REPORTING TANK LEAKAGE: Dealer shall measure product in tanks
daily and report shortages to Seller immediately upon discovery. Failure of
Dealer to comply constitutes a waiver of any claims of Dealer. Further, Dealer
agrees to reimburse Seller for any and all expenses incurred as a result of
leakage of product because of Dealer's failure to report shortages as stated
above. Also refers to Exhibit A, Dealer (Purchaser) Inventory Control Program.
10. Paragraph 16, HEALTH AND SAFETY.
(a) Dealer must "cooperate" with Seller to disseminate health and
safety information. Upon request, Dealer must provide list of "types of uses"
made of products sold by Dealer and make "reasonable efforts" to determine the
uses of product bought by customers. Dealer shall also provide this information
to anyone it can reasonably foresee as exposed to possible hazard.
(b) Dealer shall implement, install and maintain all safety and/or
security measures, devices and/or procedures required by law to protect the
health and safety of Dealer's employees, agents and customers.
11. Paragraph 17. MINIMUM STANDARDS.
(a) These standards apply to all Texaco branded retail facilities
operated by the Dealer. New image requirements are outlined below.
(1) All retail facilities shall meet one of the following
image categories on or before June 30, 1994 or be de-identified.
(i) Texaco System 2000 Facilities - Facilities
meet all of the standards of the current edition of the Texaco Retail Facility
Standards Manual and meet the requirements of Exhibit C(i) of the Agreement.
(ii) Texaco System 2000 with Marketer
Identification - Facilities meet all of the standards of the current edition of
the Texaco Retail Facility Standards Manual, have
5 - STAR GUIDELINES
<PAGE> 6
approved Marketer identification on the primary identifier, and meet the
requirements of Exhibit C(ii) of the Agreement.
(iii) Texaco Canopy Perfect Facilities - All Texaco
branded locations serving Federal and/or Interstate Highways must have pump
island and a canopy that meet the standards of the current edition of the
Retail Facility Standards Manual where local zoning permits. Dealer's building
and identification, at Star Enterprise's sole discretion, must blend with, and
not detract front, the Texaco System 2000 image and meet the requirements of
Exhibit C(iii) of the Agreement.
(iv) Other Texaco Approved Facilities - Where
governmental regulations or restrictions or other factors prevent Dealer's
retail facilities from being included in one of the above three categories,
Star has the right, in its sole discretion, to approve or disapprove the retail
facility. Other Texaco Approved Facilities must meet the requirements of the
current edition of the Retail Facility Standards Manual and the requirements of
Exhibit C(iv) of the Agreement.
(2) Contains detailed requirements for maintenance of
facilities, equipment, and grounds of retail facilities.
(3) Requires Dealer's operations to be maintained in
accordance with strict standards. Automotive equipment identified Texaco must
be in accordance with the guidelines outlined in the Texaco Marketing
Automotive Equipment Painting & Identification Specification Manual.
(b) Requires Dealers to provide prompt, efficient, courteous and
diligent service to all customers.
(c) If facilities operated by Dealer do not meet the above
standards, or are abandoned, unoccupied, or not operated for a period of 60
consecutive days, Texaco identification must be removed within 10 days of
written notice by Seller. Failure to do so, may result in Seller and/or Star
removing identification at Dealer's expense.
12. Paragraph 18, INSURANCE REQUIREMENTS: This paragraph requires the
Dealer to carry the same type insurance Star requires of the wholesaler (except
for liability associated with the transportation of product). Limits are up to
the discretion of wholesaler. It further provides for Dealer's policies to be
endorsed to show Seller as an additional insured and for Dealer to provide
Seller with a Certificate of Insurance and an additional insured endorsement in
a form identical to that attached as Exhibit D.
13. Paragraph 19, FORCE MAJEURE: A"catch-all" provision which releases
both parties from liability caused directly or indirectly by: Acts of God; such
events as war, riots, strikes, etc.; governmental actions; law, failure or loss
of transportation facilities; and, failure of Seller's
6 - STAR GUIDELINES
<PAGE> 7
supplier to supply product. States that failure of Seller to make deliveries to
Dealer while delivering to others shall not be a breach of this agreement.
Failure of, or delay by, Seller in performance shall not obligate either party
to make up deliveries or receipts or to extend the term of this Agreement.
Seller may suspend delivery so long as his/her costs of performance are
increased and cannot be recovered by an equivalent increase in the price paid
by Dealer. Nothing contained in this Agreement shall excuse Dealer from paying
Seller amounts of funds due.
14. Paragraph 22, CREDIT CARDS -
(a) Dealer agrees to accept the Texaco credit card or other cards
if authorized by Seller at time of sale. Also, reserves the right of Seller to
withdraw authorization at any time. Requires compliance with Texaco Retailer
Credit Card Agreement.
(b) Requires all credit card sales to relate only to products and
services authorized by Seller and/or Star Enterprise. Also requires imprinters
to be used for authorized sales only. Provides for revocation of credit card
privileges for violations of Credit Card Agreement.
(c) Acknowledges a "service charge and/or processing charge" for
credit cards and reserves the right of Seller to cancel the credit privilege or
change the service/processing charge on 30 days notice.
(d) Seller may pay for credit card invoices by credit memo or
check and reimbursement arrangements may be changed by Seller.
15. Paragraph 23, TERMINATION OR NONRENEWAL BY SELLER: In addition to
grounds for termination or nonrenewal of Agreement outlined in the Petroleum
Marketing Practices Act (PMPA), Seller may terminate or fail to renew the
franchise for any of the reasons listed in paragraph 23 (a) through (t) of this
Agreement (self-explanatory).
16. Paragraph 24, INDEMNITY: This clause is patterned from the Star
requirement placed on the wholesalers. It holds Seller harmless against claims
except for those arising, from Seller's sole negligence.
17. Paragraph 26, ASSIGNMENT AND DELEGATION.
(a) Prohibits assignment of contract without written waiver. Also,
transfer of any shares in corporation is covered.
(b) Establishes contract as "personal in nature" and prohibits
delegation.
EXHIBIT A - Dealer Inventory Control Program
Must be acknowledged and signed by Dealer.
7 - STAR GUIDELINES
<PAGE> 8
EXHIBIT B - Unleaded Motor Fuels
This exhibit provides a detailed list of duties for the Dealer with respect to
assuring the absence of lead content from "unleaded Texaco motor fuel". Dealer
is required to sample and test all tanks and hold Seller and Star harmless from
any and all liability resulting from any lead introduced into unleaded fuel.
EXHIBIT B(i) - Diesel Fuels
This exhibit contractually reiterates the requirements of EPA Reg. 40 CFR Parts
80 & 86, which require that, commencing in October 1993, all diesel sold for
off-the-road diesel engines contain blue dye Dealer is required to sample and
test all tanks and hold Star and Seller harmless from any and all liability
resulting from the introduction of diesel fuel not meeting legally applicable
standards into any motor vehicle tank compartment labeled "Low Sulfur Diesel
Fuel Only."
EXHIBIT B(ii) - Reid Vapor Pressure
This exhibit requires Strict compliance with all federal and state Reid Vapor
Pressure requirements. Dealer is required to hold Star and Seller harmless from
any and all liability resulting from any infraction. It provides a somewhat
detailed program aimed at assuring full compliance. If product fails to meet
RVP specs, Dealer must notify Seller "immediately" of any RVP discrepancy at
the tinge of delivery, or any rights Dealer may have are waived. Seller and/or
Star are granted the right to investigate any such claimed failure to meet RVP
specifications.
EXHIBITS C(i)-(iv) Minimum Standards
Breaks out standards for facilities in the following categories.
(1) Texaco System 2000 Facilities
(2) Texaco System 2000 Facilities with Marketer Identification
(3) Canopy Perfect
(4) Other Approved Facilities
The Texaco Star Sign Program is required for all categories.
EXHIBIT D - Insurance Endorsement - Commercial General Liability
This Exhibit modifies the Commercial General Liability coverage, Part I.
8 - STAR GUIDELINES
<PAGE> 9
Form NA-101-MFR (REV. 3/93)
PRODUCT SALES AGREEMENT
AGREEMENT OF SALE (in duplicate) made on the 1st day of June, 1996, between
Blaylock Oil Company, located at 724 S. Flagler Avenue. P. O. Box 310,
Homestead, Florida, 33090 hereinafter called Seller, and Key West Conch Harbor
located at 951 Caroline Street, Key West, Florida, 33040 hereinafter called
Purchaser.
1. SALE.
Seller hereby sells and agrees to deliver and Purchaser buys and agrees to
receive and pay for the following products of the kind and quality marketed by
Seller at time and place of delivery in quantities specified from time to time
by Purchaser, and agreed to by Seller, but in respect of each product not less
per year than the minimum nor more per year than the maximum quantity stated
below:
<TABLE>
<CAPTION>
PRODUCT *MINIMUM *MAXIMUM
<S> <C> <C>
Gasolines 65,000 gallons 81,000 gallons
----------- -----------
Diesel Fuels 565,000 gallons 706,000 gallons
----------- -----------
Gasohol gallons gallons
----------- -----------
Anti-Freeze gallons gallons
----------- -----------
Motor Lubes (Oils) 115 gallons 150 gallons
----------- -----------
Motor Lubes (Greases) pounds pounds
----------- -----------
</TABLE>
* Seller reserves the right to deliver such quantities of branded
products offered by Seller, only in such lesser or greater amounts as Seller
determines are available for delivery hereunder. If this Agreement extends over
a period of months, shipments or deliveries shall be made in equal monthly
quantities, subject to reasonable seasonal variations as determined by the
Seller; provided that, subject to the other provisions of this Agreement, the
agreed quantity must be taken within the time fixed.
2. POINT OF DELIVERY.
951 Caroline Street
Key West, FL 33040
<PAGE> 10
3. PRICES AND TERMS OF PAYMENT.
(a) PRICES: Purchaser's place of business delivered by Seller's
truck or common earlier furnished by Seller.
(1) For Gasolines and Diesel Fuels and for Gasohol:
Seller's price to retailers in effect at time of delivery.
(2) For Motor Lubricants and Anti-Freeze: Seller's price
to retailers in effect at time of delivery less applicable quantity discounts
based on Seller's announced quantity discount schedule for these products.
(3) For other products: Seller's price to retailers in
effect at time of delivery.
(b) TERMS OF PAYMENT.
(1) Gasoline end Diesel Fuel as per arrangement
(2) Gasohol
(3) Motor Lubricants as per arrangement
(4) Anti-Freeze
(5) __________________________________
4. OTHER PROVISIONS.
The "Provisions of Agreement" printed hereinafter on pages 4 through 19 of this
Agreement, except those that by their terms are inapplicable, are a part of
this Agreement.
5. DURATION OF AGREEMENT.
This Agreement is for a period of 5 years commencing on June 1, 1996 and ending
on May 31, 2001 and is subject to the following specific additional provisions:
(a) Either party may terminate this Agreement forthwith by written
notice upon failure of the other party to perform strictly any of the
obligations imposed upon the other hereby, or upon failure of the other party
to exert good faith efforts to carry out the provisions of this Agreement.
(b) Purchaser acknowledges receipt of a copy of "Summary of Title
I of The Petroleum Marketing Practices Act", a Federal law enacted June 19,
1978, and agrees that each and every covenant hereinafter set forth and agreed
to by Purchaser is reasonable and of material significance to the Seller and to
the contractual relationship established hereby.
2 STAR
<PAGE> 11
(c) If this Agreement covers delivery at premises leased by Seller
to Purchaser, it shall automatically terminate upon termination or cancellation
of such lease. In the event that such lease arrangements do exist between
Seller and Purchaser, Seller does hereby notify Purchaser in sub-paragraph (i)
below, of the existence of an underlying lease, if any, between Seller and a
third party covering the same premises, which lease will expire on the date
indicated, or for valid reasons may be canceled prior to the end of the term of
this Agreement.
(i) Underlying lease (if any) expires: _________________
and said lease may not be renewed.
(d) If Seller determines that it is unable to perform hereunder by
reason of any Federal, State or local law or regulation, order, rule,
recommendation, request or suggestion relating to priority, rationing or
allocation of any product covered hereby, Seller may terminate this Agreement
at any time on ninety (90) days written notice to Purchaser
IN WITNESS WHEREOF Seller and Purchaser have hereunto subscribed their
names the day and year first above written.
/s/ T. J. Covey Key West Conch Harbor, Inc.
- -------------------------- ----------------------------------
Witness Purchaser
By /s/
-----------------------
President
/s/ Constance White Blaylock Oil Company
- -------------------------- ----------------------------------
Witness Seller
By /s/ L.H. Blaylock
-----------------------
L.H. Blaylock
3 STAR
<PAGE> 12
PROVISIONS OF AGREEMENT
Acknowledgment: Purchaser acknowledges the provisions set out in
paragraph (6) through (28) below as part of this Agreement placing his/her
initials in the lower left hand margin of each page.
6. PRACTICALITY AND PRODUCT GRADES.
(a) PRACTICALITY.
(1) In the event Seller's capacity to perform as to all
or some of its customers, including Purchaser, becomes impractical in Seller's
sole judgment for any reason whatsoever, Seller shall be relieved of its
obligation to perform hereunder and shall not be obligated to Purchaser by
reason of any delay in performance in whole or in part except to the extent of
providing product to Purchaser on the same allocation formula (to be solely
determined by Seller) as other purchasers in the same class of trade served
from the same shipping point. Seller shall notify Purchaser of the allocation
formula to be applied and the quantities, if any, Seller will be able to supply
Purchaser.
(2) If Seller determines that it is unable to perform
hereunder by reason of any federal, state, or local law or regulation, order,
rule, recommendation, request or suggestion relating to priority, rationing or
allocation of any motor fuel covered hereby, Seller may suspend this Agreement
at any time on ten (10) days notice to Purchaser until such time as Seller
determines its ability to perform is restored. Nothing herein shall be
construed to extend the contract period beyond the term of this Agreement or
give rise to any cause of action by reason of any of the provisions of this
Paragraph 6. In the event this Agreement is suspended as herein provided,
Seller shall not be obligated to make up shipments not made as a result of such
suspension.
(b) PRODUCT GRADES.
Purchaser shall make available for sale to its customers, representative
quantities of all grades of motor fuel gasoline offered for sale by Seller. In
the event Seller determines, in its sole discretion that it should make
available to Purchaser a motor fuel or grades(s) of motor fuel gasoline
different from those provided for in this Agreement, including new formulations
containing oxygenates or other additives, or should not make available to
Purchaser a motor fuel or grade(s) of motor fuel gasoline provided for in this
Agreement, Seller reserves the right at any time to discontinue supplying any
such motor fuel covered by this Agreement or to substitute a different motor
fuel or grade(s) of motor fuel gasoline. In the event any substitution is made,
any maximum and minimum quantities provided for the motor fuel gasoline
substituted for shall apply to such replacement motor fuel or grade(s) of motor
fuel gasoline and the price shall be Seller's applicable retailer price for
such replacement motor fuel. Thereafter, Seller shall be
4 STAR
<PAGE> 13
relieved of any further liability or obligation to furnish the substituted or
discontinued motor fuel or grade(s) of motor fuel gasoline.
7. TAXES.
(a) Purchaser assumes responsibility for the payment of all
federal, state and local taxes, licenses, fees and/or duties, including but not
limited to: gross receipts taxes, occupation taxes, motor fuel taxes, sales and
use taxes, franchise taxes, income taxes, ad valorem taxes, property taxes,
inspection fees, license fees, and all other taxes, fees and licenses arising
from the purchase, sale, transfer or disposition, holding for sale, transfer or
disposition, or use of the goods covered by this Agreement. Should any
government authority require Seller to pay taxes, penalties, or interest which
under this Agreement are the responsibility of Purchaser, Purchaser agrees to
reimburse Seller for all amounts so paid by Seller.
(b) If any federal, state or local law authorizes Purchaser to
purchase the goods covered by this Agreement without the payment of federal,
state or local taxes, Purchaser agrees to furnish Seller evidence satisfactory
to Seller of such authority. Until Purchaser presents Seller with acceptable
evidence of such authority, Seller shall be entitled to bill Purchaser for all
applicable taxes.
8. TRADEMARKS AND BRANDS.
(a) It is understood and agreed by Purchaser that Seller does not
control the signs, brands, trademarks, or trade name Texaco and that Star
Enterprise (Star) has the right to disallow the use of the name Texaco or sale
of its products if the retail facility(ies) which Purchaser operates do not
comply with the provisions hereunder.
(b) Purchaser shall have the right to use the trademarks and brand
names of Texaco, but only for the purpose of properly identifying and
advertising Texaco brand motor fuels handled by Purchaser and in a manner and
form satisfactory to Seller and Star in Seller's and Star's sole judgment. The
retail facilities operated by Purchaser which meet the minimum standards set
forth in Paragraph 17 are hereby authorized by Seller to be identified with
Texaco brand names and trademarks. If during the term of this Agreement, any of
Purchaser's Texaco-branded retail facilities fail to meet the minimum standards
set forth in Paragraph 17, Seller will notify Purchaser in writing to bring
such retail facility into compliance, and if Purchaser fails to do so within
(120) days after receipt of such notice, such retail facility shall be
de-identified by Purchaser at its expense. Purchaser will cause to be removed
all Texaco identification from such location(s) and automotive equipment
(including removing all Texaco identification and Primary I.D., Stars and
letters from canopy; any Texaco I.D. from dispensers; and any other I.D. that
references Texaco from building or property. Purchaser will also paint out
faded imprint or outline of Texaco lettering that may exist on building or
canopy and remove graphics from spreader bar.) For temporarily closed
locations, Purchaser shall cover all signs if applicable, cover Stars and
letters on the canopy, and keep the location clean and maintained.
5 STAR
<PAGE> 14
(c) If Texaco trademarks and identification are not removed as
required in Paragraph 8(b), Seller and/or Star may, in addition to any other
rights they have, cause the removal for Purchaser's account or, at Seller's
sole option, treat it as a breach and failure to comply with a material
provision of this Agreement which is both reasonable and of material
significance to the relationship between Seller and Purchaser. Any failure by
Purchaser to comply with this Paragraph 8 shall constitute good cause to
nonrenew or terminate this Agreement as the term "good cause" or any similar
term is or may be used in any state or federal statute affecting the rights of
the parties to terminate this Agreement.
(d) In the conduct of its operations Purchaser shall take
reasonable action to promote Texaco tradenames and trademarks and the branded
products they represent and shall not operate its business in a manner
detrimental to the trademarks or brand names of Texaco.
(e) Purchaser shall not sell non-Texaco brand motor fuels under
the trademarks or brand names of Texaco. Purchaser further undertakes and
agrees to sell Texaco motor fuels purchased hereunder for resale to the
motoring public only through Texaco-branded retail facilities which Purchaser
operates.
(f) Purchaser must seek prior written approval of Seller in order
to brand a retail facility under the Texaco brand names and trademarks.
Purchaser further understands that Seller has the right, in its sole
discretion, to approve or disapprove any retail facility for branding.
Purchaser shall not use the trademarks or brand names of Texaco at any retail
service station unless Seller in its sole discretion has approved in writing
each such retail facility as an acceptable outlet for Texaco branded products
and has given Purchaser prior written authorization for the use of such
trademarks and brand names of Texaco at such retail facility.
9. PRODUCT QUALITY MAINTENANCE.
Purchaser will not allow or permit any Texaco brand products to be
sold as Texaco branded products by Purchaser which are mislabeled, misbranded
or contaminated. Without limiting the generality of the foregoing, Purchaser
will not sell or allow Texaco motor fuels of a lower grade to be sold as Texaco
motor fuels of a higher grade if they have been commingled. Purchaser will not
commingle any substance with a Texaco brand motor fuel and then sell it as a
Texaco brand motor fuel; nor will Purchaser allow or permit the commingling of
leaded with unleaded motor fuel; nor will Purchaser allow or permit the sale of
motor fuel or any other product under a Texaco label or designation which is in
fact not a Texaco brand product or is a grade of Texaco product other than that
described by the label or designation. Purchaser hereby authorizes Seller
and/or Star to inspect and sample at any time the Texaco brand products at
Purchaser's facility(ies), including products contained in Purchaser's
equipment, and to conduct such tests of the product as Seller and/or Star may
deem necessary. Purchaser shall cooperate with Seller and/or Star in any
investigation of an alleged violation of any obligations contained herein.
6 STAR
<PAGE> 15
10. COMPLIANCE WITH LAWS.
(a) Purchaser shall fully comply with all applicable laws, rules,
regulations, orders and guidelines of any federal, state or local governmental
authority regarding the receipt, handling, storage, dispensing, packaging,
labeling, advertising, promotion and sale of the motor fuels hereunder,
including without limitation (1) all requirements of the Americans with
Disabilities Act, 42 U.S.C. section 12101 et seq., and the regulations
promulgated thereunder, (2) the requirements of the Occupational Safety and
Health Act, 29 U.S.C. section 651 et seq., and the regulations promulgated
thereunder, and (3) the Clean Air Act, 42 U.S.C. section 7401 et seq., and any
other federal, state and local environmental laws, and the regulations
promulgated thereunder, relating to or governing the recovery of vapors, octane
and other labeling requirements, segregation, and storage of unleaded
gasolines, and any laws, rules and regulations governing the sale of diesel
fuel, reformulated gasolines and maximum allowable Reid Vapor Pressure.
Without limitation of the foregoing, Purchaser shall comply with the provisions
of Exhibit B (Unleaded Motor Fuels), Exhibit B(i) (Diesel Fuels), and Exhibit
B(ii) (Reid Vapor Pressure).
(b) Purchaser will give the written contractual right for Seller
and/or Star, its employees, agents and designees, to enter Purchaser's place of
business at any time to obtain such samples or conduct such tests or
inspections as may, in Seller's and/or Star's judgment, be reasonably required
to determine that Purchaser is complying with all applicable federal, state and
local laws, rules, regulations, orders and guidelines as required herein.
Purchaser shall cooperate with Seller and/or Star in any investigation relating
to Purchaser's obligations hereunder.
11. ENVIRONMENTAL PROTECTION, INVENTORY CONTROLS AND SPILL RESPONSE.
(a) Purchaser represents and warrants that the facilities and
equipment owned or operated by Purchaser and used for the storage and handling
of motor fuels comply with all applicable environmental laws, rules and
regulations, including without limitation federal, state and local leak
detection requirements and standards, and are capable of safely handling motor
fuels without leaking.
(b) Purchaser agrees to maintain and reconcile inventory records
to detect and otherwise prevent motor fuel releases, leaks, discharges and
losses. Purchaser agrees to comply with 40 CFR Part 280 and all applicable
state and local laws. Such inventory reconciliation shall comply with API
Publication 1621 and all applicable laws. Purchaser agrees to retain product
inventory records for a minimum of two (2) years or any longer period required
by law. Purchaser agrees to inspect motor fuel storage and handling facilities
at least once a month or more frequently if required by law for indications of
possible leakage. This inspection should include without limitation the
following areas: (1) around and under fuel dispensers, (2) inside remote pump
access boxes, (3) inside fuel fill boxes, (4) storage tank diked areas, (5)
transport truck loading and unloading areas, (6) pumps and piping, and (7) low
areas such as sumps, hillsides or culverts.
7 STAR
<PAGE> 16
(c) Purchaser shall immediately report any spill, release or other
discharge of motor fuels as may be required by federal, state or local laws,
rules or regulations, including without limitation any reporting requirements
contained in the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. section 9601 et seq., and the Oil Pollution Act of
1990, 33 U.S.C. section 2701 et seq. In the event of any spill, release,
discharge, disposal or loss (or imminent threat thereof of motor fuel handled
by Purchaser under this Agreement or of any hazardous or harmful substance, air
contaminant or pollutant for which Purchaser is responsible, Purchaser shall
immediately proceed, at its sole cost and expense, to prevent, stop or abate
any such spill, release or discharge, and shall immediately notify Seller of
such event or occurrence. Purchaser shall, at its sole cost and expense, be
responsible for all spill response action and any environmental remediation
required as a result of any such spill, release or discharge, including any
requirements of a "Responsible Party" as defined in the Oil Pollution Act of
1990, and for the disposal of any waste resulting from such spill response or
environmental remediation.
(d) Purchaser shall comply with Dealer Inventory Control Program
outlined in Exhibit A.
12. GOVERNMENT PRICE CONTROLS.
If Seller's right to charge or receive any price or amount payable under this
Agreement, or to revise any such price as herein provided, is restricted or
prohibited by law, regulation or order of any government authority, Seller may
from time to time terminate the provisions of this Agreement insofar as they
apply to the product or products, or to the price or prices which are so
restricted or prohibited, upon thirty (30) days prior written notice to
Purchaser. Upon the expiration of said thirty days, any such product or
products shall be deemed deleted from this Agreement; provided, however, that
the remainder of this Agreement shall otherwise continue to remain in full
force and effect.
13. CLAIMS.
(a) VARIANCE - Any claims for defect or variance in quality or
shortage in quantity shall be made, and the Seller shall be notified and given
an opportunity to inspect, within two (2) days after the product or goods are
delivered, except that if delivery is made in equipment furnished by the
Seller, such notice and opportunity shall be given before the product or goods
are unloaded, and if piece count, after unloading. If delivery is made in
equipment furnished by the Purchaser, such notice and opportunity shall be
given before the products or goods move from point of shipment. If equipment
furnished by the Seller is in bad order or leaking, the Purchaser shall notify
the carrier and secure examination by the authorized agent of the carrier
8 STAR
<PAGE> 17
as to the condition of the shipment before the same is unloaded. Failure of
the Purchaser to comply with these requirements shall operate as a waiver of
any and all claims by the Purchaser.
(b) REPORTING TANK LEAKAGE - Purchaser shall be responsible for
measuring product contained in tanks, on a daily basis and reporting
unexplained shortages to Seller immediately upon discovery. Failure of
Purchaser to comply with this requirement shall constitute a waiver of any and
all claims of Purchaser. Further, Purchaser agrees to reimburse Seller for any
and all expenses incurred as a result of leakage of product because of
Purchaser's failure to report shortages as stated above. (Also, see Exhibit A,
Dealer (Purchaser) Inventory Control Program.)
14. WARRANTIES AND DISCLAIMERS.
SELLER WARRANTS THAT ALL MOTOR FUELS SOLD TO PURCHASER UNDER THIS AGREEMENT
SHALL MEET STAR'S THEN CURRENT SPECIFICATIONS. SELLER MAKES NO OTHER
WARRANTIES OF ANY KIND AS TO THE MOTOR FUELS SOLD TO PURCHASER UNDER THIS
AGREEMENT, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED
WARRANTY OF MERCHANTABILITY AND THE IMPLIED WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE.
15. LIMITATION OF DAMAGES.
Neither party shall be liable for any indirect, special, incidental,
consequential or punitive damages whether under tort, contract, strict
liability, statute or otherwise.
16. HEALTH AND SAFETY.
(a) Purchaser shall cooperate with Seller to facilitate the
dissemination of any health and safety information from Seller concerning the
motor fuels sold hereunder. Upon request of Seller, Purchaser shall promptly
provide to Seller an accurate listing of the types of uses made of the motor
fuels sold hereunder by Purchaser and shall provide accurate information in
response to such requests. In response to such request by Seller, Purchaser
shall make reasonable efforts to determine the uses of the motor fuels bought
hereunder by Purchaser's customers. Purchaser shall also disseminate, to all
persons who Purchaser can reasonably foresee may be exposed to possible hazards
from the motor fuels sold hereunder, any health and safety information from
Seller promptly after such information is furnished to Purchaser by Seller and
in the manner prescribed by Seller, including but not limited to dispenser
decals, portable container labels, fueling area signs and information leaflets.
(b) Purchaser shall be responsible for the implementation,
installation and maintenance of any and all safety and/or security measures,
devices and procedures required by
9 STAR
<PAGE> 18
law or which may reasonably be required to protect the health and safety of
Purchaser's employees, agents and customers.
17. MINIMUM STANDARDS.
Purchaser recognizes that it is in the interest of the parties to this
Agreement for Purchaser to affirmatively conduct its business to reflect
favorably on said parties and to further promote public acceptance of Texaco's
brand names, trademarks and motor fuels. In recognition of such objectives,
Purchaser agrees to conduct its operations in accordance with the following
minimum standards:
(a) Retail Facilities Operated by Purchaser and Purchaser Operations.
(1) All Texaco-branded retail facilities shall meet one
of the following image categories on or before June 30, 1994 or be
de-identified.
(i) Texaco System 2000 Facilities - Facilities
shall meet all of the standards of the current edition of the Texaco Retail
Facility Standards Manual and meet the requirements of attached Exhibit C(i).
(ii) Texaco System 2000 with Marketer
Identification - Facilities shall meet all of the standards of the current
edition of the Texaco Retail Facility Standards Manual, including approved
Marketer identification on the primary identifier, and meet the requirements of
attached Exhibit C(ii).
(iii) Texaco Canopy Perfect Facilities - Facilities
serving U.S. and/or Interstate Highways must have a pump island and a canopy
that meet the standards of the current edition of the Retail Facility Standards
Manual where local zoning permits. Purchaser's building and identification
requirements shall be at Star's sole discretion and must blend with and not
detract from the Texaco System 2000 image, and meet the requirements of
attached Exhibit C(iii).
(iv) Other Texaco Approved Facilities - Where
governmental regulations or restrictions or other factors prevent
Texaco-branded retail facilities operated by Purchaser from being included in
one of the above three categories, Star has the right in its sole discretion to
approve or disapprove the retail facility. Other Texaco Approved Facilities
must meet the requirements of the current edition of the Retail Facility
Standards Manual and the requirements of attached Exhibit C(iv).
(2) All Texaco-branded retail facilities shall be
maintained as follows: (i) Buildings, equipment, rest rooms, driveways, grass
or planting areas, and storage areas shall be maintained inside and out in
good, clean, neat, safe, secure, uncluttered, unobstructed and healthful
condition with all necessary painting and repairs made thereto; (ii) Pumps and
10 STAR
<PAGE> 19
dispensers which dispense Seller's products shall be properly identified with
Texaco product decals and other decals which may be required by applicable
laws, rules and regulations; (iii) If price signs are displayed, they shall be
Texaco approved type and Texaco trademarks, signs, logos and other
identification shall be kept clean, in good repair and painted where required
according to Star's specifications; (iv) Purchaser's employees shall at all
times present a good personal appearance, observe clean, neat and safe working
habits, render prompt, courteous and honest treatment to customers and take
reasonable action to promote Texaco tradenames and trademarks and the branded
products they represent; and (v) The driveways and pump islands will be kept
clear of repaired vehicles, damaged vehicles, or other obstacles which may
prevent easy access to the motoring public.
(3) All other facilities operated by Purchaser shall be
maintained as follows: (i) Operations inside and out, including storage tanks,
warehouse buildings, automotive equipment, loading racks, improvements and
facilities thereon, shall be in a good, clean, neat, safe, secure, uncluttered,
unobstructed, healthful condition, painted and operated and in accordance with
all applicable laws, rules and regulations; and (ii) Automotive equipment
identified Texaco must be in accordance with the guidelines outlined in the
Texaco Marketing Automotive Equipment Painting and Identification Specification
Manual.
(b) In the conduct of its operations Purchaser shall provide
prompt, efficient, courteous and diligent service to customers at its
Texaco-branded retail facilities.
(c) In the event Purchaser's retail facility(ies) do not meet
Seller's minimum standards as set forth in this Agreement or if the retail
facility(ies) is abandoned, unoccupied or not operated for a period of sixty
(60) consecutive days, Purchaser will cause, upon written demand by Seller,
Texaco identification to be removed from such location(s) or automotive
equipment (including painting over identifying Texaco colors) promptly but not
later than within ten (10) days following date of said demand. Removal will be
at Purchaser's expense. If Texaco identification is not removed within said
time, Seller and/or Star may, in addition to any other rights they have, cause
the removal for Purchaser's account in accordance with Paragraph 8(c).
18. INSURANCE REQUIREMENTS.
(a) Purchaser shall maintain, at its sole cost during the term of
this Agreement, the insurance coverage set forth below with companies
satisfactory to Seller with full policy limits applying, but not less than as
required herein. Such insurance shall state that coverage is primary to any
other valid insurance available to Seller or its affiliates, provide for
separation of interests, and give written notice of cancellation or material
change. Any deductible or retention of insurable coverages shall be for
Purchaser's account Notice of cancellation or changes shall not affect the
coverage afforded Seller until 30 days after written notice is received A
certificate evidencing these coverages shall be delivered to Seller prior to
commencement of this Agreement
11 STAR
<PAGE> 20
The insurance policy and certificate of insurance issued to Seller shall name
Seller (and Star Enterprise to the extent of their interest in Seller) an
additional insured (except for Worker's Compensation Insurance) without regard
to the allocation of liability provisions contained in this Agreement, to the
extent of any claim, loss or liability within the scope of the insurance
coverage set forth below. Purchaser shall secure from its insurance companies,
for all insurance coverage specified below, except Worker's Compensation
Insurance or its equivalent, an additional insured endorsement in a form
identical to the endorsement form attached as Exhibit D. Purchaser shall
maintain, in accordance with this Paragraph 18, the following required
insurance:
(1) Commercial General Liability unamended or Comprehensive
General Liability insurance with Broad Form CGL endorsement with limits of not
less than $500,000 each occurrence and $500,000 general aggregate, provided
that endorsement CG2503 or CG2504 amending aggregate limits should apply.
Liquor Liability coverage must be included for facilities engaged in the sale
of alcohol.
Purchasers which operate marine facilities shall have the water craft exclusion
deleted or purchase equivalent coverage.
(2) Business Automobile Liability insurance covering any vehicle
used in Purchaser's operations with limits of liability of not less than:
Bodily Injury $500,000 each person, $500,000 each accident; Property Damage
$500,000 or a Combined Single Limit of $500,000 for bodily injury and property
damage, such policy to be endorsed with MCS-90 when material transportation is
involved.
(3) Worker's Compensation Insurance as required by laws and
regulations applicable to and covering employees of Purchaser engaged in the
performance of this Agreement.
(4) Employer's Liability Insurance protecting Purchaser against
common law liability, in the absence of statutory liability, for employee
bodily injury arising out of the master-servant relationship with a limit of
not less than $500,000 each accident; $500,000 Disease-Policy Limit; $500,000
Disease-Each Employee.
(5) Underground Storage Tank Liability (UST) insurance with limits
as required by federal and/or state laws.
(6) Purchasers engaged in garage operations shall provide
Comprehensive Garage-keepers Legal Liability with limits not less than $ N/A.
Failure of the Purchaser to keep the required insurance policies in full force
and effect during the term covered by this Agreement shall constitute a breach
of this Agreement and Seller shall have the right in addition to any right or
remedy available under applicable law, to immediately cancel and terminate this
Agreement without further cost to Seller.
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19. FORCE MAJEURE.
(a) Unless otherwise expressly provided for in this Agreement,
failure (in whole or in part) or delay on the part of either party in the
performance of any of the obligations imposed upon such party hereunder shall
be excused and such party shall not be liable for damages or otherwise on
account thereof when such failure or delay is the direct or indirect result of
any of the following causes, whether or not existing at the date hereof, and
whether or not reasonably within the contemplation of the parties at the date
hereof, namely: Acts of God, earthquakes, fire, flood, or the elements,
malicious mischief, insurrection, riot, strikes, lockouts, boycotts, picketing,
labor disturbances, public enemy, war (declared or undeclared), compliance with
any federal, state or municipal law, or with any regulation, order, rule,
recommendation, request or suggestion (including, but not limited to, priority
rationing or allocation orders or regulations) of governmental agencies, or
authorities or representatives of any government (foreign or domestic) acting
under claim or color of authority; total or partial failure or loss or shortage
of all or any part of transportation facilities ordinarily available to and
used by a party hereto in the performance of the obligations imposed by this
Agreement, whether such facilities are such party's own or those of others; or,
if failure or delay be that of Seller, total or partial loss or shortage of raw
or component materials or products ordinarily required by Seller, the
commandeering or requisitioning by civil or military authorities of any raw or
component materials, products or facilities, including but not limited to,
producing, manufacturing, transportation and delivery facilities; perils of
navigation, even when occasioned by negligence, malfeasance, default or errors
in judgment of the pilot, master, mariners or other servants of the ship's
owner; or any cause whatsoever beyond the control of either party hereto,
whether similar to or dissimilar from the causes herein enumerated.
(b) If by reason of any said causes, Seller is unable to make
deliveries to all of its customers (whether under contract or not), its failure
in whole or in part to make deliveries to Purchaser, while delivering to
others, shall not be a breach of this Agreement and in such event Seller may,
but shall not be obligated to, prorate its available supply.
(c) Upon cessation of the cause or causes for any such failure or
delay, performance hereof shall be resumed, but such failure or delay shall not
operate to extend the term of this Agreement nor obligate either party to make
up deliveries or receipts, as the case may be.
(d) Seller may suspend deliveries so long as its cost of
performance is increased and the increased cost cannot be recovered by an
equivalent increase in the price to be paid by Purchaser.
(e) Nothing herein contained shall excuse Purchaser from paying
Seller when due any amounts payable hereunder or pursuant hereto.
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20. MARKET WITHDRAWAL.
In the event Seller elects to withdraw from marketing of motor fuels in any
market or area supplied by Purchaser pursuant to the provisions of the
Petroleum Marketing Practices Act, 15 U.S.C. section 2801 et seq., as may be
amended from time to time, Seller may terminate this Agreement at any time
without further liability upon one hundred eighty (180) days written notice.
Upon receipt of the aforesaid notice of termination, Purchaser may at any time
thereafter terminate this Agreement prior to the expiration of said 180-day
period upon delivery of written notice of termination to Seller.
21. CUSTOMER COMPLAINTS.
Purchaser will respond to any customer inquiries or complaints received by
Purchaser or Seller in connection with any customer served by Purchaser. Upon
receiving notice of a customer inquiry or complaint, Purchaser shall promptly
take reasonable action to correct or satisfactorily resolve each such inquiry
or complaint and shall promptly notify Seller of all actions taken by Purchaser
to correct or resolve each such complaint.
22. CREDIT CARDS.
(a) Purchaser agrees that the Texaco-branded retail facilities it
operates will accept and honor Texaco Credit Cards or other credit cards, if
any, authorized by Seller and/or Star at the time of sale. Seller reserves the
right to withdraw authorization at any time. Purchaser covenants that in
credit card sales Purchaser shall comply with the Texaco Retailer Credit Card
Agreement between Seller and Purchaser (and any special instructions relative
to credit card transactions issued by Seller and/or Star from time to time).
Purchaser shall be responsible in all respects for any breach of the aforesaid
agreement by the Texaco-branded retail facilities operated by Purchaser.
(b) Purchaser covenants that all credit card or other invoices
which are transmitted to Seller by Purchaser shall relate only to sales of
products and services authorized by Seller and/or Star for purchase on Texaco
Credit Cards or other credit cards authorized by Seller and/or Star, if any.
Purchaser further covenants that credit card imprinters and any other equipment
associated with credit card sales (Credit Card Equipment) which are supplied by
Seller will be accounted for at all times and will never be permitted to cover
sales of products other than those authorized by Seller and/or Star on Texaco
Credit Cards or other credit cards authorized by Seller and/or Star, if any In
the event that Credit Card Equipment is used in violation of the covenants in
the preceding sentence or otherwise used in violation of the covenants set
forth in the Credit Card Agreement, Seller may revoke the privilege of honoring
credit cards at said outlets, repossess the Credit Card Equipment, and upon
written demand Purchaser shall take such action necessary to secure the return
of the Credit Card Equipment to Seller promptly but no later than five (5) days
from the date of demand.
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(c) Purchaser acknowledges that Seller imposes a service charge
and/or processing charge for the privilege of honoring Texaco Credit Cards or
other credit cards authorized by Seller and/or Star, and Purchaser acknowledges
that Seller reserves the right to discontinue the extension of credit
(including the acceptance of Texaco Credit Cards) or to change the terms of
such service charge and/or processing charge upon giving Purchaser at least
thirty (30) days written notice.
(d) Credit Card invoices will be transmitted to the Credit Card
Center designated by Seller or other place that may be designated by Seller
from time to time. Seller will, upon receipt and verification of such invoices,
reimburse Purchaser by check or credit memorandum, although reimbursement
arrangements may be changed from time to time by Seller.
23. TERMINATION OR NONRENEWAL BY SELLER.
The occurrence of any of the events enumerated in subparagraphs (a) through (t)
of this Paragraph 23 shall constitute a failure by the Purchaser to comply with
a provision of this Agreement which is both reasonable and of material
significance to the relationship between Seller and Purchaser, and shall
constitute good cause to nonrenew or terminate this Agreement as the term "good
cause" or any similar term is or may be used in any state or federal statute
affecting the rights of the parties to terminate this Agreement. Upon the
occurrence of any of the following events, or upon such other grounds as are
set forth in the Petroleum Marketing Practices Act, 15 U.S.C. section 2801 et
seq., as amended from time to time, Seller may terminate this Agreement:
(a) If Purchaser fails to purchase at least the minimum quantities
of each motor fuel as set forth in Paragraph 1 for any yearly period unless
such right is expressly waived in writing by Seller; provided, however, that
any failure to terminate shall not constitute a waiver by Seller of any
subsequent breach of the Purchaser's obligation to purchase and take the
minimum yearly quantities of motor fuels;
(b) If Purchaser fails to observe Seller's rules, regulations and
requirements in effect at the delivery point(s) at which delivery is made;
(c) Upon default in the payment of any sum when due;
(d) If Purchaser, its employees, agents, or invitees violate the
covenants or fail to comply with any of the provisions of Exhibit B, B(i), and
B(ii);
(e) If Seller elects to withdraw from marketing of motor fuels in
the market or area supplied by Purchaser as set forth in Paragraph 20 hereof;
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(f) If Purchaser fails to cause the removal of Texaco
identification from automotive equipment owned by Purchaser or retail
facilities operated by Purchaser as required by Paragraphs 8 or 17 hereof;
(g) If Purchaser sells non-Texaco brand motor fuels or any mixture
or adulteration of Texaco brand motor fuels with each other or with any other
product or material under the trademarks or brand names of Texaco; if Purchaser
sells Texaco brand motor fuels under brand names or trademarks other than those
of Texaco; if Purchaser uses Texaco identification in a manner which deceives
or causes a likelihood of confusion to the motoring public;
(h) If Purchaser fails to take reasonable action to satisfy
customer complaints as set forth in Paragraph 21 hereof;
(i) If Purchaser violates the covenants or fails to comply with
any of the provisions of Paragraph 22 hereof;
(j) If Purchaser fails to comply with any applicable laws,
ordinances, regulations, judicial and administrative orders and other legal
requirements of all governmental authorities, federal, state, municipal or
other pertaining to this Agreement and the loading, unloading, storage,
transportation, and sale of petroleum products;
(k) If Purchaser fails to maintain the quality and integrity of
Texaco brand motor fuels as set forth in Paragraph 9 hereof;
(l) If Purchaser sells or assigns this Agreement without the prior
written consent of Seller, or attempts to do so, as set forth in Paragraph 26
hereof;
(m) If Purchaser fails to secure and maintain insurance coverage
as provided in Paragraph 18 hereof;
(n) If Purchaser fails to cooperate with Seller to facilitate the
dissemination of any health and safety warnings and notices from Seller
concerning the motor fuels sold hereunder as provided in Paragraph 16 hereof;
(o) Upon any breach of any of the other terms, covenants,
warranties, agreements and conditions of this Agreement or any Credit Card
Agreement or any other agreement that may be in effect between the parties;
(p) If bankruptcy or insolvency proceedings are begun by or
against Purchaser or if Purchases becomes insolvent;
(q) If any attachment, garnishment, execution or other legal
process or proceeding is levied or begun by anyone other than Seller against or
involving Purchaser's business, or any
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other financial impairment exists as to Purchaser's business, and is not
removed, cured, bonded or satisfied within forty-five (45) days from the date
of such levy, execution or commencement of proceedings;
(r) If Purchaser makes or furnishes any false or misleading
statement, or if Purchaser fails to disclose information to Seller, its agents
or employees, concerning any material fact for the purpose of inducing Seller
to make any payment, to deliver product, to extend or continue to extend or
increase credit or to issue any credit memorandum to Purchaser or to any other
party acting in concert with Purchaser.
(s) If the premises are vacant, unattended or not operated for the
retail sale of motor fuels for seven (7) consecutive days or such lesser period
which, under the fact and circumstances, constitutes an unreasonable period of
time;
(t) If Purchaser fails to maintain the following hours of
operation:
competitive __________________________________________________________________
_______ Approved and agreed to_______________________________
24. INDEMNITY
Purchaser covenants and agrees to fully defend, protect, indemnify and hold
harmless Seller, its employees and agents, from and against each and every
claim, demand or cause of action and any and all liability, costs, and expenses
(including but not limited to reasonable attorneys' fees and expenses incurred
in defense of the Seller), damage or loss in connection therewith which may be
made or asserted by Purchaser, Purchaser's employees or agents, or any third
parties (including but not limited to Seller's agents, servants or employees)
on account of personal injury or death or property damage caused by, arising
out of, or in any way incidental to or in connection with the performance
hereunder. Purchaser shall defend, protect and indemnify Seller without regard
to whether the negligence, fault or strict liability of Seller is a
contributory factor. Only those matters which are determined by a final,
nonappealable judgment to be a result of the sole negligence of the Seller or
the sole negligence of a third party who is not an agent, employee, invitee, or
subcontractor of Purchaser shall be excluded from Purchaser's duty to indemnify
Seller. For the purpose of this paragraph, the term "Seller" shall include
Seller's agents, employees and affiliated companies.
25. INDEPENDENT STATUS OF PURCHASER.
This Agreement shall not be deemed to reserve, give or grant to Seller any
right to manage or control the day-to-day business of Purchaser and neither
Purchaser nor its employees or agents shall be agents or employees of Seller
for any reason or for any purpose whatsoever. Purchaser is, and shall be at
all times, an independent business entity that is free to select its customers,
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purchase and sell products from sources other than Seller, set its own selling
prices and terms of sale, and generally conduct its business as it determines
subject to the obligations set forth in this Agreement.
26. ASSIGNMENT AND DELEGATION.
(a) It is understood and agreed Purchaser shall not sell, assign
or otherwise dispose of Purchaser's interest in this Agreement in whole or in
part, directly or indirectly, by operation of law or otherwise without the
prior written consent of Seller in each instance, and this requirement may not
be waived except in writing. Any such purported sale, assignment or
disposition of Purchaser's interest in this Agreement without Seller's prior
written consent shall be null and void and not binding upon Seller. In the
event Purchaser is a corporation or other business entity, this subparagraph
shall be deemed to apply to the sale, assignment or other disposition of the
ownership of any share or interest in such corporation or business entity. It
is further understood and agreed that if an assignment is made with Seller's
prior written consent (1) to a corporation or other business entity, all owners
of any share or interest in such corporation or other business entity shall
agree to be jointly and severally liable and responsible hereunder and to
personally carry out all obligations of Purchaser hereunder, or (2) to one or
more individuals, all assignees accepting such assignment or acting pursuant to
the assignment as owners or operators of Purchaser's business shall agree to be
jointly and severally liable to carry out all obligations of Purchaser
hereunder.
(b) This Agreement is personal in nature and the performance of
Purchaser's duties cannot be delegated by the Purchaser without the prior
written consent of Seller.
27. ADDITIONAL PROVISIONS
(a) Entirety of Agreement. This Agreement is intended by the
parties to be the final, complete and exclusive embodiment of their agreement
about the matters covered herein and no prior stipulation, agreement or
understanding of the parties or their agents shall be valid or enforceable to
the extent they are inconsistent with this Agreement. This Agreement may not
be altered, amended or changed in any way except by a written instrument
executed by both parties.
(b) Waiver. The right of either party to require strict
performance by the other of any and/or all obligations imposed upon the other
by this Agreement shall not in any way be affected by any previous waiver,
forbearance or course of dealing.
(c) Severability. If for any reason a provision or provisions
contained in this Agreement are held to be invalid, illegal or otherwise void,
the remaining provisions of this Agreement shall not, be affected and shall
continue in full force and effect.
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28. APPROVAL AND SIGNING BY SELLER.
This Agreement shall not be binding on Seller until approved and signed on its
behalf by a duly authorized of officer or employee. Commencement of
performance hereunder prior to such signing approval and signing shall in no
case be construed as a waiver by Seller of the foregoing requirement.
IN WITNESS WHEREOF, Seller and Purchaser have hereunto subscribed
their names.
/s/ Constance White (SELLER)
- -----------------------
(WITNESS)
By:/s/
--------------------------
Blaylock Oil Company
Title: President
-----------------------
Date: 6/1/96
------------------------
/s/ T.J. Covey (PURCHASER)
- -----------------------
(WITNESS)
T.J. Covey By:/s/
--------------------------
Key West Conch Harbor, Inc.
Title: President
-----------------------
Date: 6/1/96
------------------------
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EXHIBIT A
DEALER (PURCHASER) INVENTORY CONTROL PROGRAM
This is to advise you of Blaylock Oil Company' s (hereafter referred to as
Seller) comprehensive environmental program and to establish current standards
for maintaining and monitoring dealer inventory control at your station and for
protecting you financially against product loss from tank leaks.
Product Loss Implications
Federal, state and local laws regarding water and ground pollution, as well as
the increased interest of the public and the news media in any type of
pollution, make it necessary that Seller and its service station dealers exert
every reasonable effort to prevent product leaks and spills at their
facilities. Furthermore, the potential impact of a product loss is staggering:
businesses, homes, and schools could be shut down; recreational areas can be
affected; and drinking water might be contaminated. In addition, fines and
penalties can range up to $10,000 per tank per day and the costs for product
recovery and claim settlements can run into millions of dollars. The
consequences should not be taken lightly by any of us.
Seller's Comprehensive Environmental Program
Accordingly, Seller has developed and committed itself to a comprehensive
environmental control program aimed at minimizing the risk of product loss.
The program addresses equipment and installation standards, as well as on-going
monitoring, leak detection, record keeping and reporting requirements. Our
efforts, however, cannot solve this problem without your full cooperation in
maintaining methodical daily inventory control, including daily reconciliation
of physical inventory readings with sales records and delivery receipts, and
immediate reporting of evidence or suspicion of leaks to us so that appropriate
remedial action can be taken. You must also use one or a combination of the
following monthly leak detection methods: automatic tank gauging, monitoring of
soil vapors or liquids in ground water; interstitial monitoring (between tank
and secondary barrier); or any other method that meets the requirements of 40
C.F.R. S 280.43. Because of the grave consequences that can result from an
underground tank leak, we invite your attention to and emphasize the importance
of your contractual obligation in this matter and advise you of our intent to
monitor the integrity of the underground storage facilities by periodically
performing a review of your inventory control records and procedures,
including, if necessary, a physical inventory. This is being done so that
Seller may limit the effects of any tank leaks which might be discovered.
However, your daily actions will be the backbone of an effective leak
prevention program.
In order to protect both you and Seller and fully comply with existing laws and
regulations, you must, at a minimum, ensure that the following inventory
control procedures are adhered to.
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(1) Check the underground storage tanks daily for leakage and
water.
(2) Check the underground storage system monthly for leakage by
using one of the required leak detection methods mentioned earlier.
(3) Observe all motor fuel deliveries to ensure that there are no
overspills or that spills are immediately detected and reported to Seller.
(4) Maintain regular inventory control records in accordance with
Seller's recommendations and permit Seller to examine such records.
Also, you may be responsible for making repairs or replacements, which are
ordinarily Seller's responsibility, if you are negligent or do not give Seller
prompt notice of each such repair or replacement required. Moreover, you are
required to protect Seller against any loss from, and to immediately report any
accident to, any person or property arising from your operations on the
promises.
Procedures for Product Deliveries
Your maintenance of the daily and monthly inventory systems, as discussed
above, will help protect both you and Seller against any costly product losses
and reduce the risks of injury to persons and property, imposition of fines,
etc., which can result from an undetected leak. In addition, you must ensure
that the following procedures are adhered to for all motor fuel deliveries:
1. Gauge tanks prior to deliveries to ensure that there is
available storage capacity for the amount of product to be delivered.
2. Make sure that all delivery trucks are checked prior to
delivery to determine if compartments are loaded to markers and after delivery
to determine if truck is empty.
3. Take and record stick readings just prior to and immediately
after each delivery. In the case of manifold tanks, sufficient time should be
allowed for product equalization.
4. Constantly watch all deliveries of product to ensure that the
tank can hold the product and that no overfill results.
5. Immediately contain and clean up any spills of 25 gallons or
less. Spills of any size must be immediately reported to Seller.
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Product Loss Protection
Our current policy is to protect any lessee-dealer against product loss not
caused by the dealer's negligence from line or tank leaks or from overfills
from the date the dealer gives telephone notification (promptly confirmed by
written notification) to us of a suspected product loss, inventory discrepancy
or overfill, provided the dealer is otherwise in compliance with his contract
obligations. In this regard and in compliance with the dealer inventory
control program, you must notify us immediately of any overfill or of any
inventory discrepancies for a single product, particularly whenever a variation
(loss or gain) occurs in excess of one percent (1%) of flow-through plus 130
gallons for any month. Out of necessity this is a general guideline. In some
cases, inventory discrepancies of lesser amounts or for shorter periods - such
as daily or weekly discrepancies - would warrant investigation. You should
immediately advise us any time you suspect a product loss or question an
inventory discrepancy, even though the variation may be less than the
notification level mentioned above.
Procedures to Follow Upon Discovery of
Suspicion of Product Loss or Related Claims
Upon receiving any notification from you of any suspected or actual spill or
product loss, we will immediately assist you in investigating, correcting
and/or reporting the problem to the proper authorities. Furthermore, you shall
notify us immediately of any claim or threatened claim related to such spill or
product loss, or of any newly discovered fact related to such spill or product
loss. Additionally, you must adhere to the following procedures and any other
reasonable recommendations we may make at the first indication of an
underground leak:
1. After immediate telephone notification to us, promptly send
written confirmation notifying us of the product loss.
2. Make your inventory control records immediately available for
our inspection and review.
3. Confirm that all fill caps are kept locked.
4. Check that all pump/dispenser computer weights and measures
seals are intact and report any suspect seals to us.
5. Refuse further product deliveries until equipment is
investigated by us and found to be safe to receive motor fuel.
We will, if appropriate, test underground systems, make any necessary reports
and arrange for any needed repairs or replacements. Such work will be done at
our expense unless you have been negligent or are otherwise responsible.
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Inspection/Retention of Records
At various intervals, we will expect to inspect your records relating to daily
and monthly inventory controls and/or your leak detection system to verify your
compliance with our dealer inventory control program. You are required by law
to maintain at the premises, the following records:
o all leak detection performance and maintenance information, including
the last year's worth (12 months) of monthly monitoring results, the
most recent tightness test, and copies of manufacturers' performance
claims and maintenance schedules,
o all documents concerning tank system repairs,
o a corrosion expert's analysis of the corrosion potential at your
location (if you do not use corrosion protection equipment),
o the latest two inspections of all cathodic protection systems, and the
last three 60-day inspections of impressed current systems, and
o all information related to notices filed with federal or state
agencies concerning underground tanks and piping, including
installation, site inspections and cleanup actions.
Failure by you to permit inspection and review of the above records upon
reasonable request by us will place you in violation of your lease and/or
supply agreement. Your records evidencing methodical daily inventory control,
as discussed herein above, must be retained for our inspection and review for
at least one year, or longer upon special request by us or if indicated above.
Records which have not been currently prepared on a daily basis will not be
deemed acceptable for any purpose hereunder.
Conclusion
You, as an independent business person, have the responsibility for the safe
and lawful operation of your service station. Careful attention to daily
inventory control and prompt action if a gasoline loss is suspected will insure
quick repair, avoidance of financial loss and the safety of our neighbors and
the environment.
Please review the foregoing carefully so that you understand it, and if you
have any questions, discuss them with me.
Please acknowledge your receipt of and agreement to the terms of this program
by signing and dating in the space provided and returning one copy to us for
our records. The other copy provided should be retained for your files and
future reference.
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Sincerely,
BLAYLOCK OIL COMPANY
/s/
----------------------------
(Seller)
RECEIVED AND AGREED TO THIS 1st DAY OF June, 1996.
/s/
- --------------------------------
(Purchaser) President
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EXHIBIT B
UNLEADED MOTOR FUELS.
1. Purchaser warrants and agrees that Purchaser (a) will not mix or allow
unleaded Texaco motor fuel to be mixed with any motor fuel containing lead
antiknock agents and then sell it as unleaded Texaco motor fuel; and (b) will
not store unleaded Texaco motor fuel in or through any container, tank, pump,
pipe or other element of its motor fuel storage system unless such facilities
comply with all federal, state, and local government requirements.
2. Purchaser further warrants and agrees that Purchaser, its employees,
agents or invitees will not introduce, cause or allow the introduction of
leaded (containing unlawful amounts of lead or phosphorus) motor fuel into any
motor vehicle which bears a label "UNLEADED GASOLINE ONLY" or which is equipped
with a gasoline tank filler inlet which is designed for the introduction of
unleaded motor fuel only.
3. All leaded motor fuels must be removed from the tank, lines and
dispensers. The tank should then be flushed with approximately 20-50 gallons of
unleaded motor fuel, depending on the size of the tank. Experience has shown
that three flushings with small quantities of unleaded motor fuel are usually
sufficient. After the tank has been flushed, thoroughly flush the lines and
dispensers by dispensing a small quantity of unleaded motor fuel through each
dispenser connected to the tank. Dispensed unleaded motor fuel must then be
tested to ensure that the product meets the lead specifications for unleaded
motor fuel. If it does not, additional flushing of the system will be
required.
4. Purchaser will allow Seller and/or Star, its employees, agents or
designees to enter Purchaser's place of business at any time to obtain such
samples or conduct such tests or inspections as may, in Seller's and/or Star's
judgment, be reasonably required to determine that Purchaser is complying with
the aforesaid obligations. Purchaser shall cooperate with Seller and/or Star
in any investigation of any alleged violations of such obligations.
5. Purchasers agrees and warrants that Purchaser will sample and test the
lead content of all tanks on its premises containing unleaded Texaco motor
fuels, on a frequent and regular basis, to assure that said motor fuels in
compliance with the United States Environmental Protection Agency Regulations
pertaining to unleaded motor fuels. Purchaser shall keep accurate records of
all such samples and tests, and said records shall be reasonably made available
to Seller for inspection and copying upon demand. Purchaser shall immediately
notify Seller if its test indicate the presence of lead in excess of amounts
allowed by law in any unleaded Texaco motor fuel storage facility, and shall
not sell or distribute said motor fuels as unleaded. In the event Purchaser
discovers any contamination, Purchaser shall make every reasonable effort to
inspect and correct any deficiency in its motor fuel storage and handling
facilities.
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6. Purchaser agrees that it will defend, indemnify and hold Seller and
Star harmless from and against all present and future claims, demands, suits,
actions, proceedings and litigation arising out of any alleged liability for
Purchaser's storage of unleaded Texaco motor fuels in or through any container,
tank, pump, pipe or other element of its storage system or the introduction of
leaded motor fuel into any motor vehicle tank or compartment which is labeled
"UNLEADED GASOLINE ONLY."
7. Purchaser shall notify Seller immediately of any claim that Texaco
brand unleaded gasoline motor fuel delivered hereunder by Seller fails to meet
Seller's specifications. Upon receipt of notice, Seller shall at any time
thereafter have the right to inspect and investigate the claim. Failure of
Purchaser to notify Seller promptly or cooperate with Seller in any
investigation shall operate as a waiver of any and all claims by the Purchaser
hereunder.
EXHIBIT B(i)
DIESEL FUELS
1. Purchaser warrants and agrees that Purchaser shall not sell, offer for
sale, or dispense any diesel fuel for use in motor vehicles unless the diesel
fuel is free of visible evidence of the dye 1,4-dialkylamino-anthraquinone and
has a cetane index of at least 40, or a maximum aromatic content of 35 volume
percent, and a sulfur percentage no greater than 0.05 percent.
2. Purchaser warrants and agrees that Purchaser, its employees, agents or
invitees, will not introduce, cause or allow the introduction of motor diesel
fuel (containing visible evidence of the dye 1,4-dialkylamino-anthraquinone and
a cetane index of at least 40, or containing unlawful amounts of aromatic or
sulfur) into any motor vehicle which bears a label "LOW SULFUR DIESEL FUEL
ONLY."
3. Purchaser will allow Seller and/or Star, its employees, agents or
designees, to enter Purchaser's place of business at any time to obtain such
samples or conduct such tests or inspections as may, in Seller's and/or Star's
judgment, be reasonably required to determine that Purchaser is complying with
the aforesaid obligations. Purchaser shall cooperate with Seller and/or Star
in any investigation of any alleged violations of such obligations.
4. Purchaser agrees and warrants that Purchaser will sample and test the
contents of all tanks on its premises containing Texaco brand motor diesel
fuels, on a frequent and regular basis, and in accordance with the sampling and
testing methodologies set forth in applicable federal and state laws and
regulations, to assure that said motor diesel fuels are in compliance with
applicable federal and state laws and regulations. Purchaser shall keep
accurate records of all such samples and tests and said records shall
reasonably be made available to Seller and/or Star for inspection and copying
upon demand. Purchaser shall immediately notify Seller if its sampling and
testing indicate the presence of the dye 1,4-dialkylamino-anthraquinone and a
cetane index of at least 40, or an aromatic content greater than 35 volume
percent, and a sulfur
26 STAR
<PAGE> 35
percentage grater than 0.05 percent in any Texaco brand motor diesel fuel
storage facility and shall not sell, offer for sale, or dispense said motor
diesel fuels. In the event Purchaser discovers any contamination, Purchaser
shall make every reasonable effort to inspect and correct any deficiency in its
motor diesel fuel storage and handling facilities.
5. Purchaser agrees that it will defend, indemnify and hold Seller and
Star harmless from and against all present and future claims, demands,
penalties, suits, actions, proceedings and litigation arising out of any
alleged liability for Purchaser's sale, offer for sale or dispensing of Texaco
brand motor diesel fuel that does not meet any legally applicable standard.
Purchaser also agrees that it will indemnify and hold Seller and/or Star
harmless from and against all present and future claims, demands, suits,
actions, proceedings and litigation arising out of any alleged liability for
Purchaser's introduction of motor diesel fuel not meeting legally applicable
standards into any motor vehicle tank compartment which is labeled "LOW SULFUR
DIESEL FUEL ONLY."
6. Purchaser shall notify Seller immediately of any claim that
Texaco-brand motor diesel fuel delivered hereunder by Seller fails to meet
Seller's specifications. Upon receipt of notice, Seller shall at any time
thereafter have the right to inspect and investigate the claim. Failure of
Purchaser to notify Seller promptly or cooperate with Seller in any
investigation shall operate as a waiver of any and all claims by the Purchaser
hereunder.
EXHIBIT B(ii)
REID VAPOR PRESSURE
1. Purchaser warrants and agrees that Purchaser shall not see offer for
sale or dispense gasoline whose Reid Vapor Pressure (RVP) exceeds the legally
applicable standard under federal and state law for the geographical area and
time period in which said gasoline is intended to be dispensed to motor
vehicles.
2. Purchaser further warrants that it will keep records of the
geographical area and time for which each purchase of gasoline is intended to
be dispensed to motor vehicles.
3. Purchaser will allow Seller and/or Star, its employees, agents or
designees, to enter Purchaser's place of business at any time to obtain such
samples or conduct such tests or inspections as may, in Seller's and/or Star's
sole judgment, be reasonably required to determine that Purchaser is complying
with the aforesaid obligations. Purchaser shall cooperate with Seller and/or
Star in any investigation of any alleged violations of such obligations.
4. Purchaser agrees and warrants that Purchaser will sample and test the
RVP of the contents of all tanks at its place of business containing Texaco
brand gasoline on a frequent and regular basis to assure that said gasoline is
in compliance with applicable federal and state laws pertaining to RVP.
Purchaser shall keep accurate records of all such samples and tests, and said
27 STAR
<PAGE> 36
records shall reasonably be made available to Seller and/or Star for inspection
and copying upon demand. Purchaser shall immediately notify Seller if its
tests indicate RVP in excess of that allowed by law in any Texaco brand
gasoline storage and shall not sell, offer for sale or dispense said gasoline.
5. Purchaser agrees that it will defend, indemnify and hold Seller and
Star harmless from and against all present and future claims demands, suits,
actions, proceedings and litigation arising out of any alleged liability for
Purchaser's sale, offer for sale or dispensing of Texaco brand gasoline whose
RVP allegedly exceeds any legally applicable standard.
6. Purchaser shall notify Seller immediately of any claim for variance in
Seller's specifications for RVP at the time of delivery. Upon receipt of
notice, Seller shall at any time thereafter have the right to inspect and
investigate the claim. Failure of Purchaser to notify Seller promptly or
cooperate in any investigation shall operate as a waiver of any and all claims
by the Purchaser hereunder.
EXHIBIT C(i)
TEXACO SYSTEM 2000 FACILITIES
BUILDING
Building must meet Texaco specifications per RFSM current edition.
1. There will be a 48" flat metal facie with a 3 1/2" wide continuous red
band at the bottom of the facie. Facia will be painted dark dove gray
above red line. All 4 sides of building facie should be wrapped where
necessary.
2. Lower portion of the building will have authorized V-grove siding, (or
other Star approved siding) painted light dove gray.
3. Brick buildings will not need siding but will be painted light dove
gray.
4. All soffits and island curbs are to be painted white except stainless
steel curbs.
5. Rest room doors should be painted and properly identified with current
Texaco rest room identification. Rest rooms must be maintained in a
clean, neat and sanitary condition with water, toilet paper, towels
and soap available to the motoring public.
6. General condition in and around building should be clean and inviting
to the motoring public. No junk or hazardous material should be lying
around the facility.
7. No broken or cracked windows.
8. Trash enclosures should be painted light dove gray and trash should be
contained inside the trash enclosure.
9. All guard posts will be installed, painted and decaled at the top, per
current issue RFSM.
10. Doors and trim should be painted light dove gray unless door and trim
are aluminum.
28 STAR
<PAGE> 37
CANOPIES
Canopies must meet Texaco specifications per RFSM current edition for System
2000's.
1. Must be flat metal facie, 44 inches in height and painted black.
2. Authorized Texaco flag signs or authorized canopy column decals are
required on islands.
3. Spanner boards and aprons with proper graphics are required unless
prohibited by ordinance. (If prohibited, must provide copy of
ordinance and be approved by Star Enterprise).
4. Canopy signage will be properly placed per RFSM.
5. All guard posts will be installed, painted, and decaled at the top per
current issue RFSM.
6. No aprons are required for rehabed canopies.
7. Aprons will be required on all new canopies.
8. Pumps will be identified per current standards.
9. Pumps will not have any unauthorized signs attached to them.
10. Islands will be kept clean and oil-free and curbs painted white.
11. Canopy poles will be painted dark dove gray.
12. Canopy must be in good condition and all lighting should be working
and provide minimum 100 foot candle power at surface.
13. Canopy ceilings are to be painted white.
IDENTIFICATION
Primary identification and Texaco Star Signs must be authorized signs per RFSM
current edition.
1. No Banjo, Hex or home-made signs are authorized.
2. Primary I.D. poles must be painted black.
3. Company signs can be installed only as spelled out in the current
edition of RFSM.
4. Only additional signs to be attached to the poles arc authorized
service modules, metal black and white price signs and the new
internally illuminated black and white price sign per RFSM.
5. No banners, flags, or other promotional items can be placed on the
Primary I.D. sign and poles other than approved Texaco promotions.
6. No module signs are authorized - all present modules must be converted
to a new Texaco Star and Logotype Primary Identifier.
7. The Texaco Star Sign Program must be included as a part of the total
identification of the retail facility.
29 STAR
<PAGE> 38
MISCELLANEOUS
The general condition of the facility area should be clean and inviting to the
motoring public.
1. Grass must be kept neat and trimmed.
2. Landscape areas must be neat, trimmed, and weed-free.
3. No junk or junk cars should be on facility grounds.
4. Driveways must be in good repair. Only asphalt and concrete driveways
are acceptable.
5. No grass or weeds in curb lines or cracks in driveway.
6. All light poles will be painted dark dove gray.
EXCEPTIONS
Any exceptions to the above listed standards must be approved in writing by
Star Enterprise.
EXHIBIT C(ii)
TEXACO SYSTEM 2000 FACILITIES
WITH MARKETER IDENTIFICATION
BUILDING
Building must meet Texaco specifications per RFSM current edition.
1. There will be a 48" with a flat metal facie with a 3 1/2" wide
continuous red band at the bottom of the facie. Facia will be painted
dark dove gray above red line. All 4 sides of building facie should be
wrapped where necessary.
2. Lower portion of the building will have authorized V-grove siding, (or
other Star approved siding) painted light dove gray.
3. Brick buildings will not need siding but will be painted lighter dove
gray.
4. All soffits and island curbs are to be painted white except stainless
steel curbs.
5. Rest room doors should be painted and properly identified with current
Texaco rest room identification. Rest rooms must be maintained in a
clean, neat and sanitary condition with water, toilet paper, towels
and soap available to the motoring public.
6. General condition in and around building should be clean and inviting
to the motoring public. No junk or hazardous material should be lying
around the facility.
7. No broken or cracked windows.
8. Trash enclosures should be painted light dove gray and trash should be
contained inside the trash enclosure.
9. All guard posts will be installed, painted and decaled at the top, per
current issue RFSM.
10. Doors and trim should be painted light dove gray unless door and trim
are aluminum.
30 STAR
<PAGE> 39
CANOPIES
Canopies must meet Texaco specifications per RFSM current edition for System
2000's.
1. Must be flat metal facie, 44 inches in height and painted black.
2. Authorized Texaco flag signs or authorized canopy column decals are
required on islands.
3. Spanner boards and aprons with proper graphics are required unless
prohibited by ordinance. (If prohibited, must provide copy of
ordinance and be approved by Star Enterprise).
4. Canopy signage will be properly placed per RFSM.
5. All guard posts will be installed, painted, and decaled at the top per
current issue RFSM.
6. No aprons are required for rehabed canopies.
7. Aprons will be required on all new canopies.
8. Pumps will be identified per current standards.
9. Pumps will not have any unauthorized signs attached to them.
10. Islands will be kept clean and oil-free and curbs painted white.
11. Canopy poles will be painted dark dove gray.
12. Canopy must be in good condition and all lighting should be working
and provide minimum 100 foot candle power at surface.
13. Canopy ceilings are to be painted white.
IDENTIFICATION
Primary identification and Texaco Star Signs must be authorized signs per RFSM
current edition.
1. No Banjo, Hex or home-made signs are authorized.
2. Primary I.D. poles must be painted black.
3. Company signs can be installed only as spelled out in the current
edition of RFSM.
4. Only additional signs to be attached to the poles are authorized
service modules, metal black and white price sign and the new
internally illuminated black and white price sign per RFSM.
5. No banners, flags, or other promotional items can be placed on the
Primary I.D. sign and poles other than approved Texaco promotions.
6. No module signs are authorized - all present modules must be converted
to a new Texaco Star and Logotype Primary Identifier
7. The Texaco Star Sign Program must be included as a part of the total
identification of the retail facility.
MISCELLANEOUS
The general condition of the facility area should be clean and inviting to the
motoring public.
1. Grass must be kept neat and trimmed.
2. Landscape areas must be neat, trimmed, and weed-free.
3. No junk or junk cars should be on facility grounds.
4. Driveways must be in good repair. Only asphalt and concrete driveways
are acceptable.
5. No grass or weeds in curb lines or cracks in driveway.
6. All light poles will be painted dark dove gray.
31 STAR
<PAGE> 40
EXCEPTIONS
Any exceptions to the above listed standards must be approved in writing by
Star Enterprise.
EXHIBIT C(iii)
CANOPY PERFECT
Applies to the fuel center of a local, regional or national convenience store
chain that has a brand value.
BUILDING
1. Building must be in good condition with no broken or cracked windows.
2. No junk or debris should be around the buildings. Area should also be
free of hazardous materials on site and have a clean and inviting
appearance.
3. Building signage should be in good condition.
4. Internally-lit signage should work properly.
5. Rest rooms must be maintained in a clean, neat and sanitary condition
with water, toilet paper, towels and soap available to the motoring
public.
CANOPIES
Canopies must meet Texaco specifications per RFSM current edition for System
2000's.
1. Must be flat metal facie, 44 inches in height and painted black.
2. Authorized Texaco flag signs or authorized canopy column decals are
required on islands.
3. Spanner boards and aprons with proper graphics are required unless
prohibited by ordinance. (If prohibited must provide copy of ordinance
and be approved by Star Enterprise).
4. Canopy signage will be properly placed per RFSM.
5. Guard posts will be installed, painted and decaled at top per current
edition of RFSM.
6. No aprons are required for rehabed canopies.
7. Aprons will be required on all new canopies.
8. Pumps will be identified per current standards.
9. Pumps will not have any unauthorized signs attached to them.
10. Islands will be kept clean and oil-free and curbs painted white,
except stateless steel curbs.
11. Canopy poles will be painted dark dove gray.
12. Canopy must be in good condition and all lighting should be working
and provide minimum 100 foot candle power at surface.
13. Canopy ceilings are to be painted white.
32 STAR
<PAGE> 41
IDENTIFICATION
Primary identification and Texaco Star Signs must be the new authorized signs
per RFSM current edition.
1. No Banjo, Hex or home-made signs are authorized.
2. Poles must be painted black.
3. Personal/Company signs can be installed only as spelled out in the
current edition of RFSM.
4. Only additional signs to be attached to the poles are authorized
service modules, metal black and white price sign and the new
internally illuminated black and white price sign per RFSM.
5. No banners, flags or other promotional items can be placed on the
Primary I.D. signs and poles other than approved Texaco promotions.
6. The Texaco Star Sign Program must be included as a part of the total
identification of the retail facility.
MISCELLANEOUS
The general condition of the facility should be clean and inviting to the
motoring public.
1. Grass must be kept neat and trimmed.
2. Landscape areas must be neat, trimmed, and weed-free.
3. No junk or junk cars should be on facility grounds.
4. Driveways must be in good repair. Only asphalt and concrete driveways
are acceptable.
5. No grass or weeds in curb lines or cracks in driveways.
6. All light poles will be painted dark dove gray.
7. Only Texaco authorized price signs will be used on Primary I.D. and
free standing ground signs.
EXCEPTIONS
Any exceptions to the above listed standards must be approved in writing by
Star Enterprise.
33 STAR
<PAGE> 42
EXHIBIT C(iv)
OTHER TEXACO APPROVED FACILITIES
BUILDINGS
Buildings must be painted to Texaco specifications per RFSM current edition.
(This pertains to non-System 2000 conforming locations).
1. A 3 1/2" wide, continuous red band aligning with window and door
lintels.
2. Surfaces above red line are to be painted dark dove gray.
3. Surfaces below red line are to be painted light dove gray.
4. Items not to be painted are shingle or slate roofs, aluminum door
frames, window mullins, and roll-up doors.
5. Simulated masonry and stonework are to be painted or removed. Real
stonework should be but does not have to be painted.
6. All soffits and island curbs are to be painted white.
7. Rest room doors should be painted and properly identified with current
Texaco rest room identification.
8. General condition in and around building should be clean and inviting
to the public. No junk, or hazardous material should be lying around
the facility.
9. No broken or cracked windows.
10. Trash should be contained in trash enclosures.
Building with flat facie must meet same standards except that the 3 1/2" red
stripe will be at the bottom of the building facie and facie above the red
stripe will be dark dove gray.
CANOPIES
Canopies must be painted to Texaco specs, per RFSM, current edition, Paint
Conversions.
1. All canopies that are not System 2000 44" flat, black facie must be
painted dark dove gray and are signed only with clearance information.
2. Canopy poles are to be painted dark dove gray.
3. Authorized Texaco flag signs should be used where needed to identify
full and self-serve islands.
4. Island curbs are to be painted white, except stainless steel curbs.
5. Pumps are to be decaled to meet current standards.
6. Pumps will not have any unauthorized signs attached to them.
7. Islands are to be clean and oil-free.
8. Canopy underside should be painted white.
34 STAR
<PAGE> 43
Canopies with System 2000 facie.
1. Must be 44 inches in height and painted black.
2. Authorized Texaco flag signs or canopy column decals are required.
3. Spanner boards with proper graphics are required.
4. Canopy signage will be properly placed per RFSM.
5. Guard post will be painted dark dove gray and have white striping at
the top.
6. No aprons are required for rehabed canopies.
7. Pumps must be identified per current standards.
8. Pumps will not have any unauthorized signs attacher to them.
9. Islands will be kept clean and oil-free. Island curbs painted white.
IDENTIFICATION
Primary identification Texaco Star Signs must be the new, authorized signs per
RFSM.
1. No Banjo, Hex, or home-made signs are authorized.
2. Poles must be painted black.
3. Personal/Company sign can be installed only per RFSM.
4. Only additional signs to be attached to the poles are authorized
service modules, metal black and white price signs and the new
internally-illuminated black and white price sign per RFSM.
5. No banners, flags, or other promotional items can be placed on the
Primary I.D. signs and pole other than approved Texaco promotions.
6. The Texaco Star Sign Program must be included as a part of the total
identification of the retail facility.
High rise modules signs must be replaced with a new Star sign per RFSM.
Existing module poles can be used with prior written approval of Star
Enterprise and per approved Texaco drawings.
1. No additional signage can be installed on the module poles except for
a two product price sign white on black and at truck stops whore only
an internally-illuminated service module for "DIESEL" exists.
2. Poles must be painted black.
MISCELLANEOUS
The general condition of the facility area should be clean and inviting to the
motoring public.
1. Grass must be kept neat and trimmed.
2. Landscape areas must be neat, trimmed, and weed-free.
3. No junk or junk cars should be on the facility grounds.
4. Driveways must be in good repair.
5. No grass or weeds in curb lines or cracks in driveway.
35 STAR
<PAGE> 44
FULL-SERVICE TUNNEL CAR WASHES.
1. Dispensing equipment and pump island must be properly identified per
RFSM current edition.
2. I.D. signs must meet present standards per RFSM.
3. If building and canopy design of car wash will allow conversion
to System 2000 design, conversion should be made. All exceptions
will need prior written approval from Star Enterprise.
EXCEPTIONS
Any exceptions to the alcove listed standards must be approved in writing by
Star Enterprise.
INSURANCE ENDORSEMENT
EXHIBIT D
POLICY NUMBER COMMERCIAL GENERAL LIABILITY
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. ADDITIONAL
INSURED - OWNERS, LESSEES OR CONTRACTORS - FORM B
This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY COVERAGE PART.
SCHEDULE
Name of Person or Organization:
(If no entry appears above, information required to complete this endorsement
will be shown in the Declarations as applicable to this endorsement.)
WHO IS AN INSURED (Section II) is amended to include as an insured the person
or organization shown in the Schedule, but only with respect to liability
arising out of "your work" for that insured by or for you.
36 STAR
<PAGE> 45
SPECIAL INSTRUCTIONS TO WHOLESALERS
FOR TEXACO RETAILER CREDIT CARD AGREEMENT
o Amount in paragraph (1)(a) should not exceed limits in your Travel
Card Agreement with Texaco (Texaco Form S 452-W).
o Amount in (3)(d), fourth paragraph should not be less than six (6)
months.
o Texaco's Travel Card Agreement allows for chargebacks within six (6)
months of date of sale. You should keep this in mind when establishing
chargeback limits for your dealers (paragraph (4)). Also Texaco Travel
Card Agreement allows for chargebacks of obsolete invoices three (3)
months after notification and receipt of new invoices. You should keep
this in mind when establishing a time frame for this purpose in
paragraph (4).
o Amount in paragraph (9) should not exceed $65.
o Reference paragraph (10). Processing charge should not exceed that
allowed by your state's usury laws. Remember, Star and TRMI charge
3%, which you may want to adopt for your dealers.
<PAGE> 46
TEXACO RETAILER CREDIT CARD AGREEMENT
On this 1st day of June, 1996 Blaylock Oil Company (Seller) having offices at
724 S. Flagler Avenue, P.O. Box 310, Homestead, Florida, 33090 and Key West
Conch Harbor (Retailer), whose place of business is located at 951 Caroline
Street, Key West, Florida, 33040 made the following TEXACO RETAILER CREDIT CARD
AGREEMENT, hereinafter called the Agreement.
(1) AUTHORIZED CREDIT CARD TRANSACTIONS. Seller grants to Retailer the
privilege of honoring valid Texaco Credit Cards or other valid credit cards, if
any, authorized by Seller at the time of the sale.
(a) All Texaco brand products for motor vehicles, watercraft, home
and gardens, but sales of motor fuel may not exceed the capacity of the
vehicle's or craft's fuel tank, plus an additional 25 gallons of motor fuel or
two cases of motor oil.
(b) Other merchandise sold by Seller to Retailer. Tires, tubes,
batteries and automotive accessories must be mounted on the vehicle or craft at
time of sale.
(c) Marfak lubrication, Texaco rustproofing, car washing and
polishing services.
(d) Emergency and/or mechanical repairs including parts, labor
and services provided that parts, if any, are attached to or mounted on the
vehicle or craft.
(e) Such other products or services as authorized by Seller from
time to time or as detailed in booklet Form S-452, "Information on the Handling
of Texaco Credit Card Transactions". Credit cards issued by Texaco Canada Inc.
shall be honored in the same manner as Texaco Credit Cards.
Credit cards other than Texaco may be honored only in accordance with special
written authorization issued to Retailer by Seller from time to time.
(2) REQUIREMENTS OF A VALID CREDIT CARD TRANSACTION. When a credit card
bearing an expiration date is presented, Retailer must check the date to be
sure the card is currently valid. Retailer must seek approval of credit sales
of a certain dollar amount as designated by special written notification by
telephoning Star Enterprise's Authorization Center, and if credit is approved,
Retailer will record on the invoice in the space marked "Authorization Code",
the authorization code number furnished. If the credit is disapproved, Retailer
will be advised either:
(a) "CREDIT IS DECLINED".
(b) "PICK UP CARD".
1 - SCC
<PAGE> 47
Since Retailers are independent business entities, Seller does not have the
right to tell them how to conduct their private business affairs. However, this
Agreement will serve to confirm that Seller has not and will not request and
does not authorize any Retailer to accuse any person of a crime or to file any
complaint, civil or criminal, against any person for or in Seller's or Star's
name arising out of any credit card or other transaction. Furthermore, Seller
does not authorize or condone any action by a Retailer which is not peaceable.
The instructions furnished by Star's "Charge Authorization Center" in
connection with credit card transactions are not intended in any way to
represent that any person has violated any law or ordinance.
It is suggested that a Retailer not take steps to make any accusations, file a
complaint or otherwise cause the arrest of a customer without first consulting
their personal attorney.
For manual handling of credit cards, after filling in the details of the
transaction legibly with a ball point pen or pencil, Retailer must insert the
invoice and the purchaser's credit card in the imprinter and imprint the credit
card account number the purchaser's name and total amount of the transaction,
the date and the Retailer identification plate on the invoice. (The written and
imprinted totals must agree. If they do not, the imprinted amount shall
prevail). The customer must then sign the invoice for the products and to
confirm the accuracy of the complete invoice.
The Texaco Credit Card Imprinter and appurtenant Plates, Plastics, and Credit
Card Invoice Forms are the property of Seller, and shall be accounted for by
Retailer at all times, shall never be used at premises not selling Texaco
branded fuels, nor shall they be used for the sale of any product or service
not an authorized credit card transaction as defined in Paragraph (1). The
aforesaid equipment shall be used by Retailer only to imprint Texaco invoices
with Texaco Credit Cards and any other credit cards authorized by Seller. Any
usage of the aforesaid equipment inconsistent with this Agreement may result in
Seller's exercise of rights detailed in Paragraph (8).
(3) TEXACO AUTOMATED MARKETING SYSTEM. Seller hereby allows Retailer the
right to access the Star Automated Marketing Point of Sale Program (Program)
using Point of Sale (POS) Equipment and third party processors which have been
approved by Star (such approval to be at Star's sole discretion). Retailer
agrees to purchase, lease, install and maintain POS Equipment at all retail
outlets.
POS equipment includes any terminal device, printer, card reader, electric cash
register, hardware/software, cables, other communication equipment, and other
related devices and equipment.
The access to the Program granted herein shall only be available for use at
outlets selling Texaco branded fuels and only for products and services
authorized in Paragraph (1). Usage of the aforesaid Program in any manner
inconsistent with this agreement may result in Seller's exercise of rights
detailed in Paragraph (8), or any other result in rights available in the
Agreement or
2 - SCC
<PAGE> 48
by law. Any tampering or willful attempt to distort, alter, or otherwise
manipulate the POS Equipment or network may result in prosecution and/or
termination.
All sales must be electronically processed through the POS Equipment except in
the following instances:
(a) A debit or credit card which cannot be electronically
processed because of physical defect including a defective or missing magnetic
strip.
(b) Transactions during a temporary "down-time" of the POS
Equipment due to hardware/software problems, loss of communications, power
outages, etc.;
(c) Selective cards listed in Form S-452, "INFORMATION ON THE
HANDLING OF TEXACO CREDIT CARD TRANSACTIONS" which require special billing; or
(d) When instructed by the POS Equipment to use the manual
imprinter.
In these instances the credit card must be manually processed following all
procedures required in the Agreement. Invoices which have been manually
imprinted should be submitted to Seller for payment in the manner prescribed by
Seller. All debit cards, if any, authorized by Seller must be electronically
processed.
When indicated by the POS Equipment, or if the POS Equipment is unable to
process authorizations and the sales amount exceeds an amount designated in
writing by Seller, the sale must be authorized by telephoning the proper
Authorization Center. The authorization number so obtained must be recorded on
the invoice.
A credit entry is to be made on the POS Equipment only to adjust for or void an
incorrect sales entry made on the POS Equipment. Any misuse of this adjusting
entry may result in a chargeback of the credit and/or Seller's termination of
this Agreement.
Items (a), (b), (c), (d), (1) and (n) of Paragraph (4) do not apply to
electronically processed charges. Retailer shall be responsible for retaining
all electronically generated sales reports and records including signed copies
of Form S-199D (POS) for a period of not less than 12 months. This latter
provision (retaining copies of signed S-199D (POS)) does not apply to credit
card sales generated from island card readers. Seller may, from time to time,
request Retailer to provide necessary data to satisfy card holder inquiries or
to verify electronic transactions. Failure to furnish requested data may result
in a chargeback to Retailer's account.
Retailer agrees to be responsible to Seller for the performance by each detail
facility accessing the Program through Retailer, of all terms, conditions and
instructions in accordance with the provisions of this Agreement, and any
further Addenda thereto.
3 - SCC
<PAGE> 49
(4) SELLER'S CHARGEBACK RIGHTS. Seller may charge back to Retailer's
account, within 12 months of date of sale, the face value, or any portion
thereof, of invoices:
(a) bearing an illegible account number or other omitted,
incomplete or inaccurate entries;
(b) imprinted with an expired credit card;
(c) with missing entries or notations where entries or notations
are required by this Agreement;
(d) received by Seller more than 20 days after date of purchase;
(e) in amounts requiring credit authorization and which do not
bear a valid authorization code number or when two or more invoices are
prepared to avoid obtaining required credit authorization for a single sale;
(f) covering any product or service not an authorized credit card
transaction as defined in Paragraph (1);
(g) covering sales which are or subsequently become the subject
of disputes between Retailer and his customers; except disputes solely
involving the quality or performance of Texaco products;
(h) with a customer's name signed by Retailer or one of his
employees without the authority of the credit card holder;
(i) covering fraudulent sales or other activities by Retailer or
his employees whether done alone or in concert with others (the 12 month
limitation on chargebacks shall not apply to any such sales or activities);
(j) that do not represent true consummated sales at Retailer's
place of business;
(k) covering sales made contrary to special written instructions
from Seller to Retailer;
(l) bearing incorrect, illegible, or missing license number or
state of issue entries (a valid operator's license number and state of issue
must be obtained when vehicles have no license plate or carry dealer tags or
temporary plates);
(m) which are executed or submitted in any other manner not
authorized by the terms of this Agreement;
(n) covering sales made contrary to embossed or printed
restrictions on the card;
(o) which includes a surcharge or any other means of increasing the
regular price to a cardholder, which is imposed by the Retailer at the time
and point of sale, and which is not imposed upon customers paying by cash,
check or similar means.
From time to time new styled credit card invoices are furnished by Seller to
Retailers. Upon receipt of the new forms, all obsolete credit card invoices
should not be used. Any credit card sale made on an obsolete invoice will be
subject to chargeback within 1 months after Seller has notified Retailer to
discontinue use of the obsolete invoices.
Seller will return to or furnish the Retailer with photocopies of unauthorized,
illegible, improperly prepared and disputed invoices which are charged back.
4 - SCC
<PAGE> 50
(5) NO WAIVER OF CHARGEBACK AND TERMINATION RIGHTS. It is understood that
failure by Seller to chargeback to Retailer any such invoices from time to time
shall not operate as a waiver of its right thereafter to charge back any
invoices, within 6 months of the date of sale, which may thereafter be prepared
in violation of the provisions of this Agreement and shall not operate as a
waiver by Seller of its right to terminate this Agreement or any other
contractual arrangements between Seller and Retailer relating to the place of
business at the above address.
(6) INSTRUCTION BOOKLET. Retailer should familiarize itself with all of
the material contained in the booklet Form S-452 "Information on the Handling
of Texaco Credit Card Transactions".
(7) OTHER AGREEMENTS BETWEEN THE PARTIES. Retailer understands and agrees
that any material violation of the provisions of this Agreement shall give
Seller the right, in addition to all other rights it may have hereunder, to
terminate forthwith any or all other contractual arrangements between Seller
and Retailer relating to the place of business at the above address.
(8) MODIFICATION AND TERMINATION. Except as otherwise provided in this
Paragraph (8), Seller reserves the light to modify or assign this Agreement at
any time by written notice to Retailer. In the event that Retailer violates any
of the covenants set forth in this Agreement, including, but not limited to,
the covenants to honor Texaco Credit Cards or other authorized credit cards and
to pay to Seller all service charges and/or processing charges imposed by
Seller for the privilege of honoring said credit cards, Seller may revoke this
privilege of honoring said credit cards at the retail outlets operated by
Retailer and repossess its Imprinters and appurtenant Plates, Plastics and
Credit Card Invoice Forms. This Agreement shall terminate automatically upon
the termination, nonrenewal, or expiration of the Agreement of Sale under which
Retailer buys petroleum products from Seller. Retailer acknowledges that Seller
imposes a service charge and/or processing charge for the privilege of honoring
Texaco Credit Cards or other credit cards authorized by Seller, if any, and
Retailer acknowledges that Seller reserves the right to discontinue the
extension of credit (including the acceptance of Texaco Credit Cards) or to
change the terms of such service charge and/or processing charge upon giving
Retailer at least _____________ days written notice.
(9) ANNUAL CREDIT CARD IMPRINTER SERVICE CHARGE. One credit card Imprinter
will be issued by Seller at no cost to Retailer for each retail outlet operated
by Retailer and at which Texaco brand motor fuels are offered for sale. Should
Retailer require additional Imprinters, Retailer agrees to pay to Seller an
annual lease and maintenance charge of [ * ] dollars for each additional
Imprinter furnished by Seller. *Texaco's current charge
(10) CREDIT CARD PROCESSING CHARGE. Retailer will submit credit card
invoices to Seller in a manner prescribed by Seller. Seller will, upon receipt
of said invoices, compute and deduct the processing fee equal to 3 percent
(3%) from the gross total of the invoices. Seller will credit Retailer by
check or credit memorandum for 97 percent (97%) of the gross total. Any such
credit is subject to verification by the Texaco Credit Card Center.
Reimbursement arrangements may be changed from time to time by Seller.
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<PAGE> 51
For sales transmitted electronically, Seller will compute and deduct the
processing fee equal to 3 percent (3%) from the gross total of those invoices.
Seller will credit Retailer with 97 percent (97%) of the gross total.
(11) NO FRANCHISE. Retailer acknowledges that this Agreement does not
create, extend, or renew a franchise under any local, state or federal law,
including the Petroleum Marketing Practices Act.
(SELLER)
By:/s/ Blaylock Oil Company
---------------------------------
(RETAILER)
By:/s/ President
---------------------------------
(Key West Conch Harbor, Inc.)
6 - SCC
<PAGE> 52
INSTRUCTIONS FOR USE OF MUTUAL
CANCELLATION OF SALES AGREEMENT
1. Many jobbers are operating under an inadequate Product Sales Agreement
with their dealers.
2. Since they are already in a franchise relationship under the PMPA
(even if only an oral agreement), they cannot enter into a Trial Franchise or
arbitrarily cut off the dealer for the purpose of entering into a new and more
sound agreement like Form NA-101-MFR. This is because normally, under PMPA, a
change in an existing agreement would be proposed in advance of the regular
renewal date with the appropriate notice given. If the renewal date has
recently passed and no formal action was taken by the jobber, it could be
another year or more before the jobber could formalize a more desirable
agreement.
3. If the jobber unilaterally proceeded to obtain a dealer's agreement to
a new contract in the above situation, he might be open to repudiation by the
dealer at a later date. For the jobber's protection in this situation, he
should obtain a mutual agreement with the dealer to cancel existing contracts
using the Mutual Cancellation of Sales Agreement (Form NA-103-SAC) contained
herein.
4. We believe if approached in the proper manner, a reasonable dealer
will accept the above approach. If the dealer refuses to sign the Mutual
Cancellation of Sales Agreement, contact the NATW office before proceeding with
further action.
<PAGE> 53
Form NA-103-SAC
MUTUAL CANCELLATION OF SALES AGREEMENT
THIS AGREEMENT is made the ____________________ day of ______________________,
19____, by and between _____________________________________________________,
as Franchisor (Seller), and _________________________________________, as
Franchisee (Purchaser), for the purpose of cancelling any and all existing
SALES AGREEMENTS between the parties relating to the purchase and sale of motor
fuels and to enter into a new agreement.
WITNESSETH:
WHEREAS, on or about the ______________ day of _____________________, 19______,
Franchisor (as Seller) and Franchisee (as Purchaser) entered into a product
Sales Agreement under which Franchisee would purchase motor fuels and certain
other petroleum products from Franchisor for resale at service station
facilities located at Franchisee's address shown above; and
WHEREAS, Franchisor has proposed to Franchisee certain changes in the
terms and provisions of the existing agreements whether or not said agreements
and understandings exist in oral or written form; and
WHEREAS, Franchisor has furnished Franchisee with a copy of
Franchisor's proposed new "Product Sales Agreement" including all terms,
conditions, and provisions thereof; and
WHEREAS, Franchisee has examined the proposed new agreement, is
agreeable to the changes, revisions and provisions contained therein and now
desires to cancel the existing Sales Agreement and accept Franchisor's proposed
new Product Sales Agreement;
NOW, THEREFORE, In consideration of the mutual premises and covenants
herein contained, the parties hereto agree as follows:
1. Franchisee accepts the termination of existing agreements with
Franchisor concerning the purchase of motor fuels and other products from
Franchisor, whether or not said agreements exist in oral or written form.
2. Franchisee and Franchisor simultaneously with the date hereof
propose to enter into a new Product Sales Agreement in writing setting out all
of the terms and provisions of the Franchisor-Franchisee relationship
established thereby between the parties and their respective obligations
thereunder.
3. Franchisee has received from Franchisor a copy of "Summary of
Title I of The Petroleum Marketing Practices Act" and is aware that pursuant to
Section 102(b), (2), (D), (iii) of said Act, Franchisee may within seven (7)
days of the date hereof repudiate this agreement by written notice to
Franchisor by certified mail.
<PAGE> 54
4. Franchisee acknowledges receipt of an executed copy of this
agreement and of the new Product Sales Agreement.
5. Franchisee certifies that he has had full opportunity to read
and understand Franchisor's proposed new Product Sales Agreement and to
negotiate with Franchisor on any provisions of said agreement not acceptable to
Franchisee and has not executed this cancellation agreement under any form of
coercion or duress by Franchisor or any other party.
IN WITNESS WHEREOF the parties hereunto have caused these presents to
be executed the day and year first above written
---------------------------------
Franchisor (Seller)
---------------------------------
Franchisee (Purchaser)
<PAGE> 55
DEPARTMENT OF ENERGY
SUMMARY OF TITLE I OF THE PETROLEUM MARKETING PRACTICES ACT
SUMMARY OF DEALER RIGHTS AT TERMINATION
AGENCY: Department of Energy
ACTION: Notice
SUMMARY: This notice contains a summary of Title I of the Petroleum Marketing
Practices Act, a federal law enacted on June 19, 1978. The law is intended to
protect franchised distributors and retailers of gasoline and diesel motor fuel
against arbitrary or discriminatory termination or nonrenewal of franchises.
The summary describes the reasons for which a franchise may be terminated or
not renewed under the new law, the responsibilities of franchisors, and the
remedies and relief available to franchisees. Franchisors must give
franchisees copies of the summary contained in this notice whenever
notification of termination or nonrenewal of a franchise is given.
SUPPLEMENTARY INFORMATION:
Title I of the Petroleum Marketing Practices Act, Pub. L. 95-297 (the
"Act"), enacted on June 19, 1978, provides for the protection of franchised
distributors and retailers of motor fuel by establishing minimum Federal
standards governing the termination of franchises and the nonrenewal of
franchise relationships by the franchisor or distributor of such fuel. Section
104(d)(1) of the Act provides that the Secretary of Energy shall prepare and
publish in the Federal Register, not later than 30 days after enactment of the
Act, a simple and concise summary of the provisions of Title I, including a
statement of the respective responsibilities of, and the remedies and relief
available to, franchisors and franchisees under that title.
As required by section 104(d)(1) of the Act, the following is a
summary statement of the respective responsibilities of, and the remedies and
relief available to, franchisors and franchisees. Franchisors must give copies
of this summary statement to their franchisees when entering an agreement to
terminate the franchise or not to renew the franchise relationship, and when
giving notification of termination or nonrenewal. In addition to the summary
of the provisions of Title I, a more detailed description of the definitions
contained in the Act and of the legal remedies available to franchisees is also
included in this notice, following the summary statement.
SUMMARY OF LEGAL RIGHTS OF MOTOR FUEL FRANCHISEES
This is a summary of the franchise protection provisions of the
federal Petroleum Marketing Practices Act. This summary must be given to you,
as a person holding a franchise for the sale, consignment, or distribution of
gasoline or diesel motor fuel, in connection with any termination or nonrenewal
of your franchise by your franchising company (referred to in this summary as
your supplier).
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The franchise protection provisions of the Act apply to a variety of
franchise arrangements. The term "franchise" is broadly defined as a license
to use a motor fuel trademark which is owned or controlled by a refiner, and it
includes secondary arrangements such as leases of real property and motor fuel
supply agreements which have existed, continuously since May 15, 1973
regardless of a subsequent withdrawal of a trademark.
Thus, if you have lost the use of a trademark previously granted by
your supplier but have continued to receive motor fuel supplies through a
continuation of a supply agreement with your supplier, you are protected under
the Act.
You should read this summary carefully, and refer to the Act if
necessary, to determine whether a proposed termination or nonrenewal of your
franchise is lawful, and what legal remedies are available to you if you think
the proposed termination or failure to renew is not lawful. In addition, if you
think your supplier has failed to comply with the Act, you may wish to consult
an attorney in order to enforce your legal rights.
The Act is intended to protect you, whether you are a distributor or a
retailer, from arbitrary or discriminatory termination or nonrenewal of your
franchise agreement. To accomplish this, the Act first lists the reasons for
which termination r nonrenewal is permitted. Any notice of termination or
nonrenewal must state the precise reason, as listed in the Act, for which the
particular termination or nonrenewal is being made. These reasons are
described below under the headings "Reasons for Termination" and "Reasons for
Nonrenewal."
You should note that the Act does not restrict the reasons which may
be given for the termination of a franchise agreement entered into before the
June 19, 1978 effective date of the Act. However, any nonrenewal of such a
terminated franchise must be based on one of the reasons for nonrenewal
summarized below.
The Act also requires your supplier to give you a written notice of
termination or intention not to renew the franchise within certain time
periods. These requirements are summarized below, under the heading "Notice
Requirements for Termination or Nonrenewal."
The Act allows trial and interim franchise agreements, which are
described below under the heading "Trial and Interim Franchises."
The Act gives you certain legal rights if your supplier terminates or
does not renew your franchise in a way that is not permitted by the Act. These
legal rights are described below under the heading "Your Legal Rights."
This summary is intended as a simple and concise description of the
general nature of your rights under the Act. For a more detailed description
of these rights, you should read the text of the Petroleum Marketing Practices
Act itself (Pub. L. 95-297, 92 Stat. 322, 15 U.S.C. 2801).
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I. Reasons for Termination
The following is a list of the only reasons for which your franchise
is permitted to be terminated by the Act. One or more of these reasons must be
specified if your franchise was entered into on or after June 19, 1978 and is
being terminated. If your franchise was entered into before June 19, 1978, as
discussed above, there is no statutory restriction on the reasons for which it
may be terminated. If such a franchise is terminated, however, the Act
requires the supplier to renew the franchise relationship unless one of the
reasons listed under this heading or one of the additional reasons for
nonrenewal described below under the heading "Reasons for Nonrenewal" exists.
If your supplier attempts to terminate a franchise which you entered
into on or after June 19, 1978 for a reason that is not listed under this
heading, you can take the legal action against your supplier that is described
below under the heading "Your Legal Rights."
Non-Compliance with Franchise Agreement
Your supplier may terminate your franchise if you do not comply with a
reasonable and important requirement of the franchise relationship. In order
to use this reason, your supplier must have learned of this non-compliance
recently. The Act limits the time period within which your supplier must have
learned of your non-compliance to various periods, the longest of which is 120
days before you receive notification of the termination.
Lack of Good Faith Efforts
Your supplier may terminate your franchise if you have not made good
faith efforts to carry out the requirements of the franchise, provided you are
first notified in writing that you are not meeting a requirement of the
franchise and you are given an opportunity to make a good faith effort to carry
out the requirement. This reason can be used by your supplier only if you fail
to make good faith efforts to carry out the requirements of the franchise for a
period of 180 days before you receive the notice of termination.
Mutual Agreement to Terminate the Franchise
A franchise can be terminated by an agreement in writing between you and your
supplier if the agreement is entered into not more than 180 days before the
effective date of the termination and you receive a copy of this agreement,
together with this summary statement of your rights under the Act. You may
cancel the agreement to terminate within 7 days after you receive a copy of the
agreement, by mailing (by certified mail) a written statement to this effect to
your supplier.
Withdrawal from the Market Area
Under certain conditions, the Act permits your supplier to terminate
your franchise if your supplier is withdrawing from marketing activities in the
entire geographic area in which you operate. You should read the Act for a
more detailed description of the conditions under which
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market withdrawal terminations are permitted.
Other Events Permitting a Termination
If your supplier learns within the time period specified in the Act
(which in no case is more than 120 days prior to the termination notice) that
one of the following events has occurred, your supplier may terminate your
franchise agreement:
(1) Fraud or criminal misconduct by you that relates to the
operation of your marketing premises.
(2) You declare bankruptcy or a court determines that you are
insolvent.
(3) You have a severe physical or mental disability lasting at
least 3 months which makes you unable to provide for the continued proper
operation of the marketing premises.
(4) Expiration of your supplier's underlying lease to the leased
marketing premises, if you were given written notice before the beginning of
the term of the franchise of the duration of the underlying and that the
underlying lease might expire and not be renewed during the term of the
franchise.
(5) Condemnation or other taking by the government, in whole or in
part, of the marketing premises pursuant to the power of eminent domain. If
the termination is based on a condemnation or other taking, your supplier must
give you a fair share of any compensation which he receives for any loss of
business opportunity or good will.
(6) Loss of your supplier's right to grant the use of the trademark
that is the subject of the franchise, unless the loss was because of bad faith
actions by your supplier relating to trademark abuse, violation of Federal or
State law, or other fault or negligence.
(7) Destruction (other than by your supplier) of all or a
substantial part of your marketing premises. If the termination is based on
the destruction of the marketing premises and if the premises are rebuilt or
replaced by your supplier and operated under a franchise, your supplier must
give you a right of first refusal to this new franchise.
(8) Your failure to make payments to your supplier of any sums to
which your supplier is legally entitled.
(9) Your failure to operate the marketing premises for 7
consecutive days, or any shorter period of time which, taking into account
facts and circumstances, amounts to an unreasonable period of time not to
operate.
(10) Your intentional adulteration, mislabeling or misbranding of
motor fuels or other trademark violations.
(11) Your failure to comply with Federal, State, or local laws or
regulations of which you have knowledge and that relate to the operation of the
marketing premises.
(12) Your conviction of any felony involving moral turpitude.
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(13) Any event that affects the franchise relationship and as result
of which termination is reasonable.
II. Reasons for Nonrenewal
If your supplier gives notice that he does not intend to renew any
franchise agreement, the Act requires that the reasons for nonrenewal must be
either of the reasons for termination listed immediately above, or one of the
reasons for nonrenewal listed below.
Failure to Agree on Changes or Additions to Franchise
If you and your supplier fail to agree to changes in the franchise
that your supplier in good faith has determined are required, and your
supplier's insistence on the changes is not for the purpose of preventing
renewal of the franchise, your supplier may decline to renew the franchise.
Customer Complaints
If your supplier has received numerous customer complaints relating to
the condition of your marketing premises or to the conduct of any of your
employees, and you have failed to take prompt corrective action after having
been notified of these complaints, your supplier may decline to renew the
franchise.
Unsafe or Unhealthful Operations
If you have failed repeatedly to operate your marketing premises in a
clean, safe and healthful manner after repeated notices from your supplier,
your supplier may decline to renew the franchise.
Operation of Franchise is Uneconomical
Under certain conditions specified in the Act, your supplier may
decline to renew your franchise if he has determined that renewal of the
franchise is likely to be uneconomical. Your supplier may also decline to
renew your franchise if he has decided to convert your marketing premises to a
use other than for the sale of motor fuel, to sell the premises, or to
materially alter, add to, or replace the premises.
III. Notice Requirements for Termination
or Nonrenewal
The following is a description of the requirements for the notice
which your supplier must give you before he may terminate your franchise or
decline to renew your franchise relationship. These notice requirements apply
to all franchise terminations, including franchises entered into before June
19, 1978 and trial and interim franchises, as well as to all nonrenewals of
franchise relationships.
How Much Notice is Required
In most cases, your supplier must give you notice of termination or
nonrenewal at least 90 days before the termination or nonrenewal takes effect.
In circumstances where it would not be reasonable for your supplier to
give you 90 days notice, he must give you notice as soon as he can do so. In
addition, if the franchise involves leased marketing
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premises, your supplier may not establish a new franchise relationship
involving the same premises until 30 days after notice was given to you or the
date the termination or nonrenewal takes effect, whichever is later. If the
franchise agreement permits, your supplier may repossess the premises and, in
reasonable circumstances, operate them through his employees or agents.
If the termination or nonrenewal is based upon a determination to
withdraw from the marketing of motor fuel in the area, your supplier must give
you notice at least 180 days before the termination or nonrenewal takes effect.
Manner and Contents of Notice
To be valid, the notice must be in writing and must be sent by
certified mail or personally delivered to you. It must contain:
(1) a statement of your supplier's intention to terminate the
franchise or not to renew the franchise relationship, together with his reasons
for this action;
(2) the date the termination or nonrenewal takes effect; and
(3) a copy of this summary.
IV. Trial Franchises and
Interim Franchises
The following is a description of the special requirements that apply
to trial and interim franchises.
Trial Franchises
A trial franchise is a franchise, entered into on or after June 19,
1978, in which the franchisee has not previously been a party to a franchise
with the franchisor and which has an initial term of one year or less. A trial
franchise must be in writing and must make certain disclosures, including that
it is a trial franchise, and that the franchisor has the right not to renew the
franchise relationship at the end of the initial term by giving the franchisee
proper notice.
The unexpired portion of a transferred franchise (other than a trial
franchise, as described above) does not qualify as a trial franchise.
In exercising his right not to renew a trial franchise at the end of
its initial term, our supplier must comply with the notice requirements
described above under the heading "Notice Requirements for Termination or
Nonrenewal."
Interim Franchises
An interim franchise is a franchise, entered into on or after June 19,
1978, the duration of which, when combined with the terms of all prior interim
franchises between the franchisor and the franchisee, does not exceed 3 years,
and which begins immediately after the expiration of a prior franchise
involving the same marketing premises which was not renewed, based upon a
lawful determination by the franchisor to withdraw from marketing activities in
the geographic area in which the franchisee operates.
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An interim franchise must be in writing and must make certain
disclosures, including that it is an interim franchise and that the franchisor
has the right not to renew the franchise at the end of the term based upon a
lawful determination to withdraw from marketing activities in the geographic
area in which the franchisee operates.
In exercising his right not to renew a franchise relationship under an
interim franchise at the end of its term, your supplier must comply with the
notice requirements described above under the heading "Notice Requirements for
Termination or Nonrenewal."
V. Your Legal Rights
Under the enforcement provisions of the Act, you have the right to sue
your supplier if he fails to comply with the requirements of the Act. The
courts are authorized to grant whatever equitable relief is necessary to remedy
the effects of your supplier's failure to comply with the requirements of the
Act, including declaratory judgment, mandatory or prohibitive injunctive
relief, and interim equitable relief. Actual damages, exemplary (punitive)
damages under certain circumstances, and reasonable attorney and expert witness
fees are also authorized. For a more detailed description of these legal
remedies you should read the text of the Act.
FURTHER DISCUSSIONS OF TITLE I --
DEFINITIONS AND LEGAL REMEDIES
I. Definitions
Section 101 of the Petroleum Marketing Practices Act sets forth
definitions of the key terms used throughout the franchise protection
provisions of the Act. The definitions from the Act which are listed below are
of those terms which are most essential for purposes of the foregoing summary
statement. (You should consult section 101 of the Act for additional
definitions not included here.)
Franchise
A franchise is any contract between a refiner and a distributor,
between a refiner and a retailer, between a distributor and another
distributor, or between a distributor and a retailer, under which a refiner or
distributor (as the case may be) authorizes or permits a retailer or
distributor to use, in connection with the sale, consignment, or distribution
of motor fuel, a trademark which is owned or controlled by such refiner or by a
refiner which supplies motor fuel to the distributor which authorizes or
permits such use.
The term "franchise" includes any contract under which a retailer or
distributor (as the case may be) is authorized or permitted to occupy leased
marketing premises, which premises are to be employed in connection with the
sale, consignment or distribution of motor fuel under a trademark which is
owned or controlled by such refiner, or by a refiner which supplies motor fuel
to the distributor which authorizes or permits such occupancy. The term also
includes any contract pertaining to the supply of motor fuel which is to be
sold, consigned or distributed under a trademark owned or controlled by a
refiner, or under a contract which has
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existed continuously since May 15, 1973, and pursuant to which, on May 15,
1973, motor fuel was sold, consigned or distributed under a trademark owned or
controlled on such date by a refiner. The unexpired portion of a transferred
franchise is also included in the definition of the term.
Franchise Relationship
The term "franchise relationship" refers to the respective motor fuel
marketing or distribution obligations and responsibilities of a franchisor and
a franchisee which result from the marketing of motor fuel under a franchise.
Franchisee
A franchisee is a retailer or distributor who is authorized or
permitted, under a franchise, to use a trademark in connection with the sale,
consignment, or distribution of motor fuel.
Franchisor
A franchisor is a refiner or distributor who authorizes or permits,
under a franchise, a retailer or distributor to use a trademark in connection
with the sale, consignment, or distribution of motor fuel.
Marketing Premises
Marketing premises are the premises which, under a franchise, are to
be employed by the franchisee in connection with the sale, consignment, or
distribution of motor fuel.
Leased Marketing Premises
Leased marketing premises are marketing premises owned, leased, or in
any way controlled by a franchisor and which the franchisee is authorized or
permitted, under the franchise, to employ in connection with the sale,
consignment, or distribution of motor fuel.
Fail to Renew or Nonrenewal
The terms "fail to renew" and "nonrenewal" refer to a failure to
reinstate, continue, or extend in franchise relationship (1) at the conclusion
of the term, or on the expiration date, stated in the relevant franchise, (2)
at any time, in the case of the relevant franchise which does not state a term
of duration or an expiration date, or (3) following a termination (on or after
June 19, 1978) of the relevant franchise which was entered into prior to June
19, 1978 and has not been renewed after such date.
II. Legal Remedies Available to Franchise
The following is a more detailed description of the remedies available
to the franchisee if a franchise is terminated or not renewed in a way that
fails to comply with the Act.
Franchisee's Right to Sue
A franchisee may bring a civil action in United States District Court
against a franchisor who does not comply with the requirements of the Act. The
action must be brought within one year after the date of termination or
nonrenewal or the date the
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franchisor fails to comply with the requirements of the law, whichever is
later.
Equitable Relief
Courts are authorized to grant whatever equitable relief is necessary
to remedy the effects of a violation of the law's requirements. Courts are
directed to grant a preliminary injunction if the franchisee shows that there
are sufficiently serious questions, going to the merits of the case to make
them a fair ground for litigation, and if, on balance, the hardship which the
franchisee would suffer if the preliminary injunction is not granted will be
greater than the hardship which the franchisor would suffer if such relief is
granted.
Courts are not required to order continuation or renewal of the
franchise relationship if the action was brought after the expiration of the
period during which the franchisee was on notice concerning the franchisor's
intention to terminate or not renew the franchise agreement.
Burden of Proof
In an action under the Act, the franchisee has the burden of proving
that the franchise was terminated or not renewed. The franchisor has the
burden of proving, as an affirmative defense, that the termination or
nonrenewal was permitted under the Act and, if applicable, that the franchisor
complied with certain other requirements relating to terminations and
nonrenewals based on condemnation or destruction of the marketing premises.
Damages
A franchisee who prevails in an action under the Act is entitled to
actual damages and reasonable attorney and expert witness fees. If the action
was based upon conduct of the franchisor which was in willful disregard of the
law's requirements or the franchisee's rights under the law, exemplary
(punitive) damages may be awarded where appropriate. The court, and not the
jury, will decide whether to award exemplary damages and, if so, in what
amount.
On the other hand, if the court finds that the franchisee's action is
frivolous, it may order the franchisee to pay reasonable attorney and expert
witness fees.
Franchisor's Defense to Permanent Injunctive Relief
Courts may not order a continuation or renewal of a franchise
relationship if the franchisor shows that the basis of the nonrenewal of the
franchise relationship was a determination made in good faith and in the normal
course of business:
(1) to convert the leased marketing premises to a use other than
the sale or distribution of motor fuel;
(2) to materially alter, add to, or replace such premises;
(3) to sell such premises;
(4) to withdraw from marketing activities in the geographic area
in which such premises are located; or
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(5) that the renewal of the franchise relationship is likely to be
uneconomical to the franchisor despite any reasonable changes or additions to
the franchise provisions which may be acceptable to the franchisee.
In making this defense, the franchisor also must show that he has
complied with the notice requirements of the Act.
This defense to permanent injunctive relief, however, does not affect
the franchisee's right to recover actual damages and reasonable attorney and
expert witness fees if the nonrenewal is otherwise prohibited under the Act.
Issued in Washington, D.C. on August 23, 1978.
10
<PAGE> 1
EXHIBIT 10.3
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT ("Agreement") is made and entered into this
17 day of June, 1988, by and between the TRANSPORTATION CABINET, OF THE
COMMONWEALTH OF KENTUCKY ("Transportation Cabinet") and JAMESTOWN RESORT &
MARINA, LTD. a Kentucky limited partnership ("Partnership") acting by and
through Jamestown Resort and Marina, Inc., a Kentucky corporation, its general
partner.
R E C I T A L S:
A. WHEREAS, the United States Government is the owner of that
certain tract of land and body of water located in Russell County, Kentucky,
consisting of 287.45 acres, more or less, which is presently leased to the
Partnership for a remaining term concluding on December 31, 2012, (the 287.45
acres being more particularly described on Exhibit "A" attached hereto and
incorporated herein and referred to herein as the "Partnership Premises"), but
deleting therefrom those portions of land and water defined hereinbelow as the
Commonwealth Premises; and
B. WHEREAS, the Partnership presently operates certain resort and
marina facilities upon the Partnership Premises, and, contingent upon the
construction of certain improvements by the Commonwealth as hereinafter
described, the Partnership has committed to invest in excess of $5.5 million
thereon including the substantial rehabilitation of the existing resort,
restaurant and lodging facilities, the substantial addition to the existing
campground and "RV" areas, the replacement of the existing marina facilities
with new "World Class" marina facilities, the addition of a substantial number
of new boats to the marina rental fleet, and the addition of other substantial
improvements and facilities, all for the purpose of providing to the general
public, including the citizens of the Commonwealth of Kentucky and of other
states, modern and first class resort and marina facilities; and
C. WHEREAS, the development of the marina facilities will benefit
the citizens of the Commonwealth of Kentucky and of other states and will
attract tourists to this area of the Commonwealth because of its natural scenic
beauty and attractiveness, and the recreational and vacation opportunities and
facilities available in the area; and
D. WHEREAS, in order to accomplish the public purposes described
in the preceding paragraph, it is necessary and appropriate for the
Transportation Cabinet to construct an extension of Kentucky Highway 92 to the
island across a new causeway and to construct a roadside park on the island
(such new highway and roadside park referred to herein as the "Public
Improvements"). The Public Improvements shall be constructed and maintained
upon that property more specifically described on Exhibit "B" attached hereto
and incorporated herein (referred to herein as the "Commonwealth Premises")
pursuant to an agreement between the Corps of Engineers and the Transportation
Cabinet; and
<PAGE> 2
E. WHEREAS, the construction of the Public Improvements, the
maintenance and operation of the Public Improvements as part of the State
highway system, and the construction, development, maintenance and operation of
the Partnership's new resort and marina improvements and facilities will
constitute an investment in excess of $7 million, will create a substantial
number of construction and permanent jobs, will add public transportation
facilities to the highway system of the Commonwealth of Kentucky, will result
in a substantial increase in tourists and tourism revenues in this area of the
Commonwealth, will result in substantial additional tax revenues to the County
of Russell and the Commonwealth of Kentucky, and will in other ways greatly
benefit the citizens of the commonwealth of Kentucky; and
F. WHEREAS, as an inducement to the Partnership to make its
investment in modern resort and marina facilities on the Partnership Premises,
the Transportation Cabinet agrees to enter into this Agreement and other
agreements described herein to accomplish the purposes set forth herein, all on
the terms and conditions as set forth hereinafter;
NOW, THEREFORE, it is agreed and understood by and among the
Transportation Cabinet and the Partnership, for good and valuable
consideration, including the promises, covenants and agreements of the parties
hereinafter set forth, as follows:
1. Corps of Engineers - Partnership Lease. It is acknowledged
between the parties hereto that the Corps of Engineers and the Partnership have
entered into a Lease for the Partnership Premises (excluding the Commonwealth
Premises) for a term concluding December 31, 2012 upon such rental and other
terms and conditions as provided in such lease, which lease allows the
development of the Partnership Premises for the purposes described herein and
such other purposes as set forth in such lease.
2. Corps of Engineers - Transportation Cabinet Agreement. It is
acknowledged between the parties hereto that the Corps of Engineers and the
Transportation Cabinet have tentatively agreed, subject to the execution of
this Agreement, to execute a right-of-way agreement granting the Transportation
Cabinet over and across the Commonwealth Premises a perpetual public
right-of-way on which will be constructed the Public Improvements upon such
terms and conditions as shall be agreed upon between such parties, which
agreement shall allow the construction and maintenance thereon of the Public
Improvements.
3. Partnership Construction/Development Obligations and Payments.
In consideration of the construction of the Public Improvements by the
Transportation Cabinet, the Partnership agrees (i) to invest not less than $5.5
million for the rehabilitation of existing resort and marina facilities and the
construction of new resort and marina facilities as more generally described in
the Recitals hereinabove on the Partnership Premises coincidental with the
construction of the Public Improvements, and, (ii) commencing on the date the
Public Improvements are opened for use by the public to pay to the
Transportation Cabinet one-half of one percent of the gross revenues ("Gross
Revenues"), as defined herein, received by the Partnership from the marina
facilities ("Marina Facilities"), as defined below, payable during the
remaining term of this Agreement on the 20th day of each month based upon Gross
2
<PAGE> 3
Revenues received during the preceding calendar month. For purposes of this
paragraph the term "Gross Revenues" shall mean revenues derived from (i) sales
of gasoline, food, merchandise, and all other tangible products from the Marina
Facilities, (ii) rental of marina slips, boats, equipment, lockers, and other
tangible items located on the Marina Facilities, and (iii) repair, maintenance,
and other services of boats, equipment, or other items from the Marina
Facilities, but excluding from all such Gross Revenues sales and any other like
taxes, discounts, refunds, and other like credits. Further, the Partnership
shall be entitled to deduct from each monthly payment the amount of the
Maintenance and Utility Expenses (as defined in Paragraph 7) incurred by the
Partnership for the preceding month. For purposes of this paragraph, the term
"Marina Facilities" shall mean those marina improvements located upon the body
of water that is a part of the Partnership Premises, but excluding therefrom
all revenues derived from any activities located upon the land which is a
portion of the Partnership Premises.
4. Transportation Cabinet and Partnership Construction
Obligations and Payments. The Transportation Cabinet agrees to let construction
contracts for the Public Improvements in substantial accordance with the general
concept plans therefore as more specifically described on Exhibit "C", attached
hereto and incorporated herein, and in accordance with the detailed plans and
specifications therefor which shall be subject to the prior approval of the
Transportation Cabinet and the Corps of Engineers. The commencement of
construction of the Public Improvements shall occur as soon as possible after
securing all necessary governmental approvals and permits therefore and shall be
completed within one year from the date of commencement of construction, subject
to delays beyond the control of the Transportation Cabinet. It is understood
that the maximum obligation of the Transportation Cabinet shall be the sum of
$1,979,000 for construction costs, design and engineering fees, utility
relocation costs and other related costs. The Partnership agrees to pay the
balance of all costs incurred in excess of $1,979,000. In the event the initial
construction contract of the Transportation Cabinet exceeds the maximum
obligation of the Transportation Cabinet, the Partnership agrees to pay to the
Cabinet the amount of excess costs prior to awarding the contract. Prior to
executing the initial construction contract, the Partnership has the option of
refusing to participate in the contract and in such event, the Partnership shall
reimburse the Transportation Cabinet for all costs up to that time and the
agreement shall be rescinded. The Transportation Cabinet agrees to pay design
and engineering fees directly related to construction of the roadway and
roadside park from the date of this Agreement and also design and engineering
fees incurred within the period of time commencing thirty (30) days prior to the
date of the Agreement. The Public Improvements shall consist of the
construction of the causeway and roadside park and other appropriate and related
facilities in conjunction with the causeway and roadside park which shall
include appropriate lighting, drainage facilities, utility relocating, signage,
guardrail, paving of the roadway and roadside park and other appropriate and
related items.
5. Utilities; Utilities and Access Easements. The Transportation
Cabinet shall grant to the Partnership a permit under, on, over and across the
Commonwealth Premises for the construction, maintenance, repair and replacement
of utility facilities and access improvements for the use and benefit of the
Partnership's resort and marina facilities adjacent to the Commonwealth
Premises. The construction, maintenance, repair and replacement of utilities
3
<PAGE> 4
and access improvements that are for the use of the Partnership's resort and
marina facilities shall be at the expense of the Partnership.
6. Approvals, Licenses and Permits. It is the intent and desire
of the parties that all of the construction and improvements described herein
shall be accomplished in accordance with all applicable local, state and
federal rules, regulations, and laws. It shall be the responsibility of the
party obligated herein to perform such specific work to obtain all necessary
approvals, licenses and permits therefore. Further, each of the parties hereto
agrees to cooperate with the other parties herein, including joining as an
applicant in any application, to obtain the necessary approvals, licenses or
permits. Notwithstanding the foregoing, no provision of this Agreement shall
in any manner obligate, or be construed to so obligate, the Transportation
Cabinet, or any other local, state or federal entity, to perform any obligation
described herein or to issue any such approval, license or permit except as it
otherwise would in accordance with all of its applicable rules, regulations and
laws, upon the full and proper satisfaction of all requirements therefor, and
in the total and sole discretion of such entity in all circumstances wherein
such entity shall have such discretion. For purposes of the Agreement,
provisions of the Kentucky Standard Specifications for Road and Bridge
Construction, Edition of 1988, are incorporated by reference.
7. Maintenance, Repairs, Etc. of the Public Improvements. The
Transportation Cabinet at its expense shall be responsible for the maintenance,
repair and replacement of all of the Public Improvements with the exception
that the Partnership agrees to maintain at its expense the roadside park by
keeping the roadside park free of trash and debris, maintaining the landscaping
thereon, and the enactment and enforcement of reasonable rules and regulations
for the use thereof by the public. The Partnership agrees to maintain at its
expense all light fixtures and to pay all lighting utility bills. The roadside
park shall be available to the public at all times and no fees shall be charged
for the use of the roadside park by the public.
8. Term of Agreement. The Term of this Agreement shall be
coincidental with the term and all renewals and extensions thereof of the lease
agreement between the Corps of Engineers and the Partnership for the
Partnership Premises, but in no event shall extend beyond the term of the
agreement and all renewals and extensions thereof between the Corps of
Engineers and the Transportation Cabinet for the Commonwealth Premises.
9. Assignment. Upon the assignment by the Partnership of its
leasehold interest in the Partnership Premises, the Partnership may assign all
of its rights and interests under this Agreement to such assignee upon the
written agreement of the said assignee to accept such assignment and to perform
all of the obligations and responsibilities of the Partnership as provided in
this Agreement. Such assignment shall be binding upon the Transportation
Cabinet upon being furnished a written copy of such assignment executed by the
Partnership and by the assignee. Such assignment shall not relieve the
Partnership of its obligations and responsibilities to the Transportation
Cabinet under this Agreement.
4
<PAGE> 5
10. Contingencies and Good Faith Efforts. The performance by the
respective parties hereto of their obligations as set forth in this Agreement
shall be contingent upon (i) the execution of an agreement between the Corps of
Engineers and the Transportation Cabinet described in Paragraph 2 herein above,
and (ii) the issuance of all applicable and necessary approvals, licenses and
permits for the construction, development and operation of the Public
Improvements described herein. This Agreement is intended to outline the
general approach and terms agreed to by and between the parties hereto, and as
an inducement to the Partnership to proceed with its investment in the resort
and marina facilities, and with the full knowledge and understanding that final
details of each of the provisions of this Agreement shall be approached,
resolved and reduced to writing by the parties through their good faith efforts
and to the best interest and benefit of each of them, and the public, as the
particular provisions and obligations dictate, and within the scope of the
legal authority of the Corps of Engineers and the Transportation Cabinet. The
parties agree to proceed with good faith efforts to seek such approvals,
licenses and permits as necessary to comply with or evidence compliance with
all applicable local, State and federal rules, regulations and laws applicable
to this Agreement for the purposes to be accomplished herein and to exert their
good faith efforts to bring about the financing and completion of the public
and private improvements and facilities described herein in compliance with all
applicable local, State and federal rules, regulations and laws.
11. Hold Harmless. The Partnership agrees to hold the
Transportation Cabinet harmless for any and all claims and causes of action
arising out of the Partnership's failure to perform any of its duties and
responsibilities set forth in this Agreement.
12. Legal Effect. If any clause or provision of this Agreement
shall become illegal, invalid, or unenforceable under present or future laws,
the remainder of this Agreement shall not be affected thereby. All terms and
provisions of this Agreement shall be construed to give effect to this
Agreement to the greatest extent permitted by applicable law. It is the
intention of the parties hereto that in lieu of any clause of provision in this
Agreement which shall be illegal, invalid, or unenforceable, there shall be
added as a part of this Agreement a clause or provision as similar in terms to
such illegal, invalid, or unenforceable clause or provision as may be legally
enforceable in order to give the fullest possible effect to the intentions of
the parties hereto.
13. Cancellation. The Partnership agrees that the Transportation
Cabinet shall have the right at any time, in its sole discretion and without
liability or penalty, to cancel and terminate this agreement by transmitting to
the Partnership written notice of such cancellation and termination.
14. Notices. When any party to this Agreement desires to give
notice to other parties, such notices shall be given by certified or registered
mail, return receipt requested. The notice shall be sufficient if given and
addressed to the respective parties at the following addresses or at such other
addresses as any party may notify the other parties in writing of from time to
time.
5
<PAGE> 6
If to Transportation Cabinet: Transportation Cabinet
Attention: Secretary
Frankfort, KY 40622
If to Partnership: Jamestown Resort and Marina, Inc.
c/o the Webb Companies
3000 Financial Center
Lexington, KY 40507
Attn: Mr. R. Dudley Webb
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day, month and year first above written.
"Transportation Cabinet"
TRANSPORTATION CABINET OF THE
COMMONWEALTH OF KENTUCKY
BY: /s/
---------------------------------
Secretary
"Partnership"
JAMESTOWN RESORT AND MARINA, LTD.
a Kentucky limited partnership
By: Jamestown Resort and Marina
Inc., a Kentucky corporation
Its General Partner
By: /s/
---------------------------------
Chairman
6
<PAGE> 7
AMENDED DEVELOPMENT AGREEMENT
Substituted Agreement made August 1, 1988 between the Transportation
Cabinet of the Commonwealth of Kentucky, referred to as "Transportation
Cabinet" and Jamestown Resort and Marina, Ltd., a Kentucky limited partnership
acting by and through Jamestown Resort and Marina, Inc., a Kentucky
corporation, its general partner of 3000 Financial Center, Lexington, Kentucky
referred to as "Partnership."
R E C I T A L S:
A. On June 17, 1988, the parties entered into a development
agreement at the State Office Building, Frankfort, Kentucky relative to the
public purpose of extending Kentucky Highway 92 in Russell County by
construction of a causeway to and roadside park on the public area known as
Jamestown Island as an inducement for private capitalization of a world-class
marina and resort on pubic property.
B. The parties are desirous of modifying the provisions of the
prior contract by this Amended Agreement.
AGREEMENT
The prior contract of the parties is modified, altered and changed in
the following respects only:
ELIMINATIONS AND INSERTIONS
By eliminating and striking out from the agreement of June 17, 1988
all of Paragraph 3 on pages 2 and 3, Paragraph 4 on pages 3 and 4, and
Paragraph 7 on page 4, and inserting in their place the following paragraphs:
3. Partnership Construction/Development Obligations and Payments.
In consideration of the construction of the Public Improvements by the
Transportation Cabinet, the Partnership agrees (i) to invest not less than $5.5
million for the rehabilitation of existing resort and marina facilities and the
construction of new resort and marina facilities as more generally described in
the Recitals hereinabove on the Partnership Premises coincidental with the
construction of the Public Improvements, and, (ii) commencing on the date the
Public Improvements are opened for use by the public to pay to the
Transportation Cabinet one percent of the gross revenues ("Gross Revenues"), as
defined herein, received by the Partnership from the marina facilities ("Marina
Facilities"), as defined below, payable during the remaining term of this
Agreement on the 20th day of each month based upon Gross Revenues received
during the preceding calendar month. For purposes of this paragraph the term
"Gross Revenues" shall mean revenues derived from (i) sales of gasoline, food,
merchandise, and all other tangible products from the Marina Facilities, (ii)
rental of rooms, cabins, marina slips, boats, equipment, lockers, and other
tangible items located on the Marina Facilities, and (iii) repair, maintenance,
<PAGE> 8
and other services of boats, equipment, or other items from the Marina
Facilities, but excluding from all such Gross Revenues sales and any other like
taxes, discounts, refunds, and other like credits.
4. Transportation Cabinet and Partnership Construction
Obligations and Payments. The Transportation Cabinet agrees to let
construction contracts for the Public Improvements in substantial accordance
with the general concept plans therefore as more specifically described on
Exhibit "C", attached hereto and incorporated herein, and in accordance with
the detailed plans and specifications therefor which shall be subject to the
prior approval of the Transportation Cabinet and the Corps of Engineers. The
commencement of construction of the Public Improvements shall occur as soon as
possible after securing all necessary governmental approvals and permits
therefore and shall be completed within one year from the date of commencement
of construction, subject to delays beyond the control of the Transportation
Cabinet. It is understood that the maximum obligation of the Transportation
Cabinet shall be the sum of $1,979,000 for construction costs, design and
engineering fees, utility relocation costs and other related costs. The
Partnership agrees to pay the balance of all costs incurred in excess of
$1,979,000. In the event the initial construction contract of the
Transportation Cabinet exceeds the maximum obligation of the Transportation
Cabinet, the Partnership agrees to pay to the Cabinet the amount of excess
costs prior to awarding the contract. Prior to executing the initial
construction contract, the Partnership has the option of refusing to
participate in the contract and in such event, the Partnership shall reimburse
the Transportation Cabinet for all costs up to that time and the agreement
shall be rescinded. The Transportation Cabinet agrees to pay design and
engineering fees directly related to construction of the roadway and roadside
park. The Transportation Cabinet agrees to pay for design and engineering fees
incurred within the period of time commencing thirty (30) days prior to the
date of the agreement up to a maximum of $100,000, any balance of which shall
be applied to engineering costs that may be necessary until the construction
project begins. The Public Improvements shall consist of the construction of
the causeway and roadside park and other appropriate and related facilities in
conjunction with the causeway and roadside park which shall include appropriate
lighting, drainage facilities, utility relocating, signage, guardrail, paving
of the roadway and roadside park and other appropriate and related items.
7. Maintenance, Repairs, Etc. of the Public Improvements. The
Transportation Cabinet at its expense shall be responsible for the maintenance,
repair and replacement of all of the Public Improvements with the Partnership
agreeing to maintain the roadside park by keeping the roadside park free of
trash and debris, maintaining the landscaping thereon, and the enactment and
enforcement of reasonable rules and regulations for the use thereof by the
public and the customers of the marina. The Partnership agrees to likewise
monitor the improvements and to pay all lighting utility bills relating to the
Public Improvements. Disputes regarding maintenance responsibilities shall be
the subjects of negotiations between the Transportation Cabinet and the
Partnership. In the event these disputes cannot be resolved, the Secretary of
Transportation's determination shall be final. The roadside park shall be
available to the public at all times and no fees shall be charged for the use
of the roadside park by the public.
-2-
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this amended development
agreement at Frankfort, Kentucky, the day and year first above written.
"Transportation Cabinet"
TRANSPORTATION CABINET OF THE
COMMONWEALTH OF KENTUCKY
BY: /s/
------------------------------------
Secretary
"Partnership"
JAMESTOWN RESORT AND MARINA, LTD.
a Kentucky limited partnership
BY: Jamestown Resort and Marina, Inc.,
a Kentucky corporation Is
General Partner
BY: /s/
------------------------------------
Chairman
- 3 -
<PAGE> 1
EXHIBIT 10.4
PROMISSORY NOTE (SECURED)
$6,300,000.00 January 29, 1996
FOR VALUE RECEIVED, the undersigned, JAMESTOWN RESORT & MARINA, LTD.,
a Kentucky limited partnership ("Borrower"), promises to pay to the order of
NATIONSCREDIT COMMERCIAL CORPORATION, a Delaware corporation with a principal
place of business at One Canterbury Green, P.O. Box 120013, Stamford,
Connecticut 06912-0013 ("Lender"), to the account set forth in Section 2d below
or at such other place as Lender may from time to time direct, the principal
sum of SIX MILLION THREE AND 00/100 DOLLARS ($6,300,000.00), or so much thereof
as may have been advanced pursuant hereto and to the Loan Agreement, on or
before the Maturity Date (both as defined below), together with interest
thereon, all as hereinafter provided. Interest shall be computed and accrue on
the principal amount hereof from time to time outstanding from the date
advanced to the date of payment at a rate per annum equal to the Interest Rate
(as defined below).
1. Definitions. In addition to terms defined elsewhere in this
Note, the following terms shall have the following definitions:
a. "Acceleration Fee" shall mean the aggregate
difference between: (x) the Base Rate and (y) the Lender's actual cost to
borrow funds accruing from the date for which the last payment of interest due
hereunder was received by Lender (prior to the acceleration of the Loan by
Lender as a result of an Event of Default under the Loan Documents) through the
last day of Loan Month thirty six (36).
b. "Advance" shall mean an advance by Lender to Borrower
in accordance with this Note or the Loan Agreement.
c. "Base Rate" shall mean the Commercial Paper Rate plus
four and one quarter percent (4.25%) per annum.
d. "Business Day" shall mean any day other than a
Saturday, Sunday or legal holiday on which commercial banks are authorized or
required to be closed in Illinois, Kentucky or Connecticut.
e. "Commercial Paper Rate" shall mean, for each Loan
Month, the highest discount rate reported as having been the rate in effect for
"high-grade unsecured notes" having thirty (30) day maturities "sold through
dealers by major corporations in multiples of $1,000" (whether or not such
notes have actually been sold by such dealers at such rates) in the "Money
Rates" column of The Wall Street Journal (the "Published Rate") published on
the first day of the applicable Loan Month, or, if the Published Rate is not
published on the first day of the applicable Loan Month, on the immediately
preceding Publication Date. If The Wall Street Journal (i) publishes more than
one Published Rate on any Publication Date, the higher of such rates shall
apply, or (ii) publishes a retraction or correction of any Published Rate, the
corrected
<PAGE> 2
rate reported in such retraction or correction shall apply. If the Published
Rate is no longer published at least monthly, the Base Rate shall, in the sole
and absolute discretion of Lender, be deemed to be either (x) such other
discount rate reported as having been the rate in effect for "high grade
unsecured notes" reported in The Wall Street Journal and reasonably
satisfactory to Lender, or (y) the Substitute Rate.
f. "Default Rate" shall mean a rate per annum equal to
the lesser of (i) five percent (5%) per annum plus the Base Rate, and (ii) the
Maximum Rate.
g. "Environmental Indemnity" shall mean the Hazardous
Substance Indemnity Agreement of even date from Borrower, General Partner, and
Guarantor to Lender.
h. "Event of Default" shall mean (i) the failure by
Borrower to pay any installment of principal or interest under this Note within
five (5) days following the due date thereof, (ii) the failure by Borrower to
pay all sums owed to Lender under this Note and every Loan Document on or
before the Maturity Date, or (iii) the occurrence of any Event of Default under
the Loan Agreement, the Mortgage or any other Loan Document.
i. "Dollars" and the symbol "$" shall mean lawful money
of the United States of America.
j. "General Partner" shall mean Jamestown Resort &
Marina, Inc., a Kentucky corporation.
k. "Guaranty" shall mean the Guaranty and Indemnity
Agreement of even date from General Partner and Guarantor to Lender.
l. "Guarantor" shall mean R. Dudley Webb.
m. "Incipient Default" shall mean any condition which
with the giving of notice or passage of time, or both, would constitute an
Event of Default.
n. "Interest Rate" shall mean the lesser of (i) the
Maximum Rate, and (ii) the Base Rate or the Default Rate, as applicable, from
time to time in effect hereunder.
o. "Lease Estoppel, Consent, Non-Disturbance and
Attornment Agreement" -- shall mean the Lease Estoppel, Consent,
Non-Disturbance and Attornment Agreement of even date entered into by and
between Borrower, the United States Of America, By And Through The Department
Of The Army, and Lender.
p. "Loan" shall mean the loan from Lender to Borrower
evidenced by this Note and by the Loan Agreement.
2
<PAGE> 3
q. "Loan Agreement" shall mean that certain Loan
Agreement of even date herewith by and between Lender and Borrower which,
together with this Note, evidences the Loan.
r. "Loan Documents" shall have the meaning set forth in
the Loan Agreement.
s. "Loan Month" shall mean any full calendar month
during the term of this Note, with Loan Month one (1) being February 1996 and
the Loan Month sixty (60) being January 2001. Loan Month one (1) shall be
deemed to include the partial month commencing on the date of this Note.
t. "Maturity Date" shall mean the earliest to occur of:
(i) February 1, 2001; (ii) such date as Lender may, in its discretion,
designate in writing as the Maturity Date if the Base Rate should at any time
exceed the Maximum Rate; or (iii) the date on which the entire principal amount
evidenced by this Note and all accrued and unpaid interest thereon shall be
paid or be required to be paid in full, whether by prepayment, acceleration or
otherwise in accordance with the terms of this Note or any of the Loan
Documents.
u. "Maximum Rate" shall mean the maximum interest rate
allowed by applicable law in effect with respect to the Loan on the date for
which a determination of interest accrued hereunder is made and after taking
into account all fees, payments and other charges which are, under applicable
law, characterized as interest.
v. "Mortgage" shall mean that certain Open-End Leasehold
Mortgage, Security Agreement, and Assignment of Rents of even date herewith
from Borrower to Lender securing the Loan.
w. "Mortgaged Property" shall have the meaning set forth
in the Mortgage.
x. "Publication Date" shall mean any date on which the
Commercial Paper Rate is published in The Wall Street Journal.
y. "Trapped Funds" shall have the meaning set forth in
Section 4.R of the Loan Agreement.
2. Payment of Interest and Principal.
a. Commencing on the first (1st) day of Loan Month two
(2) (March 1,1996) and on the first (1st) day of each Loan Month thereafter,
Borrower shall pay to Lender (i) interest at the Interest Rate on the principal
amount hereof then outstanding, (ii) installments of principal for each Loan
Month in the amounts set forth on Exhibit A attached hereto, which monthly
installments are calculated to be equal to the amount which would be sufficient
to amortize the principal balance of this Note over a fifteen (15) year term
commencing on the date
3
<PAGE> 4
hereof (or the remainder of said term at the time of each such monthly
payment), with interest accruing thereon at ten percent (10%) per annum.
b. In addition to the payments required under
Subsections 2.a and 2.b above, Lender shall have the right, subject to and in
accordance with Subsection 4.R of the Loan Agreement, to apply Trapped Funds
held by Lender to payment of (x) the outstanding principal balance of this
Note, or (y) upon the occurrence of an Event of Default, amounts then due and
payable under the Loan Documents in such order and priority as Lender may elect
in its sole and absolute discretion. Said mandatory payments made pursuant to
Subsection 4.R of the Loan Agreement shall not be subject to the Prepayment
Fee.
c. The entire outstanding principal amount of the Loan,
and all accrued and unpaid interest thereon, shall be due and payable on the
Maturity Date. Borrower acknowledges and agrees that a substantial portion of
the principal balance evidenced by this Note will be outstanding and due and
payable on the Maturity Date.
d. All payments hereunder shall be made by wire transfer
of immediately available federal funds without set-off or counterclaim and
shall be made to the following account of Lender prior to 1:30 p.m., Eastern
Standard Time, on the date due:
FIRST NATIONAL BANK OF CHICAGO
CHICAGO, ILLINOIS
ABA #071000013
ACCOUNT NUMBER: #52-56933
ACCOUNT NAME: NATIONSCREDIT COMMERCIAL CORPORATION
REFERENCE: JAMESTOWN RESORT & MARINA, LTD.
Whenever any payment to be made hereunder shall be stated to be due on a date
other than a Business Day, such payment may be made on the next succeeding
Business Day, and such extension of time shall be included in the calculation
of interest on such principal. Any payments received after 1:30 p.m., Eastern
Standard Time shall be deemed received on the next Business Day and shall
include interest to such next Business Day.
e. All interest required to be paid by Borrower
hereunder shall be calculated on the basis of a year consisting of 360 days and
shall be paid in arrears for the actual number of days elapsed, calculated as
to each Advance from and including the date the applicable period commenced to,
but not including, the date such period ends.
f. If any regular monthly installment of principal and
interest shall not be pied at the place required under this Note on or before
the fifth (5th) day following the due date thereof, Borrower shall pay to
Lender a late charge (the "Late Charge") of five cents ($0.05) for each Dollar
so overdue in order to compensate Lender for its frustration in the meeting of
its financial and loan commitments and to defray part of Lender's expenses
incident to handling such delinquent payments. This charge shall be in
addition to any other remedy Lender may
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<PAGE> 5
have and is in addition to Lender's right to collect reasonable fees and
charges of any agents or attorneys which Lender employs in connection with any
Event of Default. To the extent that any Late Charge shall constitute interest
under applicable law, the amount thereof, together with all other interest
hereunder and under the Loan Documents, shall be expressly limited to the
Maximum Rate. Nothing herein contained shall be deemed to constitute a waiver
or modification of the due date for such installments or any deposits required
to be made hereunder or under any of the Loan Documents or the requirement that
Borrower make all payments of installments and deposits as and when the same
are due and payable. In addition, Borrower shall pay to Lender interest at the
Default Rate on (i) any part of any regular monthly installment of principal
and interest which is not paid on or before the fifth (5th) day following the
due date thereof, and (ii) any other amounts owed to Lender hereunder or under
any Loan Document which are not paid on or before the fifth (5th) day following
the due date thereof; such interest at the Default Rate shall be calculated
from the date the payment in question became due to the date such payment is
made.
g. If at any time the Base Rate exceeds the Maximum Rate
and the Interest Rate is reduced to the Maximum Rate, any subsequent reductions
in the Base Rate to a level which is less than the Maximum Rate shall not
reduce the Interest Rate below the Maximum Rate unless and until the total
amount of the interest accrued and actually paid on this Note equals the amount
of interest which would have been paid or accrued if the Interest Rate had at
all times been equal to the Base Rate.
h. All agreements between Borrower and Lender, whether
now existing or hereafter arising and whether written or oral, are hereby
expressly limited so that in no contingency or event, whether by reason of
acceleration of the maturity of this Note or otherwise, shall the amount paid,
or agreed to be paid to Lender for the use, forbearance, or detention of the
money to be loaned under this Note or otherwise or for the payment or
performance of any covenant or obligation contained herein or in any other
document evidencing, securing or pertaining to the Loan exceed the Maximum
Rate. If from any circumstances whatsoever fulfillment of any provision hereof
or any of such other agreements shall cause the amount paid to exceed the
Maximum Rate, then ipso facto, the amount paid to Lender shall be reduced to
the Maximum Rate, and if from any such circumstances Lender shall ever receive
interest which exceeds the Maximum Rate, such amount which would be excessive
interest shall be applied to the reduction of the principal of this Note and
not to the payment of interest, or if such excessive interest exceeds the
unpaid balance of principal of this Note, such excess shall be refunded to
Borrower. All sums paid or agreed to be paid to Lender for the use,
forbearance or detention of the indebtedness of Borrower to Lender shall, to
the extent permitted by applicable law, (i) be amortized, prorated, allocated
and spread throughout the full term of such indebtedness until payment in full,
so that the actual rate of interest on account of such indebtedness does not
exceed the Maximum Rate throughout the term thereof; (ii) be characterized as a
fee, expense or charge other than interest; and (iii) exclude any voluntary
prepayments and the effects thereof The terms and provisions of this Section
2.i shall control and supersede every other provision of all agreements between
Lender and Borrower.
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<PAGE> 6
i. Except as otherwise expressly provided in this Note,
the Loan Agreement or the Mortgage, each payment received by Lender shall be
applied by Lender to amounts outstanding under the Loan Documents in such order
and priority as Lender may elect in its sole and absolute discretion; provided,
however, that if at the time of any payment there is due and payable any
portion of the principal balance of this Note and sums not constituting
repayment of principal, then such payment shall first be allocated to sums not
constituting repayment of principal (in such order of priority as among the
various obligations constituting such sums as Lender may elect in its sole and
absolute discretion) before Lender applies such payments to the reduction of
the outstanding principal balance of this Note.
3. Advances. The proceeds of the Loan have been advanced as
follows:
a. On the date hereof, Lender has advanced to or for the
benefit of Borrower the sum of FIVE MILLION EIGHT HUNDRED THOUSAND AND NO/00
DOLLARS ($5,800,000.00), and Borrower hereby acknowledges its receipt of said
funds.
b. So long as no Event of Default or Incipient Default
exists, Lender shall advance up to FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($500,000.00) in accordance with the terms and conditions set forth in Article
5 of the Loan Agreement.
4. Extension Options. Intentionally Deleted.
5. Net Cash Flow Payments. Intentionally Deleted.
6. Prepayment. The Loan may not be prepaid, in whole or in part,
at any time during the term hereof, except as expressly set forth below.
a. Prepayment in full of the Loan is permitted at any
time on or after the first day of Loan Month thirty seven (37) and prior to the
Maturity Date. Any prepayment in full which is made on or after the first (1st)
day of Loan Month thirty seven (37) shall not be subject to a Prepayment Fee.
b. Borrower shall give Lender thirty (30) days prior
written notice of the proposed prepayment, which notice shall be irrevocable.
Borrowers failure to make a prepayment in full in accordance with such a
written notice from Borrower to Lender shall constitute an Event of Default.
c. Any tender of payment by Borrower or any other party,
except as expressly set forth in this Section 6, shall constitute a prohibited
prepayment hereunder.
d. In the event that Lender accelerates the Loan to be
due in full as a result of the occurrence of an Event of Default prior to the
end of Loan Month thirty six (36), Borrower shall be liable to pay to Lender
the Acceleration Fee.
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<PAGE> 7
7. Default. Upon the occurrence of any Event of Default, the
principal amount of the Loan, together with all accrued interest thereon and
all amounts due and payable hereunder (including the Acceleration Fee) shall
immediately become due and payable on demand. If this Note, or any part
hereof, is not paid when due, whether by acceleration or otherwise, Borrower
promises to pay all costs of collection, including, but not limited to,
reasonable attorneys' fees and disbursements, incurred by the holder hereof on
account of such collection, whether or not suit is filed hereon. Additionally,
after the Maturity Date, the Interest Rate shall without notice immediately
become the Default Rate.
8. Notices. All notices, demands and requests required or
desired to be given hereunder shall be in writing and shall be delivered in
person, by United States registered or certified mail, return receipt
requested, postage prepaid, or by overnight courier addressed as follows:
To Borrower:
Jamestown Resort & Marina, Ltd.
250 West Main Street, Suite 3000
Lexington, Kentucky 40507
Attn: R. Dudley Webb
with a copy to:
Glenn A. Hoskins, Esq.
Webb & Hoskins
250 West Main Street, Suite 3010
Lexington, Kentucky 40507
To Lender:
NationsCredit Commercial Corporation
One Canterbury Green
P.O. Box 120013
Stamford, Connecticut 06912-0013
Attn: Vice President, Commercial Real Estate
with a copy to:
NationsCredit Commercial Corporation
One Canterbury Green
P.O. Box 120013
Stamford, Connecticut 06912-0013
Attn: General Counsel
7
<PAGE> 8
or at such other addresses or to the attention of such other persons as may
from time to time be designated by the party to be addressed by written notice
to the other in the manner herein provided. Notices, demands and requests given
in the manner aforesaid shall be deemed sufficiently served or given for all
purposes hereunder when received or when delivery is refused or when the same
are returned to sender for failure to be called for.
9. Governing Law. In all respects, including, without
limitation, matters of construction and performance of this Note and the
obligations arising hereunder, this Note shall be governed by, and construed in
accordance with, the internal laws of the State of Connecticut applicable to
contracts and obligations made in such state and any applicable laws of the
United States of America.
10. Waiver. Borrower hereby (a) waives demand,
presentment for payment, notice of nonpayment, notice of intent to accelerate,
notice of acceleration, protest, notice of protest and all other notice (except
notice specifically provided for herein or in the Loan Documents), filing of
suit and diligence in collecting this Note or enforcing any of the security for
this Note, (b) agrees to any substitution, exchange or release of any party
primarily or secondarily liable hereon, (c) agrees that Lender or any other
holder hereof shall not be required first to institute suit or exhaust its
remedies hereon or to enforce its rights under any Loan Document in order to
enforce payment of this Note, (d) consents to any extension or postponement of
time of payment of this Note and to any other indulgence with respect hereto
without notice thereof to Borrower, and (e) agrees that the failure to exercise
any option or election herein provided upon the occurrence of any default in
respect hereto shall not be construed as a waiver of the right to exercise such
option or election at any later date or upon the occurrence of a subsequent
default in respect hereto.
11. Business Purpose. Borrower represents and warrants
that the proceeds of this Note will be used for business purposes and not for
personal, family or household purposes.
12. Severability. If any provision of this Note or any
payments pursuant to this Note shall be invalid or unenforceable to any extent,
the remainder of this Note and any other payments hereunder shall not be
affected thereby and shall be enforceable to the greatest extent permitted by
applicable law.
13. Miscellaneous.
a. BORROWER HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF
THIS NOTE. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE BY
BORROWER, AND BORROWER ACKNOWLEDGES THAT LENDER HAS NOT MADE ANY
REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO
MODIFY OR NULLIFY ITS EFFECT. BORROWER FURTHER ACKNOWLEDGES THAT BORROWER HAS
BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE
8
<PAGE> 9
SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL
COUNSEL, SELECTED BY BORROWER, AND THAT BORROWER HAS HAD THE OPPORTUNITY TO
DISCUSS THIS WAIVER WITH COUNSEL.
b. Borrower hereby submits to personal jurisdiction in
the State of Connecticut for the enforcement of the provisions of this Note and
irrevocably waives any and all rights to object to such to such jurisdiction
for the purposes of litigation to enforce any provision of this Note. Borrower
hereby consents to the jurisdiction of and agrees that any action, suit or
proceeding to enforce this Note may be brought in any state or federal court in
the State of Connecticut. Borrower hereby irrevocably waives any objection
which Borrower may have to the laying of the venue of any such action, suit, or
proceeding in any such court and hereby further irrevocably waives any claim
that any such action, suit or proceeding brought in such a court has been
brought in an inconvenient forum. Borrower hereby appoints the Secretary of
the State of Connecticut as its agent for service of process. Borrower hereby
consents that service of process in any action, suit or proceeding may be made
by service upon the aforesaid agent for service of process (in which event
Lender will furnish Borrower a copy of the complaint and summons filed in
accordance with the notice requirements of Section 8.8 of the Loan Agreement),
by personal service upon Borrower, or by delivery in accordance with the notice
requirements of Section 8 of this Note or in such other manner permitted by
law.
c. This Note shall be binding upon Borrower and its
representatives, successors and assigns.
d. This Note may not be changed orally, but only by an
agreement in writing signed by Borrower and Lender.
e. The headings used in this Note are for ease of
reference only and shall not be used to construe or interpret this Note.
f. Borrower agrees that the terms and conditions of this
Note are the result of negotiations between Borrower and Lender and that this
Note shall not be construed in favor of or against any party by reason of the
extent to which any party or its professionals participated in the preparation
of this Note.
14. Limitation on Liability. (a) Subject to the limitations and
exceptions contained in subsections (b), (c) and (d) below, neither Borrower
nor the General Partner shall have any personal recourse liability for amounts
owing under this Note or any of the other Loan Documents and no deficiency
judgment therefor shall be enforced against Borrower or the General Partner.
Lender's recourse for such amounts shall, subject to the limitations and
exceptions contained in subsections (b), (c), (d), and (e) below, be limited to
the collateral and security provided under the Loan Documents.
(b) A judgment may be sought, obtained, entered and
enforced against Borrower and/or the General Partner to the extent necessary to
preserve or enforce the rights
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<PAGE> 10
and remedies of Lender in, to or against the collateral and security provided
under the Loan Documents, and nothing contained in this Section 14 shall be
construed to limit, prejudice or impair the rights of Lender to enforce its
rights and remedies against any real and personal property mortgaged, pledged,
encumbered, assigned or granted to secure payment or performance under this
Note, the Loan Agreement and the other Loan Documents. Notwithstanding anything
to the contrary herein or elsewhere Lender shall, to the fullest extent
permitted by law, be entitled to injunctive relief and to specific performance.
(c) Anything contained herein or elsewhere to the
contrary notwithstanding, Borrower and/or the General Partner shall be liable
to Lender, without limitation, for Lender's harm, loss (including lost interest
and principal on the Loan), damage, costs and expenses (including Lender's
reasonable attorneys' fees and collection costs) arising out of or in
connection with any of the following circumstances:
(i) any misapplication or misappropriation of any
Gross Revenues (as defined in the Loan Agreement), including the
distribution by Borrower of any Gross Revenues in violation of Section
4.1.S of the Loan Agreement;
(ii) any waste respecting all or any part of the
Property or any other collateral;
(iii) the collection of rents or other income from
the Property (as defined in the Loan Agreement) more than thirty (30)
days in advance in violation of the terms and provisions of the Loan
Documents; or the failure to account for security deposits of tenants
or other occupants at the Property, if any, not turned over to Lender
immediately after Lender's demand following the occurrence of an Event
of Default;
(iv) fraud in connection with the Loan or any Loan
Document;
(v) any material breach of any representation or
warranty made in connection with the Loan known by Borrower or the
Guarantor (as defined in the Loan Agreement) to have been false when
made or deemed made;
(vi) any material misrepresentation or inaccuracy
contained in any financial statement or other document provided to
Lender pursuant to Section 4.1.K of the Loan Agreement known by
Borrower or the Guarantor to have been false or inaccurate when
provided;
(vii) any breach of any of the terms and provisions
of the Environmental Indemnity;
(viii) the occurrence of a direct or indirect
transfer of the Property in violation of the Mortgage or any of the
other Loan Documents without the prior written consent of Lender or
the existence of any liens on the Premises (as defined in the Loan
10
<PAGE> 11
Agreement) resulting from Borrower's voluntary action, other than the
Permitted Encumbrances (as defined in the Loan Agreement);
(ix) any filing by Borrower or the General Partner,
or any Affiliate, of any voluntary petition under the Bankruptcy Code,
or the taking by any one or more of them of any comparable action
under any federal or state law, or the filing of any involuntary
petition under the Bankruptcy Code against any of Borrower, and the
General Partner, or any Affiliate, or the taking of comparable action
under any federal or state law against any one or more of them by any
Affiliate of any of them;
(x) the amendment or modification of the Ground Lease
without the prior written consent of the Lender in violation of
Paragraph 8 of the Lease Estoppel, Consent, NonDisturbance and
Attornment Agreement.
(d) In the event of any filing by Borrower or the General
Partner of any voluntary petition under the Bankruptcy Code, or the taking by
any one or more of them of any comparable action under any federal or state
law; or the filing of any involuntary petition under the Bankruptcy Code
against the Borrower, and/or the General Partner, or the taking of comparable
action under any federal or state law against any one or more of them by any
Affiliate of any of them, the Loan shall become fully recourse.
(e) Nothing contained in this Section 14 shall be
construed to release Borrower or any Loan Party (as defined in the Loan
Agreement) from liability under the indemnifications contained in the Guaranty
and in the Environmental Indemnity (each as defined in the Loan Agreement).
IN WITNESS WHEREOF, the undersigned has caused this Note to be
executed by its duly authorized representative as of the date and year first
above written.
JAMESTOWN RESORT & MARINA,
LTD., a Kentucky limited partnership
BY: JAMESTOWN RESORT &
MARINA, INC., a Kentucky
corporation, as general partner
BY: /s/ R. Dudley Webb
------------------------------------
R. DUDLEY WEBB, Its Chairman
Borrower's Taxpayer Identification
Number:
-------------------------------
11
<PAGE> 12
STATE OF OHIO
COUNTY OF HAMILTON
The foregoing instrument was acknowledged before me this ____ day of
January 1996, by R. DUDLEY WEBB, Chairman of Jamestown Resort & Marina, Inc., a
Kentucky corporation, as general partner of Jamestown Resort & Marina, Ltd., a
Kentucky limited partnership. He is personally known to me or has produced
as identification.
-----------------------------------
Print Name:
------------------------
NOTARY PUBLIC
[SEAL] Commission No.:
--------------------
My Commission expires:
12
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into as
of the 9th day of December, 1996, by and between Sonoma International, a Nevada
corporation ("Employer"), and James L. Frye ("Employee"), but shall be
effective for all purposes as of January 15, 1997. This Agreement supersedes
and replaces all prior employment agreements by and between Employer and
Employee.
W I T N E S S E T H:
WHEREAS, Employee is the President and Chief Executive Officer of
Employer; and
WHEREAS, Employee and Employer have determined that it is in their
mutual best interests to enter into this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. Employment. Employer hereby employs Employee and Employee hereby
accepts employment with Employer upon the terms and conditions hereinafter set
forth.
2. Duties. Employee shall perform such management and other duties
as the President and Co-Chief Executive Officer of a company that is similar in
type and size to Employer and as the Board of Directors of Employer shall from
time to time reasonably request.
3. Term. The employment of Employee under this Agreement shall
commence on January 15, 1997, and shall continue, unless earlier terminated
pursuant to Section 6 below, through January 14, 1999; provided, however, that
this Agreement shall automatically extend for a successive one year period on
each January 15, commencing on January 15, 1999, unless either Employer or
Employee provides the other written notice at least 30 days prior to the end of
the then existing term of its intent to terminate this Agreement at the end of
the then applicable term. The initial term of this Agreement and any renewal
term as provided above are collectively referred to herein as the "Term".
4. Compensation. As compensation for his services rendered under
this Agreement, during the Term Employee shall be entitled to receive the
following:
(a) Salary. Employee shall be paid a yearly salary of
$100,000, payable bi-weekly in equal installments, subject to increase
from time to time as may be determined by the Board of Directors of
Employer.
(b) Bonus. Employee may be paid an annual cash bonus with the
amount to be determined by the Compensation Committee of the Board of
Directors. Each annual
EMPLOYMENT AGREEMENT PAGE 1
<PAGE> 2
bonus, if any, shall be paid within five days after final audited
financial statements of Employer have been completed and delivered to
Employer.
(c) Benefits. Employee shall be entitled to receive such
group benefits as Employer may provide to its other employees at
comparable salaries and responsibilities to those of Employee, including
up to 100% of the premium costs of medical, dental, life, and disability
plans.
(d) Stock Options.
(i) Employee shall receive a grant from Employer
of a certain number of shares of common stock of Employer
("Common Stock") pursuant to the terms of Employer's 1996
Long-Term Incentive Plan (the "Plan"), with such options
being considered incentive stock options to the greatest
extent possible.
(ii) As of the date hereof, Employee shall
receive a grant from Employer of additional stock options
as agreed to by Employee and Employer in accordance with
the terms of the Plan.
(iii) As soon as possible after the date hereof,
Employee shall be entitled to receive additional options
to purchase Common Stock, either inside or outside the
Plan, as may be approved by the Board of Directors of
Employer or any committee thereof.
(e) Expenses. Employer shall pay directly for Employee's
business related car phone expenses, long distance calling card and
ordinary and necessary business travel and entertainment. In addition,
Employer shall reimburse Employee for all other ordinary and reasonable
expenses incurred by Employee in rendering services required under this
Agreement on a monthly basis upon submission of a detailed monthly
statement and reasonable documentation, including reimbursement of auto
expense when on the business of Employer at the rate of $0.31 per mile.
5. Confidentiality.
(a) Acknowledgment of Proprietary Interest. Employee
recognizes the proprietary interest of Employer and its affiliates in
any Trade Secrets (as hereinafter defined) of Employer and its
affiliates. Employee acknowledges and agrees that any and all Trade
Secrets learned by Employee during the course of his engagement by
Employer shall be and is the property of Employer and its affiliates.
Employee further acknowledges and understands that his disclosure of any
Trade Secrets and/or proprietary information may result in irreparable
injury and damage to Employer and its affiliates. As used herein,
"Trade Secrets" means all confidential and proprietary information of
Employer and its affiliates, including, without limitation, information
derived from reports, investigations, experiments, research, work in
progress, drawings, designs,
EMPLOYMENT AGREEMENT PAGE 2
<PAGE> 3
plans, proposals, codes, marketing and sales programs, client lists,
client mailing lists, financial projections, cost summaries, pricing
formula, and all other concepts, ideas, materials, or information
prepared or performed for or by Employer or its affiliates.
(b) Covenant Not-to-Divulge Trade Secrets. Employee
acknowledges and agrees that Employer and its affiliates are entitled to
prevent the disclosure of Trade Secrets. Employee agrees at all times
during the Term to hold in strict confidence and not to disclose or
allow to be disclosed to any person, firm or corporation, other than to
persons engaged by Employer and its affiliates to further the business
of Employer and its affiliates.
(c) Return of Materials at Termination. In the event of any
termination or cessation of his employment with Employer for any reason
whatsoever, Employee shall, upon the written request of Employer,
promptly deliver to Employer all documents, data and other information
pertaining to Trade Secrets. Employee shall not take any documents or
other information, or any reproduction or excerpt thereof, containing or
pertaining to any Trade Secrets.
(d) Competition During Employment. Employee agrees that
during the Term, neither he, nor any of his affiliates, will be actively
involved in, or directly or indirectly compete with Employer or its
affiliates in any way, and that he will not act as an officer, director,
employee, consultant, shareholder, lender, or agent of any entity which
is engaged in any business of the same nature as, or in competition
with, the businesses in which Employer and its affiliates are now
engaged or in which Employer or its affiliates become engaged during the
Term; provided, however, that this Section 5(d) shall not prohibit
Employee or any of his affiliates from (i) serving as a director (or
similar capacity) of any entity which is not in direct competition with
Employer or its affiliates or (ii) purchasing or holding an aggregate
equity interest of up to 5%, so long as Employee and his affiliates
combined do not purchase or hold an aggregate equity interest of more
than 5%, in any business in competition with Employer and its
affiliates.
6. Termination. This Agreement and the employment relationship
created hereby shall terminate upon the occurrence of any of the following
events:
(a) The expiration of the Term as set forth in Section 3
above;
(b) The death of Employee;
(c) The "disability" (as hereinafter defined) of Employee;
(d) Resignation by Employee;
(e) Written notice to Employee from Employer of termination
for "just cause" (as hereinafter defined); or
EMPLOYMENT AGREEMENT PAGE 3
<PAGE> 4
(f) Written notice to Employee from Employer of termination
for any reason other than as set forth in this Section 6.
For purposes of Section 6(c) above, the "disability" of Employee shall
mean his inability, because of mental or physical illness or incapacity, to
perform his duties under this Agreement for a continuous period of 120 days or
for 120 days out of a 150-day period. For purposes of Section 6(e) above,
"just cause" shall mean (a) that Employee (i) breached his fiduciary duty for
personal profit or (ii) is liable for gross negligence or intentional
misconduct in the performance of his duties to Employer, and, in either case,
such adjudication is no longer subject to direct appeal; (b) conviction of
Employee of a felony involving fraud or moral turpitude by a court of competent
jurisdiction; (c) Employee fails to give Employer not less than 30 days' notice
of Employee's resignation; or (d) Employee's material breach of any material
term of this Agreement, and such breach continues for more than thirty (30)
days after written notice of such breach is delivered to Employee by Employer.
In the event of the termination of Employee's employment pursuant to
Sections 6(a), (b), (c), (d) or (e) above, Employee shall be entitled only to
the compensation earned by him, or accrued for his benefit (with any bonuses
accruing on a daily basis) as of the date of termination. If Employee's
employment is terminated during this Agreement's initial two (2) year term
pursuant to Section 6(f) above, then Employee shall be entitled to receive the
compensation payable pursuant to Section 4 above for a period equal to the
remainder of the initial term of this Agreement. If Employee is terminated on
or after January 15, 1999 pursuant to Section 6(f) above then Employee shall be
entitled to receive the compensation payable pursuant to Section 4 above for a
period of 30 days after such date of termination stated in such notice.
7. Remedies. Employee recognizes and acknowledges that in the event
of any default in, or breach of any of, the terms, conditions or provisions of
this Agreement by Employee, Employer's remedies at law shall be inadequate.
Accordingly, Employee agrees that in such event, Employer shall have the right
of specific performance and/or injunctive relief in addition to any and all
other remedies and rights at law or in equity, and such rights and remedies
shall be cumulative.
8. Notices. Any notices, consents, demands, requests, approvals and
other communications to be given under this Agreement by either party to the
other shall be deemed to have been duly given if given in writing and
personally delivered or sent by mail, registered or certified, postage prepaid
with return receipt requested, as follows:
If to Employer: Sonoma International
3000 Lexington Financial Center
Lexington, Kentucky 40507
Attention: Chairman of the Board
EMPLOYMENT AGREEMENT PAGE 4
<PAGE> 5
If to Employee: James L. Frye
3619 Central Avenue
Nashville, Tennessee 37205
Notices delivered personally shall be deemed communicated as of actual receipt;
mailed notices shall be deemed communicated as of three days after mailing.
9. Entire Agreement. This Agreement contains the entire agreement
of the parties hereto and supersedes all prior agreements and understandings,
oral or written between the parties hereto, including, without limitation, that
certain Employment Agreement, dated as of December 9, 1996, by and between
Employer and Employee. No modification or amendment of any of the terms,
conditions or provisions herein may be made otherwise than by written agreement
signed by the parties hereto.
10. Governing Law. This Agreement and the rights and obligations of
the parties hereto shall be governed, construed and enforced in accordance with
the laws of the State of Kentucky.
11. Parties Bound. This Agreement and the rights and obligations
hereunder shall be binding upon and inure to the benefit of Employer and
Employee, and their respective heirs, personal representatives, successors and
assigns. Employer shall have the right to assign this Agreement to any
affiliate or to its successors or assigns. The terms "successors" and
"assigns" shall include any person, corporation, partnership or other entity
that buys all or substantially all of Employer's assets or all of its stock, or
with which Employer merges or consolidates. The rights, duties or benefits to
Employee hereunder are personal to him, and no such right or benefit may be
assigned by him. The parties hereto acknowledge and agree that Employer's
affiliates are third-party beneficiaries of the covenants and agreements of
Employee set forth in Sections 5 and 6 above.
12. Estate. If Employee dies prior to the payment of all sums owed,
or to be owed, to Employee pursuant to Section 4 above, then such sums, as they
become due, shall be paid to Employee's estate.
13. Enforceability. If, for any reason, any provision contained in
this agreement should be held invalid in part by a court of competent
jurisdiction, then it is the intent of each of the parties hereto that the
balance of this Agreement be enforced to the fullest extent permitted by
applicable law. Accordingly, should a court of competent jurisdiction
determine that the scope of any covenant is too broad to be enforced as
written, it is the intent of each of the parties that the court should reform
such covenant to such narrower scope as it determines enforceable.
14. Waiver of Breach. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach by any party.
EMPLOYMENT AGREEMENT PAGE 5
<PAGE> 6
15. Captions. The captions in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
16. Costs. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which he or it may be entitled.
17. Affiliate. An "affiliate" of any party hereto shall mean any
person controlling, controlled by or under common control with such party.
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument, but only one of which need be produced.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
EMPLOYER:
SONOMA INTERNATIONAL
By: /s/ R. Dudley Webb
-------------------------------
Chairman
EMPLOYEE:
By: /s/ James L. Frye
-------------------------------
EMPLOYMENT AGREEMENT PAGE 6
<PAGE> 1
EXHIBIT 10.6
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT, entered into as of October 6, 1993, between CHEVRON
U.S.A. INC., a Pennsylvania corporation ("Seller"), and JOSEPH H. ROTH, JR.
and/or assigns ("Buyer").
W I T N E S S E T H:
WHEREAS Seller is the owner of the land known as Facility #1289728
located at 909 Caroline Street, Key West, Florida 33040 and further described
in Exhibit A hereto (the "Property"); and
WHEREAS Seller wishes to sell to Buyer and Buyer wishes to purchase
from Seller the Property;
NOW, THEREFORE, Seller agrees to sell the Property to Buyer and Buyer
agrees to purchase the Property from Seller, subject to the following terms and
conditions:
1. PURCHASE PRICE: The purchase price for the Property shall be
$1,700,000 (the "Purchase Price"), which shall be paid by Buyer to Seller in
cash at Closing. The Purchase Price shall be payable by Buyer to Seller as
follows: (a) Down payment of $50,000 on execution of this contract by Buyer;
(b) an additional deposit of $120,000 to be paid within thirty (30) days
following the Effective Date of the Agreement; and (c) Balance of the Purchase
Price plus the aggregate amount of closing adjustments, if any, which Seller is
entitled to receive from Buyer on closing of Title and delivery of deed, at
Seller's option by cash, certified check, cashier's check, attorney's escrow
check or wire transfer funds payable directly to Seller. This paragraph
survives Closing.
2. CLOSING: The closing of this purchase and sale ("Closing")
shall occur at Seller's option by mail in escrow, by Buyer's attorney or other
escrow agent satisfactory to Seller, at no cost to Seller, on or before ninety
(90) days following the Effective Date, or at such other time and place as
Seller and Buyer may agree in writing; provided, however, that if the Closing
does not occur on or before December 31, 1993, either Seller or Buyer, if not
in default hereunder, may terminate this agreement by written notice to the
other. All real estate and personal property taxes and all utility and other
charges relating to the Property shall be prorated between Seller and Buyer as
of the Closing Date. With regard to any special or general assessments on the
Property which are payable in installments, Buyer shall be responsible for
<PAGE> 2
all installments which fall due subsequent to the date of Closing. All other
closing costs, recording costs and any other escrow fees, shall be paid by
Buyer provided however, Seller shall pay all transfer taxes. Buyer and Seller
hereby designate Buyer as the Reporting Person for purposes of Section 6045 of
the Internal Revenue Code.
3. TITLE: Title to and possession of the Property shall be
conveyed to Buyer at Closing pursuant to a Warranty deed substantially in the
form of Exhibit A attached (the "Deed"), subject to (a) the lien of current
real property taxes and assessments, not delinquent, (b) matters set forth or
excepted in the Deed, and (c) such other exceptions as may be approved by
Buyer.
4. CONDITION OF PROPERTY:
(a) As used herein, "Covered Contamination" means
hydrocarbon or other contamination resulting from spills, leaks, discharges or
other releases of petroleum or petroleum products at the Property, as indicated
in certain report(s) prepared by or for Seller in connection with Seller's
environmental review of the Property pursuant to subsection [b] hereof (such
report(s) to be given to the Buyer, as available in final form and for
informational purposes only, and such contamination off the Property which is
attributable to the contamination indicated in such report(s), but only to the
extent such contamination, whether on or off the Property, violates applicable
federal, state or local laws and regulations as in effect on the date of
Closing, but only to the extent that such laws and regulations are then
enforced by the applicable governmental authority.
(b) Seller shall undertake at Seller's expense an
environmental review of the Property to determine the presence of Covered
Contamination. Such review shall be substantially completed prior to the date
of Closing. (Buyer may, at its expense and on prior written notice to Seller,
make its own environmental review of the Property, and Seller shall grant
Buyer, on terms and conditions satisfactory to Seller, reasonable access to the
Property for such purpose prior to the date of Closing.) If Seller's review
determines that Covered Contamination is present, Seller shall elect either (i)
to correct or make arrangements for the correction of such Covered
Contamination or (ii) to terminate this agreement by written notice to Buyer.
(c) Seller shall indemnify, defend and hold harmless
Buyer from and against all claims, expenses (including reasonable attorneys'
fees), loss and liability arising from (i) any
<PAGE> 3
claims by third parties (other than subsequent owners or occupiers of the
Property) to the extent based on Covered Contamination and (ii) any cleanup
costs and related expenses incurred as a result of any cleanup of Covered
Contamination, but only as may be ordered or effectuated subsequent to the date
of Closing by federal, state or local governmental authorities. The duty or
obligation of Seller under this subsection [c] is contingent upon (i) Buyer
utilizing all reasonable efforts to resist any such third-party claim or
governmental cleanup order, (ii) Seller having the right to participate in any
such proceedings, and (iii) Buyer cooperating fully with Seller in order to
minimize the amount of any award to such third party or the scope of any such
cleanup order. Buyer does hereby expressly release Seller from any private
cause of action which Buyer might otherwise have against Seller under Section
107 of the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Section 9601 et seq. The indemnity set forth in this subsection
[c] shall also be deemed to run to (i) any bank or financial institution to
which Buyer may grant a security interest in the Property to secure a loan used
by Buyer to pay all or part of the Purchase Price and (ii) subsequent owners
and occupiers of the Property, but only to the extent Buyer remains responsible
for such third party claims or such costs and expenses incurred as a result of
such governmentally ordered or effectuated cleanup, provided, however, in which
event, Buyer causes such subsequent owners and occupiers of the Property to
agree to and assume in writing all of Buyer's covenants and obligations under
this section 4.
(d) Except as expressly set forth in this section 4,
Buyer accepts the Property "AS IS" and "WITH ALL FAULTS".
(e) Buyer shall indemnify, defend and hold harmless
Seller, its parent, subsidiaries, affiliates, predecessors, successors and
assigns, and its and their directors, officers, employees and agents from and
against all claims, expenses (including reasonable attorneys' fees), loss and
liability arising from any environmental contamination at the Property which
occurs after the date of Closing.
(f) All undertakings, duties and obligations of Seller
under section 4 hereof (except that with respect to claims by third parties
under subsection [c] hereof) shall be deemed completed and Seller shall be
relieved therefrom at such time as (i) a completion order or similar evidence
of approval is issued indicating that corrective action undertaken by Seller
hereunder with respect to Covered Contamination has been completed to the
satisfaction of the applicable
<PAGE> 4
governmental authority or (ii) Seller otherwise determines the Property has
been restored to a condition which satisfies applicable federal, state or local
laws and regulations as in effect on the date of Closing with respect to
Covered Contamination.
(g) If Seller elects under subsection [b] hereof to
correct or make arrangements for the correction of Covered Contamination, Buyer
shall grant to Seller at the time of Closing an easement for that purpose,
which will be recorded along with the Deed, in the form attached hereto as
Exhibit B (the "Easement") and, in which event, the sale contemplated herein
shall be expressly subject to the Easement. All undertakings, duties and
obligations of Seller under section 4 hereof shall be subject to continued
access pursuant to the Easement.
(h) Should a material spill, leak, discharge or other
release of petroleum or petroleum products, hydrocarbons or other contamination
occur following the date of Closing at the Property while Seller is engaged in
such corrective work, and such spill, leak, discharge or other release is
unrelated to Seller's work and is not due to any negligence or other wrongful
conduct by Seller in conducting such work, then (i) Seller shall have no
further responsibility to Buyer with regard to Covered Contamination, (ii) any
indemnity obligation of Seller with regard to Covered Contamination shall end,
and (iii) Buyer thereafter shall release, indemnify and hold Seller and its
parent, subsidiaries, affiliates, predecessors, successors and assigns, and its
and their directors, officers, employees and agents harmless from and against
all claims, expenses (including reasonable attorneys' fees), loss and liability
arising from the Covered Contamination as well as from such subsequent spill,
leak, discharge or other release. A spill, leak, discharge or other release
shall be deemed material for purposes of this subsection [h] if it makes any
corrective work which Seller would otherwise have been required to perform
hereunder significantly more difficult or significantly extends the time
required to complete such corrective work. Any cleanup work required with
regard to any such subsequent spill, leak, discharge or other release, whether
or not considered material hereunder, shall be the responsibility solely of
Buyer. Buyer shall notify Seller of any known or suspected spill, leak,
discharge or other release of petroleum or petroleum products, hydrocarbons or
other contamination, whether or not considered material hereunder, occurring at
the Property after the date of Closing.
(i) Buyer agrees that Seller, at its sole discretion, can
elect from time to time to participate in either a state administered
restoration program or a state reimbursement
<PAGE> 5
program or both, if and to the extent such program(s) exist in the State of
Florida and the Property or the work to be performed hereunder by Seller
qualifies under such program(s), and Buyer shall have no recourse against
Seller with regard to any such election. Buyer agrees that Seller's
participation in or compliance with a state administered restoration program or
state reimbursement program constitutes performance of Seller's obligations
hereunder with respect to corrective action of Covered Contamination. Buyer
shall, as requested by Seller and at no expense to Buyer, reasonably cooperate
with Seller in satisfying requirements of the applicable governmental agency
with respect to participation in or compliance with such state administered
restoration program or state reimbursement program. Seller shall be entitled
to retain all reimbursements received for work performed hereunder.
(j) Any failure of the Buyer to operate the Property in
conformity with the obligations and requirements of federal, state or local
laws and regulations, which if violated would adversely affect, impact upon, or
otherwise prejudice the Seller's undertakings, duties and obligations or its
rights and entitlements hereunder, may, at Seller's sole election and without
in any way limiting other recourses and remedies to which Seller is entitled
under applicable laws and regulations or otherwise, relieve Seller of all of
its undertakings, duties and obligations set forth in this section 4. Seller
shall have the right to request and obtain applicable records of the Buyer to
determine Buyer's compliance with such federal, state and local laws and
regulations. Seller shall not be liable or responsible for any penalties
imposed by any applicable governmental authority due to Buyer's failure to
conform with any federal, state and local laws and regulations. Buyer agrees
to indemnify Seller for any expenses (including reasonable attorneys' fees)
incurred arising from such penalty.
(k) The terms of this section 4 shall, to the extent
applicable, survive closing.
5. IMPROVEMENTS. Buyer acknowledges that all Improvements are to
be purchased by Buyer "AS IS" and "WITH ALL FAULTS" AND WITHOUT ANY
REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, ON THE PART OF
SELLER, OR ARISING BY OPERATION OF LAW INCLUDING, WITHOUT LIMITATION, ANY OF
CONDITION, HABITABILITY, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE
OF THE IMPROVEMENTS and the Buyer assumes itself and hereby releases Seller
from any and all liability on account of the condition of the improvements.
<PAGE> 6
6. LAWS AND REGULATIONS. Seller makes no representation or
warranty whatsoever as to operative or proposed governmental laws and
regulation (including, but not limited to zoning, environmental and land use
laws and regulations) to which the Property may be subject. Buyer acknowledges
that it has entered into this agreement on the basis of its own review and
investigation of the applicability and effect of such laws and regulations and
Buyer assumes the risk that adverse matters may not have been revealed by its
investigation.
7. BUYER'S FINANCING. The Closing of the purchase and sale of
the Property shall be conditioned on Buyer's ability to obtain financing for
this transaction by the date of Closing in any amount and on terms satisfactory
to Buyer.
8. GENERAL. This agreement constitutes the entire agreement
between Seller and Buyer with regard to the subject matter hereof. Time is of
the essence hereof. In the event of any litigation between the parties hereto
with regard to the subject matter hereof, the prevailing party shall be
entitled to recover its costs and expenses of suit, including reasonable
attorneys' fees, in connection therewith.
9. COMMISSIONS. Seller agrees to pay upon closing to Oceanfront
Resorts and United National - Southernmost as brokers, an amount equal to five
percent (5%) of the purchase price to be divided equally among the two brokers.
The Seller shall have no further obligations to any other person or entity in
connection with the purchase and sale under this agreement relative to
commissions or other brokerage or finder fees.
10. OFFER. This offer shall not constitute a contract or
otherwise be binding on Seller unless and until receipt by Buyer of a fully
executed copy of this Purchase and Sale Agreement. In the event this offer is
not accepted by Seller, Seller's sole obligation shall be to refund the down
payment to Buyer, without interest.
11. TAX DEFERRED EXCHANGE. In the event Seller so elects, Buyer
agrees to accommodate Seller in effecting a tax-deferred exchange under
Internal Revenue Code Section 1031 as amended. Seller shall have the right to
elect this tax-deferred exchange at any time prior to the Closing date. If
Seller elects to effect a tax-deferred exchange, Buyer agrees to execute
additional escrow instructions, documents, agreements, or instruments to effect
the exchange, provided that Buyer shall incur no additional costs, expenses,
fees or liabilities as a result of or connected with the exchange.
12. NO RECORDING. This agreement shall not be recorded.
<PAGE> 7
13. RADON. Radon is a naturally occurring radioactive gas that,
when it has accumulated in a building in sufficient quantities, may present
health risks to persons who are exposed to it over time. Levels of radon that
exceed federal and state guidelines have been found in buildings in Florida.
Additional information regarding radon and radon testing may be obtained from
your county public health unit.
14. All notices, demands, requests or other communications under
this Agreement shall be in writing and shall be deemed properly given if
delivered by hand to the party to whose attention it is directed, or if sent by
Certified Mail, Return Receipt Requested, postage prepaid and properly
addressed. If by mail, such notices shall be deemed given as of the postmark
date. Such notices may be delivered or mailed as follows:
IF TO SELLER:
CHEVRON U.S.A. INC.
P.O. Box 1706
Atlanta, Georgia
Attention: Audrey B. Chapline
Roger M. Pomerance, P.A.
Suite 201A, East Building
1900 Corporate Boulevard NW
Boca Raton, Florida 33431
IF TO BUYER:
JOSEPH M. ROTH, JR.
c/o Southernmost Real Estate, Inc.
A. Frederick Skomp, Broker
328 Southard Street
Key West, Florida 33040
or such other person or address which any party entitled to receive notice
hereunder may designate in writing.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the date first set forth.
SELLER:
CHEVRON U.S.A. INC.
By: /s/ W. J. Young
-------------------------------
W.J. Young
Property Manager
Southern Region
BUYER:
JOSEPH M. ROTH, JR.
By: /s/ Joseph M. Roth, Jr.
-------------------------------
<PAGE> 8
ADDENDUM TO PURCHASE AND SALE AGREEMENT
This document constitutes an Addendum to that certain Purchase and
Sale Agreement ("the Contract" by and between CHEVRON U.S.A., INC., as the
Seller and JOSEPH M. ROTH, JR., as Buyer.
The Seller and Buyer do further agree as follows:
1. CONDITION OF PROPERTY. Seller agrees to provide to Buyer all current
environmental assessments of the property and all environmental data during the
Inspection Period.
2. UNDERGROUND STORAGE TANKS. Seller represents that all underground
storage tanks have been removed from the property.
3. INSPECTION PERIOD. The Buyer shall have an inspection period
beginning at the Effective Date of the Agreement and ending thirty days
thereafter. If Buyer, in his sole discretion, determines that the property is
not suitable for his use, Buyer shall be refunded his earnest money and the
Agreement shall be null and void.
4. CONTINGENCIES. This Agreement is contingent upon:
A. Buyer successfully negotiating a lease with the State of
Florida for the use of the Bay Bottom under and around the pier.
B. Buyer successfully obtaining approval from the regulatory
agencies to repair the pier.
5. ESCROW AGENT. Attorneys' Title Insurance Fund, Inc. ("Escrow Agent")
shall serve as the escrow agent for the transaction contemplated by this
Purchase and Sale Agreement. Accordingly, all deposits, funds and documents
required by the Purchase and Sale Agreement shall be deposited with Escrow
Agent. Escrow Agent, Seller and Buyer shall execute an Escrow Agreement
concurrently herewith setting forth the terms and conditions of escrow.
6. Seller will provide a title insurance commitment and owner's policy,
at Seller's expense.
<PAGE> 9
EXHIBIT "A"
The legal description of the property and a sample deed will be provided to the
Buyer prior to closing.
<PAGE> 10
SECOND ADDENDUM TO PURCHASE AND SALE AGREEMENT
This document constitutes a SECOND ADDENDUM TO PURCHASE AND SALE
AGREEMENT, entered into this ___ day of November 1993, between CHEVRON USA,
INC., a Pennsylvania Corporation as the Seller, and JOSEPH H. ROTH, JR. and/or
his assigns as the Buyer of the property located at 909 Caroline Street, Key
West, Florida 33040 and also known as facility #1289728.
FOR VALUE RECEIVED AND ACKNOWLEDGED the Seller and Buyer do further
agree as follows:
1. CLOSING. The closing of this purchase and sale shall occur on
or before December 28, 1993. This paragraph acts as an amendment to Paragraph
2 of the Purchase and Sale Agreement.
2. INSPECTION PERIOD. The inspection period referred to in
Paragraph 3 of the Addendum To Purchase And Sale Agreement shall be extended to
5:00 p.m. on November 29, 1993.
3. CONTINGENCIES. The contingencies as contained in Paragraph 4
of the Addendum to Purchase and Sale Agreement remain in full force and effect
and are further clarified as follows:
A. The Purchase And Sale Agreement is contingent upon
the Buyer successfully negotiation a lease on or before December 31, 1993 with
the state of Florida for the use of the bay bottom under and around the pier
located adjacent to the property which is subject to the Purchase and Sale
Agreement.
B. The Purchase and Sale Agreement is also contingent
upon the Buyer successfully obtaining approval according to specifications
satisfactory to Buyer from any and all existing regulatory agencies to repair
the pier, on or before December 31, 1993.
4. Upon entering into this SECOND ADDENDUM TO PURCHASE AND SALE
AGREEMENT Buyer will immediately cause One Hundred Seventy Thousand and No/100
($170,000.00) Dollars as referenced in the Purchase and Sale Agreement to be
paid over to Attorney's Title Insurance Fund, Inc., as Escrow Agent.
<PAGE> 11
IN WITNESS THEREOF, the parties hereto have executed this Agreement as
of the date set above.
SELLER:
CHEVRON USA, INC.
BY:
-------------------------------
BUYER:
JOSEPH M. ROTH, JR.
BY:
-------------------------------
<PAGE> 1
EXHIBIT 10.7
Roger M. Pomerance, Esq. 817510 OFF
Roger M. Pomerance, P.A. REC 1287 PAGE 0266
1900 Corporate Blvd., NW
Suite 201A, East Building
Boca Raton, Florida 33431
Property Appraisers Parcel 00002970000000010101
Identification (Folio) Number(s): #4-057
Alternate Key Number: 1003069
DS Paid 11,900.00 Date 12/30/93
--------- --------
[clerk's stamp]
Grantee TIN: __________________________________
SPECIAL WARRANTY DEED
This Special Warranty Deed, made the 29th day of December, 1993, by
CHEVRON U.S.A. INC., a Pennsylvania corporation, having a mailing address of
P.O. Box 1706, Atlanta, GA 30301 (hereinafter called the "Grantor"), to KEY
WEST CONCH HARBOR, INC., a Florida corporation, having a mailing address of 830
Eaton St., Key West, FL 33040 (hereinafter called the "Grantee").
[Wherever used herein the terms "Grantor" and "Grantee" include the
parties to this instrument defined above and each of their respective
successors and assigns.]
WITNESSETH: That the Grantor, for and in consideration of the sum of
Ten and No/100 ($10.00) Dollars and other valuable consideration, receipt
whereof is hereby acknowledged, hereby grants, bargains, sells, aliens,
remises, releases, conveys and confirms unto the Grantee, all that certain real
property lying, situate and being in Monroe County, Florida and more
particularly described as:
SEE EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN
(herein called the "Property")
The Property is conveyed subject to the following:
SEE EXHIBIT "B" ATTACHED HERETO AND INCORPORATED HEREIN
TOGETHER with all the tenements, hereditaments, appurtenances thereto
belonging or in anywise appertaining.
To HAVE AND TO HOLD, the same in fee simple forever.
AND Grantor hereby covenants with Grantee that, except as noted on
Exhibit "B", at the time of delivery of this Special Warranty Deed, Grantor was
lawfully seized of the Property in fee simple, the Property was free from all
encumbrances made by Grantor, and that Grantor hereby warrants the title to the
Property and will defend same against the lawful claims and demands of all
persons claiming by, through or under Grantor, but against none other.
1
<PAGE> 2
In Witness Whereof, Grantor has signed and sealed these presents the
day and year first above written.
Signed, sealed and delivered
in the presence of:
CHEVRON U.S.A. INC.
a Pennsylvania corporation
/s/ Marrell Parker
- ------------------------------------
[Signature of Witness]
Marrell Parker By: /s/ W. J. Young
- ------------------------------------ -----------------------------
[Printed Name of Witness]
PRINT NAME: W. J. Young
---------------
/s/ Audrey B. Chapline
- ------------------------------------
[Signature of Witness] its: Assistant Secretary
-----------------------
[PRINT TITLE ABOVE]
Audrey B. Chapline
- ------------------------------------
[Printed Name of Witness]
[Corporate Seal]
STATE OF GEORGIA
COUNTY OF COBB
I HEREBY CERTIFY that, on this day before me, an officer duly
qualified to take acknowledgements, personally appeared W.J. Young , as
Assistant Secretary of CHEVRON U.S.A. INC., a Pennsylvania corporation, who is
personally known to me or who has produced ____________________________ as
identification, and who executed the foregoing instrument and acknowledged
before me that __he executed the same for the purposes set forth therein.
WITNESS my hand and seal in the County and State last aforesaid this
17 day of December, 1993.
/s/ Elizabeth A. Lemoire
-----------------------------------
Print Name: Elizabeth A. Lemoire
-------------------------
Notary Public
[Notary Seal] Commission No.:
---------------------
My Commission expires: 7/4/94
2
<PAGE> 1
This Instrument Prepared By: EXHIBIT 10.8
Roger M. Pomerance, Esq.
Roger M. Pomerance, P.A.
1900 Corporate Blvd., NW
Suite 201A, East Building
Boca Raton, Florida 33431
Property Appraisers Parcel 0000297000000010101
Identification (Folio) Number(s): 4-057
Alternate Key Number: 1003069
Grantee TIN: __________________________________
QUIT CLAIM DEED
This Quit Claim Deed, made the 29th day of December, 1993, by
CHEVRON U.S.A. INC., a Pennsylvania corporation, having a mailing address of
P.O. Box 1706, Atlanta, GA 30301 (hereinafter called the "Grantor"), to KEY
WEST CONCH HARBOR, INC., a Florida corporation, having a mailing address of
830 Eaton St., Key West, FL 33040 (hereinafter called the "Grantee").
[Wherever used herein the terms "Grantor" and "Grantee"
include the parties to this instrument defined above and each
of their respective successors and assigns.]
WITNESSETH: That the Grantor, for and in consideration of the sum of
Ten and No/100 ($10.00) Dollars and other valuable consideration, receipt
whereof is hereby acknowledged, hereby grants, bargains, sells, aliens,
remises, releases, conveys and confirms unto the Grantee, all of Grantor's
interest in and to:
All riparian and littoral rights, piers, docks, wharves,
improvements, including but not limited to, the concrete seawall,
existing pier and pilings extending into the waters of Key West
Bight (Florida Bay), and all permits, licenses and bay bottom rights
as are or may be attached to or appurtenant to the following
described property:
SEE EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN
To HAVE AND TO HOLD, the same, together with all and singular
the appurtenances thereunto belonging or in anywise appertaining,
and all the estate, right, title, interest and claim whatsoever
of the said Grantor, either in law or equity, to the only proper use,
benefit and behoof of the Grantee.
1
<PAGE> 2
In Witness Whereof, Grantor has signed and sealed these presents the
day and year first above written.
Signed, sealed and delivered
in the presence of:
CHEVRON U.S.A. INC.
a Pennsylvania corporation
/s/ G.A. Salcedo
- -----------------------------
[Signature of Witness]
G.A. Salcedo By: /s/ O.R. Farber
- ----------------------------- ----------------------------------
[Printed Name of Witness]
PRINT NAME: O.R. Farber
-----------------------
/s/ Gisele Thierry
- -----------------------------
[Signature of Witness] its: Assistant Secretary
------------------------------
[PRINT TITLE ABOVE]
Gisele Thierry
- -----------------------------
[Printed Name of Witness]
[Corporate Seal]
STATE OF CALIFORNIA
CITY AND
COUNTY OF SAN FRANCISCO
I HEREBY CERTIFY that, on this day before me, an officer duly
qualified to take acknowledgements, personally appeared O.R. Farber, as
Assistant Secretary of CHEVRON U.S.A. INC., a Pennsylvania corporation, who is
personally known to me or who has produced _______________ as identification,
and who executed the foregoing instrument and acknowledged before me that she
executed the same for the purposes set forth therein.
WITNESS my hand and seal in the County and State last aforesaid this
23rd day of December, 1993.
/s/ Joseph D. Suryan
---------------------------------
Print Name: Joseph D. Suryan
----------------------
[Notary Seal] Notary Public
Commission No.: 1007339
------------------
My Commission expires: November 19, 1997
2
<PAGE> 1
EXHIBIT 10.9
PROMISSORY NOTE
<TABLE>
====================================================================================================================================
<CAPTION>
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$3,224,184.91 07-17-1996 04-01-2016 608006684 16 37 608006684 KM
- ------------------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------------------
Borrower: Key West Conch Harbor, Inc., a Florida Lender: TIB Bank of the Keys
corporation Key West
830 Eaton Street PO Box 6330
Key West, FL 33040 Key West, FL 33041
====================================================================================================================================
</TABLE>
PRINCIPAL AMOUNT: $3,224,184.91 DATE OF NOTE: JULY 17, 1996
PROMISE TO PAY. KEY WEST CONCH HARBOR, INC., A FLORIDA CORPORATION ("BORROWER")
PROMISES TO PAY TO TIB BANK OF THE KEYS ("LENDER"), OR ORDER, IN LAWFUL MONEY OF
THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF THREE MILLION TWO HUNDRED
TWENTY FOUR THOUSAND ONE HUNDRED EIGHTY FOUR & 91/100 ($3,224,184.91), TOGETHER
WITH INTEREST ON THE UNPAID PRINCIPAL BALANCE FROM JULY 17, 1996, UNTIL PAID IN
FULL.
PAYMENT. SUBJECT TO ANY PAYMENT CHANGES RESULTING FROM CHANGES IN THE INDEX,
BORROWER WILL PAY THIS LOAN IN ACCORDANCE WITH THE FOLLOWING PAYMENT SCHEDULE:
20 CONSECUTIVE MONTHLY INTEREST PAYMENTS, BEGINNING SEPTEMBER 1, 1996,
WITH INTEREST CALCULATED ON THE UNPAID PRINCIPAL BALANCES AT AN
INTEREST RATE OF 9.000% PER ANNUM; 36 CONSECUTIVE MONTHLY PRINCIPAL AND
INTEREST PAYMENTS OF $30,208.48 EACH, BEGINNING MAY 1, 1998, WITH
INTEREST CALCULATED ON THE UNPAID PRINCIPAL BALANCES AT AN INTEREST
RATE OF 9.000% PER ANNUM; 179 CONSECUTIVE MONTHLY PRINCIPAL AND
INTEREST PAYMENTS IN THE INITIAL AMOUNT OF $30,653.29 EACH, BEGINNING
MAY 1, 2001, WITH INTEREST CALCULATED ON THE UNPAID PRINCIPAL BALANCES
AT AN INTEREST RATE OF 1.000 PERCENTAGE POINTS OVER THE INDEX DESCRIBED
BELOW; AND 1 PRINCIPAL AND INTEREST PAYMENT IN THE INITIAL AMOUNT OF
$30,653.03 ON APRIL 1, 2016, WITH INTEREST CALCULATED ON THE UNPAID
PRINCIPAL BALANCES AT AN INTEREST RATE OF 1.000 PERCENTAGE POINTS OVER
THE INDEX DESCRIBED BELOW. THIS ESTIMATED FINAL PAYMENT IS BASED ON THE
ASSUMPTION THAT ALL PAYMENTS WILL BE MADE EXACTLY AS SCHEDULED AND THAT
THE INDEX DOES NOT CHANGE; THE ACTUAL FINAL PAYMENT WILL BE FOR ALL
PRINCIPAL AND ACCRUED INTEREST NOT YET PAID, TOGETHER WITH ANY OTHER
UNPAID AMOUNTS UNDER THIS NOTE.
Borrower will pay Lender at Lender's address shown above or at such other place
as Lender may designate in writing. Unless otherwise agreed or required by
applicable law, payments will be applied first to accrued unpaid interest, then
to principal, and any remaining amount to any unpaid collection costs and late
charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an independent index which is the Prime
rate as published in the Wall Street Journal. When a range of rates has been
published, the higher of the rates will be used (the "Index"). The Index is not
necessarily the lowest rate charged by Lender on its loans. If the Index
becomes unavailable during the term of this loan, Lender may designate a
substitute index after notice to Borrower. Lender will tell Borrower the
current index rate upon Borrower's request. Borrower understands that Lender
may make loans based on other rates as well. The interest rate change will not
occur more often than each semi-annually the first day of April and October
commencing on April 1, 2001. The date on which the interest rate could change
is called the interest Change Date. The most recently available Index as of 25
days prior to each Interest Change Date is called the "Current Index". THE
INDEX CURRENTLY IS 8.250% PER ANNUM. THE INTEREST RATE OR RATES TO BE APPLIED
TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE THE RATE OR RATES SET
FORTH ABOVE IN THE "PAYMENT" SECTION. NOTICE: Under no circumstances will the
effective rate of interest on this Note be more than the maximum rate allowed
by applicable law. Whenever increases occur in the interest rate, Lender, at
its option, may do one or more of the following: (a) increase Borrower's
payments to ensure Borrower's loan will pay off by its original final maturity
date, (b) increase Borrower's payments to cover accruing interest, (c) increase
the number of Borrower's payments, and (d) continue Borrower's payments at the
same amount and increase Borrower's final payment.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount
owed earlier than it is due. Early payments will not, unless agreed to by
Lender in writing, relieve Borrower of Borrower's obligation to continue to
make payments under the payment schedule. Rather, they will reduce the
principal balance due and may result in Borrower making fewer payments.
LATE CHARGE. If a payment is 10 DAYS OR MORE LATE, Borrower will be charged
5.000% OF THE UNPAID PORTION OF THE REGULARLY SCHEDULED PAYMENT.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Note or any agreement related to this Note, or in any other agreement or loan
Borrower has with Lender. (c) Borrower defaults under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may materially affect
any of Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor
tries to take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of Borrower's accounts
with Lender. (g) Any guarantor dies or any of the other events described in
this default section occurs with respect to any guarantor of this Note. (h) A
material adverse change occurs in Borrower's financial condition, or Lender
believes the prospect of payment or performance of the Indebtedness is
impaired. (i) LENDER IN GOOD FAITH DEEMS ITSELF INSECURE.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender
demanding cure of such default: (a) cures the default within ten (10) days; or
(b) if the cure requires more than ten (10) days, immediately initiates steps
which Lender deems in Lender's sole discretion to be sufficient to cure the
default and thereafter continues and completes all reasonable and necessary
steps sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, increase the variable interest rate on this
Note to 18.000% per annum, if and to the extent that the increase does not
cause the interest rate to exceed the maximum rate permitted by applicable law.
Lender may hire or pay someone else to help collect this Note if Borrower does
not pay. Borrower also will pay Lender the amount of these costs and expenses,
which includes, subject to any limits under applicable law, Lender's reasonable
attorneys' fees and Lender's legal expenses whether or not there is a lawsuit,
including reasonable attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection services.
If not prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. THIS NOTE HAS BEEN DELIVERED TO
LENDER AND ACCEPTED BY LENDER IN THE STATE OF FLORIDA. IF THERE IS A LAWSUIT,
BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE
COURTS OF MONROE COUNTY, THE STATE OF FLORIDA. THIS NOTE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $25.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
GARNISHMENT. Borrower consents to the issuance of a continuing writ of
garnishment or attachment against Borrower's disposable earnings, in accordance
with Section 222.11, Florida Statutes, in order to satisfy, in whole or in
part, any money judgment entered in favor of Lender.
COLLATERAL. This Note is secured by collateral described in Exhibit "A" and "B"
attached hereto and incorporated herein as set forth fully herein and an
Assignment of Rents.
<PAGE> 2
07-17-1996 PROMISSORY NOTE PAGE ___
(Continued)
================================================================================
PRIOR NOTE. Consolidation of those certain Promissory Notes executed on April
8, 1996 and July 17, 1996 in the amounts of $2,724,184.91 and $500,000
respectively by Key West Conch Harbor, Inc. in favor of TIB Bank of the Keys for
a consolidated loan in the amount of $3,224,184.91.
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact
will not affect the rest of the Note. Borrower does not agree or intend to
pay, and Lender does not agree or intend to contract for, charge, collect,
take, reserve or receive (collectively referred to herein as "charge or
collect"), any amount in the nature of interest or in the nature of a fee for
this loan, which would in any way or event (including demand, prepayment, or
acceleration) cause Lender to charge or collect more for this loan than the
maximum Lender would be permitted to charge or collect by federal law or the
law of the State of Florida (as applicable). Any such excess interest or
unauthorized fee shall, instead of anything stated to the contrary, be applied
first to reduce the principal balance of this loan, and when the principal has
been paid in full, be refunded to Borrower. Lender may delay or forgo
enforcing any of its rights or remedies under this Note without losing them.
Borrower and any other person who signs, guarantees or endorses this Note, to
the extent allowed by law, waive presentment, demand for payment, protest and
notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed necessary by
Lender without the consent of or notice to anyone. All such parties also agree
that Lender may modify this loan without the consent of or notice to anyone
other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
KEY WEST CONCH HARBOR, INC., A FLORIDA CORPORATION
BY: /s/ A. FREDERICK SKOMP
---------------------------------------------
A. Frederick Skomp, President
<PAGE> 3
EXHIBIT "A"
<TABLE>
====================================================================================================================================
<CAPTION>
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$3,224,184.91 07-17-1996 04-01-2016 608006684 16 37 608006684 KM
- ------------------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------------------
Borrower: Key West Conch Harbor, Inc., a Florida Lender: TIB Bank of the Keys
corporation Key West
830 Eaton Street PO Box 6330
Key West, FL 33040 Key West, FL 33041
====================================================================================================================================
</TABLE>
THIS EXHIBIT "A" IS ATTACHED TO AND BY THIS REFERENCE IS MADE A PART OF EACH
PROMISSORY NOTE OR CREDIT AGREEMENT AND SECURITY AGREEMENT, DATED JULY 17,
1996, AND EXECUTED IN CONNECTION WITH A LOAN OR OTHER FINANCIAL ACCOMMODATIONS
BETWEEN TIB BANK OF THE KEYS AND KEY WEST CONCH HARBOR, INC., A FLORIDA
CORPORATION.
See legal description described below and incorporated herein as set forth
fully herein.
THIS EXHIBIT "A" IS EXECUTED ON JULY 17, 1996.
BORROWER:
KEY WEST CONCH HARBOR, INC., A FLORIDA CORPORATION
BY: /s/ A. FREDERICK SKOMP
---------------------------------------------
A. Frederick Skomp, President
LENDER:
TIB BANK OF THE KEYS
BY: /s/
---------------------------------------------
Authorized Officer
The following described land, situate, lying and being in Monroe
County, Florida, to-wit:
Beginning at the intersection formed by the Northwesterly line of
Carolina Street with the Southwesterly line of Grinnell Street,
Key West, Florida;
Thence South 55 degrees 00' West along the Northwesterly line of
Carolina Street, aforesaid, a distance of 251.12 feet;
Thence North 34 degrees 42' West a distance of 144.26 feet;
Thence North 54 degrees 46' East, a distance of 29.25 feet;
Thence North 35 degrees 02' West, a distance of 208.03 feet to a point;
Thence North 55 degrees 18' East, a distance of 221.87 feet more or
less to a point;
Thence South 35 degrees 02' East, a distance of 351.4 feet to the point
of beginning.
all riparian and littoral rights, piers, docks, wharves, improvements,
including but not limited to, the concrete seawall, existing pier and
pilings extending into the waters of Key West Bight (Florida Bay), and
all permits, licenses and bay bottom rights as are or may be attached
to or appurtenant to the above described property,
All lying and being in Monroe County, Florida.
<PAGE> 4
EXHIBIT "B"
<TABLE>
====================================================================================================================================
<CAPTION>
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$3,224,184.91 07-17-1996 04-01-2016 608006684 16 37 608006684 KM
- ------------------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------------------
Borrower: Key West Conch Harbor, Inc., a Florida Lender: TIB Bank of the Keys
corporation Key West
830 Eaton Street PO Box 6330
Key West, FL 33040 Key West, FL 33041
====================================================================================================================================
</TABLE>
This Exhibit "B" is attached to and by this reference is made a part of each
Promissory Note or Credit Agreement, dated July 17, 1996, and executed in
connection with a loan or other financial accommodations between TIB Bank of
the Keys and Key West Conch Harbor, Inc., a Florida corporation.
All inventory, chattel paper, accounts, equipment, general intangibles and
fixtures; whether any of the foregoing is owned now or acquired later; all
accessions, additions, replacements or substitutions relating to any of the
foregoing; all records of any kind relating to any of the foregoing; all
proceeds of any kind relating to any of the foregoing (including insurance,
general intangibles or other account proceeds)
THIS EXHIBIT "B" IS EXECUTED ON JULY 17, 1996.
BORROWER:
Key West Conch Harbor, Inc., a Florida corporation
BY: /s/ A. FREDERICK SKOMP
--------------------------------
A. Frederick Skomp, President
LENDER:
TIB Bank of the Keys
BY: /s/
---------------------------------
Authorized Officer
================================================================================
LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver, 3.20b(c) 1996 CFI ProServices, Inc.
All rights reserved. (FL-G60 E 3.21 F3.21 P3.21 KWCHARBO.LNI
<PAGE> 1
EXHIBIT 10.10
SECURITIES EXCHANGE AGREEMENT
BY AND AMONG
SONOMA INTERNATIONAL
AND
KEY WEST CONCH HARBOR, INC.
OCTOBER 15, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1. DESCRIPTION OF TRANSACTIONS
1.1 Exchange of Securities
1.2 Closing
1.3 Closing Deliveries
1.4 Conditions to Closing of Sonoma
1.5 Conditions of Closing of the Stockholders
1.6 Definitions
SECTION 2. REPRESENTATIONS OF THE STOCKHOLDERS
2.1 Organization
2.2 Corporation and Individual Powers
2.3 Authorization
2.4 Capitalization
2.5 Effect of Transactions, Compliance with Obligations
2.6 Brokerage
2.7 Consents
2.8 Status of Stockholders
2.9 Unregistered Securities Under Securities Act
2.10 No Distribution of Stock to Public
SECTION 3. REPRESENTATIONS OF SONOMA
3.1 Organization
3.2 Corporate Power
3.3 Authorization
3.4 Capitalization
3.5 Preemptive Rights, Registration Rights
3.6 Financial Statements
3.7 Liabilities and Obligations
3.8 Employee Matters
3.9 Employee Benefit Plans
3.10 Commitments
3.11 Tax Matters
3.12 Assets
3.13 Effect of Transactions, Compliance with Obligations
3.14 Litigation
3.15 Legal Compliance
3.16 Subsidiaries
3.17 Brokerage
3.18 Environmental Matters
3.19 Certain Payments
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
3.20 Consents
3.21 Authorization to Issue Stock
3.22 SEC Reports
SECTION 4. THE STOCKHOLDERS COVENANTS
4.1 Consummation of Agreement
4.2 Business Operations
4.3 Access
SECTION 5. SONOMA'S COVENANTS
5.1 Consummation of Agreement
5.2 Business Operations
5.3 Access
5.4 Approvals of Third Parties
SECTION 6. INDEMNIFICATION
6.1 Indemnification by the Stockholders
6.2 Indemnification by Sonoma
6.3 Conditions of Indemnification
6.4 Waiver
6.5 Remedies Not Exclusive
6.6 Costs, Expenses and Legal Fees
6.7 Specific Performance
SECTION 7. TERMINATION
7.1 Termination
SECTION 8. GENERAL
8.1 Amendments
8.2 Survival of Representations, Warranties and Covenants
8.3 Headings
8.4 Governing Law
8.5 Notices and Demands
8.6 Severability
8.7 Expenses
8.8 Confidentiality, Publicity and Disclosures
8.9 Entire Agreement
8.10 Counterparts
</TABLE>
<PAGE> 4
SECURITIES EXCHANGE AGREEMENT
Sonoma International, a Nevada corporation ("Sonoma"), and the
stockholders of Key West Harbor, Inc. a Florida Corporation ("KWCHI"), who are
signatories to this Agreement (the "Stockholders"), enter into this Securities
Exchange Agreement dated as of October 15, 1996 (this "Agreement").
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 Exchange of Securities. Subject to and upon the terms and
conditions contained herein, at the Closing, Sonoma will issue 300,000 shares
of the common stock, par value $.002 of Sonoma (the "Stock"), to the
Stockholders in accordance with Paragraph 2.4 hereof, and in consideration
therefore, the Stockholders will transfer, assign and convey all of the issued
and outstanding capital stock of KWCHI (the "Capital Stock") to Sonoma.
1.2 Closing. The closing (the Closing") of the transactions
contemplated herein will take place at the offices of Sonoma International,
3000 Lexington Center, Lexington, KY 40507, at 10:00 a.m., on the date as soon
as practicable after the date hereof and as agreed to by the parties hereto
(the "Closing Date").
1.3 Closing Deliveries. At the Closing, the following shall occur:
(a) The Stockholders shall have delivered to Sonoma
certificates representing all the issued and outstanding capital stock of KWCHI
(the "KWCHI Stock"), together with stock powers, executed in blank;
(b) Henry E. Davis, counsel for KWCHI and the Stockholders,
shall have delivered to Sonoma any reasonable legal opinions dated as of the
date of the closing needed to consummate this closing.
(c) Robert A. Forrester, counsel for Sonoma, shall have
delivered to the Stockholders a legal opinion, stated as of the Closing Date
and in form and substance reasonably satisfactory to the Stockholders;
(d) The Stockholders shall have delivered to Sonoma all
authorizations, consents, approvals, permits and licenses referenced in
Schedule 2.7.
(e) Sonoma shall have delivered to the Stockholders a copy of
the resolutions of the Board of Directors of Sonoma authorizing the execution,
delivery and performance of this agreement and all related documents and
agreements, each certified by the Secretary of Sonoma as being true and correct
copies of the originals thereof subject to no modifications or amendments.
- 1 -
<PAGE> 5
(f) Sonoma shall have delivered to the Stockholders a
certificate of its Secretary certifying as to the incumbency of the directors
and officers of Sonoma and as to the signatures of such directors and officers
who have executed documents delivered at the Closing on behalf of Sonoma.
(g) The Stockholders shall have delivered to Sonoma a written
appraisal dated within 90 days of September 1, 1996, which states that the
assets of KWCHI, as of the date of such appraisal, have a fair market value of
not less than $7,000,000.00.
1.4 Conditions to Closing of Sonoma. Except as may be waived in
writing by Sonoma, the obligations of Sonoma to acquire the Partnership
Interests and the Stock are subject to the fulfillment at or prior to the
Closing Date of each of the following conditions:
(a) The representations and warranties of the Stockholders
contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
(b) The Stockholders shall have performed and complied with
all covenants and conditions required by this Agreement to be performed and
complied with by the Stockholders on or prior to the Closing Date.
(c) No investigation, action, proceeding or order by any court
or governmental body or agency shall have been threatened, orally or in
writing, asserted, instituted or catered to restrain or prohibit the carrying
out of the transactions contemplated hereby.
(d) No material adverse change in the condition (financial or
otherwise, operations, assets, liabilities, business or prospects of Key West
Conch Harbor shall have occurred since the date of the Key West Conch Harbor
Balance Sheet.
(e) All authorizations, approvals consents and waivers of any
governmental authority or third party, each as required to permit the
consummation of the transactions contemplated by this Agreement, shall have
been obtained and shall not be terminated, suspended or withdrawn as of the
Closing Date.
(f) Sonoma shall have completed a due diligence review of the
business, operations and financial statements of KWCHI the results of which
shall be satisfactory to Sonoma in its sole discretion.
(g) Sonoma shall have received all documents, duly executed in
form satisfactory to Sonoma and its counsel, referred to in Section 1.3 above.
1.5 Conditions to Closing of the Stockholders. Except as may be
waived in writing by KWCHI and the Stockholders the obligations of the
Stockholders hereunder are subject to fulfillment at or prior to the Closing
Date of each of the following conditions:
- 2 -
<PAGE> 6
(a) The representations and warranties of Sonoma contained
herein shall have been true and correct in all respects when initially made and
shall be true and correct in all respects as of the Closing Date.
(b) Sonoma shall have performed and complied in all material
respects with all covenants and conditions required by this Agreement to be
performed and complied with by it prior to the Closing Date.
(c) No investigation, action, proceeding or order by any court
or governmental body or agency shall have been threatened orally or in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
(d) No material adverse change in the condition (financial or
otherwise), operations, assets, liabilities, Business or prospects of Sonoma
shall have occurred since the date of the Sonoma Balance Sheet.
(e) All authorizations, approvals consents and waivers of any
governmental authority or third party, each as required to permit the
consummation of the transactions contemplated by this Agreement, shall have
been obtained and shall not be terminated, suspended or withdrawn as of the
Closing Due.
(f) The Stockholders shall have completed a due diligence
review of the business, operations and financial statements of Sonoma, the
results of which shall be satisfactory to the Stockholders in their sole
discretion.
(g) Sonoma shall have tendered to those indicated on Schedule
1.4(g) the amounts set forth opposite each's name.
(h) The Stockholders, as the case may be, shall have received
all documents referred to in Section 1.3 above.
1.6 Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below:
(a) "Cash Compensation" shall mean wages, salaries, bonuses
(discretionary and formula) and other compensation paid or payable in cash.
(b) "Code" shall mean the Internal Revenue Code.
(c) "Environmental Laws" shall mean any laws or regulations
pertaining to health or the environment, including without limitation (i) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(42 U.S.C. Sections 9601 et seq., as amended from time to time ("CERCLA")
(including without limitations as amended pursuant to the Superfund Amendments
and Reauthorization Act of 1986), and regulations promulgated under CERCLA,
- 3 -
<PAGE> 7
(ii) the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Sections
6901 et seq.), as amended from time to time ("RCRA"), and regulations
promulgated thereunder, (iii) statutes, rules or regulations, whether federal,
state or local, relating to asbestos or polychlorinated biphenyls, and (iv) the
provisions contained in the statutes of any applicable state statutes.
(d) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(e) "GAAP" shall mean generally accepted accounting
principles.
(f) "KWCHI" shall mean the balance sheet of KWCHI as of June
30, 1996, which KWCHI Balance Sheet is included in tile KWCHI Financial
Statements.
(g) "KWCHI Financial Statements" shall mean (i) the audited
balance sheet, statement of operations and statements of cash flow of KWCHI as
of December 31, 1994 and 1995 and (ii) unaudited balance sheets, statements of
operations and statements of cash flow of KWCHI for the 6-month period ended
June 30, 1996.
(h) "Proprietary Rights" shall mean (a) all trade-marks,
trade-names, service marks and other trade designations, including common law
rights, registrations and applications therefor, and all patents, copyrights
and applications currently owned, in whole or in part by KWCHI with respect to
the business of KWCHI and all licenses, royalties, assignments and other
similar agreements relating to the foregoing to which KWCHI is a party
(including expiration date if applicable), and (b) all agreements relating to
technology, know-how or processes that KWCHI is licensed or authorized to use
by others, or which it licenses or authorizes others to use.
(i) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(j) "Sonoma Balance Sheet" shall mean the balance sheet of
Sonoma as of June 30, 1996, which Sonoma Balance Sheet is included in the
Sonoma Financial Statements.
(k) "Sonoma Financial Statements" shall mean (i) the audited
balance sheet, statement of operations and statements of cash flow of Sonoma as
of June 30, 1995 and 1996 and (ii) unaudited balance sheets, statements of
operations and statements of cash flow of Sonoma for the 6-month period ended
September 30, 1996.
(l) "Subsidiary" shall mean any corporation, partnership,
joint venture or other legal entity in which another entity owns, directly or
indirectly, an equity interest.
SECTION 2. REPRESENTATIONS OF THE STOCKHOLDERS
The Stockholders and KWCHI severally and jointly, represent and warrant
to Sonoma that:
- 4 -
<PAGE> 8
2.1 Organization. KWCHI is a corporation validly existing and in
good standing under the laws of the State of Florida, and neither is required
to be qualified to do business as a foreign limited partnership in any other
jurisdiction.
2.2 Corporate and Individual Power. KWCHI has all required power and
authority to own its properties and to carry on its business as presently
conducted and as proposed to be conducted. Each Stockholder has all required
power and authority to execute and deliver this Agreement and to carry out the
transactions contemplated by this Agreement.
2.3 Authorization. All action on the part of each Stockholder and
KWCHI necessary for the authorization, execution, delivery and performance of
this Agreement by such Stockholder and the performance of such Stockholders'
obligations hereunder have been taken. This Agreement and all documents
executed pursuant to this Agreement are valid and binding obligations of each
Stockholder, enforceable according to its terms, except as may be limited by
(a) applicable bankruptcy, insolvency, reorganization or other similar laws of
general application relating to or affecting the enforcement of creditor
rights, (b) laws and judicial decisions regarding indemnification for violation
of federal securities laws, and (c) the availability of specific performance or
other equitable remedies.
2.4 Capitalization. The names and ownership interests of the KWCHI
Stockholders are as set forth in this Paragraph. Other than Fred Skomp and
Marla Collins Webb, there are no other owners of any interests in KWCHI and
there are no outstanding options, or other rights or obligations to purchase or
acquire an interest in KWCHI, nor any outstanding securities convertible into
or exchangeable for such an ownership interest. There are no agreements to
which KWCHI, any of the Stockholders is a party or has knowledge regarding the
issuance, registration, voting or transfer of any partnership interest in KWCHI
or capital stock in KWCHI. The Stockholders are the sole shareholder of KWCHI.
Marla Collins Webb currently owns 73.625 shares of KWCHI and Fred Skomp, 26.375
shares of KWCHI. Upon consummation of this agreement, Marla Collins Webb is to
exchange her 73.625 shares of KWCHI stock for 182,700 shares of new Sonoma
stock and Frederick Skomp is to exchange his 26.375 shares of KWCHI stock for
117,300 shares of new Sonoma stock.
2.5 Effect of Transactions, Compliance with Obligations. Each
Stockholder's execution and delivery of this agreement, its performance of the
transactions contemplated by this Agreement do not and will not violate any
terms of the Certificate of Incorporation or Bylaws of KWCHI, or any judgment,
decree or order, or any material contract or obligation of such Stockholder, or
any statute, rule or regulation of any federal, state or local government or
agency applicable to such Stockholder, or any material contract to which such
Stockholder is bound. No consent, approval or filing with any regulatory
agency is required to be taken by such Stockholder in connection with the
transactions contemplated by the Agreement, except those which such Stockholder
has obtained or made in a timely manner.
2.6 Brokerage. There are no claims for brokerage commissions,
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based
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on any arrangement or agreement made by KWCHI, other than any fee owed. Each
Stockholder agrees to indemnify and hold Sonoma harmless for any such brokerage
commissions, finders foes or similar compensation.
2.7 Consents. Except as set forth, on Schedule 2.7, no consent,
authorization. approval, permit or license of, or filing with, any governmental
or public body or authority, any lender or lessor or any other person or entity
is required so authorize, or is required in connection with, the execution,
delivery and performance of this Agreement or the agreements contemplated
hereby on the part of the Stockholders.
2.8 Status of Stockholders. Each of the Stockholders is
knowledgeable and experienced in making venture capital investments and is able
to bear the economic risk of the loss of its investment in Sonoma. Each
Stockholder is acting on its own behalf in connection with the investigation
and examination of Sonoma end its decision to execute this Agreement and
exchange capital stock for the Stock.
2.9 Unregistered Securities Under Securities Act. Each Stockholder
acknowledges that the Stock has not been registered under the Securities Act
and therefore the Stock is not fully transferable except as permitted under
various exemptions contained in the Securities Act and the rules of the
Securities and Exchange Commission hereunder. Each Stockholder acknowledges
that a legend to such effect shall be placed on the certificates representing
the Stock.
2.10 No Distribution of Stock to Public. Each Stockholder represents
and warrants that such Stockholder is receiving the Stock for its own account
and not for the purpose of resale or any other distribution of the Stock. Each
Stockholder represent and warrant that such Stockholder has no present
intention of disposing of all or any part of such shares.
SECTION 3. REPRESENTATIONS OF SONOMA
Sonoma hereby represents and warrants to the Stockholders that:
3.1 Organization. Sonoma is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada, and is not
required to be qualified to do business as a foreign corporation in any other
jurisdiction.
3.2 Corporate Power. Sonoma has all required corporate power and
authority to own its properties and to carry on its business as presently
conducted and as proposed to be conducted. Sonoma has all required corporate
power and authority to execute and deliver this Agreement, and to carry out the
transactions contemplated by this Agreement.
3.3 Authorization. All corporate action on the part of Sonoma, its
directors and shareholders necessary for the authorization, execution, delivery
and performance of this Agreement by Sonoma and the performance of all of
Sonoma's obligations hereunder has been
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taken. This Agreement and all documents executed pursuant to this Agreement
are valid and binding obligations of Sonoma, enforceable according to their
terms, except as may be limited by (a) applicable bankruptcy, insolvency,
reorganization or other similar laws of general application relating to or
affecting the enforcement of creditor rights, (b) laws and judicial decisions
regarding indemnification for violations of federal securities laws, and (c)
the availability of specific performance or other equitable remedies. The
execution, delivery and performance of this Agreement have been duly authorized
by all necessary corporate action of Sonoma.
3.4 Capitalization. The authorized and issued capital stock of Sonoma
and the names and ownership interests of the shareholders of Sonoma are as set
forth in the attached proposed "Business Plan". All of the presently
outstanding shares of capital stock of Sonoma have been validly authorized and
issued and are fully paid and nonassessable. Except as provided herein, Sonoma
has not issued any other shares of its capital stock and there are no
outstanding options, warrants, subscriptions or over rights or obligations to
purchase or acquire any of such shares, nor any outstanding securities
convertible into or exchangeable for such shares. Except as disclosed herein,
or as contemplated under this Agreement (and the other agreements executed in
connection herewith), there are no agreements to which Sonoma is a party or has
knowledge regarding the issuance, registration, voting or transfer of its
outstanding shares of capital stock. No dividends are accrued but unpaid on
any capital stock of Sonoma.
3.5 Preemptive Rights Registration Rights. There are no preemptive
rights affecting the issuance or sale of Sonoma's capital stock. Sonoma is not
under any contractual obligation to register (in compliance with the filing
requirements and being deemed effective under the Securities Act) any of its
presently outstanding securities or any of its securities which may hereafter
be issued, except as described in Schedule 3.5.
3.6 Financial Statements. Schedule 3.6 contains correct and complete
copies of the Sonoma Financial Statements. The Sonoma Financial Statements are
in accordance with the books and records of Sonoma, and have been prepared
consistent with past practices, have been prepared in accordance with GAAP
(except that the unaudited Sonoma Financial Statements do not contain notes)
and present fairly in all material respects the financial position of Sonoma on
the dates of such statements and the results of their operations for the
periods covered. Sonoma maintains its books, records and accounts in
accordance with good business practice and in sufficient detail to reflect
accurately and fairly the transactions and dispositions of its assets,
liabilities and securities.
3.7 Liabilities and Obligations. A description of all liabilities
and obligations of Sonoma, accrued, contingent or otherwise (known or unknown
and asserted or unasserted), arising out of transactions effected or events
occurring on or prior to the date thereof are as set forth on Schedule 3.7
attached hereto, which liabilities and obligations will be the only liabilities
and obligations of Sonoma on the Closing Date. Except as set forth in Schedule
3.7, Sonoma is not liable upon or with respect to, or obligated in any other
way to provide funds in respect of or to guarantee or assume in any manner, any
debt, obligation or dividend of any person,
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corporation, association, partnership, joint venture, trust or other entity,
and Sonoma knows of no basis for the assertion of any other claims or
liabilities of any nature or in any amount.
3.8 Employee Matters. Sonoma has no employees.
3.9 Employee Benefit Plans. Sonoma does not have or, in the past
five years has had or been subject to, any Employee Benefit Plans.
3.10 Commitments. Sonoma is not a party to any document, instrument
or agreement, except as set forth on Schedule 3.10.
3.11 Tax Matters. Except as set forth in Schedule 3.11, all required
foreign, federal, state, local and other tax returns, notices and reports
(including, without limitation, income, property, sales, use, franchise,
capital stock, excise, added value, employees' income withholding, social
security and unemployment tax returns) of Sonoma have been accurately prepared
and duly and timely filed, and all foreign, federal, state, local and other
taxes required to be paid with respect to the periods covered by such returns
have been paid. Sonoma is not and have not been delinquent in the payment of
any tax, assessment or governmental charge. Sonoma has never had any tax
deficiency proposed or assessed against it and have not executed any waiver of
any statute of limitations on the assessment or collection of any tax or
governmental charge. Except for sales tax audits, none of Sonoma's franchise
tax returns has ever been audited by governmental authorities. No tax audit,
action, suit, proceeding investigation or claim is now pending nor, to the best
of Sonoma's knowledge, threatened against Sonoma, and no issue or question has
been raised (and is currently pending) by any taxing authority in connection
with any of Sonoma's tax returns or reports.
3.12 Assets. Sonoma has no assets, personal or real, tangible or
intangible.
3.13 Effect of Transactions; Compliance with Obligations. Sonoma's
execution and delivery of this Agreement, its performance of the transactions
contemplated by this Agreement, and the performance of the business of their
respective business as now conducted, does not and will not violate any terms
of the Articles of Incorporation or Bylaws of Sonoma or violate any judgment,
decree or order, or any material contract or obligation of Sonoma, or any
statute, rule or regulation of any federal, state or local governmental or
agency applicable to Sonoma. The offer and sale of the Stock will be in
compliance with federal and state securities laws. No consent, approval or
filing with any regulatory agency is required to be taken by Sonoma in
connection with the transactions contemplated by the Agreement, except those
which Sonoma has obtained or made in a timely manner, except for any filing of
Form D or any applicable state blue sky filing that may be made by Sonoma after
the Closing.
3.14 Litigation. There is no litigation, arbitration or governmental
proceeding or investigation pending or, to the knowledge of Sonoma, threatened
(a) against Sonoma, (b) affecting any of the properties or assets of Sonoma, or
(c) against any officer, director, shareholder or employee of Sonoma in such
capacity or relating to his prior employment
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relationships. Sonoma is not aware of any fact that is likely to form the
basis of any such litigation, arbitration or proceeding.
3.15 Legal Compliance. Sonoma has all material franchises, permits,
licenses and other rights and privileges necessary to permit it to own its
properties and to conduct its business as presently conducted. The business
and operations of Sonoma have been and are being conducted in accordance with
all applicable laws, rules and regulations, and Sonoma is not in violation of
any judgment, law or regulation.
3.16 Subsidiaries. Sonoma does not have any direct or indirect
subsidiaries yet, however it is planned that Jamestown Resort & Marina, Inc.,
Jamestown Resort & Marina, Ltd. and KWCHI will become wholly owned subsidiary
entities of the Company after consummation of these transactions.
3.17 Brokerage. There are no claims for brokerage commissions,
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by
Sonoma. Sonoma agrees to indemnify and hold the Stockholders harmless for any
such brokerage commissions, finders fees or similar compensation.
3.18 Environmental Matters. Neither Sonoma nor any of its assets is
currently in violation of, or subject to any existing, pending or threatened
investigation or inquiry by any governmental authority or to any remedial
obligations under, any Environmental Laws. To the best knowledge of Sonoma,
the assets of Sonoma have never been used in a manner that would be in
violation of any of the Environmental Laws, including without limitation
CERCLA, RCRA and any applicable state statutes. Sonoma has not obtained and is
not required to obtain, and Sonoma has no knowledge of any reason Sonoma will
be required to obtain, any permits, licenses or similar authorizations to
construct, occupy, operate or use any buildings, improvements, fixtures and
equipment owned or leased by Sonoma by reason of any Environmental Laws. To
the best knowledge of Sonoma, none of the assets owned or leases by Sonoma are
on any federal or state "Superfund" list or subject to any environmentally
related liens.
3.19 Certain Payments. To the best knowledge of Sonoma, neither
Sonoma nor any director, officer or employee of Sonoma has paid or caused to be
paid, directly or indirectly, in connection with the business of Sonoma: (a) to
any government or agency thereof or any agent of any supplier or customer any
bribe, kickback or other similar payment; or (b) any contribution to any
political party or candidate (other than from personal funds of directors,
officers or employees not reimbursed by their respective employers or as
otherwise permitted by applicable few).
3.20 Consents. Except as set forth on Schedule 3.20, no consent,
authorization, approval, permit or license of, or filing with, any governmental
or public body or authority, any lender or lessor or any other person or entity
is required to authorize, or is required in
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connection with, the execution, delivery and performance of this Agreement or
the agreements contemplated hereby on the part of Sonoma.
3.21 Authorization to Issue Stock. Sonoma has taken, or will have
taken on or prior to the Closing, all action necessary to permit it to issue
the Stock to the Stockholders. The Stock will, when issued, be duly authorized,
validly issued, fully paid and nonassessable, free and clear of any liens,
claims, charges or security interest and no shareholder of Sonoma will have any
preemptive right of subscription or purchase in respect thereof.
3.22 SEC Reports. Since June 30, 1995, Sonoma has filed all forms,
documents and reports with the SEC required to be filed by it pursuant to
federal securities laws and the SEC rules and regulations thereunder (the "SEC
Reports"), all of which complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act. To the knowledge of
Sonoma, the SEC Reports do not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein to make the
statements contained therein not misleading.
SECTION 4. THE STOCKHOLDERS COVENANTS
The Stockholders, severally and jointly, agree that between the date
hereof and the Closing:
4.1 Consummation of Agreement. The Stockholders shall use all
reasonable commercial efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions.
4.2 Business Operations. KWCHI shall operate its business in the
ordinary course. KWCHI shall use its best efforts to preserve the businesses
of KWCHI intact. The Stockholders shall not take any action that could
adversely affect the condition (financial or otherwise), operations, assets,
liabilities, business or prospects of KWCHI without the prior written consent
of Sonoma or take or fail to take any action that would cause or permit the
representations made in Section 2 to be inaccurate at the time of Closing or
the Stockholders from making such representations and warranties at the
Closing.
4.3 Access. KWCHI and its authorized representatives full access to,
and make available for inspection, all of the assets and businesses of KWCHI,
and permit Sonoma and its authorized representatives to inspect and make copies
of all documents, records and information with respect to the affairs of KWCHI
as Sonoma and its representatives may request, all for the sole purpose of
permitting Sonoma to become familiar with the business and assets and
liabilities of KWCHI.
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SECTION 5. SONOMA'S COVENANTS
Sonoma agrees that between the date hereof and the Closing:
5.1 Consummation of Agreement. Sonoma shall use its best efforts to
cause the consummation of the transactions contemplated hereby in accordance
with their terms and conditions.
5.2 Business Operations. Sonoma shall operate its business in the
ordinary course. Sonoma shall not take any action that could adversely affect
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Sonoma without the prior written consent of the
Stockholders or take or fail to take any action that would cause or permit the
representations made in Section 3 be inaccurate at the time of Closing or
preclude Sonoma from making such representations and warranties at the Closing.
5.3 Access. Sonoma shall permit the Stockholders and their
authorized representatives full access to, and make available for inspection,
all of the assets and business of Sonoma and permit the Stockholders and their
authorized representatives to inspect and make copies of all documents, records
and information with respect to the affairs of Sonoma as the Stockholders and
their representatives may request, all for the sole purpose of the Stockholders
to become familiar with the business, assets and liabilities of Sonoma.
5.4 Approvals of Third Parties. Sonoma shall use its best efforts to
secure, as soon as practicable after the date hereof, all necessary approvals
and consents of third parties to the consummation of the transactions
contemplated hereby.
SECTION 6. INDEMNIFICATION
6.1 Indemnification by the Stockholders. Subject to the terms and
conditions of this Section 6, each Stockholder severally and jointly, agree to
indemnify, defend and hold Sonoma and its directors, officers, agents,
attorneys and affiliates harmless from and against all losses, claims,
obligations, demands assessments, penalties, liabilities, costs, damages,
attorneys' fees and expenses (collectively, "Damages"), asserted against or
incurred by such indemnities by reason of or resulting from a breach of any
representation, warranty or covenant of such Stockholder contained herein, in
any exhibit, schedule, certificate or financial statement delivered hereunder,
or in any agreement executed in connection with the transactions contemplated
hereby.
6.2 Indemnification by Sonoma. Subject to the terms and conditions
of this Section 6, Sonoma hereby agrees to indemnify, defend and hold the
Stockholders and its or their respective directors, officers, agents, attorneys
and affiliates harmless from and against all Damages asserted against or
incurred by any of such indemnities by reason of or resulting from a breach of
any representation, warranty or covenant of Sonoma contained herein or in any
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exhibit, schedule or certificate delivered hereunder, or in any agreement
executed in connection with the transactions contemplated hereby.
6.3 Conditions of Indemnification. The respective obligations and
liabilities of the Stockholders and Sonoma (the "indemnifying party") to the
other (the "party to be indemnified") under Sections 6.1 and 6.2 with respect
to claims resulting from the assertion of liability by third parties shall be
subject to the following terms and conditions:
(a) Within 20 days (or such earlier time as might be required
to avoid prejudicing the indemnifying party's position) after receipt of notice
of commencement of any action evidenced by service of process or other legal
pleading, the party to be indemnified shall give the indemnifying party written
notice thereof together with a copy of such claim, process or other legal
pleading and the indemnifying party shall have the right to undertake the
defense thereof by representatives of its own choosing and at its own expense;
provided that the party to be indemnified may participate in the defense with
counsel of its own choice, the fees and expenses of which counsel shall be paid
by the party to the indemnified unless (i) the indemnifying party has agreed to
pay such fees and expenses, (ii) the indemnifying party has failed to assume
the defense of such action or (iii) the named parties to any such action
(including any impleaded parties) include both the indemnifying party and the
party to be indemnified and the party to be indemnified has been advised by
counsel that there may be one or more legal defenses available to it that are
different from or additional to those available to the indemnifying party (in
which case, if the party to be indemnified informs the indemnifying party in
writing that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of such action on behalf of the party to be indemnified, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for the party to be indemnified, which
firm shall be designated in writing by the party to be indemnified).
(b) In the event that the indemnifying party, by the 30th day
after receipt of notice of any such claim (or, if earlier, by the 10th day
preceding the day on which an answer or other pleading must be served in order
to prevent judgment by default in favor of the person asserting such claim),
does not elect to defend against such claim, the party to be indemnified will
(upon further notice to the indemnifying party) have the right to undertake the
defense, compromise or settlement of such claim on behalf of and for the
account and risk of the indemnifying party and at the indemnifying party's
expense, subject to the right of the indemnifying party to assume the defense
of such claims at any time prior to settlement, compromise or final
determination thereof.
(c) Notwithstanding the foregoing, the indemnifying party
shall not settle any claim without the consent of the party to be indemnified
unless such settlement involves only the payout of money and the claimant
provides to the party to be indemnified a release from all
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liability in respect of such claim. If the settlement of the claim involves
more than the payment of money, the indemnifying party shall not settle the
claim without the prior consent of the party to be indemnified. The party to be
indemnified and the indemnifying party will each cooperate with all reasonable
requests of the other.
6.4 Waiver. No waiver by any party of any default or breach by
another party of any representation, warranty, covenant or condition contained
in this Agreement, any exhibit or any document, instrument or certificate
contemplated hereby shall be deemed to be a waiver of any subsequent default or
breach by such party of the same or any other representation, warranty covenant
or condition. No act, delay, omission or course of dealing on the part of any
party in exercising any right, power or remedy under this Agreement or at law
or in equity shall operate as a waiver thereof or otherwise prejudice any of
such party's rights, powers and remedies. All remedies, whether at law or in
equity, shall be cumulative and the election of any one or more shall not
constitute a waiver of the right to pursue other available remedies.
6.5 Remedies Not Exclusive. The remedies provided in this Section 6
shall not be exclusive of any other rights or remedies available to one party
against the other, either at law or in equity.
6.6 Costs, Expenses and Legal Fees. Each party hereto shall bear its
own costs and expenses (including attorneys' fees and expenses), except that
each party hereto that is shown to have breached this Agreement or any other
agreement contemplated hereby agrees to pay the costs and expenses (including
reasonable attorneys' fees and expenses) incurred by any other party in
successfully (i) enforcing any of the terms of this Agreement against such
breaching party or (ii) proving that another party breached any of the terms of
this Agreement.
6.7 Specific Performance. Each party acknowledges that a refusal by
any party hereto to consummate the transactions contemplated hereby will cause
irreparable harm to the other parties to this Agreement for which there may be
no adequate remedies, at law and for which the ascertainment of damages would
be difficult. Therefore, each party shall be entitled in addition to, and
without having to prove the inadequacy of, other remedies at law, to specific
performance of this Agreement, as well as injunctive relief (without being
required to post bond or other security).
SECTION 7. TERMINATION
7.1 Termination. This Agreement may be terminated:
(a) At any time prior to the Closing Date by mutual agreement
of all parties.
(b) By any party if the Closing does not occur on or prior to
March 31, 1997.
(c) At any time prior to the Closing Date by Sonoma if any
representation or warranty of the Stockholders contained
in this Agreement or in any
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certificate or other document executed and delivered by
the Stockholders pursuant to this Agreement is or becomes
untrue or breached in any material respect, or if the
Stockholders fail to comply in any material respect with
any covenant confined herein.
(d) At any time prior to the Closing Date by the Stockholders
if any representation or warranty of Sonoma contained in
this Agreement or in any certificate or other document
executed and delivered by Sonoma pursuant to this
Agreement is or becomes untrue or breached in any material
respect or if Sonoma fails to comply in any material
respect with any covenant contained herein.
In the event this Agreement is terminated pursuant to subparagraph (b), (c) or
(d) above, each party shall be entitled to pursue, exercise end enforce any and
all remedies, rights, powers and privileges available at law or in equity. In
the event of a termination of this Agreement under the provisions of this
Section 7, a party not then in material breach of this Agreement shall stand
fully released and discharged of any and all obligations under this Agreement.
SECTION 8. GENERAL
8.1 Amendments. This Agreement may not be amended, except in a
written document signed by Sonoma, KWCHI and the Stockholders.
8.2 Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants contained herein shall survive the
Closing and all statements contained in any certificate, exhibit or other
instrument delivered by or on behalf of the parties hereto pursuant to this
Agreement shall be deemed to have been representations and warranties by the
parties hereto, as the case may be, and, notwithstanding any provision in this
Agreement to the contrary, shall survive the Closing for a period of three
years.
8.3 Heading. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
8.4 Governing Law. THIS AGREEMENT IS TO BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF KENTUCKY WITHOUT GIVING EFFECT TO
THE CHOICE OF LAW PROVISIONS THEREOF.
8.5 Notices and Demands. Any notice or demand which is permitted or
required hereunder will be deemed to have been sufficiently received (except as
otherwise provided herein) (a) upon receipt when personally delivered, (b) or
one (1) day after sent by overnight delivery or telecopy providing confirmation
or receipt of delivery, or (c) three (3) days after being sent by certified or
registered mail, postage and charges prepaid, return receipt requested to the
addresses listed on Schedule 8.5 attached hereto, or at any other address
designated by any party hereto to all other parties hereto in writing.
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8.6 Severability. If any provision of this Agreement is held invalid
under applicable law, such provision will be ineffective to the extent of such
invalidity, and such invalid provision will be modified to the extent necessary
to make it valid and enforceable. Any such invalidity will not invalidate the
remainder of this Agreement.
8.7 Expenses. Each party hereto will bear its own fees for counsel
and accountants and other expenses relating to the negotiation and consummation
of the transactions contemplated herein.
8.8 Confidentiality, Publicity and Disclosures. Each party shall
keep this Agreement and its terms confidential, and shall make no press release
or public disclosure, either written or oral, regarding the transactions
contemplated by this Agreement without the prior knowledge and consent of the
other parties hereto; provided that the foregoing shall not prohibit any
disclosure (i) by press release, filing or otherwise that is required by
federal securities laws, or (ii) to attorneys, accountants, investment bankers
or other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement.
8.9 Entire Agreement. This Agreement and the exhibits to this
Agreement constitute the entire agreement of the parties, and supersede any
prior agreements.
8.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be taken to be an original, but such
counterparts will together constitute one document.
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<PAGE> 19
The undersigned have executed this Agreement as of the day and year first
written above.
SONOMA INTERNATIONAL
By:
------------------------------------------
Harry W. Henderson, President
KEY WEST CONCH HARBOR, INC.
By: /s/
------------------------------------------
Its: President
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SIGNATURE PAGE
TO
SECURITIES AND EXCHANGE AGREEMENT
This signature page to the Securities and Exchange Agreement, dated as
of October 15, 1996, by and among Sonoma International, a Nevada corporation,
and the holders of all of the issued and outstanding capital stock of Key West
Conch Harbor, Inc., a Florida corporation, is executed by the undersigned as of
the date set forth above.
/s/ A. Frederick Skomp
-------------------------------------
A. Frederick Skomp, Individually
/s/ Marla Collins Webb
-------------------------------------
Marla Collins Webb, Individually
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<PAGE> 21
Unanimous Consent of Directors of Sonoma International
The undersigned, being all of the members of the Board of Directors of
Sonoma International, a Nevada corporation (the "Corporation") do hereby
consent to the following resolutions:
The Board of Directors recommends that the Articles of Incorporation be
amended by consent of the stockholders holding a majority of the Corporation's
issued and outstanding shares of Common Stock. Accordingly, it is unanimously:
RESOLVED, that the Board of Directors hereby adopt and recommend
that the stockholders of the Corporation adopt the following
resolutions:
"RESOLVED, that Article I of the Articles of Incorporation of
Sonoma International be amended by the deletion of the existing ARTICLE
ONE and the addition of the following:
`The name of the Corporation is American Lodging & Leisure
Corporation.'"; and
"RESOLVED,that Article IV of the Articles of Incorporation of
Sonoma International be amended by the deletion of the existing ARTICLE
FOUR and the addition of the following paragraph immediately following
paragraph 3 thereof:
ARTICLE FOUR
The authorized capital stock of the Corporation is 20,000,000
shares of Common Stock, par value $0.001 per share. Upon filing of this
amendment with the Department of State of the State of Nevada the sixty
million (60,000,000) presently outstanding shares of the Corporation's
Common Stock par value of $0.001 per share shall forthwith be
reclassified and converted into 300,000 shares of the new Common Stock
of the par value of $0.001 per share at the rate of one-two hundredth
(1/200) share of the new Common Stock of the par value $0.001 per share
for each share of the presently outstanding Common Stock of the par
value of $0.001 per share. The Corporation shall not issue fractional
shares but shall pay in cash the fair value, as determined by the Board
of Directors, of fractional interests in shares as of the time when
those entitled to receive the interests are determined.'"
RESOLVED FURTHER, that November 4, 1996 be and it hereby is set
as the record date for the voting by consent upon said resolution to
amend the Corporation's Articles of Incorporation; and
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<PAGE> 22
RESOLVED FURTHER, that an information statement complying with
the rules and regulations of the Securities and Exchange Act of 1934 be
and it hereby is, directed to be filed with the Securities and Exchange
to effect such amendment.
The Corporation has not had any operating activities for several years.
Several of the stockholders have arranged to have in excess of ten million
dollars of assets placed into the Company with the prospects of placing a
significantly larger amount of assets thereby increasing stockholder value to
the Company. It is the desire of the present Board of Directors to proceed in
accordance with such plan adopting an agreement whereby those responsible for
placing such assets into the Corporation would receive 85% of the Corporation's
issued and outstanding stock and placing those arranging for the conveyance of
such assets to take control of the Corporation's Board of Directors.
Accordingly, it is unanimously,
RESOLVED, that the form of Securities Exchange Agreement (the
"Jamestown Agreement"), the form of which has been presented to each
member of the Board of Directors, among the Corporation, the limited
partners of Jamestown Resorts & Marina Ltd., and Clear Creek
Investments, LLC, whereby an aggregate of 85% of the issued and
outstanding shares of Common Stock of the Corporation would be issued in
exchange for assets exceeding $10,000,000, said value to be supported by
either an audit or MAI appraisal be, and it hereby is, approved in all
respects, and the officers of the Corporation, or either of them, are
each hereby authorized, empowered, and directed, in the name and on
behalf of the Corporation to execute and deliver the Jamestown
Agreement, substantially in the form presented to the Board of
Directors, together with such changes as the officer executing the same
shall approve, his execution thereon to be conclusive evidence of his
approval thereof, including, without limitation, the alteration of the
Jamestown Agreement to permit the acquisition of securities of the
entity owning or to own the assets rather than acquiring the assets; and
RESOLVED FURTHER, that upon receipt by the Corporation of the
consideration set forth in the Jamestown Agreement, all such shares
shall be duly issued, fully paid, and nonassessable, and that the
Chairman, or the President, and the Secretary of the Corporation be, and
they hereby are authorized, empowered, and directed to execute and to
deliver stock certificates of the Corporation evidencing the issuance of
all such shares; and
RESOLVED FURTHER, that the proper officers of the Corporation be
and they hereby are authorized in the name and on behalf of the
Corporation to do and perform or cause to be done and performed all acts
and things as such officer or officers shall deem necessary, advisable
or appropriate to implement the foregoing resolutions, including,
without limitation, the increase in the number of authorized shares of
the Corporation or a reverse split or both, and to
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<PAGE> 23
execute and deliver any agreements, certificates, directions,
representations, issuances and other instruments or documents of any
other acts and things as such officer or officers of the Corporation
shall deem necessary, advisable or appropriate to comply with the
purposes and intent of the foregoing resolutions, and
RESOLVED FURTHER, that effective immediately following the
consummation of the transactions contemplated by the Agreement, Harry W.
Henderson, Barbara J. Henderson, and Angela L. Hochanadel, have tendered
their respective resignations as directors and officers of the
Corporation; and
RESOLVED FURTHER, that effective immediately following the
consummation of the transactions contemplated by the Agreement, Charles
W. Henne, William Jay Hall and Peter Sachmann be, and they hereby are
appointed to serve as directors of the Corporation until the election
and qualification of their respective successors; and
RESOLVED FURTHER, that the following individuals be and they
hereby are elected and appointed to serve in the office set forth next
to their name, to serve until the election and qualification of their
respective successor, said appointment to occur upon the closing of the
transaction contemplated in the Agreement
Charles W. Hence President
William Jay Hall Vice President
Peter Sachmann Secretary-Treasurer
The Corporation has arranged for the acquisition by the Corporation of
another entity that operates a Marina, namely, Key West Conch Harbor, Inc., a
Florida corporation. Accordingly, it is unanimously:
RESOLVED, that the form of Securities Exchange Agreement (the
"KWCHI Agreement"), the form of which has been presented to each member
of the Board of Directors, among the Corporation, and the stockholders
of Key West Conch Harbor. Inc., a Florida corporation, dated as of
October 31, 1996, whereby 300,000 of the issued and outstanding shares
of Common Stock, said number of shares to be based upon the number of
shares following the reverse split contemplated in the Jamestown
Agreement of the Corporation would be issued in exchange for all of the
issued and outstanding stock of said corporation, be and it hereby is,
approved in all respects, and the officers of the Corporation. or either
of them, are each hereby authorized, empowered, and directed, in the
name and on behalf of the Corporation, to execute and deliver the KWCHI
Agreement, substantially in the form presented to the Board of
Directors, together with such changes as the officer executing the same
shall approve, his execution
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<PAGE> 24
thereon to be conclusive evidence of his approval thereof, including,
without limitation, the alteration of the KWCHI Agreement to permit the
acquisition of securities of the entity owning or to own the assets
rather than acquiring the assets; and
RESOLVED FURTHER, that upon receipt by the Corporation of the
consideration set forth in the KWCHI Agreement, all such shares shall be
duly issued, fully paid, and non-assessable, and that the Chairman, or
the President, and the Secretary of the Corporation be, and they hereby
are authorized, empowered and directed to execute and to deliver stock
certificates of the Corporation evidencing the issuance of all such
shares; and
RESOLVED FURTHER, that the proper officers of the Corporation be,
and they hereby are, authorized in the name and on behalf of the
Corporation to do and perform or cause to be done and performed all acts
and things as such officer or officers shall deem necessary, advisable
or appropriate to implement the foregoing resolutions, including,
without limitation, the increase in the number of authorized shares of
the corporation or a reverse split or both, and to execute and deliver
any agreements, certificates, directions, representations, issuances and
other instruments or documents of any other acts and things as such
officer or officers of the Corporation shall deem necessary, advisable
or appropriate to comply with the purposes and intent of the foregoing
resolutions.
In connection with the Corporation's reorganization, it is desirable to
adopt an incentive stock plan. Accordingly, it is unanimously:
RESOLVED, that the form of 1996 Long Term Incentive Plan (the
"Incentive Plan"), the form of which has been presented to each member
of the Board of Directors, setting aside 350,000 shares of the
Corporation's Common Stock after the stock split referred to in the
Jamestown Agreement is effected, be, and it hereby is approved in all
respects, and the officers of the Corporation, or either of them, are
each hereby authorized, empowered, and directed, in the name and on
behalf of the Corporation, to execute and deliver the Incentive Plan,
substantially in the form presented to the Board of Directors, together
with such changes as the officer executing the same shall approve, his
execution thereon to be conclusive evidence of his approval thereof; and
RESOLVED FURTHER, that the proper officers Corporation be, and
they hereby are, authorized in the name and on behalf of the Corporation
to do and perform or cause to be done and performed all acts and things
as such officer or officers shall deem necessary, advisable or
appropriate to implement the foregoing resolutions, including, without
limitation, the ratification of the Incentive Plan by the Corporation's
Stockholders, and to execute and deliver any agreements, certificates,
directions, representations, issuances and other
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<PAGE> 25
instruments or documents of any other acts and things as such officer or
officers of the Corporation shall deem necessary, advisable or
appropriate to comply with the purposes and intent of the foregoing
resolutions.
The Corporation has not held a meeting of stockholders since 1985 and as
part of the consent it is desirable that the director's acts be ratified.
Accordingly, it is unanimously:
RESOLVED, that the corporation hereby asks the stockholders to
ratify and approve the acts of the directors, insofar as those acts do
not constitute illegalities or improprieties, since the last meeting of
the Stockholders held in 1985.
IN WITNESS WHEREOF, the undersigned have hereunto set their hand as of
the 31st day of October, 1996.
/s/ Harry W. Henderson
- ------------------------------
Harry W. Henderson
/s/ Barbara Henderson
- ------------------------------
Barbara Henderson
/s/ Angela L. Hochanadel
- ------------------------------
Angela L. Hochanadel
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<PAGE> 1
EXHIBIT 10.11
SECURITIES EXCHANGE AGREEMENT
BY AND AMONG
SONOMA INTERNATIONAL
AND
CLEAR CREEK INVESTMENTS, L.L.C.
AND
THE LIMITED PARTNERS OF
JAMESTOWN RESORT & MARINA, LTD.
September 9, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. DESCRIPTION OF TRANSACTIONS
1.1 Exchange of Securities
1.2 Closing
1.3 Closing Deliveries
1.4 Conditions to Closing of Sonoma
1.5 Conditions of Closing of the Stockholders
1.6 Definitions
SECTION 2. REPRESENTATIONS OF THE STOCKHOLDERS
2.1 Organization
2.2 Partnership Power
2.3 Authorization
2.4 Capitalization
2.5 Effect of Transactions, Compliance with Obligations
2.6 Brokerage
2.7 Consents
2.8 Status of Stockholders
2.9 Unregistered Securities Under Securities Act
2.10 No Distribution of Stock to Public
SECTION 3. REPRESENTATIONS OF SONOMA
3.1 Organization
3.2 Corporate Power
3.3 Authorization
3.4 Capitalization
3.5 Preemptive Rights, Registration Rights
3.6 Financial Statements
3.7 Liabilities and Obligations
3.8 Employee Matters
3.9 Employee Benefit Plans
3.10 Commitments
3.11 Tax Matters
3.12 Assets
3.13 Effect of Transactions, Compliance with Obligations
3.14 Litigation
3.15 Legal Compliance
3.16 Subsidiaries
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
3.17 Brokerage
3.18 Environmental Matters
3.19 Certain Payments
3.20 Consents
3.21 Authorization to Issue Stock
3.22 SEC Reports
SECTION 4. THE STOCKHOLDERS COVENANTS
4.1 Consummation of Agreement
4.2 Business Operations
4.3 Access
SECTION 5. SONOMA'S COVENANTS
5.1 Consummation of Agreement
5.2 Business Operations
5.3 Access
5.4 Approvals of Third Parties
SECTION 6. INDEMNIFICATION
6.1 Indemnification by the Stockholders
6.2 Indemnification by Sonoma
6.3 Conditions of Indemnification
6.4 Waiver
6.5 Remedies Not Exclusive
6.6 Costs, Expenses and Legal Fees
6.7 Specific Performance
SECTION 7. TERMINATION
7.1 Termination
SECTION 8. GENERAL
8.1 Amendments
8.2 Survival of Representations, Warranties and Covenants
8.3 Headings
8.4 Governing Law
8.5 Notices and Demands
8.6 Severability
8.7 Expenses
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
8.8 Confidentiality, Publicity and Disclosures
8.9 Entire Agreement
8.10 Counterparts
</TABLE>
<PAGE> 5
SECURITIES EXCHANGE AGREEMENT
Sonoma International, a Nevada corporation ("Sonoma"), the holders of
limited partnership interests in Jamestown Resort & Marina, Ltd., a Kentucky
limited partnership ("Jamestown"), who are signatories to this Agreement (the
"Partners"), Clear Creek Investments, L.L.C., a Kentucky limited liability
company ("Clear Creeks"), which is the sole stockholder of Jamestown Resort &
Marina, Inc., a Kentucky corporation ("JRMI") and the general partner of
Jamestown, enter into this Securities Exchange Agreement dated as of September
9, 1996 (this "Agreement").
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 Exchange of Securities. Subject to and upon the terms and
conditions contained herein, at the Closing, Sonoma will issue 17,000,000
shares of the common stock, par value $.001 of Sonoma (the "Stock"), to Clear
Creek and the Partners (collectively, the "Securityholders") in accordance with
Schedule 1.1, and in consideration therefore, the Partners will transfer,
assign and convey all of the limited partnership interests in Jamestown (the
"Partnership Interests") to Sonoma and Clear Creek will transfer, assign and
convey all issued and outstanding capital stock of JRMI to Sonoma.
1.2 Closing. The closing (the "Closing") of the transactions
contemplated herein will take place at the offices of Jackson & Walker, L.L.P.,
901 Main Street, Suite 6000, Dallas, Texas 75202, at 10:00 a.m., on the date as
soon as practicable after the date hereof and as agreed to by the parties
hereto (the "Closing Dates).
1.3 Closing Deliveries. At the Closing, the following shall occur:
(a) Clear Creek shall have delivered to Sonoma certificates
representing all the issued and outstanding capital stock of JRMI (the "JRMI
Stock"), together with stock powers, executed in blank;
(b) Jackson & Walker, L.L.P., counsel for Clear Creek and the
Partners, shall have delivered to Sonoma a legal opinion, dated as of the
Closing Date and in form and substance reasonably satisfactory to Sonoma;
(c) Robert A. Forrester, counsel for Sonoma, shall have delivered
to the Securityholders a legal opinion, dated as of the Closing Date and in
form and substance reasonably satisfactory to the Securityholders;
(d) The Securityholders shall have delivered to Sonoma all
authorizations, consents, approvals, permits and licenses referenced in
Schedule 2.7.
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<PAGE> 6
(e) Sonoma shall have delivered to the Securityholders a copy of
the resolutions of the Board of Directors of Sonoma authorizing the execution,
delivery and performance of this Agreement and all related documents and
agreements, each certified by the Secretary of Sonoma as being true and correct
copies of the originals thereof subject to no modifications or amendments.
(f) Sonoma shall have delivered to the Securityholders a
certificate of its Secretary certifying as to the incumbency of the directors
and officers of Sonoma and as to the signatures of such directors and officers
who have executed documents delivered at the Closing on behalf of Sonoma.
(g) The Securityholders shall have delivered to Sonoma a written
appraisal which states that the assets of Jamestown, as of the date of such
appraisal, have a fair market value of not less than $10,000,000.
(h) Each director of Sonoma shall have submitted to Sonoma such
director's resignation, dated effective immediately following the Closing, and
Charles W. Henne, William J. Hall and Peter Sachmann shall have been elected as
directors of Sonoma.
1.4 Conditions to Closing of Sonoma. Except as may be waived in
writing by Sonoma, the obligations of Sonoma to acquire the Partnership
Interests and the Stock are subject to the fulfillment at or prior to the
Closing Date of each of the following conditions:
(a) The representations and warranties of the Securityholders
contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
(b) The Securityholders shall have performed and complied with
all covenants and conditions required by this Agreement to be performed and
complied with by the Securityholders on or prior to the Closing Date.
(c) No investigation, action, proceeding or order by any court or
governmental body or agency shall have been threatened, orally or in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
(d) No material adverse change in the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Jamestown
shall have occurred since the date of the Jamestown Balance Sheet.
(e) All authorizations, approvals consents and waivers of any
governmental authority or third party, each as required to permit the
consummation of the transactions contemplated by this Agreement, shall have
been obtained and shall not be terminated, suspended or withdrawn as of the
Closing Date.
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<PAGE> 7
(f) Sonoma shall have completed a due diligence review of the
business, operations and financial statements of Jamestown and JRMI the results
of which shall be satisfactory to Sonoma in its sole discretion.
(g) Sonoma shall have received all documents, duly executed in
form satisfactory to Sonoma and its counsel referred to in Section 1.3 above.
1.5 Conditions to Closing of the Securityholders. Except as may be
waived in writing by Clear Creek and the Partners holding a majority of the
Partnership Interests, the obligations of the Securityholders hereunder are
subject to fulfillment at or prior to the Closing Date of each of the following
conditions:
(a) The representations and warranties of Sonoma contained herein
shall have been true and correct in all respects when initially made and shall
be true and correct in all respects as of the Closing Date.
(b) Sonoma shall have performed and complied in all material
respects with all covenants and conditions required by this Agreement to be
performed and complied with by it prior to the Closing Date.
(c) No investigation, action, proceeding or order by any court or
governmental body or agency shall have been threatened orally or in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
(d) No material adverse change in the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Sonoma
shall have occurred since the date of the Sonoma Balance Sheet.
(e) All authorizations, approvals consents and waivers of any
governmental authority or third party, each as required to permit the
consummation of the transactions contemplated by this Agreement, shall have
been obtained and shall not be terminated, suspended or withdrawn as of the
Closing Date.
(f) The Securityholders shall have completed a due diligence
review of the business, operations and financial statements of Sonoma, the
results of which shall be satisfactory to the Securityholders in their sole
discretion.
(g) Sonoma shall have, by reverse stock split or exchange not
involving the payment of cash or incurring of debt by Sonoma, reduced the
number of issued and outstanding shares of its common stock to 3,000,000, on a
fully diluted basis, including without limitation, all outstanding warrants,
options, convertible securities or other commitments to issue common stock.
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<PAGE> 8
(h) Garfield Bank, a California corporation ("Bank"), shall have
agreed in writing that all conditions precedent set forth in the Conditional
Settlement Agreement by and between Bank and Sonoma have been satisfied or
waived and Bank shall have filed a Satisfaction of Judgment with the applicable
court.
(i) All tax returns listed on Schedule 3.11 below shall have been
filed, and all taxes required to be paid thereon shall have been paid.
(j) The Securityholders,as the case may be, shall have received
all documents referred to in Section 1.3 above.
1.6 Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below:
(a) "Agreement of Limited Partnership" shall mean the Agreement
of Limited Partnership of Jamestown, as amended to date.
(b) "Cash Compensation" shall mean wages, salaries, bonuses
(discretionary and formula) and other compensation paid or payable in cash.
(c) "Code" shall mean the Internal Revenue Code.
(d) "Environmental Laws" shall mean any laws or regulations
pertaining to health or the environment, including without limitation (i) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(42 U.S.C. Sections 9601 et seq.), as amended from time to time ("CERCLA")
(including without limitation as amended pursuant to the Superfund Amendments
and Reauthorization Act of 1986), and regulations promulgated under CERCLA,
(ii) the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Sections
6901 et seq.), as amended from time to time ("RCRA"), and regulations
promulgated thereunder, (iii) statutes, rules or regulations, whether federal,
state or local, relating to asbestos or polychlorinated biphenyls, and (iv) the
provisions contained in the statutes of any applicable state statutes.
(e) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(f) "GAAP" shall mean generally accepted accounting principles.
(g) "Jamestown Balance Sheet" shall mean the balance sheet of
Jamestown as of June 30, 1996, which Jamestown Balance Sheet is included in the
Jamestown Financial Statements.
(h) "Jamestown Financial Statements" shall mean (i) the audited
balance sheet, statement of operations and statements of cash flow of Jamestown
as of December 31, 1994 and 1995 and (ii) unaudited balance sheets, statements
of operations and statements of cash flow of Jamestown for the 6-month period
ended June 30, 1996.
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<PAGE> 9
(i) "Proprietary Rights" shall mean (a) all trade-marks,
trade-names, service marks and other trade designations, including common law
rights, registrations and applications therefor, and all patents, copyrights
and applications currently owned, in whole or in part, by Jamestown with
respect to the business of Jamestown and all licenses, royalties, assignments
and other similar agreements relating to the foregoing to which Jamestown is a
party (including expiration date if applicable); and (b) all agreements
relating to technology, know-how or processes that Jamestown is licensed or
authorized to use by others, or which it licenses or authorizes others to use.
(j) "Securities Acts" shall mean the Securities Act of 1933, as
amended.
(k) "Sonoma Balance Sheet" shall mean the balance sheet of Sonoma
as of June 30, 1996, which Sonoma Balance Sheet is included in the Sonoma
Financial Statements.
(l) "Sonoma Financial Statements" shall mean (i) the audited
balance sheet, statement of operations and statements of cash flow of Sonoma as
of December 31, 1994 and 1995 and (ii) unaudited balance sheets, statements of
operations and statements of cash flow of Sonoma for the 6-month period ended
June 30, 1996.
(m) "Subsidiary" shall mean any corporation, partnership, joint
venture or other legal entity in which another entity owns, directly or
indirectly, an equity interest.
SECTION 2. REPRESENTATIONS OF THE SECURITYHOLDERS
Clear Creek as to itself, JRMI and Jamestown, and the Partners as to
themselves (explicitly, not as to JRMI or Jamestown), severally and not
jointly, represent and warrant to Sonoma that:
2.1 Organization. Jamestown is a limited partnership, and JRMI is a
corporation, each validly existing and in good standing under the laws of the
State of Kentucky, and neither is required to be qualified to do business as a
foreign limited partnership in any other jurisdiction.
2.2 Partnership Power. Each of Jamestown and Clear Creek has all
required power and authority to own its properties and to carry on its business
as presently conducted and as proposed to be conducted. Each Securityholder has
all required power and authority to execute and deliver this Agreement and to
carry out the transactions contemplated by this Agreement.
2.3 Authorization. All action on the part of each Securityholder
necessary for the authorization, execution, delivery and performance of this
Agreement by such Securityholder and the performance of such Securityholders'
obligations hereunder have been taken. This Agreement and all documents
executed pursuant to this Agreement are valid and binding obligations of each
Securityholder, enforceable according to its terms, except as may be limited by
(a) applicable bankruptcy, insolvency, reorganization or other similar laws of
general
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<PAGE> 10
application relating to or affecting the enforcement of creditor rights, (b)
laws and judicial decisions regarding indemnification for violations of federal
securities laws, and (c) the availability of specific performance or other
equitable remedies.
2.4 Capitalization. The names and ownership interests of the
Partners in Jamestown are as set forth in Schedule 2.4. There are no other
owners of a partnership interest in Jamestown and there are no outstanding
options, or other rights or obligations to purchase or acquire an interest in
Jamestown, nor any outstanding securities convertible into or exchangeable for
such an ownership interest. There are no agreements to which Jamestown, any of
the Partners, Clear Creek or JRMI is a party or has knowledge regarding the
issuance, registration, voting or transfer of any partnership interest in
Jamestown or capital stock in JRMI. Clear Creek is the sole shareholder of
JRMI.
2.5 Effect of Transactions, Compliance with Obligations. Each
Securityholder's execution and delivery of this Agreement, its performance of
the transactions contemplated by this Agreement does not and will not violate
any terms of the Agreement of Limited Partnership of Jamestown, the Certificate
of Incorporation or Bylaws of JRMI, or any judgment, decree or order, or any
material contract or obligation of such Securityholder, or any statute, rule or
regulation of any federal, state or local government or agency applicable to
such Securityholder, or any material contract to which such Securityholder is
bound. No consent, approval or filing with any regulatory agency is required to
be taken by such Securityholder in connection with the transactions
contemplated by the Agreement, except those which such Securityholder has
obtained or made in a timely manner.
2.6 Brokerage. There are no claims for brokerage commissions,
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by
Jamestown or JRMI, other than any fee owed to Clear Creek. Each Securityholder
agrees to indemnify and hold Sonoma harmless for any such brokerage
commissions, finders fees or similar compensation.
2.7 Consents. Except as set forth on Schedule 2.7, no consent,
authorization, approval, permit or license of, or filing with, any governmental
or public body or authority, any lender or lessor or any other person or entity
is required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement or the agreements contemplated
hereby on the part of the Securityholders.
2.8 Status of Securityholders. Each of the Securityholders is
knowledgeable and experienced in making venture capital investments, and is
able to bear the economic risk of the loss of its investment in Sonoma. Each
Securityholder is acting on its own behalf in connection with the investigation
and examination of Sonoma and its decision to execute this Agreement and
exchange its Partnership Interests or the JRMI Stock for the Stock.
2.9 Unregistered Securities Under Securities Act. Each Securityholder
acknowledges that the Stock has not been registered under the Securities Act
and therefore the Stock is not
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<PAGE> 11
fully transferable except as permitted under various exemptions contained in
the Securities Act and the rules of the Securities and Exchange Commission
thereunder. Each Securityholder acknowledges that a legend to such effect shall
be placed on the certificates representing the Stock.
2.10 No Distribution of Stock to Public. Each Securityholder
represents and warrants that such Securityholder is receiving the Stock for its
own account, not for the purpose of resale or any other distribution of the
Stock. Each Securityholder represent and warrant that such Securityholder has
no present intention of disposing of all or any part of such shares.
SECTION 3. REPRESENTATIONS OF SONOMA
Sonoma hereby represents and warrants to the Securityholders that:
3.1 Organization. Sonoma is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada, and is not
required to be qualified to do business as a foreign corporation in any other
jurisdiction.
3.2 Corporate Power. Sonoma has all required corporate power and
authority to own its properties and to carry on its business as presently
conducted and as proposed to be conducted. Sonoma has all required corporate
power and authority to execute and deliver this Agreement, and to carry out the
transactions contemplated by this Agreement.
3.3 Authorization. All corporate action on the part of Sonoma, its
directors and shareholders necessary for the authorization, execution, delivery
and performance of this Agreement by Sonoma and the performance of all of
Sonoma's obligations hereunder has been taken. This Agreement and all documents
executed pursuant to this Agreement are valid and binding obligations of
Sonoma, enforceable according to their terms, except as may be limited by (a)
applicable bankruptcy, insolvency, reorganization or other similar laws of
general application relating to or affecting the enforcement of creditor
rights, (b) laws and judicial decisions regarding indemnification for
violations of federal securities laws, and (c) the availability of specific
performance or other equitable remedies. The execution, delivery and
performance of this Agreement have been duly authorized by all necessary
corporate action of Sonoma.
3.4 Capitalization. The authorized and issued capital stock of Sonoma
and the names and ownership interests of the shareholders of Sonoma are as set
forth in Schedule 3.4. All of the presently outstanding shares of capital
stock of Sonoma have been validly authorized and issued and are fully paid and
nonassessable. Except as provided in Schedule 3.4, Sonoma has not issued any
other shares of its capital stock and there are no outstanding options,
warrants, subscriptions or other rights or obligations to purchase or acquire
any of such shares, nor any outstanding securities convertible into or
exchangeable for such shares. Except as disclosed on Schedule 3.4 or as
contemplated under this Agreement (and the other agreements executed in
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<PAGE> 12
connection herewith), there are no agreements to which Sonoma is a party or has
knowledge regarding the issuance, registration, voting or transfer of its
outstanding shares of capital stock. No dividends are accrued but unpaid on any
capital stock of Sonoma.
3.5 Preemptive Rights, Registration Rights. There are no preemptive
rights affecting the issuance or sale of Sonoma's capital stock. Sonoma is not
under any contractual obligation to register (in compliance with the filing
requirements and being deemed effective under the Securities Act) any of its
presently outstanding securities or any of its securities which may hereafter
be issued, except as described in Schedule 3.5.
3.6 Financial Statements. Schedule 3.6 contains correct and complete
copies of the Sonoma Financial Statements. The Sonoma Financial Statements are
in accordance with the books and records of Sonoma, and have been prepared
consistent with past practices, have been prepared in accordance with GAAP
(except that the unaudited Sonoma Financial Statements do not contain notes)
and present fairly in all material respects the financial position of Sonoma on
the dates of such statements and the results of their operations for the
periods covered. Sonoma maintains its books, records and accounts in accordance
with good business practice and in sufficient detail to reflect accurately and
fairly the transactions and dispositions of its assets, liabilities and
securities.
3.7 Liabilities and Obligations. A description of all liabilities
and obligations of Sonoma, accrued, contingent or otherwise (known or unknown
and asserted or unasserted), arising out of transactions effected or events
occurring on or prior to the date thereof are as set forth on Schedule 3.7
attached hereto, which liabilities and obligations will be the only liabilities
and obligations of Sonoma on the Closing Date. Except as set forth in Schedule
3.7, Sonoma is not liable upon or with respect to, or obligated in any other
way to provide funds in respect of or to guarantee or assume in any manner, any
debt, obligation or dividend of any person, corporation, association,
partnership, joint venture, trust or other entity, and Sonoma knows of no basis
for the assertion of any other claims or liabilities of any nature or in any
amount.
3.8 Employee Matters. Sonoma has no employees.
3.9 Employee Benefit Plans. Sonoma does not have or, in the past five
years has had or been subject to, any Employee Benefit Plans.
3.10 Commitments. Sonoma is not a party to any document, instrument
or agreement, except as set forth on Schedule 3.10.
3.11 Tax Matters. Except as set forth in Schedule 3.11, all required
foreign, federal, state, local and other tax returns, notices and reports
(including, without limitation, income, property, sales, use, franchise,
capital stock, excise, added value, employees' income withholding, social
security and unemployment tax returns) of Sonoma have been accurately prepared
and duly and timely filed, and all foreign, federal, state, local and other
taxes required to be paid with respect to the periods covered by such returns
have been paid. Sonoma is not
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<PAGE> 13
and have not been delinquent in the payment of any tax, assessment or
governmental charge. Sonoma has never had any tax deficiency proposed or
assessed against it and have not executed any waiver of any statute of
limitations on the assessment or collection of any tax or governmental charge.
Except for sales tax audits, none of Sonoma's franchise tax returns has ever
been audited by governmental authorities. No tax audit, action, suit,
proceeding investigation or claim is now pending nor, to the best of Sonoma's
knowledge, threatened against Sonoma, and no issue or question has been raised
(and is currently pending) by any taxing authority in connection with any of
Sonoma's tax returns or reports.
3.12 Assets. Sonoma has no assets, personal or real, tangible or
intangible.
3.13 Effect of Transactions: Compliance with Obligations. Sonoma's
execution and delivery of this Agreement, its performance of the transactions
contemplated by this Agreement, and the performance of the business of their
respective business as now conduced, does not and will not violate any terms of
the Articles of Incorporation or Bylaws of Sonoma or violate any judgment,
decree or order, or any material contract or obligation of Sonoma, or any
statute, rule or regulation of any federal, state or local government or agency
applicable to Sonoma. The offer and sale of the Stock will be in compliance
with federal and state securities laws. No consent, approval or filing with any
regulatory agency is required to be taken by Sonoma in connection with the
transactions contemplated by the Agreement, except those which Sonoma has
obtained or made in a timely manner, except for any filing of Form D or any
applicable state blue sky filing that may be made by Sonoma after the Closing.
3.14 Litigation. There is no litigation, arbitration or governmental
proceeding or investigation pending or, to the knowledge of Sonoma, threatened
(a) against Sonoma, (b) affecting any of the properties or assets of Sonoma, or
(c) against any officer, director, shareholder or employee of Sonoma in such
capacity or relating to his prior employment relationships. Sonoma is not aware
of any fact that is likely to form the basis of any such litigation,
arbitration or proceeding.
3.15 Legal Compliance. Sonoma has all material franchises, permits,
licenses and other rights and privileges necessary to permit it to own its
properties and to conduct its business as presently conducted. The business and
operations of Sonoma have been and are being conducted in accordance with all
applicable laws, rules and regulations, and Sonoma is not in violation of any
judgment, law or regulation.
3.16 Subsidiaries. Sonoma does not have any direct or indirect
Subsidiaries.
3.17 Brokerage. There are no claims for brokerage commissions,
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by
Sonoma. Sonoma agrees to indemnify and hold the Securityholders harmless for
any such brokerage commissions, finders fees or similar compensation.
- 9 -
<PAGE> 14
3.18 Environmental Matters. Neither Sonoma nor any of its assets is
currently in violation of, or subject to any existing, pending or threatened
investigation or inquiry by any governmental authority or to any remedial
obligations under, any Environmental Laws. To the best knowledge of Sonoma, the
assets of Sonoma have never been used in a manner that would be in violation of
any of the Environmental Laws, including without limitation CERCLA, RCRA and
any applicable state statutes. Sonoma has not obtained and is not required to
obtain, and Sonoma has no knowledge of any reason Sonoma will be required to
obtain, any permits, licenses or similar authorizations to construct, occupy,
operate or use any buildings, improvements, fixtures and equipment owned or
leased by Sonoma by reason of any Environmental Laws. To the best knowledge of
Sonoma, none of the assets owned or leased by Sonoma are on any federal or
state "Superfund" list or subject to any environmentally related liens.
3.19 Certain Payments. To the best knowledge of Sonoma, neither Sonoma
nor any director, officer or employee of Sonoma has paid or caused to be paid,
directly or indirectly, in connection with the business of Sonoma: (a) to any
government or agency thereof or any agent of any supplier or customer any
bribe, kick-back or other similar payment; or (b) any contribution to any
political party or candidate (other than from personal funds of directors,
officers or employees not reimbursed by their respective employers or as
otherwise permitted by applicable law).
3.20 Consents. Except as set forth on Schedule 3.20, no consent,
authorization, approval, permit or license of, or filing with, any governmental
or public body or authority, any lender or lessor or any other person or entity
is required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement or the agreements contemplated
hereby on the part of Sonoma.
3.21 Authorization to Issue Stock. Sonoma has taken, or will have
taken on or prior to the Closing, all action necessary to permit it to issue
the Stock to the Securityholders. The Stock will, when issued, be duly
authorized, validly issued, fully paid and nonassessable, free and clear of any
liens, claims, charges or security interest and no shareholder of Sonoma will
have any preemptive right of subscription or purchase in respect thereof.
3.22 SEC Reports. Since June 30, 1995, Sonoma has filed all forms,
documents and reports with the SEC required to be filed by it pursuant to
federal securities laws and the SEC rules and regulations thereunder (the SEC
Reports), all of which complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act. To the knowledge of
Sonoma, the SEC Reports do not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein to make the
statements contained therein not misleading.
- 10 -
<PAGE> 15
SECTION 4. THE SECURITYHOLDERS COVENANTS
The Securityholders, severally and not jointly, agree that between the
date hereof and the Closing:
4.1 Consummation of Agreement. The Securityholders shall use all
reasonable commercial efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions.
4.2 Business Operations. Clear Creek shall cause Jamestown and JRMI
to operate their respective businesses in the ordinary course. Clear Creek
shall use its best efforts to preserve the businesses of Jamestown and JRMI
intact. The Securityholders shall not take any action that could adversely
affect the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Jamestown or JRMI without the prior written consent of
Sonoma or take or fail to take any action that would cause or permit the
representations made in Section 2 to be inaccurate at the time of Closing or
the Securityholders from making such representations and warranties at the
Closing.
4.3 Access. Clear Creek shall permit Sonoma and its authorized
representatives full access to, and make available for inspection, all of the
assets and businesses of Jamestown and JRMI, and permit Sonoma and its
authorized representatives to inspect and make copies of all documents, records
and information with respect to the affairs of Jamestown and JRMI as Sonoma and
its representatives may request, all for the sole purpose of permitting Sonoma
to become familiar with the business and assets and liabilities of Jamestown
and JRMI.
SECTION 5. SONOMA'S COVENANTS
Sonoma agrees that between the date hereof and the Closing:
5.1 Consummation of Agreement. Sonoma shall use its best efforts to
cause the consummation of the transactions contemplated hereby in accordance
with their terms and conditions.
5.2 Business Operations. Sonoma shall operate its business in the
ordinary course. Sonoma shall not take any action that could adversely affect
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Sonoma without the prior written consent of the
Securityholders or take or fail to take any action that would cause or permit
the representations made in Section 3 to be inaccurate at the time of Closing
or preclude Sonoma from making such representations and warranties at the
Closing.
5.3 Access. Sonoma shall permit the Securityholders and their
authorized representatives full access to, and make available for inspection,
all of the assets and business of Sonoma, and permit the Securityholders and
their authorized representatives to inspect and
- 11 -
<PAGE> 16
make copies of all documents, records and information with respect to the
affairs of Sonoma as the Securityholders and their representatives may request,
all for the sole purpose of the Securityholders to become familiar with the
business, assets and liabilities of Sonoma.
5.4 Approvals of Third Parties. Sonoma shall use its best efforts to
secure, as soon as practicable after the date hereof, all necessary approvals
and consents of third parties to the consummation of the transactions
contemplated hereby.
SECTION 6. INDEMNIFICATION
6.1 Indemnification by the Securityholders. Subject to the terms and
conditions of this Section 6, each Securityholder severally (as to itself only)
and not jointly, agree to indemnify, defend and hold Sonoma and its directors,
officers, agents, attorneys and affiliates harmless from and against all
losses, claims, obligations, demands, assessments, penalties, liabilities,
costs, damages, attorneys' fees and expenses (collectively, "Damages"),
asserted against or incurred by such indemnitees by reason of or resulting from
a breach of any representation, warranty or covenant of such Securityholder
contained herein, in any exhibit, schedule, certificate or financial statement
delivered hereunder, or in any agreement executed in connection with the
transactions contemplated hereby.
6.2 Indemnification by Sonoma. Subject to the terms and conditions of
this Section 6, Sonoma hereby agrees to indemnify, defend and hold the
Securityholders and its or their respective directors, officers, agents,
attorneys and affiliates harmless from and against all Damages asserted against
or incurred by any of such indemnitees by reason of or resulting from a breach
of any representation, warranty or covenant of Sonoma contained herein or in
any exhibit, schedule or certificate delivered hereunder, or in any agreement
executed in connection with the transactions contemplated hereby.
6.3 Conditions of Indemnification. The respective obligations and
liabilities of the Securityholders and Sonoma (the "indemnifying party") to the
other (the "party to be indemnified") under Sections 6.1 and 6.2 with respect
to claims resulting from the assertion of liability by third parties shall be
subject to the following terms and conditions:
(a) Within 20 days (or such earlier time as might be required to
avoid prejudicing the indemnifying party's position) after receipt of notice of
commencement of any action evidenced by service of process or other legal
pleading, the party to be indemnified shall give the indemnifying party written
notice thereof together with a copy of such claim, process or other legal
pleading, and the indemnifying party shall have the right to undertake the
defense thereof by representatives of its own choosing and at its own expense;
provided that the party to be indemnified may participate in the defense with
counsel of its own choice, the fees and
- 12 -
<PAGE> 17
expenses of which counsel shall be paid by the party to be identified unless
(i) the indemnifying party has agreed to pay such fees and expenses, (ii) the
indemnifying party has failed to assume the defense of such action or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnifying party and the patty to be indemnified and the party to be
indemnified has been advised by counsel that there may be one or more legal
defenses available to it that are different from or additional to those
available to the indemnifying party (in which case, if the party to be
indemnified informs the indemnifying party in writing that it elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such action on behalf
of the party to be indemnified, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for the party to be indemnified, which firm shall be designated in writing
by the party to be indemnified).
(b) In the event that the indemnifying party, by the 30th day
after receipt of notice of any such claim (or, if earlier, by the 10th day
preceding the day on which an answer or other pleading must be served in order
to prevent judgment by default in favor of the person asserting such claim),
does not elect to defend against such claim, the party to be indemnified will
(upon further notice to the indemnifying party) have the right to undertake the
defense, compromise or settlement of such claim on behalf of and for the
account and risk of the indemnifying party and at the indemnifying party's
expense, subject to the right of the indemnifying party to assume the defense
of such claims at any time prior to settlement, compromise or final
determination thereof.
(c) Notwithstanding the foregoing, the indemnifying party shall
not settle any claim without the consent of the party to be indemnified unless
such settlement involves only the payment of money and the claimant provides to
the party to be indemnified a release from all liability in respect of such
claim. If the settlement of the claim involves more than the payment of money,
the indemnifying party shall not settle the claim without the prior consent of
the party to be indemnified. The party to be indemnified and the indemnifying
party will each cooperate with all reasonable requests of the other.
6.4 Waiver. No waiver by any party of any default or breach by
another party of any representation, warranty, covenant or condition contained
in this Agreement, any exhibit or any document, instrument or certificate
contemplated hereby shall be deemed to be a waiver of any subsequent default or
breach by such party of the same or any other representation, warranty,
covenant or condition. No act, delay, omission or course of dealing on the part
of any party in exercising any right, power or remedy under this Agreement or
at law or in equity shall operate as a waiver thereof or otherwise prejudice
any of such party's rights, powers and remedies. All remedies, whether at law
or in equity, shall be cumulative and the election of any one or more shall not
constitute a waiver of the right to pursue other available remedies.
- 13 -
<PAGE> 18
6.5 Remedies Not Exclusive. The remedies provided in this Section 6
shall not be exclusive of any other rights or remedies available to one party
against the other, either at law or in equity.
6.6 Costs, Expenses and Legal Fees. Each party hereto shall bear its
own costs and expenses (including attorneys' fees and expenses), except that
each party hereto that is shown to have breached this Agreement or any other
agreement contemplated hereby agrees to pay the costs and expenses (including
reasonable attorneys' fees and expenses) incurred by any other party in
successfully (i) enforcing any of the terms of this Agreement against such
breaching party or (ii) proving that another party breached any of the terms of
this Agreement.
6.7 Specific Performance. Each party acknowledges that a refusal by
any party hereto to consummate the transactions contemplated hereby will cause
irreparable harm to the other parties to this Agreement, for which there may be
no adequate remedy at law and for which the ascertainment of damages would be
difficult. Therefore, each party shall be entitled, in addition to, and without
having to prove the inadequacy of, other remedies at law, to specific
performance of this Agreement, as well as injunctive relief (without being
required to post bond or other security).
SECTION 7. TERMINATION
7.1 Termination. This Agreement may be terminated:
(a) At any time prior to the Closing Date by mutual agreement of
all parties.
(b) By any party if the Closing does not occur on or prior to
December 31, 1996.
(c) At any time prior to the Closing Date by Sonoma if any
representation or warranty of the Securityholders contained in this Agreement
or in any certificate or other document executed and delivered by the
Securityholders pursuant to this Agreement is or becomes untrue or breached in
any material respect, or if the Securityholders fail to comply in any material
respect with any covenant contained herein.
(d) At any time prior to the Closing Date by the Securityholders
if any representation or warranty of Sonoma contained in this Agreement or in
any certificate or other document executed and delivered by Sonoma pursuant to
this Agreement is or becomes untrue or breached in any material respect, or if
Sonoma fails to comply in any material respect with any covenant contained
herein.
In the event this Agreement is terminated pursuant to subparagraph (b), (c) or
(d) above, each party shall be entitled to pursue, exercise and enforce any and
all remedies, rights, powers and privileges available at law or in equity. In
the event of a termination of this Agreement under the provisions of this
Section 7, a party not then in material breach of this Agreement shall stand
fully released and discharged of any and all obligations under this Agreement.
- 14 -
<PAGE> 19
SECTION 8. GENERAL
8.1 Amendments. This Agreement may not be amended, except in a
written document signed by Sonoma, Clear Creek and the Partners holding a
majority of the Partnership Interests.
8.2 Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants contained herein shall survive the
Closing and all statements contained in any certificate, exhibit or other
instrument delivered by or on behalf of the parties hereto pursuant to this
Agreement shall be deemed to have been representations and warranties by the
parties hereto, as the case may be, and, notwithstanding any provision in this
Agreement to the contrary, shall survive the Closing for a period of three
years.
8.3 Headings. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
8.4 Governing. THIS AGREEMENT IS TO BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO THE
CHOICE OF LAW PROVISIONS THEREOF.
8.5 Notices and Demands. Any notice or demand which is permitted or
required hereunder will be deemed to have been sufficiently received (except as
otherwise provided herein) (a) upon receipt when personally delivered, (b) or
one (1) day after sent by overnight delivery or telecopy providing confirmation
or receipt of delivery, or (c) three (3) days after being sent by certified or
registered mail, postage and charges prepaid, return receipt requested to the
addresses listed on Schedule 8.5 attached hereto, or at any other address
designated by any party hereto to all other parties hereto in writing.
8.6 Severability. If any provision of this Agreement is held invalid
under applicable law, such provision will be ineffective to the extent of such
invalidity, and such invalid provision will be modified to the extent necessary
to make it valid and enforceable. Any such invalidity will not invalidate the
remainder of this Agreement.
8.7 Expenses. Each party hereto will bear its own fees for counsel
and accountants and other expenses relating to the negotiation and consummation
of the transactions contemplated herein.
8.8 Confidentiality, Publicity and Disclosures. Each party shall
keep this Agreement and its terms confidential, and shall make no press release
or public disclosure, either written or oral, regarding the transactions
contemplated by this Agreement without the prior knowledge and consent of the
other parties hereto; provided that the foregoing shall not prohibit any
disclosure (i) by press release, filing or otherwise that is required by
federal securities laws,
- 15 -
<PAGE> 20
or (ii) to attorneys, accountants, investment bankers or other agents of the
parties assisting the parties in connection with the transactions contemplated
by this Agreement.
8.9 Entire Agreement. This Agreement and the exhibits to this
Agreement constitute the entire agreement of the parties, and supersede any
prior agreements.
8.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be taken to be an original; but such
counterparts will together constitute one document.
The undersigned have executed this Agreement as of the day and year
first written above.
SONOMA INTERNATIONAL
BY: /s/ Harry W. Henderson
------------------------------------------
Harry W. Henderson, President
CLEAR CREEK INVESTMENTS, L.L.C.
BY:
------------------------------------------
ITS:
-----------------------------------------
- 16 -
<PAGE> 21
SIGNATURE PAGE
TO
SECURITIES AND EXCHANGE AGREEMENT
This signature page to the Securities and Exchange Agreement, dated as
of August 15, 1996, by and among Sonoma International, Inc., a Nevada
corporation, the holders of limited partnership interests in Jamestown Resort &
Marina, Ltd., a Kentucky limited partnership, who are signatories thereto, and
Clear Creek Investments, L.L.C., a Kentucky limited liability company, is
executed by the undersigned as of the date set forth above.
If an individual:
---------------------------------------------
Printed name:
--------------------------------
If a legal entity:
SONOMA INTERNATIONAL
---------------------------------------------
(type in name)
By: /s/ Harry W. Henderson
------------------------------------------
Title: President
- 17 -
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
The registrant has two wholly owned subsidiaries: Jamestown Resort;
Marina, Inc., a Kentucky corporation and Key West Conch Harbor, Inc., a Florida
corporation. Both companies do business under their own name.
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form SB-2
(File No. 333-20037) of our report dated March 7, 1997, on our audits of the
financial statements of Sonoma International and Subsidiaries, our report dated
September 6, 1996, except as to Note H, which is as of December 9, 1996 on our
audits of the financial statements of Sonoma International and our report dated
October 18, 1996 on our audits of the financial statements of Key West Conch
Harbor, Inc. We also consent to the reference to our firm under the caption
"Experts."
King Griffin & Adamson P.C.
Dallas, Texas
March 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SONOMA
INTERNATIONAL AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH SB-2.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 104,353
<SECURITIES> 0
<RECEIVABLES> 81,500
<ALLOWANCES> 3,876
<INVENTORY> 85,668
<CURRENT-ASSETS> 377,572
<PP&E> 18,579,948
<DEPRECIATION> 4,537,677
<TOTAL-ASSETS> 16,085,643
<CURRENT-LIABILITIES> 6,099,139
<BONDS> 0
0
0
<COMMON> 2,300
<OTHER-SE> (279,582)
<TOTAL-LIABILITY-AND-EQUITY> 16,085,643
<SALES> 1,379,151
<TOTAL-REVENUES> 4,157,734
<CGS> 1,040,165
<TOTAL-COSTS> 1,765,250
<OTHER-EXPENSES> 1,961,742
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,025,784
<INCOME-PRETAX> (595,042)
<INCOME-TAX> 453,560
<INCOME-CONTINUING> (141,482)
<DISCONTINUED> 0
<EXTRAORDINARY> 2,518,486
<CHANGES> 0
<NET-INCOME> 2,377,004
<EPS-PRIMARY> 1.67
<EPS-DILUTED> 1.67
</TABLE>
