As filed with the Securities and Exchange Commission on January 28, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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5TH AVENUE CHANNEL CORP.
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(Name of Small Business Issuer in its Charter)
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FLORIDA 4841 59-3175814
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(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
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3957 N.E. 163rd Street
North Miami Beach, Florida 33160
(305) 947-3010
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(Address and telephone number of principal executive offices
and principal place of business)
Melvin Rosen
President
5th Avenue Channel Corp.
3957 N.E. 163rd Street
North Miami Beach, Florida 33160
(305) 947-3010
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(Name, address and telephone number of agent for service)
Copies to:
Leonard H. Bloom, P.A.
Broad and Cassel
201 South Biscayne Boulevard
Suite 3000
Miami, Florida 33131
(305) 373-9400
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Approximate date of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
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If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of 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. |_|
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SHARES TO BE BE REGISTERED PER SHARE(1) PRICE(1) FEE
REGISTERED
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Common Stock, 2,979,559 $2.81 $8,372,560.79 $2,210.36
$.001 par value shares
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Common Stock, 300,000 $2.50 $ 750,000 $ 198.00
$.001 par value(2) shares
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Common Stock, 15,000 $5.00 $ 75,000 $ 19.80
$.001 par value(2) shares
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Common Stock 5,000 $6.00 $ 30,000 $ 7.92
$.001 par value(2) shares
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TOTAL: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,436.08(3)
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) using the average of the high and low prices reported
for the Company's Common Stock as of January 26, 2000 and Rule 457(g)(1) with
respect to the various warrants.
(2) Represents shares issuable upon exercise of certain warrants issued to the
Company's financial consultant and subsequently assigned to certain assignees.
See "Selling Shareholders."
(3) Does not include the following securities for which the Company paid a fee
in connection with the filing of a Registration Statement on Form SB-2 (File No.
33-88788-A) and for which this Registration Statement serves as Post-Effective
Amendment No. 3: (i) 2,010,000 shares of our common stock issuable upon exercise
of warrants at $5.75 per share sold in our May 1995 initial public offering
("IPO Warrants"), (ii) 100,000 shares of common stock issuable upon exercise of
warrants at $7.50 per share issued to the underwriter of our initial public
offering, (iii) 140,000 IPO Warrants issuable upon exercise of warrants at $.325
per share issued to the underwriter of our public offering, and (iv) 140,000
shares of common stock underlying the IPO Warrants.
Pursuant to Rule 429, this Registration Statement serves as
Post-Effective Amendment No. 3 to the Registrant's Registration Statement on
Form SB-2 (File No. 33-88788-A) relating to: (i) 2,010,000 shares of our common
stock issuable upon exercise of warrants at $5.75 per share sold in our May 1995
initial public offering ("IPO Warrants"), (ii) 100,000 shares of common stock
issuable upon the exercise of warrants at $7.50 per share issued to the
underwriter of our initial public offering, (iii) 140,000 IPO Warrants issuable
upon exercise of warrants at $.325 per warrant issued to the underwriter of our
initial public offering, and (iv) 140,000 shares of common stock underlying the
IPO Warrants.
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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 said Section 8(a),
may determine.
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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. We may not sell these securities until the
registration statement filed with the Securities Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state in which the offer
or sale is not permitted.
PROSPECTUS
SUBJECT TO COMPLETION, DATED JANUARY 28, 2000
5,549,559 SHARES OF COMMON STOCK
5TH AVENUE CHANNEL CORP.
Certain of our shareholders are offering a total of 3,299,559 shares of
common stock pursuant to this prospectus, consisting of the following:
o 2,979,559 shares of issued and outstanding common stock,
o 300,000 shares issuable upon the exercise of certain consultant's
warrants at $2.50 per share, and
o 20,000 shares issuable upon the exercise of warrants issued in a
private placement, which include 15,000 warrants exercisable at $5.00
per share and 5,000 warrants exercisable at $6.00 per share. See
"Selling Shareholders."
The selling shareholders may sell their shares in one or more
transactions in the over-the-counter market, on the Nasdaq SmallCap Market or on
any other exchange on which our common stock may be listed. They may also sell
in privately negotiated transactions or otherwise, or a combination of such
methods of sale, at market prices prevailing at the time of sale or prices
related to such prevailing market prices or at negotiated prices. The selling
shareholders may sell the shares to or through broker-dealers, and such
broker-dealers may receive compensation from the selling shareholders and/or
purchasers of the shares for whom they may act as agent (which compensation may
be in excess of customary commissions). The selling shareholders and any
participating broker-dealers may be deemed to be "underwriters" as defined in
the Securities Act of 1933, as amended (the "Securities Act"). We cannot
estimate at the present time the amount of commissions or discounts, if any,
that will be paid by the selling shareholders on account of their sales of the
shares from time to time. We will indemnify the selling shareholders against
certain liabilities, including certain liabilities under the Securities Act.
See "Plan of Distribution."
This prospectus also covers (i) 2,010,000 shares of our common stock
issuable upon exercise of warrants at $5.75 per share sold in our May 1995
initial public offering (the "IPO Warrants"), (ii) 100,000 shares of our common
stock issuable upon exercise of warrants at $7.50 per share issued to the
underwriter of our initial public offering, (iii) 140,000 IPO Warrants issuable
upon exercise of warrants at $.325 per warrant issued to the underwriter of our
initial public offering, and (iv) 140,000 shares of common stock underlying the
IPO Warrants.
We will not receive any proceeds from the sale of these shares but may
receive up to an aggregate of approximately $13,165,000 upon exercise of the
various warrants.
Our common stock is quoted on the Nasdaq SmallCap Market under the
symbol "FAVE."
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YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 4 OF
THIS PROSPECTUS.
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YOU SHOULD ONLY RELY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS OR ANY SUPPLEMENT. WE HAVE NOT AUTHORIZED ANYONE
ELSE TO PROVIDE YOU WITH DIFFERENT INFORMATION. THE COMMON STOCK IS NOT BEING
OFFERED IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME
THAT THE INFORMATION IN THIS PROSPECTUS OR ANY SUPPLEMENT IS ACCURATE AS OF ANY
DATE OTHER THAN THE DATE ON THE FRONT OF THOSE DOCUMENTS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is January 28, 2000
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TABLE OF CONTENTS
PAGE
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Prospectus Summary ........................................................ 1
The Offering .............................................................. 2
Summary Consolidated Financial Information ................................ 3
Risk Factors .............................................................. 4
Price Range Of Common Stock ............................................... 14
Use Of Proceeds ........................................................... 15
Dividend Policy ........................................................... 15
Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................................ 16
Business .................................................................. 22
Management ................................................................ 29
Principal Shareholders .................................................... 33
Selling Shareholders ...................................................... 35
Certain Transactions ...................................................... 37
Description of Securities ................................................. 39
Shares Eligible For Future Sale ........................................... 41
Plan of Distribution ...................................................... 41
Legal Matters ............................................................. 42
Experts ................................................................... 42
Where You Can Find More Information ....................................... 43
Index To Consolidated Financial Statements ................................ F-1
As used in this Prospectus, the terms "we," "us," "our," "the Company"
and "5th Avenue" mean 5th Avenue Channel Corp. (unless the context indicates a
different meaning) and the term "common stock" means 5th Avenue Channel Corp.'s
common stock, $.001 par value per share.
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FORWARD LOOKING STATEMENTS
Some of the information in this prospectus contains forward-looking
statements within the meaning of the federal securities laws. These statements
include, among others, business development plans, strategies, expectations
regarding competition and market acceptance of our products and services.
Forward-looking statements typically are identified by use of terms like "may,"
"will," "expect," "anticipate," "estimate" and similar words, although some
forward-looking statements are expressed differently. You should be aware that
our actual results could differ materially from those contained in the
forward-looking statements due to a number of factors, including our substantial
operating losses, availability of capital resources, ability to compete
effectively, economic conditions, unanticipated difficulties in development of
products and services, ability to gain market acceptance and market share,
ability to manage growth, dependence on third party content providers and
dependence on our key personnel. You should also consider carefully the risks
described in this prospectus or detailed from time to time in our filings with
the Securities and Exchange Commission. See "Prospectus Summary," "Risk Factors"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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PROSPECTUS SUMMARY
BECAUSE THIS IS A SUMMARY, IT DOES NOT CONTAIN ALL OF THE INFORMATION
THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS. YOU SHOULD
CONSIDER THE INFORMATION SET FORTH UNDER "RISK FACTORS" AND OUR FINANCIAL
STATEMENTS AND ACCOMPANYING NOTES THAT APPEAR ELSEWHERE IN THIS PROSPECTUS.
GENERAL
We were organized as a Florida corporation on May 7, 1993 under the
name Tele Consulting Corp. On February 14, 1994, we changed our name to Tel-Com
Wireless Cable TV Corporation and on March 17, 1999, we changed our name to 5th
Avenue Channel Corp. Our principal executive offices are located at 3957 N.E.
163rd Street, North Miami Beach, Florida 33160, and our telephone number is
(305) 947-3010.
We are a media company that seeks to utilize the convergence of the
Internet and television to provide financial information and products and
services to our clientele.
We operate a website, 5thAvenueChannel.com, and are developing the 5th
Avenue Financial Television Network, both of which will contain information
provided by Zacks Investment Research, Inc. and others. We also plan to
distribute content through our new NetVideoFinance division, which will feature
interviews from analysts, brokers and others. A component of our business plan
is syndicating our content and products to other websites on the Internet. Ivana
Trump is under a long term agreement with us and will be the host for certain
financially-oriented television and Internet programming. We also own wireless
cable television systems in Wisconsin and Costa Rica and operate 5th Avenue
Channel Retail, Inc., which markets products and services to other websites,
home shopping channels and retail chains.
TELEVISION OPERATIONS
We have commenced production of programming for our 5th Avenue
Financial Television Network. The programming is expected to provide current
financial information about the stock market and initial public offerings,
useful personal financial tools, and interviews with analysts and others about
growing companies. Revenue streams are expected to be derived from sponsorships,
advertising and the sale of financial products promoted on the channel. We have
signed our first cable carriage agreement with Comcast, one of the largest cable
operators in the United States. The channel is expected to launch with two hours
of programming per day, from 10:00 A.M. to 12:00 noon, to approximately 2.5
million homes in the New York, Baltimore and Philadelphia designated marketing
areas. We expect to be able to expand our programming into additional hours and
homes on Comcast. We are also working with other cable and satellite systems for
additional carriage. The programming is expected to be available on our website
in streaming and downloadable formats and will also be available on FasTV's
website. See "Business -- Television Operations."
WEBSITE OPERATIONS
We operate 5thAvenueChannel.com, which offers financial and other
information as well as consumer products. The website was originally launched in
December 1998. In March 1999, the website was revised. Sections devoted to
consumer products, personal success and motivational products, and financial
resources were added, as well as links to other sites. The website is currently
being redesigned to incorporate additional financial content, our anticipated
television programming and NetVideoFinance
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content. The website is expected to contain information from Zacks Investment
Research as well as financial services including online insurance, online tax
preparation, online trading, online banking, online gift certificates and online
mortgages. We expect the redesign to be completed in January 2000, with
additional programming and content being added later in the first quarter of
2000. Revenue streams are expected to be derived from advertising, product and
subscription sales. See "Business -- Website Operations."
NETVIDEOFINANCE
We have commenced development of our NetVideoFinance division, which
plans to record and market interviews with analysts, fund managers, corporate
executives and journalists. Such content is expected to be available on
5thAvenueChannel.com, syndicated to other websites and e-mailed to users on a
subscription basis. Revenue streams are expected to be derived from advertising,
syndication payments from other websites, and subscription services from end
users. See "Business -- Net VideoFinance Division."
SALES DIVISION
We recently employed new management in our retail and wholesale product
sales division to manage expansion of the marketing of our products and services
to the mass market, retail chains, home shopping channels and other websites.
See "Business -- Sales Division."
WIRELESS CABLE TELEVISION OPERATIONS
We are a developer, owner and operator of wireless cable television
systems in Costa Rica and LaCrosse, Wisconsin. Wireless cable television is
provided to subscribers by transmitting designated frequencies over the air to a
small receiving antenna at each subscriber's location. We provide television and
related cable services to approximately 800 multiple dwelling units, commercial
locations and single family residences. See "Business -- Wireless Cable
Television."
THE OFFERING
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Securities Offered by the Selling Shareholders(1) .................... 3,299,559 shares of common stock.
See "Description of Securities."
Common Stock Outstanding ............................................. 12,164,702 shares(1)
Nasdaq SmallCap Market
Symbols ............................................................ Common Stock FAVE
Warrants FAVEW
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(1) Excludes 2,570,000 shares issuable upon the exercise of various warrants at
prices ranging from $2.50 to $7.50 per share.
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following is a summary of our Consolidated Financial Statements,
which are included elsewhere in this prospectus. You should read the following
data together with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section of this prospectus as well as with
our Consolidated Financial Statements and the notes therewith.
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FOR THE NINE
MONTHS
ENDED FOR THE YEARS
SEPTEMBER 30, ENDED DECEMBER 31,
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1999 1998 1998 1997
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(UNAUDITED) (UNAUDITED)
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STATEMENT OF OPERATIONS DATA:
Net sales........................... $ 2,923,086 $ 1,055,470 $ 1,453,033 $ 1,085,149
Gross profit........................ 1,376,346 893,754 1,217,666 914,535
Net loss............................ $ (3,754,380) $ (1,729,623) $ (3,297,941) $ (3,061,964)
================= ================ ================= =================
SHARE DATA:
Net loss per share basic and diluted $ (0.39) $ (0.43) $ (0.81) $ (1.17)
================= ================ ================= =================
Weighted average number
of common shares outstanding -
basic and diluted................ 9,577,429 4,024,850 4,080,242 2,758,112
================= ================ ================= =================
AS OF AS OF AS OF
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1999 1998 1998
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(UNAUDITED) (HISTORICAL) PRO FORMA *
(UNAUDITED)
BALANCE SHEET DATA:
Cash........................................... $ 127,882 $ 256,209 $ 256,209
Total current assets........................... 1,186,228 430,588 430,588
Total assets................................... 10,297,495 7,107,172 7,107,172
Total current liabilities...................... 6,728,655 2,435,438 2,435,438
Long term debt................................. 864,893 3,531,557 1,165,557
Stockholders' equity........................... 2,703,947 1,140,177 3,506,177
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* The pro forma balance sheet as of December 31, 1998 gives pro forma effect
to the conversion in January 1999 and March 1999 of a $2,366,000
convertible debenture payable to the President/Chairman of the Board
assuming that it had been converted on December 31, 1998.
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RISK FACTORS
THE SECURITIES OFFERED ARE HIGHLY SPECULATIVE. YOU SHOULD PURCHASE THEM
ONLY IF YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT IN US. YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, AS WELL AS ALL OTHER INFORMATION
SET FORTH ELSEWHERE IN THIS PROSPECTUS.
CERTAIN IMPORTANT FACTORS MAY AFFECT OUR ACTUAL RESULTS AND COULD CAUSE
THOSE RESULTS TO DIFFER SIGNIFICANTLY FROM ANY FORWARD-LOOKING STATEMENTS MADE
IN THIS PROSPECTUS OR OTHERWISE MADE BY US OR ON OUR BEHALF. FOR THIS PURPOSE,
ANY STATEMENTS CONTAINED IN THIS PROSPECTUS THAT ARE NOT STATEMENTS OF
HISTORICAL FACT SHOULD BE CONSIDERED TO BE FORWARD-LOOKING STATEMENTS. WORDS
SUCH AS "MAY," "EXPECT," "BELIEVE," "ANTICIPATE," "INTEND," "COULD," "ESTIMATE,"
OR "CONTINUE" OR THE NEGATIVES OF THOSE WORDS, IDENTIFY FORWARD-LOOKING
STATEMENTS. THESE STATEMENTS APPEAR IN A NUMBER OF PLACES IN THIS PROSPECTUS AND
INCLUDE STATEMENTS AS TO OUR INTENT, BELIEF OR EXPECTATIONS. THESE
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO THE RISKS DETAILED BELOW OR ELSEWHERE
IN THIS PROSPECTUS, OR DETAILED FROM TIME TO TIME IN OUR FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION. SEE "FORWARD LOOKING STATEMENTS."
WE HAVE ONLY A LIMITED OPERATING HISTORY WITH OUR CURRENT BUSINESS MODEL.
We were incorporated in 1993, but our efforts in the Internet and
television date back only to 1998. We therefore have only a limited operating
history for you to evaluate our business. No independent market studies have
been conducted concerning the extent to which the public will access our channel
or website, or purchase our products or services. You must consider the risks,
expenses and uncertainties that an early stage company like ours faces. These
risks include our ability to:
o increase awareness of the 5th Avenue brand and to be able to build user
loyalty;
o develop and expand the content and services on our channel and website;
o attract a large audience to our channel and website;
o attract a large number of advertisers from a variety of industries;
o maintain our current and develop new strategic relationships;
o respond effectively to competitive pressures; and
o continue to develop and upgrade our programming.
If we are unsuccessful in addressing these risks, our business,
financial condition and results of operations will be materially and adversely
affected.
WE HAVE A HISTORY OF OPERATING LOSSES, ACCUMULATED DEFICITS AND LIMITED FUNDS.
We have a history of operating losses and expect to continue to incur
operating losses for the foreseeable future as we continue to invest in our core
businesses. Our current financial resources are limited and will be utilized for
execution and expansion of our business plan. Our ability to execute our
business model will depend on our ability to obtain additional financing and
achieve a profitable level of operations. There can be no assurance that such
financing will be obtained. Nor can we give any
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assurance that we will generate substantial revenues or that our business
operations will prove to be profitable. Our operations are subject to all of the
risks inherent in the establishment of a new business, particularly one in the
highly competitive Internet and television industries. Our likelihood of success
must be considered in light of our limited financial resources and the problems,
expenses, difficulties, complications and delays frequently encountered in
connection with establishing a new business, including, without limitation,
market acceptance of our services, regulatory requirements, unanticipated
expenses and competition. We don't know if our business will be successful.
WE NEED ADDITIONAL FINANCING FOR GROWTH.
We may not be able to obtain additional capital or generate sufficient
revenues to fund our operations. The growth of our business will require
investment on a continuing basis to finance capital expenditures and related
expenses for equipment, software, licenses, television carriage agreements,
website development, marketing and other expenses. Our future capital
requirements will depend upon a number of factors, many of which are not within
our control, including programming costs, capital costs, marketing rates,
subscriber growth and competitive conditions. Although we are actively pursuing
additional financing sources, we have no arrangements or commitments for
additional capital, and we may not be able to raise such capital.
WE MUST ESTABLISH AND MAINTAIN THE 5TH AVENUE CHANNEL BRAND.
We must strengthen the 5th Avenue Channel brand in order to establish
our television audience and expand and maintain Internet traffic and subscribers
to our website and its services. For us to be successful in establishing our
brand, consumers must perceive us as offering quality, cost-effective products,
services and programming. Our business could be materially adversely affected if
our marketing efforts are not productive, or if we cannot increase our brand
awareness.
OUR QUARTERLY FINANCIAL RESULTS MAY FLUCTUATE SIGNIFICANTLY.
Our quarterly operating results may fluctuate significantly in the
future as a result of a variety of factors, some of which are outside our
control. These factors include:
o the number of ongoing visitors and subscribers to our channel and
website and their use of our services;
o fees we may pay for distribution, service or content agreements and
promotional arrangements or other costs we incur as we expand our
operations;
o the timing and amount of advertising and sponsorship revenues;
o the amount and timing of capital expenditures and other costs related
to the expansion of our operations;
o the introduction of new products or services by us or our competitors;
o pricing changes in the industry;
o new government regulations that affect business on the Internet;
o general economic conditions; and
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o seasonality, price and cost factors affecting the sale of consumer
products.
Due to all of these factors, our quarterly operating results may fall
below market expectations. If this happens, the trading price of our common
stock would likely decline, perhaps significantly.
WE FACE INTENSE INTERNET COMPETITION.
The market for Internet services and products is relatively new,
intensely competitive and rapidly changing. Since the Internet's
commercialization in the early 1990's, the number of websites on the Internet
competing for users' attention has proliferated with no substantial barriers to
entry. We expect that competition will continue to intensify. We compete,
directly and indirectly, for subscribers, consumers, content and service
providers, advertisers, sponsors and acquisition candidates with the following
categories of companies:
o online financial services or financial websites targeted to consumers;
o publishers and distributors of traditional offline media, including
those targeted to financially and entrepreneurially conscious
consumers, many of which have established web use;
o public sector and non-profit websites that provide information without
advertising or commercial sponsorships;
o vendors of products and services distributed through the web and other
means, including direct sales, mail and fax messaging; and
o web search and retrieval services and other high-traffic websites.
We expect competition in our market to increase significantly as new
companies enter the market and current competitors expand their product lines
and services. Many of these potential competitors are likely to enjoy
substantial competitive advantages, including:
o greater financial, technical and marketing resources that can be
devoted to the development, promotion and sale of their services;
o relatively easy access to capital;
o longer operating histories;
o greater name recognition;
o larger subscriber bases; and
o association or ownership by large entertainment, news or information
corporations.
To be competitive, we must use leading technologies, enhance our
services and content, develop new technologies and respond to technological
advances and emerging industry standards on a timely and cost-effective basis.
We believe that there are many websites that provide much of the same
substantive information that we provide on our website and others could easily
develop such capabilities. There can be no assurances that we will be successful
in using new technologies effectively or adapting our website to user
requirements or emerging industry standards. Any pricing pressures, reduced
margins or loss of
6
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market share resulting from our failure to compete effectively would materially
adversely affect our business, financial condition and operating results.
WE FACE INTENSE TELEVISION COMPETITION.
There are a number of television channels already on the market that
offer financial information to their viewers. These channels are backed by large
organizations that have more resources than we do. We compete, directly and
indirectly with these channels for viewers, consumers, content and service
providers, advertisers and sponsors. We also expect competition to develop in
the broadband delivery of content. Many of these potential competitors are
likely to enjoy substantial competitive advantages, including:
o greater financial, technical and marketing resources that can be
devoted to the development, promotion and sale of their services;
o relatively easy access to capital;
o longer operating histories;
o greater name recognition;
o larger subscriber bases; and
o association or ownership by large entertainment, news or information
corporations.
To be competitive, we must use leading technologies, enhance our
services and content on a timely and cost-effective basis. There can be no
assurances that we will be successful in using new technologies effectively or
adapting our television channel to user requirements or emerging industry
standards. Any pricing pressures, reduced margins or loss of market share
resulting from our failure to compete effectively could materially adversely
affect our business, financial condition and operating results.
DEPENDENCE ON THE ABILITY TO ATTRACT INTERNET ADVERTISERS.
We expect to generate revenues from the sale of advertising on our
website; however, we have not earned any cash advertising revenues to date. We
may not be able to generate significant advertising revenues in the future. Our
ability to generate advertising revenue will depend on, among other factors:
o the amount of traffic on, and the number of subscribers to, our
website; and
o our ability to achieve and demonstrate user and member demographic
characteristics that are attractive to advertisers.
Advertisers will want accurate measures of demographics of our
subscriber base. We will need to demonstrate to advertisers the demographics of
our users so that we can set advertising rates. We are unable to predict our
revenues from advertising until we have data on our subscribers and their use of
our website.
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DEPENDENCE ON THE ABILITY TO ATTRACT TELEVISION ADVERTISERS.
The success of our television enterprise is dependant upon the ability
to attract advertisers. The ability to attract advertisers is dependant upon
having a sufficient number of viewers. We currently have one carriage agreement
for approximately 2.5 million households, but cannot guarantee the number of
viewers that will result from this agreement. Further, there can be no
assurances that we will be successful in negotiating and executing additional
carriage contracts or distribution agreements for the channel. We currently do
not have enough distribution to generate sufficient advertising revenues to pay
for the operating costs of the channel. The inability to attract additional
viewers would materially and adversely affect our ability to generate
advertising revenues.
WE MAY NOT BE ABLE TO RECOGNIZE RECIPROCAL ADVERTISING AGREEMENTS AS REVENUE.
We expect to derive a portion of our revenues from reciprocal
advertising arrangements under which we will exchange advertising space on our
channel and website for advertising space on other television channels and
websites. These will not generate cash flow and there can be no assurances that
we will be able to recognize these arrangements as revenue.
REVENUES DERIVED FROM STOCK POSITIONS MAY NOT GENERATE CASH FLOWS.
We expect to derive a portion of our revenues from strategic, joint
venture or partnership agreements under which we will receive stock in lieu of
cash. These agreements do not generate cash flow and there is no guarantee that
the stock we receive will have value or can be liquidated for cash by us in the
time frame we would like.
OUR BUSINESS AND GROWTH WILL SUFFER IF WE ARE UNABLE TO HIRE AND RETAIN KEY
PERSONNEL THAT ARE IN HIGH DEMAND.
We depend on the services of our senior management. Our success is
largely dependent on our ability to hire highly qualified managerial, sales and
television production personnel. These individuals are in high demand and we may
not be able to attract the staff we need. In addition, the loss of the services
of any of our senior management could have a material adverse effect on our
business, financial condition and operating results.
OUR JOINT VENTURES, ACQUISITIONS AND ALLIANCES MAY STRAIN OUR MANAGERIAL,
OPERATIONAL AND FINANCIAL RESOURCES AND MAY BE DISRUPTIVE TO OUR BUSINESS.
We have established alliances or joint ventures with complementary
businesses for the utilization of technologies, services and products and intend
to continue these efforts in the future; however, we may be unable to integrate
or implement these joint ventures or alliances effectively. Difficulties in this
process could disrupt our ongoing business, distract our management and
employees, increase our expenses and otherwise adversely affect our business.
FINANCING FOR FUTURE JOINT VENTURES, ACQUISITIONS OR ALLIANCES MAY NOT BE
AVAILABLE.
We do not know if we will be able to identify any future joint
ventures, acquisitions or alliances or if we will be able to successfully
finance these transactions. To finance these transactions, it may be necessary
for us to raise additional funds through public or private financings, which may
not be available on acceptable terms, if at all. A failure to identify or
finance future transactions may impair our growth.
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WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY AGAINST OUR COMPETITORS.
There are many companies that offer websites that provide financial
services. Competition for visitors, advertisers and electronic commerce partners
is intense and is expected to increase significantly in the future.
Increased competition could result in:
o lower advertising rates;
o price reductions and lower profit margins;
o loss of visitors;
o reduced page views; or
o loss of market share.
In addition, our competitors may develop content that is better than
ours or that achieves greater market acceptance. It is also possible that new
competitors may emerge and acquire significant market share. Any one of these
factors could materially and adversely affect our business, financial condition
and operating results.
WE MAY HAVE A FURTHER PAYMENT OBLIGATION TO THE FEDERAL COMMUNICATIONS
COMMISSION (THE "FCC") AS A RESULT OF OUR AUCTION DEFAULT IN HICKORY, NC.
We participated in the FCC's auction of wireless cable authorizations
which concluded in March, 1996. We were the winning bidder in three markets:
Hickory, North Carolina; Wausau, Wisconsin; and Stevens Point, Wisconsin. We
made the required down payments for the two Wisconsin markets but defaulted on
the second 10% down payment for the Hickory market. As a result of our default,
on May 23, 1997, the FCC dismissed our Hickory application and assessed an
initial default payment of $55,712, three percent of our bid of $1,857,060,
which was deducted from the $185,706 we had deposited with the FCC for the
Hickory market. The FCC also announced that in accordance with its auction rules
we would be liable for the difference between our Hickory bid and the amount of
the winning bid when the authorization is reauctioned, if the amount of the
winning bid in the reauction is less than our bid. The FCC has not yet scheduled
the reauction of the Hickory market, and there is no way of knowing the amount
that will be obtained in the reauction, or our potential liability.
WE MAY FORFEIT OUR DOWN PAYMENTS TO THE FCC FOR THE TWO WISCONSIN MARKETS, AND
DEFAULT IN THOSE MARKETS AS WELL, AS A RESULT OF THE REAUCTION OF THE HICKORY,
NORTH CAROLINA MARKET.
Following the FCC's wireless cable authorization auction in 1996, we
made down payments totaling $237,862 on our winning bids in Wausau and Stevens
Point, Wisconsin. As indicated above, however, we defaulted on our bid in
Hickory, North Carolina and under the FCC's auction rules, default payments are
to be deducted from any deposits made by a party in default. This means that our
default payment for Hickory can be deducted by the FCC from the funds we have
deposited for Wausau and Stevens Point. We have a balance of $129,994 still on
deposit for Hickory, but if the amount of our bid exceeds the amount of the
winning bid upon the reauction of Hickory by more than that amount, as it may,
our deposits for the two Wisconsin markets may be applied to pay the Hickory
default. This would have the effect of forcing us into default in those markets
also. On July 24, 1998, the FCC granted us
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licenses in Wausau and Stevens Point, conditioned on us making additional
installment payments for those markets. In April, 1999, when the first
installment payments were due, we requested a waiver to enable us to make the
required installment payments for the two Wisconsin markets, without placing the
additional payments in jeopardy because of the Hickory default. The FCC has not
yet ruled on our waiver request, and we are not able to predict the outcome.
WE FACE POTENTIAL LIABILITY CLAIMS FROM THE OFFERING OF FINANCIAL INFORMATION,
PRODUCTS AND SERVICES.
We intend to offer financial products, information and services on our
website. We also intend to syndicate content to other websites and broadcast
content on our television channel. Although a substantial portion of this
content is expected to be provided by others, we face the risk that claims may
be made against us for losses or damages, perceived or real, which could
adversely affect our business.
Although we carry general liability insurance, our insurance may not
cover potential claims of this type or may not be adequate to cover all costs
incurred in defense of potential claims or to indemnify us for all liability
that may be imposed. Any costs or imposition of liability that is not covered by
insurance or in excess of insurance coverage could have a material adverse
effect on our business, financial condition and operating results.
COMPUTER VIRUSES MAY CAUSE OUR SYSTEMS TO INCUR DELAYS OR INTERRUPTIONS AND MAY
ADVERSELY AFFECT OUR BUSINESS.
Computer viruses may cause our systems to incur delays or other service
interruptions. In addition, the inadvertent transmission of computer viruses
could expose us to a material risk of loss or litigation and possible liability.
Moreover, if a computer virus affecting our system is highly publicized, our
reputation could be materially damaged and our visitor traffic may decrease.
WE WILL HAVE TO PROTECT AGAINST INTERNET SECURITY RISKS.
Our activities may involve the storage and transmission of proprietary
information such as credit card numbers. Security breaches in our system could
expose us to a risk of loss, litigation and possible liability. Our security
measures may not prevent security breaches and the failure to prevent such
security breaches may have a material adverse effect on our business, financial
condition and operating results.
WE DEPEND ON OUR CONTENT PROVIDERS.
We will rely on independent content providers for much of the
information and content provided on our website and television channel. We have
entered into relationships with many companies to obtain content for our website
and television channel. We intend to enter into additional relationships in the
future. Our success depends significantly on our ability to maintain our
existing relationships with these content providers and to build new or
replacement relationships with other content providers. Some of our agreements
with content providers are short-term and non-exclusive. Providers could also
increase license fees for their services. Due to the non-exclusivity of certain
of our agreements, the providers could offer certain content that is similar or
the same as ours to our competitors. To the extent that content providers,
including but not limited to our current providers, offer information to users
or our competitors at a lower cost, our business, financial condition and
operating results could be materially adversely affected.
In addition, we depend on the ability of our content providers to
deliver high quality content from reliable sources and to continually upgrade
their content in response to subscriber and consumer demand
10
<PAGE>
and evolving industry trends. The failure by these parties to develop and
maintain high quality, attractive content could result in subscriber and
consumer dissatisfaction, could inhibit our ability to add subscribers and
consumers and could dilute the 5th Avenue Channel brand name, each of which
could have a material adverse effect on our business, financial condition and
operating results.
WE MAY EXPERIENCE SYSTEM FAILURES.
We rely on third parties to provide portions of our network
infrastructure such as hosting and broadband delivery. Any significant
interruptions in our services or an increase in response time could result in a
loss of potential or existing subscribers, strategic partners, advertisers and
sponsors and, if sustained or repeated, could reduce the attractiveness of our
website to them. Although we maintain insurance, we cannot guarantee that our
insurance will be adequate to compensate for all losses that may occur or to
provide for costs associated with business interruptions.
We must be able to operate our website 24 hours a day, seven days a
week, without interruption. To operate without interruption, we and our service
providers must guard against:
o damage from fire, power loss and other natural disasters;
o communications failures;
o software and hardware errors, failures or crashes;
o security breaches, computer viruses and similar disruptive
problems; and
o other potential interruptions.
Failure to adequately address any of these issues could materially
adversely affect our business.
WE COULD BE SUBJECT TO SALES OR OTHER TAXES.
The tax treatment of the Internet and e-commerce is currently
unsettled. A number of proposals have been made at the federal, state and local
levels and by certain foreign governments that could result in taxes being
imposed on the sale of goods and services and certain other activities through
the Internet. A recently enacted law places a temporary moratorium on certain
types of taxation on Internet commerce. We cannot predict the effect of current
attempts at taxing or regulating commerce over the Internet. Any legislation
that imposes a tax on Internet Commerce could have a material adverse effect on
our business, financial condition and operating results.
OUR STOCK PRICE MAY BE VOLATILE.
The stock market experiences volatility that affects the market prices
of equity securities of technology companies generally and Internet-related
companies in particular. This volatility includes rapid and significant
increases in the trading prices of certain Internet companies following public
offerings to levels that do not bear any reasonable relationship to the
operating performance of such companies. These fluctuations may materially
affect the trading price of our common stock. In the past, following periods of
volatility in the market price for a company's securities, shareholders have
often instituted securities class action litigation. Litigation could result in
substantial costs and the diversion of management's attention and resources,
which could have a material adverse effect on our business, financial condition
and results of operations.
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WE MAY BE SUBJECT TO CLAIMS BASED ON PRODUCTS AND SERVICE SOLD ON OUR CHANNEL OR
WEBSITE.
We have entered into arrangements to offer third-party products and
services on our channel and website under which we are entitled to receive a
share of revenues generated from these transactions. These arrangements may
subject us to additional claims including product liability or personal injury
from the products and services, even if we do not ourselves provide the products
or services. These claims may require us to incur significant expenses in their
defense or satisfaction. While our agreements with these parties often provide
that we will be indemnified against such liabilities, such indemnification may
not be adequate.
Although we carry general liability insurance, our insurance may not
cover all potential claims to which we are exposed or may not be adequate to
indemnify us for all liability that may be imposed. Any imposition of liability
that is not covered by insurance or is in excess of insurance coverage could
have a material adverse effect on our business, financial condition and results
of operations.
GOVERNMENT REGULATION MAY AFFECT OUR BUSINESS.
Our wireless cable business in Wisconsin is subject to regulation by
the FCC and other regulatory agencies. Our Costa Rican operations are subject to
regulation under Costa Rican law. Due to the regulated nature of the cable
industry, our operations may be adversely impacted by the adoption of new, or
changes to, existing laws or regulations or the interpretations thereof.
WE FACE INTENSE COMPETITION IN THE WIRELESS CABLE TV INDUSTRIES.
The pay television industry is highly competitive. Legislative,
regulatory and technological developments may result in additional and
significant new competition, including competition from local telephone
companies. Wireless cable television systems face or may face competition from
several sources, such as traditional hard-wire cable companies, satellite
receivers, direct broadcast satellites and other alternative methods of
distributing and receiving television transmissions. Further, premium movie
services offered by cable television systems have encountered significant
competition from the home video cassette recorder industry. In areas where a
number of local off-air VHF/UHF broadcast signals can be received without the
benefit of cable television, cable television systems have also experienced
competition from the availability of broadcast signals generally and have found
market penetration more difficult. Further, several actual and potential
competitors have greater financial, marketing, and other resources.
WE FACE RISKS IN OUR INTERNATIONAL OPERATIONS.
A significant percentage of our revenue is derived from our
wholly-owned subsidiary in Costa Rica. This revenue is subject to the risks
normally associated with international operations including, without limitation,
difficulties in staffing and managing foreign operations, losses from currency
conversion and fluctuating exchange rates, limitations (including taxes) on the
repatriation of earnings, slower and more difficult accounts receivable
collection, greater difficulty and expense in administering business abroad,
complications in complying with foreign laws and changes in regulatory
requirements, and cultural differences in the conduct of business. These factors
may adversely affect our business, financial condition and operating results.
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WE DEPEND ON PROGRAM AGREEMENTS.
We are dependent on fixed-term contracts with various program suppliers
in connection with our distribution of television programming in Costa Rica and
Wisconsin. If such contracts are canceled or not renewed, we will have to seek
program material from other sources. There can be no assurance that other
program material will be available to us on acceptable terms or at all or, if
available, that such material will be acceptable to our subscribers.
OUR PRESENT MANAGEMENT HAS THE VOTING POWER TO CONTROL OUR AFFAIRS.
As of the date of this prospectus, our officers and directors own
approximately 53.28% of our outstanding common stock. Consequently, these
individuals are in a position to elect a majority of our directors and to
exercise control over our affairs generally.
FUTURE SALES OF COMMON STOCK COULD DEPRESS THE PRICE OF OUR COMMON STOCK.
Future sales of substantial amounts of common stock pursuant to Rule
144 under the Securities Act of 1933 or otherwise by certain shareholders could
have a material adverse impact on the market price for the common stock at the
time. There are presently 8,811,438 outstanding shares of our common stock
beneficially held by management and other shareholders which are deemed
"restricted securities" as defined by Rule 144 under the Securities Act. Under
certain circumstances, these shares may be sold without registration pursuant to
the provisions of Rule 144. In general, under Rule 144, a person (or persons
whose shares are aggregated) who has satisfied a one-year holding period may,
under certain circumstances, sell within any three-month period a number of
restricted securities which does not exceed the greater of one (1%) percent of
the shares outstanding or the average weekly trading volume during the four
calendar weeks preceding the notice of sale required by Rule 144. In addition,
Rule 144 permits, under certain circumstances, the sale of restricted securities
without any quantity limitations by a person who is not an affiliate of ours and
has satisfied a two-year holding period. Any sales of shares by shareholders
pursuant to Rule 144 may have a depressive effect on the price of our common
stock.
AUTHORIZATION OF PREFERRED STOCK COULD AFFECT THE VOTING POWER OF HOLDERS OF OUR
COMMON STOCK.
Our articles of incorporation authorizes us to issue 5,000,000 shares
of "blank check" preferred stock with such designations, rights and preferences
as may be determined from time to time by our Board of Directors. Accordingly,
our Board of Directors is empowered, without stockholder approval (but subject
to applicable government regulatory restrictions), to issue preferred stock with
dividend, liquidation, conversion, voting or other rights which could adversely
affect the voting power or other rights of the holders of our common stock. In
the event of issuance, the preferred stock could be used, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
our control.
OUR CONTINUED LISTING WITH NASDAQ IS NOT ASSURED.
While our common stock and warrants are listed on the Nasdaq SmallCap
Market, there can be no assurance that such listing will continue. If our common
stock were delisted, the shares might be subject to the penny stock rules
promulgated under the Securities Exchange Act of 1934. The SEC has adopted
regulations which generally define a "penny stock" to be any equity security
that has a market price of less than $5.00 per share, subject to certain
exceptions. The shares offered hereby may be deemed to be "penny stocks" and
thus become subject to rules that impose additional sales practice requirements
on broker/dealers who sell such securities to persons other than established
customers and accredited investors. Consequently, the "penny stock" rules may
restrict the ability of broker/dealers to
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sell our securities and may affect the ability of purchasers in this offering to
sell our securities in a secondary market.
The Nasdaq Stock Market, Inc. has adopted certain changes to the
maintenance criteria for listing eligibility on the Nasdaq SmallCap market. The
new maintenance standards require at least $2,000,000 in net tangible assets
(total assets less total liabilities and goodwill) or $500,000 in net income in
two of the last three years, a public float of at least 500,000 shares, a
$1,000,000 market value of the public float, a minimum bid price of $1.00 per
share, at least two market makers, at least 300 shareholders and at least two
outside directors. The SEC approved these criteria, and a compliance period for
the new maintenance criteria is being implemented. If we become unable to meet
the listing criteria of the Nasdaq SmallCap market and become delisted, trading
in our common stock would be conducted in the over-the-counter market. In such
an event, the market price of our common stock may be adversely impacted and an
investor may find it difficult to dispose of, or to obtain accurate quotations
as to the market value of our common stock.
OUR STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE AND COULD DROP UNEXPECTEDLY.
The average daily trading volume for our common stock during the 90-day
period ending December 31, 1999 was 48,750. As a result of this and other
factors, the price at which our common stock trades is highly volatile and may
fluctuate substantially.
In addition, the stock market has from time to time experienced
significant price and volume fluctuations that have affected the market prices
for the securities of technology companies, particularly Internet companies. As
a result, investors in our common stock may experience a decrease in the value
of their common stock regardless of our operating performance or prospects.
PRICE RANGE OF COMMON STOCK
Our common stock is traded on The Nasdaq SmallCap Market under the
symbol "FAVE."
The following table sets forth the range of high and low sale prices
for our common stock for each quarterly period indicated, as reported by The
Nasdaq Small Cap Market. Such quotations reflect inter-dealer prices without
retail markup, markdown or commissions, and may not necessarily represent actual
transactions:
COMMON STOCK
QUARTER ENDED HIGH LOW
------------- ---- ---
December 31, 1999 $ 6.438 $ 2.250
September 30, 1999 7.437 2.375
June 30, 1999 11.500 3.500
March 31, 1999 12.750 7.875
December 31, 1998 $ 17.625 $ 1.375
September 30, 1998 5.880 2.000
June 30, 1998 6.938 2.250
March 31, 1998 2.625 1.750
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COMMON STOCK
QUARTER ENDED HIGH LOW
------------- ---- ---
December 31, 1997 $ 3.812 $ 1.500
September 30, 1997 3.937 .375
June 30, 1997 1.281 .156
March 31, 1997 4.375 .968
As of December 31, 1999, the approximate number of record holders of
our common stock was 2,286.
USE OF PROCEEDS
We will not receive any proceeds from the sale of securities being
offered. However, we may receive approximately $13,165,000 in proceeds from the
exercise of warrants. Such proceeds will be used for working capital and other
corporate purposes.
We expect to incur expenses of approximately $55,000 in connection with
the registration of the shares.
DIVIDEND POLICY
We have not declared any dividends on our common stock in the past two
fiscal years and do not contemplate paying cash dividends for the foreseeable
future, but instead will retain any earnings to fund our growth. Any decision to
pay cash dividends on our common stock in the future will depend on our ability
to generate earnings, our need for capital, our overall financial condition and
such other factors as our Board of Directors deems relevant.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is an analysis of our results of operations and our
liquidity and capital resources. To the extent that such analysis contains
statements that are not of a historical nature, such statements are
forward-looking statements, which involve risks and uncertainties. See "Forward
Looking Statements." The following should be read in conjunction with our
Consolidated Financial Statements and the related Notes included elsewhere in
this Prospectus.
During 1999, we operated in three segments, wireless cable television
services, product sales, and Internet/television. In 1998 and 1997, we only
operated wireless cable television operations in Costa Rica and Wisconsin.
Corporate overhead expenses are exclusively included in the internet and
television segment for 1999 due to the shift in our business model from focusing
on wireless cable to the Internet and television production.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AS COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998 (IN THOUSANDS)
NINE MONTHS NINE MONTHS %
ENDED ENDED INCREASE
SEPTEMBER SEPTEMBER (DECREASE)
30, 1999 30, 1998
------------ ----------- ----------
REVENUE
Product sales $ 1,446 $ - -
Wireless cable:
Costa Rica 974 795 23%
Wisconsin 252 260 (3%)
Corporate, Internet and TV 251 - -
----------- -----------
Total $ 2,923 $ 1,055 177%
=========== ===========
DIRECT COSTS
Product sales $ 1,125 $ - -
Wireless cable:
Costa Rica 145 98 48%
Wisconsin 57 64 (11%)
Corporate, Internet and TV 220 - -
----------- -----------
Total $ 1,547 $ 162 855%
=========== ===========
OPERATING EXPENSES
SELLING, GENERAL & ADMINISTRATIVE
Product sales $ 762 $ - -
Wireless cable:
Costa Rica 466 526 (11%)
-----------
Wisconsin 210 182 15%
Corporate, Internet and TV 1,727 652 165%
----------- -----------
Sub total 3,165 1,360 133%
----------- -----------
WEBSITE & PRODUCT DESIGN
Corporate, Internet and TV 359 430 (17%)
----------- -----------
DEPRECIATION AND AMORTIZATION
Product sales 37 -
Wireless cable:
Costa Rica 391 331 18%
Wisconsin 154 107 43%
Corporate, Internet and TV 261 14 1,764%
----------- -----------
Sub total 843 452 87%
----------- -----------
Total $ 4,367 $ 2,242 95%
=========== ===========
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NINE MONTHS NINE MONTHS %
ENDED ENDED INCREASE
SEPTEMBER SEPTEMBER (DECREASE)
30, 1999 30, 1998
------------ ----------- ----------
INTEREST EXPENSE
ACCRETION OF DEBENTURE DISCOUNT
Corporate, Internet and TV $ 437 $ 176 148%
----------- -----------
OTHER INTEREST EXPENSE
Corporate, Internet and TV 327 206 59%
Wisconsin - 2 (100%)
----------- -----------
Sub total 327 208 57%
----------- -----------
Total $ 764 $ 384 99%
=========== ===========
NET LOSS
Product sales $ (478) $ - -
Wireless cable:
Costa Rica (27) (158) (83%)
Wisconsin (169) (94) 80%
Corporate, Internet and TV (3,080) (1,478) 108%
------------ ------------
Total $ (3,754) $ (1,730) 117%
============ ============
REVENUES
We had revenues of $2,923,000 for the nine month period ended September
30, 1999 compared to $1,055,000 during the same period in 1998, an increase of
$1,868,000 or 177%. Approximately $1,446,000 of this increase was derived from
product sales primarily to home shopping channels and sales of our teen cosmetic
line. Wireless cable television services accounted for $171,000 of the increase
in 1999 due to an increased subscriber base in Costa Rica despite a reduction in
revenues of $8,000 in Wisconsin due to a decrease in the subscriber base.
Corporate, Internet and television revenue accounted for $251,000 of the
increase due primarily to advertising revenue associated with the KeyTrade
Co-Marketing Agreement, which consisted of non-cash consideration.
DIRECT COSTS
Direct costs for the nine month period ended September 30, 1999
increased $1,385,000 to $1,547,000 from $162,000 during the same period in 1998,
an increase of 855%. This increase was due primarily to $1,125,000 in costs
incurred from adding the product sales division. Direct costs also increased by
$220,000 due to advertising costs associated with the Key Trade Co-Marketing
Agreement. Direct costs for the wireless cable operations increased $47,000 in
Costa Rica due to our offering more channels to subscribers without an increase
in subscription fees.
OPERATING EXPENSES
Operating expenses during the nine month period ended September 30,
1999 increased by $2,125,000, or 95% due primarily to an increase of $1,805,000
in selling, general and administrative expenses associated with an increase in
salary and related expenses of approximately $281,000 and contracted services of
$301,000 as we added personnel for the development and launch of the website and
television channel. In addition, we incurred legal expenses of approximately
$148,000 during the nine month period ended September 30, 1999 compared to
$74,000 for the same period in 1998.
We incurred $359,000 of website and product design costs during the
nine month period ended September 30, 1999 compared to $430,000 for the same
period in 1998, a 17% decrease. These costs were greater during the 1998 period
as we incurred greater costs in the initial development of the website.
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Depreciation and amortization costs increased to $843,000 for the nine
month period ended September 30, 1999 compared to $452,000, an increase of
$391,000 or 87%. This increase was due to the amortization of goodwill resulting
from the acquisitions of Fifth Avenue Channel, Inc. and IBC, as well as the
addition of fixed assets including furniture, office equipment and television
rebroadcast and receiving equipment.
INTEREST EXPENSE
Interest costs increased to $764,000 during the nine month period ended
September 30, 1999 compared to $384,000 for the same period in 1998, an increase
of $380,000 or 99%. This increase is due primarily to an increase of $261,000
debenture discount accretion associated with the issuance of convertible
debentures in May and November of 1998.
The remaining $119,000 increase is due to an increase of $70,000 in
interest for the 12% convertible debentures, an increase of $73,000 in interest
on loans from our President, and an increase of $19,000 in interest on a note
issued in conjunction with the acquisition of IBC in 1999.
NET LOSS
Net losses for the nine month period ended September 30, 1999 increased
to $3,754,000 compared to $1,730,000 for the same period in 1998, an increase of
$2,024,000 or 177% due primarily to an increase of $1,602,000 in losses
associated with primarily operations, the development of our Internet and
television operations.
YEAR ENDED DECEMBER 31, 1998 AS COMPARED TO YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
YEAR ENDED YEAR ENDED %
DECEMBER 31, DECEMBER 31, INCREASE
1998 1997 DECREASE
------------ ------------ --------
REVENUE
Wireless cable:
Costa Rica $ 1,093 $ 700 56%
Wisconsin 360 385 (6%)
------------ -------------
Total $ 1,453 $ 1,085 34%
============ =============
DIRECT COSTS $ 235 $ 171 37%
============ =============
OPERATING EXPENSES
NON RECURRING ITEMS
Corporate, Internet and TV $ - $ 1,236 (100%)
PROVISION FOR ASSET IMPAIRMENT
Wisconsin 350 - -
WEBSITE AND PRODUCT DESIGN
Corporate, Internet and TV 697 - -
OTHER OPERATING EXPENSES 2,734 2,201 24%
------------ -------------
Total $ 3,781 $ 3,437 10%
============ =============
INTEREST EXPENSE $ 737 $ 545 35%
============ =============
NET LOSS $ (3,298) $ (3,062) 8%
============= =============
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REVENUES
Revenues increased to $1,453,000 in 1998 compared to $1,085,000 in
1997, an increase of $368,000 or 34%. This increase was due to an increase of
13% in our Costa Rican subscriber base. Revenues from our LaCrosse operations
declined 6% in 1998 to $360,000 from $385,000 in 1997 due to a decline in the
subscriber base. The Costa Rican system generated approximately 75% of 1998
revenues and 65% of 1997 revenues and the LaCrosse system generated
approximately 25% of 1998 revenues and 35% of 1997 revenues.
DIRECT COSTS
Direct costs for 1998 increased to $235,000 compared to $171,000 in
1997, an increase of 37%, due primarily to costs of approximately $58,000
associated with servicing the increased Costa Rican subscriber base.
OPERATING EXPENSES
During 1998, we had operating expenses of approximately $3,781,000
compared to $3,437,000 in 1997, an increase of $344,000 or 10%. This increase is
due to an increase in variable costs associated with providing subscriber
services to the expanded Costa Rican system. Operating expenses for 1998
included a $350,000 provision for asset impairment related to the undeveloped
Wisconsin licenses obtained as a result of the FCC auction in 1996. See Note 5
of Notes to Consolidated Financial Statements. Development costs for website
design, software development, website content, research, and product development
were approximately $697,000 in 1998. Operating expenses for 1997 include
$1,236,000 in nonrecurring charges of $988,000 in investment banking and
consulting expenses associated with the issuance of 200,000 of our common stock
for consulting services, $128,000 in fees associated with a warrant issued for
investment banking services, and a $120,000 deposit made to the FCC which we
expensed in 1997 when we defaulted on the Hickory, North Carolina license.
INTEREST EXPENSE
Interest expense for 1998 was $737,000 compared to $545,000 for 1997, a
$192,000 or 35% increase. This increase was due primarily to approximately
$448,000 of debenture discount amortization related to the issuance of the 12%
convertible debentures in the principal amount of $595,000 in May 1998 and
$500,000 in November 1998. This increase was partially offset by a non-recurring
charge of $188,750 in 1997 related to the debt restructuring agreement with our
President and $266,000 of interest and conversion inducement costs related to
the $2,366,000 debenture payable to our President. No interest was accrued on
such debenture in 1998 because of the agreement by our President in November
1997 to convert the debenture to common stock on May 15, 1998. The conversion of
the debenture was ultimately delayed until 1999, when we increased the number of
authorized shares of our common stock to 50,000,000. Prior to the increase we
did not have sufficient authorized but unissued shares to cover all outstanding
warrants, options and conversion agreements to issue common stock.
LIQUIDITY AND CAPITAL RESOURCES
To date we have funded our growth and operations through (i) the sale
of our common stock, (ii) the sale of debentures, and (iii) loans, primarily
from our President, Mr. Rosen. Operating deficits will continue until such time
as substantial revenues are generated from our channel and website. Although we
believe we have enough cash to fund operations for the next six months, we must
raise additional capital to continue to execute our business plan. We are
currently developing plans to raise additional
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capital, which may include the sale of our common stock, however, there can be
no assurance that we will be able to raise such funds on favorable terms, if at
all.
Cash used in operating activities was $1,663,000 for the nine months
ended September 30, 1999 and $607,000 for the same period in 1998. The cash used
during these periods was primarily attributable to net losses of $3,754,000 for
1999 and $1,730,000 for the same period in 1998. These losses were offset in
part by depreciation and amortization. We also had an increase in accounts
payable and accrued liabilities of $846,000 for the nine months ended September
30, 1999 compared to $322,000 for the same period in 1998.
Cash flows from investing activities included investments in property
and equipment of $594,000 and deferred television production costs of $118,000
during the nine month period ended September 30, 1999 due primarily to the
development of our channel and website compared to $130,000 for the same period
in 1998.
Cash provided by financing activities was $2,190,000 for the nine-month
period ended September 30, 1999 compared to $774,000 for the same period in
1998. The cash provided from financing activities for the first nine months of
1999 came primarily from loans in the aggregate principal amount of
approximately $1,804,484 from Mr. Rosen compared to $206,600 for the same period
in 1998. Since 1996, Mr. Rosen has made loans to us on an ongoing basis. As of
September 30, 1999, the aggregate balance on these loans was approximately
$2,928,000 including accrued interest of $194,000 consisting of aggregate
principal amounts of $79,000 at 18% interest, $300,000 at 10% interest and
$2,355,000 at 8% interest. In November 1999, we used $708,000 of proceeds
received from the sale of our common stock to fully repay the 18% and 10% loans,
and applied $329,000 to the balance on the 8% loan. The remaining balance of
approximately $2,026,000 payable to Mr. Rosen plus any accrued interest is due
on demand. If Mr. Rosen seeks full payment on this note, we would have to seek
additional funding. No assurances can be given that we will be able to obtain
such funding on terms favorable to us, if at all.
During the nine month period ended September 30, 1999, Mr. Rosen
converted the $2,366,000 convertible debenture he obtained in connection with
the debt restructuring agreement into 4,732,000 shares of our common stock. As
part of the consideration for early conversion of the debenture, Mr. Rosen
agreed to forego all interest on the debenture from December 31, 1997.
Between September 30, 1999 and December 31, 1999, we received
$4,612,000 in proceeds from the sale of our common stock. We used $708,000 of
these funds to repay a portion of the loans due to Mr. Rosen and approximately
$321,000 to fully repay the balance of the note issued in connection with the
purchase of IBC. The balance of the proceeds has been, and is being used to fund
our operations. As of December 31, 1999, we had approximately $1,800,000 in cash
to fund our operations.
In December 1999, the convertible debentures in the principal amount of
$595,000 were converted into 297,500 shares of our common stock, and $70,117 of
accrued interest thereon was converted into 35,059 shares of our common stock.
In addition, the convertible debenture in the principal amount of $500,000 was
converted into 200,000 shares of our common stock, and $55,000 of accrued
interest thereon was converted into 22,000 shares of our common stock.
We currently do not have any material commitments for capital
expenditures.
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INFLATION AND FOREIGN CURRENCY FLUCTUATION
During 1997 and 1998, Costa Rica experienced a decline in the value of
the Colon relative to the U.S. dollar of approximately 1% per month. The
government of Costa Rica mandates minimum salary increases on July 1 and January
1 of each year. We have been able to increase prices to cover the wage increases
and the effects of the currency decline in Costa Rica and believe that we will
be able to continue to do so without significant adverse effect on our
subscriber base.
Some providers of the programming that we rebroadcast in LaCrosse
increase the rates charged per subscriber when the contracts are renewed. To
date these increases have not been significant and, as a low cost provider of
alternative cable television, we believe we have the ability to increase our
rates to pass the additional programming costs onto our subscribers.
RECENT ACCOUNTING PRONOUNCEMENTS
We do not expect SFAS 130, which establishes standards for reporting
and displaying comprehensive income, its components and accumulated balances, to
have any effect on our financial statements. SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," establishes standards for
reporting information about operating segments in annual financial statements
and requires reporting of selected information about operating segments in
interim financial reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geographic areas and major
customers. We have adopted the provisions of SFAS No. 131 for the year ended
December 31, 1998 as required.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15,
2000. A company may also implement the provisions of SFAS No. 133 as of the
beginning of any fiscal quarter commencing June 16, 1998 and thereafter. SFAS
No. 133 cannot be applied retroactively. SFAS No. 133 must be applied to (a)
derivative instruments and (b) certain derivative instruments embedded in hybrid
contracts that were issued, acquired, or substantively modified after December
31, 1997 (and, at the Company's election, before January 1, 1998). We have not
entered into derivatives contracts to hedge existing risks or for speculative
purposes. Accordingly, we do not expect the adoption of the new standard to
affect our financial statements.
In March 1998, the Accounting Standards Executive Committee issued
Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 requires all costs
related to the development of internal use software other than those incurred
during the application development stage to be expensed as incurred. Costs
incurred during the application development stage are required to be capitalized
and amortized over the estimated useful life of the software. SOP 98-1 was
adopted by the Company on January 1, 1999 and did not have a material effect on
the Company's financial position or results of operations.
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BUSINESS
GENERAL
We were organized as a Florida corporation on May 7, 1993 under the
name Tele Consulting Corp. On February 14, 1994, we changed our name to Tel-Com
Wireless Cable TV Corporation and on March 17, 1999, we changed our name to 5th
Avenue Channel Corp. Our principal executive offices are located at 3957 N.E.
163rd Street, North Miami Beach, Florida 33160, and our telephone number is
(305) 947-3010.
We are a media company that seeks to utilize the convergence of the
Internet and television to provide financial information and products and
services to our clientele.
We operate a website, 5thAvenueChannel.com, and are developing the 5th
Avenue Financial Television Network, both of which will contain information
provided by Zacks Investment Research, Inc. and others. We also plan to
distribute content through our new NetVideoFinance division, which will feature
interviews from analysts, brokers and others. A component of our business plan
is syndicating our content and products to other websites on the Internet. Ivana
Trump is under a long term agreement with us and will be the host for certain
financially-oriented television and Internet programming. We also own wireless
cable television systems in Wisconsin and Costa Rica and operate 5th Avenue
Channel Retail, Inc., which markets products and services to other websites,
home shopping channels and retail chains.
TELEVISION OPERATIONS
We have commenced production of programming for our 5th Avenue
Financial Television Network. The programming is expected to provide current
financial information about the stock market and initial public offerings,
useful personal financial tools, and interviews with analysts and others about
growing companies. Revenue streams are expected to be derived from sponsorships,
advertising and the sale of financial products promoted on the channel. We have
signed our first cable carriage agreement with Comcast, one of the largest cable
operators in the United States. The channel is expected to launch with two hours
of programming per day, from 10:00 A.M. to 12:00 noon, to approximately 2.5
million homes in the New York, Baltimore and Philadelphia designated marketing
areas. We expect to be able to expand our programming into additional hours and
homes on Comcast. We are also working with other cable and satellite systems for
additional carriage. The programming is expected to be available on our website
in streaming and downloadable formats and will also be available on FasTV's
website.
In late 1997, we began examining the possibility of operating a
television channel by acquiring an interest in Fifth Avenue Channel, Inc., a
company of which Ivana Trump was a shareholder and contractual host and
spokesperson. We hired personnel and began the detailed development of plans for
the launch of the channel, including analyzing the market, developing
programming grids, establishing relationships with various cable and satellite
carriers, acquiring programming and searching for production facilities to
produce programming. We tested a version of our programming in 1998 on a local
station in the Miami area and produced a fashion program for future broadcast.
We also presented our programming concepts and format at the National Cable
Television Association convention in June 1998.
Beginning in 1998, we developed and executed a number of contracts with
content and product suppliers including Zacks Investment Research, MonsterDaata,
an aggregator of real estate information, General Life Insurance, and
Taxes4Less.
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In late 1999, we produced a number of programs for future broadcast,
placed digital cameras in the offices of Zacks Investment Research, KeyTrade
Online and other locations for the delivery of digital feeds featuring
interviews with analysts and others about various stocks. Also in late 1999, we
produced a pilot program demonstrating the quality of our productions. We have
recently entered into an agreement with Conus Communications Company to provide
1.5 minutes of content for each half hour episode of their syndicated daily
television program, "First Business." We have begun hiring a full staff of
television production personnel, including executive producers, producers,
writers, on-screen talent and directors. We anticipate launching our channel in
the first quarter of 2000 and have created a subsidiary, NetVideoNetworks, Inc.,
which will archive searchable and streamable video content for distribution to
our television channel and website, as well as to websites across the Internet.
Revenue streams are expected to be derived primarily from advertising.
WEBSITE OPERATIONS
We operate 5thAvenueChannel.com, offering financial and other
information as well as consumer products. The website was originally launched in
December 1998. In March 1999, the website was revised. Sections devoted to
consumer products, personal success and motivational products, and financial
resources were added, as well as links to other sites. The website is currently
being redesigned to incorporate additional financial content, our anticipated
television programming and NetVideoFinance content. The website is expected to
contain information from Zacks Investment Research, including taped interviews
with analysts and other Zacks' personnel and financial services including online
insurance, online tax preparation, online trading, online banking, online gift
certificates and online mortgages. We expect the redesign to be completed in
January 2000, with additional programming and content being added later in the
first quarter of 2000. Revenue streams are expected to be derived from
advertising, product and subscription sales.
We have negotiated agreements for a grouping of financial services to
be marketed on our website and syndicated to other websites. To supply these
services, we have signed agreements with KeyTrade Online for online brokerage
services; The Producers Group for the supply of term life insurance from General
Life, a division of Metropolitan Life; Taxes4Less.com for online tax
preparation, MonsterDaata.com for low cost transaction and real estate
information services; Nightingale-Conant for success and motivation books and
tapes; U.S. Check for online gift certificates; and World Class Concierge for
personalized shopping services. We are continuing to negotiate additional
relationships. These services are currently being incorporated into our website.
NETVIDEOFINANCE DIVISION
We have commenced development of a new division, under the name of
NetVideoFinance, which will record and market live interviews with experienced
analysts and brokers from securities brokerage firms, fund managers, corporate
executives and journalists. These interviews will be available on
5thAvenueChannel.com, and are intended to be syndicated to other websites and
e-mailed to users on a subscription basis. It is our goal to build a large
library of financially related video clips. Current video clips will be
broadcast on our television channel and on our website, and syndicated to other
websites. The video clips will also be permanently available in archived
streaming and downloadable formats on our websites and on the websites with
which we negotiate distribution agreements. We own the URL NetVideoFinance.com,
and may choose to develop this division under that name. We are planning to
allocate personnel and marketing resources towards the development of this
division. These efforts will include the placement of cameras on location with
analysts, development of a video player for the display and playback of the
videos, video servers for the storage and retrieval of the videos and sales
efforts to
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syndicate our content on other websites. Revenue streams are expected to be from
advertising, syndication payments from other websites, and subscription services
from end users.
SALES DIVISION
In early 1999, we acquired the assets of International Broadcast
Consultants of America, Inc. ("IBC") including the rights to distribute a
variety of products through retail, television and other channels of
distribution. Subsequently, we formed a wholly-owned subsidiary, 5th Avenue
Channel Retail, Inc., to manage and expand the marketing, sale and distribution
of consumer products. This subsidiary is intended to manage the sale of products
to the home shopping networks, retail store chains and wholesale distributors.
We anticipate expanding into sales on the Internet and into the international
marketplace. We recently signed an agreement with Signature Products, Inc. for
exclusive distribution rights in North and South America for a teen cosmetic
line called Body Jewels. The first product was launched on September 1, 1999 and
as of November 30, 1999, we have sold approximately $745,000 of this product
line, subject to the customer's right to return the product during a limited
period of time. We are currently expanding the four item line into 36 items for
launch in the second quarter of 2000. We are supplying the Body Jewel products
to mass market retailers in the United States, including Wal-Mart, Target,
Walgreens, CVS, Longs, Albertson's and Meijers.
This subsidiary is also responsible for the marketing of our financial
services and products through mass market chains and direct-mail efforts, and on
websites. We are selling a variety of products to the home shopping channels,
including Home Shopping Network, TVN/Panda and Shop-at-Home, and are currently
negotiating for exclusive distribution rights for a number of patented products
that could have large potential in the mass market. We anticipate signing these
agreements in January 2000, with sales beginning in the second quarter of 2000.
WIRELESS CABLE TELEVISION
We are also a developer, owner and operator of wireless cable
television systems in Costa Rica and LaCrosse, Wisconsin. Wireless cable
television is provided to subscribers by transmitting designated frequencies
over the air to a small receiving antenna at each subscriber's location. We
provide television and related cable services for multiple dwelling units,
commercial locations and single family residences.
LACROSSE, WISCONSIN. We operate a wireless cable television system in
LaCrosse, Wisconsin. Our business began on August 24, 1993, when we entered into
an agreement with Grand Alliance LaCrosse (F) Partnership and Home/Systems Joint
Venture, which ultimately provided for the lease and purchase of the LaCrosse
System.
We began transmitting programming in LaCrosse in December 1994 and
presently have approximately 800 subscribers in the LaCrosse System. There are
approximately 70,000 households within the LaCrosse System's 25-mile signal
pattern. We currently offer 22 channels in the LaCrosse System, consisting of 17
wireless cable channels and 5 local off-air (VHF/UHF) broadcast channels.
We own main transmitters, encoding equipment, antenna, cables, cable
boxes, satellite dishes, beam benders, computer hardware and software that is
utilized in this business and located in LaCrosse.
COSTA RICA. We acquired certain rights to up to 18 pay television
broadcast channels in Costa Rica in February 1996. Three channels are UHF
frequencies (Channels 56, 58 and 60); three are "super band" frequencies
(Channels 35, 37 and 39); and 12 are microwave frequencies similar to those used
in our LaCrosse system. At the time we acquired these licenses, the three "super
band" channels were in full
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operation broadcasting a scrambled signal of pay television programming to
approximately 1,700 subscribers. We currently broadcast pay television
programming over the three super band channels and the three UHF channels in our
Costa Rican system. We presently have no plans to use the additional 12
microwave channels.
As of September 30, 1999, we have approximately 5032 subscribers in our
Costa Rican System. There are approximately 580,000 line-of-site households in
the central valley that are reachable from our present transmission facility.
All eighteen of the channel licenses may be used exclusively anywhere in Costa
Rica, thereby allowing the Company to expand its service beyond the central
valley.
We own television and microwave transmitters, cable head-end equipment,
encoding equipment, antenna, cables, cable boxes, satellite dishes, beam
benders, computer hardware and software that are used in this business and which
are located in Costa Rica.
MARKETING
We expect to use a variety of methods to drive traffic to our channel
and website and to promote product sales. These methods include advertising
banners on other websites, listings with major search engines, advertising
outside of the Internet, including print and radio, Internet affiliations, and
joint venture marketing agreements with such websites as Zacks.com,
KeyTradeOnline.com, and others.
We utilize media advertising, telemarketing, direct mail, and
door-to-door marketing to increase our subscriber base both in the LaCrosse
system and the Costa Rican system. We emphasize value, reliability of service,
quality and reliability of equipment, and picture quality in our marketing
programs.
GOVERNMENT REGULATION
INTERNET/E-COMMERCE. There are currently few laws or regulations that
specifically regulate commerce on the Internet. However, laws and regulations
may be adopted in the future that address issues such as online content, user
privacy, pricing and characteristics and quality of products and services.
Several telecommunications carriers are seeking to have telecommunications over
the Internet regulated by the FCC in the same manner as other telecommunications
services.
The tax treatment of the Internet and e-commerce is currently
unsettled. A number of proposals have been made at the federal, state and local
levels and by certain foreign governments that could impose taxes on the sale of
goods and services and certain other Internet activities. A recently-passed law
places a temporary moratorium on certain types of taxation of Internet commerce.
We cannot predict the effect of current attempts at taxing or regulating
commerce over the Internet.
WIRELESS CABLE TELEVISION. The wireless cable industry is subject to
regulation by the FCC pursuant to the Communications Act of 1934, as amended
(the "Communications Act"). The Communications Act empowers the FCC, among other
things: to issue, revoke, modify and renew licenses within the spectrum
available to wireless cable, to approve the assignment and/or transfer of
control over such licenses; to determine the location of wireless cable systems"
to regulate the kind, configuration and operation of equipment used by wireless
cable systems; and to impose certain equal employment opportunity requirements
on wireless cable operators. The FCC has determined that wireless cable systems
are not "cable systems" for purposes of the Communications Act. Accordingly, a
wireless cable system does not require a franchise from a local authority and is
subject to fewer local regulations than a hard-wire cable system. In addition,
utility poles and dedicated easements are not necessary.
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In the Telecommunications Act of 1996, the U.S. Congress changed the
focus of government oversight of the communications industry from regulation to
facilitating competition. Congress has passed laws, and the FCC has adopted
rules and regulations, to encourage competition among various providers of
communication services. While current FCC regulations are intended to promote
the development of a competitive pay television industry, the rules and
regulations affecting the wireless cable industry may change in the future, and
such changes could have an adverse effect on our business.
In September 1998, the FCC expanded the uses of the wireless cable
spectrum by adopting what is called the "Two Way Rule." The Two Way Rule permits
the use of wireless cable frequencies for two way digital communications where
previously this spectrum could be used only for the one way transmission of
television programming. This change in the FCC regulations makes it possible for
a wireless cable operator to provide data transmissions, such as high speed
internet access service, or voice transmissions, such as local loop telephone
service, as well as television programming, in its service area. The provision
of internet service or telephone service, however, would require a substantial
financial commitment on our part. At this time, we do not plan to expand into
the internet service business or the telephone business at its wireless cable
system in La Crosse.
The Cable Television Consumer Protection and Competition Act of 1992
(the "Cable Act") allows state and municipal governments to regulate cable
equipment and "basic" tier (i.e., broadcast, local public access, governmental
and educational channels) cable rates for traditional hard-wire cable systems.
The Cable Act gave the FCC the authority to regulate rates on the "cable
programming service" tier (i.e., cable networks and all video programming not on
the basic tier) and the Commission regulated such rates for the last seven
years. The Telecommunications Act of 1996 provided that rate regulation by the
FCC was to be phased out in three years, and as of March 31, 1999, the FCC no
longer has the authority to regulate any cable rates. Thus, cable operators are
now free to offer discounts to our subscribers or potential subscribers.
The Telecommunications Act of 1996 also permits telephone companies to
enter the video distribution business, subject to certain conditions. The entry
of telephone companies into the video distribution business, with greater access
to capital and other resources, could provide significant competition to the
wireless cable industry. To date, the telephone companies have not entered the
video distribution business to any significant extent, but that could change at
any time, and such change could have an adverse effect on our business.
Over the last few years, competition for the wireless cable industry
has also come from direct broadcast satellite carriers, a service which has
grown rapidly to over ten million subscribers nationwide. On November 29, 1999,
as part of the Omnibus Appropriations Act of 1999, the President signed into law
the Satellite Home Viewer Improvement Act, which gives satellite carriers the
right to carry local television stations to subscribers in the stations' own
markets for the first time. At this point, it is too early to tell what impact
this new legislation will have on the wireless cable industry as a whole or on
us in particular.
COMPETITION
INTERNET. The Internet business is highly competitive. New companies
are being established everyday and any business set up on the Internet,
including such businesses as our website, might face competition from a variety
of existing or upcoming websites. Many of these competitors may have greater
financial, technical and marketing resources, greater name recognition and
better strategic relationships. Consequently, we have been focusing on acquiring
exclusive distribution rights and rights to a variety of products not widely
available on the Internet, and on signing content agreements that allow
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us to offer unique combinations of content. We believe that our ability to
effectively compete in this market will depend on our ability to build a brand
name and drive traffic to the site, which can occur as a result of superior
content.
The business of finance on the Internet is highly competitive. Many
companies such as On24, CBS MarketWatch, CNBC and CNNfn have established
websites that offer financial and business information and services, and it is
our belief that many new websites will be created.
TELEVISION. The television business is highly competitive. New channels
will face competition from a variety of existing television channels and
networks. Consequently, we have been focusing on acquiring exclusive television
rights to products and programming to help distinguish our television channel
from other networks. Ultimately, the quality of our programming will determine
our success in this environment.
WIRELESS CABLE TELEVISION. The pay television industry is highly
competitive. Wireless cable television systems face competition from several
sources, including established hardwire cable companies.
In Costa Rica, three hard-wire cable companies are our primary, direct
competitors. We estimate that within our signal pattern for Costa Rica, fewer
than 20% of the households are hard-wire cable subscribers and no more than an
additional 10% have access to hard-wire cable services. The three hard-wire
cable companies in Costa Rica currently offer up to 46 (11 local, 35
international), 48 (13 local, 35 international), and 36 (9 local, 27
international) channels, respectively, and charge approximately $22, $25, and
$23 per month, respectively, for basic programming (movies are additional), and
approximately $15, $23, and $23, respectively, for installation services. None
offers pay-per-view programming or addressable converters. All three companies
offer discounts for long-term contracts. We offer a package of 28 channels (22
local off-air, 6 international) for a monthly fee of approximately $15 to $17,
plus installation. Based on our existing subscriber base of approximately 5,500
households that presently pay an average of $16 per month for six channels of
programming and the very limited penetration of hard-wire cable into this
market, we believe that we have a competitive programming alternative to
hard-wire cable.
The Costa Rican operation currently offers 6 pay channels and the three
local hard-wire cable companies offer from 36 to 40 channels, approximately
one-third of which are the re-broadcast of local, off-air programming. We
believe that our 22 off-air plus 6 pay, l line-up channel are price competitive.
Our LaCrosse operation system competes with two large hard-wire cable
companies. Our competitors currently offer 28 and 40 channels to their
subscribers, while we offer 22 channels to our subscribers.
PRODUCT SALES. Our product sales division competes with all other
suppliers of merchandise to home shopping channels, retail stores and
distributors such as Telebrands, Emson, Media Brands and Media Group. Our
ability to compete in this market will depend upon the pricing and uniqueness of
our products.
LITIGATION
On June 9, 1999, the SEC issued an order directing an investigation of
certain of our activities and the activities of others. The investigation
focuses on whether we and other persons misrepresented certain of our affairs in
press releases and public filings during 1998 and the early part of 1999. The
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commencement of an SEC investigation is part of the SEC's routine surveillance
and enforcement program and, as expressed by the SEC, should not be construed as
an adverse reflection on us and does not necessarily mean that any wrongdoing
has occurred. We do not believe that we have engaged in any conduct that would
warrant the institution of legal proceedings against us by the SEC and we are
cooperating fully with the SEC staff.
EMPLOYEES
As of December 31, 1999, we had 47 full-time employees serving in our
North Miami Beach, Florida, LaCrosse, Wisconsin, Pelham, New York and Costa Rica
offices, including 10 in management, 10 in sales and marketing, 9 technical
support and 18 clerical employees. We maintain various employee group benefit
plans and experience good employee relations.
DESCRIPTION OF PROPERTY
We lease approximately 4,500 square feet of general office space at
3957 Northeast 163rd Street, North Miami Beach, Florida 33160 used as its
principal executive offices. The lease has a five-year term that commenced May
8, 1998 and provides for an initial annual rent of $60,750 and increases
annually to a maximum of $78,780 in the fifth year.
We also lease approximately 1,300 square feet of space at 3953
Northeast 163rd Street, North Miami Beach, Florida 33160. This space is leased
in conjunction with the property above and is used as additional office space.
The lease has a five-year term that commenced May 8, 1998 and provides for an
initial annual rent of $17,550 increasing each year to a maximum of $22,750 in
the fifth year.
We lease approximately 2,000 square feet of space in La Crosse,
Wisconsin for our wireless cable division. The lease provides for a one-year
term, renewing annually, with an annual rent of approximately $15,500.
We lease approximately 750 square feet of office space at 629 Fifth
Avenue, Pelham, New York 10803 which is used to house our retail sales
operations. The lease has a three-year term that commenced March 29, 1999 and
provides for an annual rent of $13,560 for the first two years and $13,967 for
the third year.
We rent office space in Costa Rica from our President. This arrangement
is on a month-to-month basis, and since January 1, 1999, no rent is being
charged.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Effective as of February 17, 1999, our principal accountants, BDO
Seidman, LLP resigned and was replaced by the firm of Rachlin, Cohen and Holtz,
LLP effective as of February 23, 1999.
As of December 31, 1997 and during our two most recent fiscal years
ending December 31, 1997 and the subsequent periods preceding the resignation of
BDO Seidman, LLP there were no disagreements with BDO Seidman, LLP on matters of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
BDO Seidman, LLP would have caused BDO Seidman, LLP to make reference to the
subject matter of the disagreements in connection with its reports. The audited
financial statements for the years ended December 31, 1997 and 1996 contained an
explanatory paragraph which stated that our significant operating losses and
negative working capital as of such date raised substantial doubt about our
ability to continue as a going concern.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors, executive officers and key employees are as follows:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
- ---- --- -------- -----
<S> <C> <C>
Melvin Rosen 55 Chairman of the Board, President and 1997
Chief Executive Officer
Eric Lefkowitz 39 Senior Vice President and Director 1999
Dennis Devlin 49 Director 1993
Scott Housefield 41 Director 1999
Larry Weinstein 52 Director 1999
Nick van der Linden 31 Director 1999
Adam Taylor 46 Chief Operating Officer --
Dominique Sada 43 Executive Vice President and Chief --
Financial Officer
Michael Tedesco 43 President and Chief Operating Officer --
of 5th Avenue Channel Retail, Inc.
</TABLE>
Each of our directors holds his position until the next annual meeting
of shareholders or until his successor is duly elected and qualified.
MELVIN ROSEN: PRESIDENT, C.E.O. AND CHAIRMAN OF THE BOARD. Melvin
Rosen, 55, has served as President, Chief Executive Officer and Chairman of the
Board of the Company since May 1997. From July 1986 to May 1996, he owned and
served as the President of Teleplus, S.A., a wireless cable television system in
Costa Rica which was sold to us in February 1996.
ERIC LEFKOWITZ: EXECUTIVE VICE PRESIDENT AND DIRECTOR. Eric Lefkowitz,
39, has served as one of our Executive Vice Presidents since January 1999 and as
one of our directors since March 1998. Mr. Lefkowitz was President, CEO and 50%
owner of International Broadcast Consultants of America, Inc., a consumer
products marketing and wholesaling company, between 1994 and 1999.
DENNIS J. DEVLIN: DIRECTOR. Mr. Devlin, 49, has served as one of our
directors since May 1993 and as our Vice President from 1993 to 1998. Mr. Devlin
is the founder and has served as President of Dennis' Mobile Home Service
29
<PAGE>
and Supply, Inc. in Wayne, Michigan since 1979. Mobil Home Service and Supply,
Inc. is engaged in the construction of additions, roof systems and specialized
products for mobile home owners, including remodeling, insurance services, parts
supply and repair.
SCOTT HOUSEFIELD: DIRECTOR. Scott Housefield, 41, has served as one of
our directors since June 1999. From 1993 to 1998, he held various senior
management positions at Brightpoint, Inc. (Nasdaq: CELL - news), a global
wireless telecommunications company.
LARRY WEINSTEIN: DIRECTOR. Larry Weinstein, 52, has served as one of
our directors since September 1999. He is currently Vice President of Strategic
Projects for Cybergold, Inc. (Cybergold.com), an on-line incentive marketing
company. From 1992 to 1998, Mr. Weinstein served as Executive Vice President for
Greenleaf Technologies Corp., a high-tech company specializing in encryption and
compression technologies.
NICK VAN DER LINDEN: DIRECTOR. Mr. van der Linden, 31, has served as
one of our directors since November 1999. Mr. van der Linden is founder of
Caladan B.V., a holding company for a number of investment activities including
corporate finance and consulting. Mr. van der Linden is also founder of The
Traders Society N.V., one of the largest wholesale trading houses in the
Netherlands where he served as its Chief Executive Officer from 1996 to 1998.
From 1994 to 1996, he was a managing director at Rabo Securities in the
Netherlands.
ADAM TAYLOR: EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER. Adam
Taylor, 46, has served as an Executive Vice President and Chief Operating
Officer since January 1999. Mr. Taylor was President of Taylor/Fox Enterprises,
LLC, a marketing company based in California from June 1992 to December 1998 and
President of Goldman/Taylor Entertainment Inc., a television development and
production company from February 1990 to May 1997.
DOMINIQUE SADA: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER.
Dominique Sada, 43, has served as an Executive Vice President and our Chief
Financial Officer since December 1999. Prior to joining the Company, Ms. Sada
worked as a manager of Accounting, Auditing and Consulting for Rachlin, Cohen &
Holtz, a South Florida public accounting firm from 1997 to 1999. Between 1994
and 1996, she served as financial manager of Chase Manhattan Corp., a financial
services company, and between 1987 and 1994, she worked for Deloitte & Touche, a
public accounting firm, where she was an audit manager. Ms. Sada is a Certified
Public Accountant.
MICHAEL TEDESCO. PRESIDENT AND CHIEF OPERATING OFFICER OF 5TH AVENUE
CHANNEL RETAIL, INC.
Mr. Tedesco, 43, has served as President and Chief Operating Officer of
5th Avenue Channel Retail since April 1999. From 1996 to 1999, he was Executive
Vice President of Sales at Media Brands, LLC, a direct-response, retail
manufacturing company. Between 1995 and 1996, Mr. Tedesco served as National
Sales Manager at Home Shopping Network, and between 1993 and 1995 Mr. Tedesco
served as Vice President of Claude G., Inc., an importer of private label French
fragrances. Prior to joining Claude G, Inc., Mr. Tedesco served as a Partner and
Vice President of Sales at Innovo Inc., a manufacturer of canvas bags and
aprons. During his tenure, Mr. Tedesco created, manufactured and marketed the
"E.A.R.T.H. Bag" which sold over 10 million units.
DIRECTOR'S REMUNERATION
Each non-employee director is reimbursed for expenses incurred in
attending board meetings. Directors do not receive any other compensation for
their service.
30
<PAGE>
EXECUTIVE COMPENSATION
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with certain of our key
executives as follows:
Eric Lefkowitz, our Senior Vice President, entered into a five-year
agreement effective January 1, 1999. The agreement provides for an annual salary
of $150,000. The agreement also provides for bonuses and stock options based on
our performance and for health, life and disability insurance and reimbursement
for all reasonable business expenses.
Adam Taylor, our Chief Operating Officer, entered into a one-year
agreement effective January 5, 1999. The agreement provides for an annual salary
of $102,000 plus benefits. The agreement also provides for grants of 5,000
options to purchase our common stock per month at an exercise price equal to
$.25 above the average market value of the common stock for the five days prior
to each monthly grant date. The options vest ratably over a three-year period
from the date of the grant. The agreement also provides for term life, health,
medical, dental and hospitalization insurance, as well as pension and
profit-sharing benefits and for reimbursement of all reasonable business
expenses and a monthly automobile reimbursement allowance of $1,000.
Michael Tedesco, President and Chief Operating Officer of 5th Avenue
Channel Retail, Inc., our wholly-owned subsidiary, entered into a one-year
agreement dated April 1999. The agreement provides for an annual salary of
$102,000 plus benefits and incentive bonuses as determined by the Board of
Directors. The agreement also provides for Mr. Tedesco to receive up to 24,000
options to purchase our common stock at an exercise price of $7.25 per share in
the first year of employment accruing at a rate of 2,000 options per month. If
we elect to renew Mr. Tedesco's agreement for a second year, he will receive a
grant of an additional 30,000 options. Mr. Tedesco also receives an incentive
monthly bonus equal to one percent of the gross sales receipts from the sale of
products and services by 5th Avenue Channel Retail during the preceding month.
If 5th Avenue Channel Retail exceeds its annual sales projections, Mr. Tedesco
will receive options to purchase 500,000 shares of our common stock at an
exercise price equal to the fair market value of our stock at the date of grant.
The agreement provides for life, health, medical, dental and hospitalization
insurance, as well as pension and profit-sharing benefits and reimbursement of
all reasonable business expenses and an annual automobile allowance of $5,000.
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation paid to or
accrued for our Chief Executive Officer for the years ended December 31, 1998,
1997 and 1996. Mr. Rosen did not receive a bonus or stock options as
compensation during these years. No other executive officer or key employee of
the Company earned a salary and bonus in excess of $100,000 during these years.
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
OTHER
NAME AND YEAR ANNUAL ALL OTHER
PRINCIPAL POSITION ENDED SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- ------------------ ----- ------ ----- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Melvin Rosen, 12/31/98 $ 180,000 0 0 0 0
President and CEO 12/31/97(1) $ 90,000 0 0 0 0
12/31/96 -- -- -- -- --
</TABLE>
- -------------------------
(1) Mr. Rosen commenced his employment with us in May 1997.
31
<PAGE>
STOCK OPTION PLAN
In January 1995, the Company adopted a stock option plan (the "SOP"),
pursuant to which officers, directors, key employees and consultants are
eligible to receive "incentive" and/or non-qualified stock options. The Company
can grant 200,000 shares of its common stock under the SOP. The SOP is
administered by the Board of Directors which determines, among other things, the
persons to be granted options under the SOP, the number of shares subject to
each option, and the option price. To date, the Company has granted options to
purchase 131,860 shares of common stock under the SOP, 91,360 of which remain
outstanding. The exercise price of all options granted under the SOP equaled or
exceeded the fair market value of the common stock on the date of grant.
32
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding beneficial
ownership of our common stock as of November 30, 1999 by all persons known by us
to own beneficially 5% or more of the outstanding shares of our common stock,
each director, and all executive officers and directors as a group:
NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT OF
BENEFICIAL OWNER OR OF BENEFICIAL OUTSTANDING
IDENTITY OF GROUP OWNERSHIP(1) SHARES(2)
- ----------------- ------------ ---------
Melvin Rosen 6,220,212(3) 47.25%
c/o 5th Avenue Channel Corp.
3957 N.E. 163rd Street
North Miami Beach, FL 33160
Ivana Trump 745,000(4) 5.79%
c/o Lyman & Landy
405 Park Avenue, 17th Floor
New York, NY 10022
Eric Lefkowitz 341,667(5) 2.81%
Dennis J. Devlin
260,000(6) 2.14%
Scott Housefield 0 --
Larry Weinstein 0 --
Nick van der Linden 320,000(7) 2.63%
All officers and directors as a group 7,223,239(8) 53.28%
(9 persons)
- -------------------------------------------
(1) Except as otherwise indicated, all shareholders have sole voting and
investment power with respect to the shares of common stock set forth
opposite their respective names.
(2) Based on 12,164,702 shares of common stock issued and outstanding shares as
of December 31, 1999. For purposes of calculating each person's beneficial
ownership, amount and percentage, each person's options and warrants that
are exercisable within 60 days as of December 1, 1999 are included and are
deemed outstanding and are added to the 12,164,702 shares outstanding.
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<PAGE>
(3) Includes 500,000 shares of common stock issuable upon exercise of a warrant
at an exercise price of $1.00 per share, and 500,000 shares issuable upon
exercise of a warrant at $5.00 per share.
(4) Includes options to purchase an aggregate of 700,000 shares of common stock
at exercise prices ranging from $5.00 per share to $15.00 per share.
(5) Includes 300,000 shares held by IBC, a company of which Mr. Lefkowitz owns
50%.
(6) Includes options to purchase 5,000 shares at $5.85 per share and options to
purchase 5,000 shares at $8.25 per share.
(7) Represents shares owned by Caladan B.V., a company controlled by Mr. van
der Linden.
(8) Includes a total of 1,391,360 shares issuable upon the exercise of
presently exercisable options and warrants held by the following persons:
Melvin Rosen 1,000,000 warrants; Adam Taylor 63,360 options; Dennis Devlin
10,000 options; and Michael Tedesco 18,000 options.
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<PAGE>
SELLING SHAREHOLDERS
The following table sets forth certain information with respect to the
ownership of our common stock by selling shareholder as of the date of this
prospectus.
<TABLE>
<CAPTION>
OWNERSHIP OF SHARES NUMBER OF OWNERSHIP OF SHARES
OF COMMON STOCK SHARES OFFERED OF COMMON STOCK
SELLING SHAREHOLDER PRIOR TO OFFERING HEREBY AFTER OFFERING(1)
- ---------------------------- ----------------------------------- ---------------- -------------------------------
SHARES PERCENTAGE SHARES PERCENTAGE
----------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
Michael Ploshnick 30,000(2) * 30,000 0 *
Steven Finkelstein 54,000(2) * 54,000 0 *
Salvatore Marasa 54,000(2) * 54,000 0 *
David Ganz 54,000(2) * 54,000 0 *
Anthony Imbo 54,000(2) * 54,000 0 *
Howard Schwartz 67,875(3) * 67,875 0 *
Donald Fiore 13,875(4) * 13,875 0 *
James Ganduglia 11,100(4) * 11,100 0 *
Dermot Kiernan 13,875(4) * 13,875 0 *
Debra & Harvey Lichtman 13,875(4) * 13,875 0 *
Elmer Macke 27,750(4) * 27,750 0 *
Richard Measelle 27,750(4) * 27,750 0 *
Leonard Pianko 5,550(4) * 5,550 0 *
Charles Rankin 13,875(4) * 13,875 0 *
Jeremy & Franca Rawitz 11,100(4) * 11,100 0 *
Lawrence & Lori Turel 11,100(4) * 11,100 0 *
Ganot Corporation 168,834(5) 1.39% 168,834 0 *
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
OWNERSHIP OF SHARES NUMBER OF OWNERSHIP OF SHARES
OF COMMON STOCK SHARES OFFERED OF COMMON STOCK
SELLING SHAREHOLDER PRIOR TO OFFERING HEREBY AFTER OFFERING(1)
- ---------------------------- ----------------------------------- ---------------- -------------------------------
SHARES PERCENTAGE SHARES PERCENTAGE
----------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
Klurman Investment Limited
Partnership 222,000(6) 1.82% 222,000 0 *
Klurman Investment Limited
Partnership II 145,000(7) 1.19% 145,000 0 *
Carina B.V. 50,000 * 50,000 0 *
Maddox Mutual 250,000 2.06% 250,000 0 *
J.W. Kranendonk 100,000 * 100,000 0 *
J.J. Van den Berg 320,000 2.63% 320,000 0 *
M.M.G. Pilarczyk 100,000 * 100,000 0 *
Caladan B.V. 320,000 2.63% 320,000 0 *
Finance IT B.V. 500,000 4.11% 500,000 0 *
Trasmin Invest B.V. 250,000 2.06% 250,000 0 *
AGI Finance SA 50,000 * 50,000 0 *
John Bus 10,000 * 10,000 0 *
Ab ter Horst 50,000 * 50,000 0 *
International Broadcast
Consultants of America,
Inc. (8) 300,000 2.47% 300,000 0 *
</TABLE>
- ----------------------------
* Indicates less than 1%.
(1) Assumes that all shares are sold pursuant to this offering and that no
other shares of common stock are acquired or disposed of by the selling
shareholders prior to the termination of this offering. Because the selling
shareholders may sell all, some or none of their shares or may acquire or
dispose of other shares of common stock, no reliable estimate can be made
of the
36
<PAGE>
aggregate number of shares that will be sold pursuant to this offering or
the number or percentage of shares of common stock that each selling
shareholder will own upon completion of this offering.
(2) Represents shares of common stock issuable upon the exercise of warrants
originally issued to a consultant to the Company and assigned to the
holders. Such warrants are exercisable for $2.50 per share and expire on
July 10, 2000.
(3) Consists of 54,000 shares of common stock issuable upon exercise of
warrants assigned to the holder and 13,875 shares issued upon conversion of
12% convertible debentures in the principal amount of $25,000 including
1,375 shares issued in lieu of accrued interest.
(4) Part of an aggregate of 297,500 shares issued upon conversion of 12%
convertible debentures in the aggregate principal amount of $595,000
including 35,059 shares issued in lieu of accrued interest.
(5) Represents 150,000 shares issued upon conversion of $2.00 per share of 12%
convertible debentures in the principal amount of $300,000 and 18,834
shares issued in lieu of accrued interest.
(6) Represents 200,000 shares issued upon conversion of a 12% convertible
debenture in the principal amount of $500,000 and 22,000 shares issued in
lieu of accrued interest.
(7) Includes 15,000 shares issuable upon the exercise of warrants at $5.00 per
share and 5,000 shares issuable upon the exercise of warrants at $6.00 per
share.
(8) International Broadcast Consultants of America, Inc. is a company of which
Eric Lefkowitz, our Senior Vice President and Director, owns 50%. Assuming
the sale of all of these shares, Mr. Lefkowitz will own 41,667 shares of
common stock, which is less than 1% of our issued and outstanding shares.
CERTAIN TRANSACTIONS
LOANS TO THE COMPANY
During 1996 and 1997, Mr. Rosen loaned us $262,479 at 18% interest. We
repaid $183,400 during 1998. As of September 30, 1999, the balance of this loan
was $79,079. We fully repaid this loan in November 1999.
During 1998, Mr. Rosen also loaned us $300,000 at 10% interest. We
fully repaid this loan in November 1999. In addition, during 1998 Mr. Rosen
loaned us $550,000 at 8% interest. At various times during 1999, he loaned us
additional amounts at the same rate. During 1999, we made certain repayments to
him so that the loan balance as of September 30, 1999 was $2,354,484. In
November 1999, we repaid $329,134 of this amount leaving a balance of
approximately $2,026,000, which amount is payable on demand.
Aggregate accrued interest on the three loans at December 31, 1998 and
September 30, 1999 was $70,696 and $194,376, respectively.
37
<PAGE>
On February 24, 1997, Mr. Duquette and Mr. Devlin each loaned us
$25,000 ($50,000 in the aggregate), which we used to pay Mr. Rosen for an
extension of the indebtedness due to him as described below. These loans accrue
interest at 10% per annum. As of September 30, 1999, the balance of these loans,
including accrued interest, was $54,456 and $52,581, respectively. These loans
are payable on demand.
DEBT RESTRUCTURING AGREEMENT AND DEBENTURE
In January 1999 and March 1999 Mr. Rosen converted a debenture in the
amount of $2,366,000 including accrued interest into 4,732,000 shares of our
common stock.
Mr. Rosen acquired the convertible debentures in 1997 in an agreement
to restructure a $2 million note issued to him as part of the acquisition of our
Costa Rican operations. The agreement provided for restructuring the note into a
convertible debenture maturing in 12 months with interest at 12% per annum (7%
to be paid monthly and 5% at maturity). The principal amount of the debenture
was increased by $100,000 for expenses owed or reimbursable to Mr. Rosen. We
paid interest of $12,000 on the original note to Mr. Rosen in early 1997. No
interest was paid on the debenture in 1997 and $156,033 of interest accrued from
May 19, 1997 to December 31, 1997 and was added to the debenture principal.
As consideration for this debt restructuring, we agreed to issue to Mr.
Rosen (i) 180,000 shares of our common stock; (ii) a warrant to purchase 500,000
shares at $1.00 per share, and (iii) a warrant to purchase 500,000 shares of
common stock at $5.00 per share. Mr. Rosen received the right to nominate two
members to our Board of Directors until such time as he exercised the conversion
rights under the debenture and we released him from any liability in connection
with the Costa Rican acquisition. Upon consummation of the debt restructuring,
Mr. Rosen and his designee, Samuel H. Simkin, were appointed to our Board of
Directors and Mr. Rosen was named our President and Chief Executive Officer.
The debenture was convertible by Mr. Rosen into our common stock at any
time prior to payment of the debenture on at least 30 days notice. The
conversion price was the lesser of (1) $.50 per share of common stock, or (2)
the average of the closing bid price for our common stock as reported on the
Nasdaq Small Cap Market for the five trading days immediately prior to the
conversion date.
OTHER RELATED TRANSACTIONS
Effective December 10, 1998, we acquired 100% of the capital stock of
The Fifth Avenue Channel, Inc. ("5th Avenue") from its shareholders for 335,000
shares of our common stock and we agreed to issue up to 665,000 additional
"performance shares" as follows: 332,500 if 5th Avenue achieves gross revenues
in excess of $10,000,000 for any calendar quarter; and the remaining 332,500
shares if 5th Avenue achieves either gross revenues in excess of $25,000,000 for
any calendar quarter or net income in excess of $1,000,000 for any calendar
quarter. If 5th Avenue does not achieve these objectives by September 30, 2003,
the right to receive the performance shares will terminate. Mr. Rosen owned 65%
of the 5th Avenue stock, IBC owned 25% and Ms. Trump owned 10%. IBC is 50% owned
by Mr. Lefkowitz, our Executive Vice President and Director.
Effective January 4, 1999, we purchased 100% of the assets and
operations of IBC for 300,000 shares of our common stock and $450,000 in cash.
IBC was active in the electronic media field, specializing in new product
marketing on cable television. IBC's products are aired to television viewers in
over 43 countries in their respective languages and in 38 states in the United
States. See "Notes to Consolidated Financial Statements."
38
<PAGE>
DESCRIPTION OF SECURITIES
GENERAL
Our authorized capital stock consists of 50,000,000 shares of common
stock, par value $.001 per share, and 5,000,000 shares of preferred stock, par
value $.001 per share. As of the date of this prospectus, 12,164,702 shares of
common stock and no shares of preferred stock were outstanding. The transfer
agent for our common stock is Continental Stock Transfer & Trust Company, 2
Broadway, New York, New York 10004.
COMMON STOCK
We are authorized to issue 50,000,000 shares of common stock, $.001 par
value, of which 12,164,702 shares are issued and outstanding as of the date of
this prospectus. The issued and outstanding shares of common stock are fully
paid and non-assessable. Holders of common stock are entitled to one vote for
each share held of record on all matters submitted to a vote of stockholders and
may not cumulate their votes for the election of directors. Shares of common
stock are not redeemable, do not have any conversion or preemptive rights and
are not subject to further calls or assessments once fully paid.
Holders of common stock will be entitled to share pro rata in such
dividends and other distributions as may be declared from time to time by the
Board of Directors out of funds legally available therefore, subject to any
prior rights accruing to any holders of our preferred stock. Upon our
liquidation or dissolution, holders of shares of common stock will be entitled
to share proportionally in all assets available for distribution to such
holders.
PREFERRED STOCK
The Board of Directors has the authority, without further action by our
shareholders, to issue up to 5,000,000 shares of preferred stock, par value of
$.001 per share, in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences and the
number of shares constituting any series or the designation of such series. No
shares of preferred stock are currently issued and outstanding. The issuance of
preferred stock could adversely affect the voting power of holders of common
stock and could have the effect of delaying, deferring or preventing a change in
our control.
PURCHASE WARRANTS AND CONVERTIBLE DEBENTURES
The various exercise or conversion prices and the number of shares of
common stock purchasable upon the exercise of the warrants and conversion of
debentures, are subject to adjustment upon the occurrence of certain events,
including stock dividends, stock splits, combinations or reclassification of the
common stock. The warrants and the debentures do not confer upon holders any
voting or any other rights as our shareholders.
12% CONVERTIBLE DEBENTURES
In May 1998, we completed a private placement of 12% convertible
debentures in the principal amount of $595,000 to accredited investors. In
December 1999, these investors converted their debentures into common stock at a
conversion price of $2.00 per share and are listed as selling shareholders
herein. See "Selling Shareholders."
39
<PAGE>
In November 1998, we completed a private placement of a 12% convertible
debenture in the principal amount of $500,000 to an accredited investor. In
December 1999, this investor elected to convert his debenture at a conversion
price of $2.50 per share and is listed as a selling shareholder herein. See
"Selling Shareholders."
IPO WARRANTS
In connection with our initial public offering, we sold 1,610,000
redeemable common stock purchase warrants for $.25 per warrant and certain
selling shareholders sold an additional 400,000 warrants. The warrants are
exercisable at a price of $5.75 per share until May 3, 2003 and are governed by
a warrant agreement between us and Continental Stock Transfer & Trust Company as
warrant agent.
The warrants are subject to redemption by us upon 30 days' prior
written notice, at a price of $.25 per warrant, if the closing sale or bid price
per share of our common stock equals or exceeds 120% of the then-current
exercise price (initially $5.75, subject to adjustment) per share for the 20
trading days ending on the third trading day prior to the mailing of the notice
of the redemption.
UNDERWRITER'S WARRANTS AND UNDERWRITER'S STOCK WARRANTS
The 140,000 underwriter's warrants and the 100,000 underwriter's stock
warrants were issued to designees of our underwriter in our initial public
offering in May 1995.
The 140,000 underwriter's warrants are exercisable at $.375 per warrant
and entitle the holders to purchase a like number of underlying warrants. Each
underlying warrant entitles the holder to purchase one share of common stock at
an exercise price of $5.75 until May 3, 2000, and is subject to redemption by us
upon 30 days prior written notice at a price of $.25 per underlying warrant,
provided that the closing sale or bid price per share of our common stock equals
or exceeds 120% of the then current exercise price (initially $5.75, subject to
adjustment) to the 20 trading days ending on the third trading day prior to the
mailing of the notice of redemption.
The underwriter's stock warrants are exercisable for a like number of
shares of common stock at a price of $7.50 per share. The underwriter's warrants
and the underwriter's stock warrants are exercisable until May 3, 2000.
CONSULTANT'S WARRANTS
The consultant's warrants were issued to Meyers, Pollock, Robbins,
Inc., our financial consultant, pursuant to a consulting agreement entered into
as of July 24, 1997. The consultant's warrants were subsequently assigned to
certain individuals. 500,000 of the consultant's warrants were previously
exercised.
The remaining consultant's warrants include: (i) one-year warrants for
the purchase of 200,000 shares of common stock at an exercise price of $2.50 per
share which were all extended to July 10, 2000; and (ii) three-year warrants for
the purchase of 100,000 shares of common stock at an exercise price of $2.50 per
share.
CERTAIN ANTI-TAKEOVER EFFECTS
Florida has enacted legislation that may deter or frustrate takeovers
of Florida corporations. The Florida Control Share Act generally provides that
shares acquired in excess of certain specified thresholds will not possess any
voting rights unless such voting rights are approved by a majority vote of a
40
<PAGE>
corporation's disinterested shareholders. The Florida Affiliated Transactions
Act generally requires supermajority approval by disinterested shareholders of
certain specified transactions between a public corporation and holders of more
than 10% of the outstanding voting shares of the corporation (or their
affiliates). Florida law and our Articles of Incorporation also authorize us to
indemnify our directors, officers, employees and agents.
Additionally, the authority possessed by the Board of Directors to
issue preferred stock could potentially be used to discourage attempts by others
to obtain control of us through merger, tender offer, proxy contest or otherwise
by making such attempts more difficult to achieve or more costly. The Board of
Directors may issue preferred stock with voting and conversion rights that could
adversely affect the voting power of the holders of common stock. Except as
described above, there are no agreements or understandings for the issuance of
preferred stock and the Board of Directors has no intention to issue additional
series of preferred stock as of the date of this prospectus.
SHARES ELIGIBLE FOR FUTURE SALE
Of the 12,164,702 shares currently outstanding, 5,831,879 shares are
owned by our affiliates, as that term is defined under the Securities Act.
Absent registration under the Securities Act, such as the shares being offered
by selling shareholders herein, the sale of these shares is subject to Rule 144.
Under Rule 144, if certain conditions are satisfied, a person (including any of
our affiliates) who has beneficially owned restricted shares of common stock for
at least one year is entitled to sell within any three-month period a number of
shares up to the greater of 1% of the total number of outstanding shares of
common stock, or if the common stock is quoted on Nasdaq, the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
has not been an affiliate of us for at least three months immediately preceding
the sale, and who has beneficially owned the shares of Common Stock for at least
two years, is entitled to sell the shares under Rule 144 without regard to any
of the volume limitations described above.
No prediction can be made as to the effect, if any, that sales of
shares or the availability of shares for sale as described above will have on
the market prices of the common stock prevailing from time to time.
Nevertheless, the possibility that substantial amounts of common stock may be
sold in the public market may adversely affect prevailing prices for the common
stock and could impair our ability to raise capital in the future through the
sale of equity securities. See "Risk Factors -- Future sales of common stock
could depress the price of our common stock."
PLAN OF DISTRIBUTION
The selling shareholders have advised us that they may from time to
time sell all or a portion of the shares offered in one or more transactions in
the over-the-counter market, on the Nasdaq SmallCap Market, or on any other
exchange on which the common stock may then be listed, in privately negotiated
transactions or otherwise, or a combination of such methods of sale, at market
prices prevailing at the time of sale or prices related to such prevailing
market prices or at negotiated prices. The selling shareholders may effect such
transactions by selling the shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the selling shareholders and/or purchasers of
the shares for whom they may act as agent (which compensation may be in excess
of customary commissions). The selling shareholders and
41
<PAGE>
any participating broker-dealers may be deemed to be "underwriters" within the
meaning of Section 2(4) of the Securities Act. Neither we nor the selling
shareholders can estimate at the present time the amount of commissions or
discounts, if any, that will be paid by the selling shareholders on account of
their sales of the shares from time to time.
Because the selling shareholders may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act, the selling
shareholders will be subject to prospectus delivery requirements under the
Securities Act. Furthermore, in the event of a "distribution" of securities, the
selling shareholders, any selling broker-dealer, and any "affiliated purchasers"
may be subject to Regulation M under the Securities Exchange Act of 1934, as
amended, which prohibits certain activities for the purpose of pegging, fixing
or stabilizing the price of securities in connection with an offering.
Under the securities laws of certain states, the shares may be sold
only through registered or licensed broker-dealers or pursuant to available
exemptions from such requirements. In addition, in certain states the shares may
not be sold unless the shares have been registered or qualified for sale or an
exemption from such requirement is available and is complied with.
We will pay certain expenses in connection with this offering,
estimated to be approximately $55,000, but will not pay for any underwriting
commissions and discounts, if any, or counsel fees or other expenses of the
selling shareholders. We have agreed to indemnify the selling shareholders,
their directors, officers, agents and representatives, and any underwriters,
against certain liabilities, including certain liabilities under the Securities
Act. The selling shareholders have also agreed to indemnify us, our directors,
officers, agents and representatives against certain liabilities, including
certain liabilities under the Securities Act.
LEGAL MATTERS
Broad and Cassel, a partnership including professional associations,
Miami, Florida, will give an opinion for us regarding the validity of the common
stock offered in this prospectus.
EXPERTS
Rachlin Cohen & Holtz, LLP, independent certified public accountants,
have audited our consolidated financial statements at December 31, 1998 and for
the year then ended as set forth in their report (which contains an explanatory
paragraph regarding certain liquidity and profitability considerations). BDO
Seidman, LLP, independent certified public accountants, have audited our
consolidated statements of operations, stockholders' equity and cash flows for
the year ended December 31, 1997 as set forth in their report (which contains an
explanatory paragraph regarding our ability to continue as a going concern). We
have included our consolidated financial statements in the registration
statement, in reliance on Rachlin Cohen & Holtz's report and BDO Seidman's
report, given on their authority as experts in accounting and auditing.
42
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form SB-2 with the Securities
and Exchange Commission in connection with this offering. This prospectus does
not contain all of the information set forth in the registration statement, as
permitted by the Rules and Regulations of the Securities and Exchange
Commission. Whenever reference is made in this prospectus to any contract or
other document of ours, the reference may not be complete and you should refer
to the exhibits that are part of the registration statement for a copy of the
contract or document.
We also file annual, quarterly and current reports and other
information with the Securities and Exchange Commission. You may read and copy
any report or document we file, and the registration statement, including the
exhibits, may be inspected at the Securities and Exchange Commission's public
reference room located at 450 Fifth Street, N.W., Washington, D.C. 20549. Please
call the Securities and Exchange Commission at 1-800-SEC-0330 for further
information on the public reference rooms. Our Securities and Exchange
Commission filings are also available to the public from the SEC's website at:
HTTP://WWW.SEC.GOV.
43
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Reports of Independent Certified Public Accountants F-2
Balance Sheet as of December 31, 1998 F-4
Statements of Operations for the Years Ended December 31, 1998 and 1997 F-5
Statements of Stockholders' Equity for the Years Ended December 31, 1998 and 1997 F-6
Statements of Cash Flows for the Years Ended December 31, 1998 and 1997 F-7
Notes to Financial Statements F-8
Balance Sheet as of September 30, 1999 (Unaudited) F-33
Statements of Operations for the Nine Months Ended September 30, 1999 and 1998
(Unaudited) F-34
Statements of Cash Flows for the Nine Months Ended September 30, 1999 and 1998
(Unaudited) F-35
Notes to Financial Statements F-36
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
5th Avenue Channel Corp.
North Miami Beach, Florida
We have audited the accompanying consolidated balance sheet of 5th
Avenue Channel Corp. as of December 31, 1998 and the related consolidated
statements of operations, stockholders' equity and cash flows for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of 5th Avenue
Channel Corp. as of December 31,1998, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
As more fully described in Note 2, the Company is subject to certain
liquidity and profitability considerations. The Company's plans with respect to
these matters are also described in Note 2.
RACHLIN COHEN & HOLTZ LLP
Miami, Florida
April 20, 1999
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
5th Avenue Channel Corp. (formerly known as Tel-Com Wireless
Cable TV Corporation)
Miami, Florida
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of 5th Avenue Channel Corp. (formerly known
as Tel-Com Wireless Cable TV Corporation) for the year ended December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of 5th Avenue Channel Corp. (formerly known as Tel-Com Wireless Cable TV
Corporation) for the year ended December 31, 1997 in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As described in Note
2 to the financial statements, the Company has experienced significant operating
losses and has negative cash flows from operations for the year ended December
31, 1997. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans in regard to these matters
are described in Note 2 to the financial statements. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
BDO SEIDMAN, LLP
Miami, Florida
March 27, 1998
F-3
<PAGE>
5TH AVENUE CHANNEL CORP.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------ ------------
ASSETS (UNAUDITED)
<S> <C> <C>
Current Assets:
Cash and cash equivalents ................................................ $ 256,209 $ 256,209
Accounts receivable, net of allowance for doubtful accounts of $186,000 .. 41,559 41,559
Loans receivable, related parties ........................................ 28,191 28,191
Prepaid expenses and other current assets ................................ 104,629 104,629
------------ ------------
Total current assets ..................................................... 430,588 430,588
Property and Equipment ........................................................ 1,323,404 1,323,404
Licenses ...................................................................... 4,651,061 4,651,061
Goodwill ...................................................................... 615,000 615,000
Other Assets .................................................................. 87,119 87,119
------------ ------------
$ 7,107,172 $ 7,107,172
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities ................................. $ 775,417 $ 775,417
Accrued payroll, President/Chairman of the Board ......................... 270,000 270,000
Current portion of long-term debt ........................................ 417,492 417,492
Loans and notes payable, related parties ................................. 972,529 972,529
------------ ------------
Total current liabilities ................................................ 2,435,438 2,435,438
------------ ------------
Long-Term Debt:
Convertible debenture payable to President/Chairman of the Board ......... 2,366,000 --
License installment payment plan notes ................................... 951,479 951,479
Convertible subordinated debentures, net of unamortized discount ......... 623,101 623,101
Other long-term debt ..................................................... 8,469 8,469
------------ ------------
3,949,049 1,583,049
Less current portion .......................................................... 417,492 417,492
------------ ------------
3,531,557 1,165,557
------------ ------------
Commitments, Contingencies, Subsequent Events, and Other Matters .............. -- --
Stockholders' Equity:
Preferred stock, $.001 par value, 5,000,000 shares authorized; 500 shares
designated as Series A; none issued and outstanding; 1,500 shares designated as
Series B; none issued and outstanding ......................................... -- --
Common stock, $.001 par value, 50,000,000 shares authorized; issued and
outstanding 4,503,143 shares (historical) and 9,235,143 shares (pro forma) .... 4,504 9,236
Additional paid-in capital .................................................... 9,942,225 12,303,493
Deficit ....................................................................... (8,806,522) (8,806,552)
------------ ------------
1,140,177 3,506,177
------------ ------------
$ 7,107,172 $ 7,107,172
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE>
5TH AVENUE CHANNEL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Revenue ..................................... $ 1,453,033 $ 1,085,149
Direct Costs ................................ 235,367 170,614
----------- -----------
Gross Margin ................................ 1,217,666 914,535
----------- -----------
Operating Expenses:
Selling, general and administrative ... 2,734,473 3,437,282
Website and product development ....... 696,762 --
Provision for asset impairment ........ 350,000 --
----------- -----------
3,781,235 3,437,282
----------- -----------
Loss from Operations ........................ (2,563,569) (2,522,747)
Other Income (Expense):
Interest income ............................. 2,377 6,179
Interest expense ............................ (736,749) (545,396)
----------- -----------
(734,372) (539,217)
----------- -----------
Net Loss (Note 18) .......................... $(3,297,941) $(3,061,964)
=========== ===========
Net Loss Per Common Share - Basic and Diluted $ (0.81) $ (1.17)
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
5TH AVENUE CHANNEL CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ADDITIONAL STOCK TOTAL
COMMON PREFERRED PAID-IN SUBSCRIPTION STOCKHOLDERS'
STOCK AMOUNT TOCK AMOUNT CAPITAL DEFICIT RECEIVABLE EQUITY
--------- ----------- ---- ---- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 2,196,212 $ 2,196 500 $ 1 $ 7,544,720 $(2,284,847) $(400,000) $ 4,862,070
Year Ended December 31, 1997
Partial payment of subscriptions
receivable for preferred stock -- -- -- -- -- -- 100,000 100,000
Cancellation of subscriptions
receivable for preferred stock -- -- (300) -- (300,000) -- 300,000 --
Sale of preferred stock -- -- 100 -- 100,000 -- -- 100,000
Issuance of common stock in debt
restructuring 180,000 180 -- -- 78,570 -- -- 78,750
Issuance of warrants in debt
restructuring -- -- -- -- 10,000 -- -- 10,000
Issuance of warrants in payment
of consulting fees -- -- -- -- 128,000 -- -- 128,000
Conversion of preferred stock to
common stock 1,183,431 1,184 (300) (1) (1,183) -- -- --
Exercise of warrants for common
stock 450,000 450 -- -- 449,550 -- -- 450,000
Preferred stock dividends -- -- -- -- 161,800 (161,800) -- --
Net loss -- -- -- -- -- (3,061,964) -- (3,061,964)
--------- ----------- ---- --- ----------- ----------- --------- -----------
Balance, December 31, 1997 4,009,643 4,010 -- -- 8,171,457 (5,508,611) -- 2,666,856
Year Ended December 31, 1998
Issuance of common stock in payment
of consulting fees 26,000 26 -- --
Issuance of common stock in
settlement of debt 82,500 83 -- -- 86,600 -- -- 86,626
Exercise of warrants 50,000 50 -- -- 99,553 -- -- 99,636
Issuance of common stock in
connection with 335,000 335 -- -- 49,950 -- -- 50,000
acquisition of The 5th Avenue
Channel, Inc
Discount on subordinated convertible
debentures -- -- -- -- 614,665 -- -- 615,000
Net loss -- -- -- -- 920,000 -- -- 920,000
-- -- -- -- -- (3,297,941) -- (3,297,941)
--------- ----------- ---- --- ----------- ----------- --------- -----------
Balance, December 31, 1998 4,503,143 $ 4,504 -- $-- $ 9,942,225 $(8,806,552) $ -- $ 1,140,177
========= =========== ==== === =========== =========== ========= ===========
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE>
5TH AVENUE CHANNEL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $(3,297,941) $(3,061,964)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 605,652 532,113
Amortization of discount on convertible subordinated debentures 448,101 --
Write-off of prepaid consulting fees -- 988,000
Provision for asset impairment and equipment write-off 431,632
Inducement costs and interest accrued to debenture balance -- 266,000
Warrants and stock compensation and other expenses incurred in connection
with debt restructure -- 188,750
Compensation in form of common stock and warrants issued to consultants 86,626 128,000
Write-off of deposit -- 120,142
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable 4,710 (34,080)
(Increase) decrease in prepaid expenses and other current assets (83,868) 23,791
Increase in accrued payroll, President/Chairman of the Board 180,000 --
Increase in accounts payable and accrued liabilities 301,421 443,569
----------- -----------
Net cash used in operating activities (1,323,667) (405,679)
----------- -----------
Cash Flows from Investing Activities:
Purchase of property and equipment (229,462) (315,921)
Increase in other assets (33,229) (1,277)
Decrease in restricted cash -- 346,400
Loans to related parties (28,191) --
----------- -----------
Net cash provided by (used in) investing activities (290,882) 29,202
----------- -----------
Cash Flows from Financing Activities:
Net proceeds from convertible subordinated debentures 1,055,330 --
Proceeds from exercise of warrants 50,000 450,000
Proceeds from subscription receivable -- 100,000
Proceeds from sale of preferred stock -- 100,000
Proceeds from loans from stockholders 935,394 255,979
Payment of loans from stockholders (275,344) (75,500)
Payment of notes payable -- (361,000)
Payment of long-term debt (7,829) (6,413)
----------- -----------
Net cash provided by financing activities 1,757,551 463,066
----------- -----------
Net Increase in Cash and Cash Equivalents 143,002 86,589
Cash and Cash Equivalents, Beginning 113,207 26,618
----------- -----------
Cash and Cash Equivalents, End $ 256,209 $ 113,207
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
F-7
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND CAPITALIZATION
The Company was organized as a Florida corporation on May 7, 1993 under
the name Tele Consulting Corp. The Company changed its name to Tel-Com Wireless
Cable TV Corporation on February 14, 1994. On March 8, 1999, the Company's
Articles of Incorporation were amended to change the Company's name to 5th
Avenue Channel Corp. and to increase the authorized number of shares of $0.001
par value common stock from 10,000,000 to 50,000,000 shares. All references to
the name of the Company and the number of shares of common stock in the
accompanying financial statements have been retroactively restated.
The Company is authorized to issue up to 5,000,000 shares of "blank
check" preferred stock and to permit the Board of Directors, without shareholder
approval, to establish such preferred stock in one or more series and to fix the
rights, preferences, privileges and restriction thereof, including dividend
rights, conversion rights, terms of redemption, liquidation preferences and the
number of shares constituting any series or the designation of such series.
During 1996, the Company designated 500 shares as Series A Convertible
Preferred Stock. The stock is convertible at the option of the holder or
automatically converted on the effective date of registration statement filed by
the Company with the Securities and Exchange Commission (SEC). The conversion
rate is the lesser of $3.25 or 65% of the average bid for the Company's common
stock for the five trading days prior to the conversion. The holders of these
shares are preferentially entitled to receive upon voluntary or involuntary
liquidation $1,000 per share plus all declared and unpaid dividends. As of
December 31, 1998, the Company had no Series A convertible preferred stock
issued and outstanding.
During 1997, the Company designated 1,500 shares as Series B Convertible
Preferred Stock. The stock is convertible at the option of the holder at a rate
of the lesser of $1.00 or 65% of the average bid for the Company's common stock
for the five trading days prior to the conversion. The holders of these shares
are preferentially entitled to receive upon voluntary or involuntary liquidation
$1,000 per share plus all declared and unpaid dividends. As of December 31,
1998, the Company had no Series B convertible preferred stock issued and
outstanding.
BUSINESS
Until the end of 1997, the Company's primary business was the operation
of wireless cable television systems in Costa Rica and LaCrosse, Wisconsin.
Wireless cable television is provided to subscribers by transmitting designated
frequencies over the air to a small receiving antenna at each subscriber's
location. The Company provides television and related cable services for
multiple dwelling units, commercial locations and single family residences. The
Company rebroadcasts 17 channels of cable programs to approximately 940
residential and commercial subscribers in a 25 mile radius of its tower in
LaCrosse. In Costa Rica, the Company rebroadcasts various channels of cable
programs and off-air channels to approximately 5,500 residential and commercial
subscribers in a 100 mile radius of the 11,000 foot Mt. Irazu in the center of
Costa Rica.
F-8
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BUSINESS (Continued)
During the fourth quarter of 1998, the Company acquired The 5th Avenue
Channel, Inc. (see Note 3). With this acquisition, the Company intends to move
forward as a multi-media Internet company, combining electronic commerce with
programming and other content on television and the Internet. Future Company
revenues are projected to be primarily derived from the electronic sale of
premium goods and services on the Internet, through retail outlets and on
television.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of 5th
Avenue Channel Corp. and its wholly-owned subsidiaries (the Company), after
elimination of intercompany accounts and transactions.
USE OF ESTIMATES
The accompanying consolidated financial statements have been prepared
in conformity with generally accepted accounting principles. In preparing the
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of the
balance sheet and operations for the period. Material estimates as to which it
is reasonably possible that a change in the estimate could occur in the near
term primarily consist of the allowance for impairment of certain licenses.
Although these estimates are based on management's knowledge of current events
and actions it may undertake in the future, they may ultimately differ from
actual results.
CASH AND CASH EQUIVALENTS
For financial presentation purposes, the Company considers those short-term,
highly liquid investments with original maturities of three months or less to be
cash and cash equivalents.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash and accounts receivable.
CASH
At various times during the year, the Company had deposits in financial
institutions in excess of federally insured limits. At December 31,1998, the
Company had deposits in excess of federally insured limits of approximately
$175,000. The Company maintains its cash with high quality financial
institutions which the Company believes limits these risks.
F-9
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTS RECEIVABLE
The Company conducts business and extends credit based on an
evaluation of the customers' financial condition generally without requiring
collateral. Exposure to losses on receivables is expected to vary by customer
due to the financial condition of each customer. The Company monitors exposure
to credit losses and maintains allowances for anticipated losses considered
necessary under the circumstances.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Expenditures for major
betterments and additions are charged to the asset accounts, while replacement,
maintenance and repairs which do not extend the lives of the respective assets
are charged to expense currently. Gain or loss on disposition of assets are
recognized currently. Depreciation expense is provided using the straight-line
method for financial statement purposes and accelerated methods for federal
income tax purposes over the estimated useful lives of the various assets,
generally 5 to 10 years.
LICENSES
Costs incurred to acquire or develop wireless cable channel licenses
are capitalized and amortized on a straight-line basis over their expected
useful lives (life of the license and expected renewal period), generally 15
years. Amortization of the licenses begins upon the commencement of operations.
The Company continually evaluates the carrying value of the licenses.
Impairments are recognized when the expected future undiscounted operating cash
flows to be derived from such intangible assets are less than their carrying
values.
ORGANIZATIONAL COSTS
Organizational costs are stated at cost less accumulated amortization.
Amortization expense is provided using the straight-line method over a five year
period.
GOODWILL
Goodwill primarily relates to the acquisition of the minority
stockholder interest of 5th Avenue Channel, Inc. and is amortized on a
straight-line basis over a five year period. Amortization will commence on
January 1, 1999. The Company will periodically evaluate whether changes have
occurred that would require revision of the remaining estimated useful life of
the assigned goodwill or render the goodwill not recoverable. If such
circumstances arise, the Company would use an estimate of the undiscounted value
of expected future operating cash flows to determine whether the goodwill is
recoverable.
F-10
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, loans receivable, accounts payable, accrued
liabilities, debentures payable, loans and notes payable and long-term debt. The
carrying amounts of such financial instruments, as reflected in the consolidated
balance sheet, approximate their estimated fair value as of December 31, 1998.
The estimated fair value is not necessarily indicative of the amounts the
Company could realize in a current market exchange or of future earnings or cash
flows.
WEBSITE AND PRODUCT DEVELOPMENT COSTS
Website and product development costs include expenses incurred by the
Company to develop, enhance, manage, monitor and operate the Company's website,
and are comprised primarily of compensation for product development staff and
payments to outside contractors. Website and product development costs are
expensed as incurred.
STOCK-BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees ("APB No. 25"), and related
interpretations, in accounting for its employee stock options rather than the
alternative fair value accounting allowed by SFAS No. 123, Accounting for
Stock-Based Compensation. APB No. 25 provides that the compensation expense
relative to the Company's employee stock options is measured based on the
intrinsic value of the stock option. SFAS No. 123 requires companies that
continue to follow APB No. 25 to provide a pro-forma disclosure of the impact of
applying the fair value method of SFAS No. 123.
NET LOSS PER COMMON SHARE
The Company computes earnings (loss) per share in accordance with SFAS
No. 128, "EARNINGS PER SHARE", which was adopted in 1997. This standard requires
dual presentation of basic and diluted earnings per share on the face of the
income statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the diluted earnings per
share computation.
Net loss per common share (basic and diluted) is based on the net loss divided
by the weighted average number of common shares outstanding during the year.
The Company's potentially issuable shares of common stock pursuant to
outstanding stock purchase options, performance shares related to the
acquisition of 5th Avenue Channel, Inc., and warrants and convertible preferred
stock and debentures are excluded from the Company's diluted computation as
their effect would be anti-dilutive.
F-11
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company accounts for income taxes using Statement of Financial
Accounting Standards (SFAS) No. 109, "ACCOUNTING FOR INCOME TAXES", which
requires recognition of deferred tax liabilities and assets for expected future
tax consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
FOREIGN CURRENCY TRANSLATION
Foreign currency denominated assets and liabilities of subsidiaries
with local functional currencies are translated to United States dollars at year
end exchange rates. The effects of translation were not material at December 31,
1998. Subsidiaries with a United States dollar functional currency remeasure
monetary assets and liabilities at year end exchange rates and non-monetary
assets and liabilities at historical exchange rates. The effects of
remeasurement are included in income.
Exchange gains and losses arising from transactions denominated in
foreign currencies are translated at average exchange rates. The effects of
these exchange adjustments are included in income and amounted to $700 and
$7,049 in 1998 and 1997, respectively.
SEGMENT INFORMATION
The Company follows the provisions of SFAS No. 131, "DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION." This standard requires that
companies disclose operating segments based on the manner in which management
disaggregates the Company in making internal operating decisions.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising costs incurred
for 1998 and 1997 were not material.
CERTAIN RISKS AND UNCERTAINTIES
Operations in the United States are regulated by the U.S. Federal
Communications Commission and may be subject to non-renewal, revocation or
cancellation for violations of the Communications Act of 1934 that may occur.
F-12
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CERTAIN RISKS AND UNCERTAINTIES (CONTINUED)
In connection with the Company's Costa Rican operations (see Note 5),
its operations are regulated mainly by the Radio and Television Law - Ley de
Radio y Television, No. 1758 of June 19, 1954, as amended, and the Regulation of
Wireless Stations Regulamenta de Estaciones Inalimbrieds, No. 63 of December 11,
1956 and the Broadcasting Rule of Atlantic City and the International Agreements
Regarding Broadcasting executed in Washington, D.C. in 1949.
The pay television industry is highly competitive. Wireless cable
television systems face or may face competition from several sources, including
traditional and established hard-wire cable companies.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "REPORTING COMPREHENSIVE INCOME" and No. 131, "DISCLOSURES ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION." SFAS No. 130 establishes standards
for reporting and displaying comprehensive income, its components and
accumulated balances. SFAS No. 131 establishes standards for the way that public
companies report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. Both SFAS No. 130
and SFAS No. 131 are effective for periods beginning after December 15,1997. The
Company adopted these new accounting standards in 1998, and their adoption had
no effect on the Company's financial statements and disclosures.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES." SFAS No.
133 requires companies to recognize all derivatives contracts as either assets
or liabilities in the balance sheet and to measure them at fair value. If
certain conditions are met, a derivative may be specifically designated as a
hedge, the objective of which is to match the timing of the gain or loss
recognition on the hedging derivative with the recognition of (i) the changes in
the fair value of the hedged asset or liability that are attributable to the
hedged risk or (ii) the earnings effect of the hedged forecasted transaction.
For a derivative not designated as a hedging instrument, the gain or loss is
recognized in income in the period of change. SFAS No. 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000.
Historically, the Company has not entered into derivatives contracts to
hedge existing risks or for speculative purposes. Accordingly, the Company does
not expect adoption of the new standard on January 1, 2001 to affect its
financial statements.
F-13
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 2. LIQUIDITY AND PROFITABILITY CONSIDERATIONS
During 1997, 1998, and continuing in early 1999, the Company
experienced, and continues to experience, certain cash flow problems and has,
from time to time, experienced difficulties meeting its obligations as they
become due. In addition, the Company has negotiated several settlement
agreements with its creditors to settle its outstanding obligations through the
issuance of stock. As reflected in the consolidated financial statements, the
Company has incurred net losses of approximately $3,298,000 in 1998 and
$3,062,000 in 1997, and as of December 31, 1998, the Company's consolidated
financial position reflects a working capital deficiency of approximately
$2,000,000.
Management's plans with regard to these matters encompass the following
actions:
LIQUIDITY
1. FINANCING BY MAJOR STOCKHOLDER
The major stockholder has provided the Company a commitment
that, in the event and to the extent that the Company is unable to obtain at
least $2,000,000 in debt or equity financing from third party sources (see
below) during the twelve month period ending April 30, 2000 and the Company
experiences a cash shortfall during this period, the major stockholder is to
advance funds to the Company, on a debt or equity basis or a combination
thereof, as agreed to by the Board of Directors, in an amount equal to the
difference between $2,000,000 and such third party funding.
2. FINANCING FROM THIRD PARTY SOURCES
Management is currently involved in various discussions with
other third party sources, seeking to raise debt or equity financing. Management
anticipates that these discussions should ultimately result in financing to meet
the Company's needs, together with the financing commitment provided by the
major stockholder (see above).
3. CONVERSION OF OUTSTANDING WARRANTS
As more fully described in Note 15, the Company presently has
outstanding warrants to purchase an aggregate of 2,475,000 shares of common
stock as follows:
Publicly traded common stock purchase warrants....... 1,610,000
Private placement warrants........................... 625,000
Underwriter stock warrants........................... 240,000
---------
2,475,000
=========
F-14
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 2. LIQUIDITY AND PROFITABILITY CONSIDERATIONS (CONTINUED)
LIQUIDITY (Continued)
3. CONVERSION OF OUTSTANDING WARRANTS (Continued)
These warrants provide for an exercise price of $5.75 per
share and expire from August 1999 to May 2000. However, the warrants are
redeemable and may be called by the Company prior to the expiration dates if the
common stock trades above $6.90 for a period of 20 consecutive trading days and
the underlying shares are registered. The Company expects to complete the filing
of a registration statement regarding such underlying shares no later than the
third quarter of 1999. If the Company were then to call the warrants at their
stipulated redemption price and, as a result, all of the warrants were
exercised, the gross proceeds to the Company would amount to approximately
$14,000,000.
PROFITABILITY
1. BUSINESS PLAN
The Company has formulated, and is in the process of
implementing, a business plan intended to define the Company's strategy for the
return of the Company to profitability, which plan includes the following:
o Expansion of the retail, television and other sales of
products and services of IBC, and the maximization of the
contractual relationships developed and to be developed by
IBC (see Note 23);
o Increase in Internet commerce, with e-commerce sales to both
consumers as well as other Internet sites which market to
consumers;
o Development of a secure gift and buying certificate program
for the Company's Internet customers, including
business-to-business customers;
o Launch of the 5th Avenue Television Channel, including
co-branded programming with Zacks Investment Research and
Nightingale-Conant, among other participants.
2. IMPROVEMENT IN OPERATIONAL COSTS
Management is continuing in its efforts to improve controls
over operating costs, enhance controls of overhead expenses and improve profit
margins.
F-15
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 3. ACQUISITION OF THE 5TH AVENUE CHANNEL, INC.
SHARE EXCHANGE AGREEMENT
In the Share Exchange Agreement dated February 28, 1999 effective
December 10, 1998, the Company completed the acquisition of The 5th Avenue
Channel, Inc. (5th Avenue Channel). Under the agreement, the Company exchanged
335,000 shares of the Company's stock in exchange for 100% of the outstanding
common stock of 5th Avenue Channel and agreed to issue up to 665,000 additional
"performance shares" of the Company's common stock. 332,500 shares will be
earned when 5th Avenue Channel achieves or exceeds $10,000,000 in revenue in any
calendar quarter and another 332,500 shares can be earned if 5th Avenue Channel
achieves or exceeds $25,000,000 of gross sales or $1,000,000 of net income in
any one calendar quarter. In a March 17, 1999 amendment to the agreement, if 5th
Avenue Channel achieves $25,000,000 of sales or $1,000,000 in net income in any
calendar quarter, all 665,000 of the performance shares will be earned.
The controlling stockholder of the Company owned 65% of 5th Avenue
Channel common stock and, accordingly, that portion of the acquisition has been
accounted in a manner similar to the pooling of interests method, at the
majority stockholder's historical cost, which was insignificant. The portion of
the acquisition acquired from minority stockholders was recorded at estimated
fair value of the common stock issued. When and if the performance shares are
earned, they will be recorded at estimated fair value.
5th Avenue Channel's primary asset is its Internet concept, which is
primarily an intangible asset. The Company allocated the purchase price to this
asset, which will be amortized over a five year period commencing January 1,
1999.
5th Avenue Channel commenced limited operations in December 1998.
$696,762 of website and product development costs were included in the Company's
consolidated statements for 5th Avenue Channel in 1998 and $57,453 included in
other operating expenses in 1997. There were no significant revenues generated
in 1998 or 1997 by 5th Avenue Channel. Accordingly, substantially all of 5th
Avenue Channel's operating results have been included in the Company's
consolidated financial statements for 1998.
F-16
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 3. ACQUISITION OF 5TH AVENUE CHANNEL, INC. (CONTINUED)
CONSULTING AGREEMENT
As an integral part of the acquisition of 5th Avenue Channel, the
Company entered into a consulting agreement with Ivana Trump for "on air"
marketing and other promotional services. Ms. Trump is Chairman of one of the
Company's subsidiaries and was a minority stockholder of 5th Avenue Channel
prior to its acquisition. Ms. Trump will receive $10,000 per month and
additional remuneration based upon appearances. In addition, she received
options to purchase up to 700,000 shares at various exercise prices ranging from
$5 to $15 per share. The options expire in December 2001. The agreement has an
initial term expiring on December 31, 2001 and is renewable for successive
additional one-year terms unless either party provides specified written notice
of non-renewal.
NOTE 4. PROPERTY AND EQUIPMENT
ESTIMATED USEFUL
LIVES (YEARS)
Leasehold improvements 7-10 $ 24,439
Furniture, fixtures and office equipment 7 118,399
TV signal equipment 5-10 1,772,794
Vehicles 5 133,372
------------
2,049,004
Less accumulated depreciation 725,600
------------
$1,323,404
============
Depreciation expense was $286,488 and $219,094 for 1998 and 1997,
respectively. In 1998, the Company wrote off approximately $82,000 of converter
boxes which were no longer operational.
NOTE 5. LICENSES
LOCATION OF LICENSE
United States:
LaCrosse, Wisconsin $ 371,493
Stevens Point and Wausau, Wisconsin, net
of $350,000 allowance for impairment 839,361
-----------
1,210,854
Costa Rica:
San Jose, Costa Rica 4,174,000
-----------
5,384,854
Less accumulated amortization 733,793
-----------
$4,651,061
===========
Amortization expense was $319,697 and $312,219 for 1998 and 1997,
respectively.
F-17
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 5. LICENSES (CONTINUED)
UNITED STATES LICENSES
During 1993, the Company entered into agreements for the lease and
purchase of certain channel licenses and for the lease and purchase of
transmitting equipment and tower site usage in LaCrosse, Wisconsin. Pursuant to
the agreements, the Company incurred $371,493 of costs related to the channel
licenses.
On March 28, 1996, the Federal Communications Commission (FCC)
completed its auction of authorizations to provide single channel and
Multi-Channel Multi-Point Distribution Service (MDS) in 493 Basic Trading Areas.
The Company won bids in three markets: Hickory-Lenoir-Morganton, NC;
Wausau-Rhinelander, WI; and Stevens Point-Marchfield-Wisconsin Rapids, WI. The
Company's total bid for these three markets was $3,046,212. The Company made the
full 10% down payment of $304,622 for all three markets but only made the second
10% down payment of $118,946 on the two Wisconsin markets.
On July 24, 1998, the Company received written notification from the
FCC that the two Wisconsin licenses had been conditionally granted, subject to
the making of required installment payments, effective as of July 25, 1997. In
connection therewith, the Company elected to participate in the installment
payment plan, and two installment payment plan notes were entered into in the
total amount of $951,479. The terms of these notes provide for the payment of
interest only at 9.125%, aggregating $115,260, through October 31, 1998, and
thereafter $21,702 on a quarterly basis until July 31, 1999; commencing on
October 31, 1999, quarterly payments of principal and interest, aggregating
$42,211, are required through the maturity date of July 25, 2007. The Company
has granted the FCC a first lien on and security interest in all of the rights
and interest in the two Wisconsin licenses and all proceeds of any sale or other
disposition thereof.
The Company has accrued, but has not paid, the required interest
payment of $115,260 which was due on October 31, 1998 or the payment of $21,702
which was due on January 31, 1999. The Company intends to contest the
retroactive interest for the period from July 25, 1997 until receipt of
notification of the grant; however, the Company intends to offer to make the
installment payment of $115,260 by April 29, 1999, the date the Company has been
advised is the final date to make the two Wisconsin license payments without
being considered in default, provided such payments will be applied to these
Wisconsin licenses and not held to make good the Hickory default (see below).
Future required principal payments are as follows:
Year ending December 31:
1999 $ 20,331
2000 86,586
2001 94,999
2002 103,969
2003 113,786
Thereafter 531,808
---------
951,479
=========
F-18
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 5. LICENSES (CONTINUED)
UNITED STATES LICENSES (Continued)
In 1998, the Company recorded a $350,000 impairment allowance relating
to the Stevens Point and Wausau, Wisconsin licenses. The Company believes the
value of these licenses declined by the estimated allowance recorded. At
December 31, 1998, these licenses have not been placed in service.
On September 1, 1996, the unpaid license fee payable of $1,671,175 for
the Hickory, NC license was defaulted. According to Section 21.959 in the FCC
MDA Audit Information Package, a maximum default payment of 3% of the defaulting
bidder's bid amount was due to the FCC. This amount, $65,544, was charged to
operations in 1996. The remaining $120,142 of the deposit submitted to the FCC
for Hickory, NC was charged to operations in the fourth quarter of 1997.
The Company will be liable to the FCC for the difference between the
Company's winning bid and a lower winning bid received by the FCC in a
subsequent reauction of this license. The FCC has not yet announced plans to
reauction the Hickory, NC license and no liability is recorded for the potential
shortfall of a reauction.
COSTA RICA LICENSES
In February 1996, the Company acquired three companies holding a total
of 18 frequency licenses for broadcast of pay television (i.e., "wireless
cable") services in Costa Rica together with related equipment and contracts
with subscribers. These companies were acquired from the person who, as the
result of the loan restructure described in Note 7, subsequently came to be the
present major stockholder of the Company.
In the first acquisition, the Company acquired 100% of Televisora
Canal Diecineuve, S.A. ("Canal 19"), for $1 million cash and $2 million due one
year later with interest at 3.6% per annum. The $2 million note payable was
secured by the stock of Canal 19 and of Grupo Masteri, discussed below.
In the second acquisition, the Company acquired all of the common
stock of Grupo Masteri, S.A. ("Grupo") for 121,212 restricted shares of the
Company's common stock valued at $8.25 per share.
The third acquisition was of TelePlus, S.A. ("TelePlus"). As
consideration for the purchase of TelePlus, the Company agreed to pay the Seller
$50 times the increase in subscribers for the one year period after TelePlus had
six pay television channels broadcasting to the public. In October 1996,
TelePlus began broadcasting six pay television channels to 760 subscribers. Over
the next year, TelePlus added 3,480 subscribers. As a result, $174,000 was added
to licenses and notes payable to stockholders.
F-19
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 5. LICENSES (CONTINUED)
COSTA RICA LICENSES (Continued)
The entire $4,174,000 purchase price of the three Costa Rican companies
was allocated to the 18 licenses since the value of the other assets acquired
was considered minimal.
NOTE 6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable $166,866
Accrued interest, including
approximately $80,000 to related parties 236,177
Sales taxes payable 53,888
Other accrued liabilities 318,486
--------
$775,417
========
NOTE 7. LOAN RESTRUCTURE
In February 1997, the Company entered into an agreement to restructure
the $2 million note incurred as part of the acquisition of Canal 19 (Note 5).
The restructure agreement required the Company to pay $625,000 of the principal
balance of the note on or before March 7, 1997. The remaining $1,375,000
principal balance, plus accrued interest thereon, was due on or before February
23, 1998. However, with an additional payment of $100,000, the Company could
extend the maturity date for an additional six months.
The Company paid $50,000 of the $100,000 on February 24, 1997. The
Company failed to pay the $625,000 by March 7, 1997 and the $50,000 was retained
by the seller as a penalty. In April 1997, the Seller declared the note to be in
default.
On May 19, 1997, the Company entered into an agreement with the Seller
restructuring the $2 million note issued in the acquisition of Canal 19 into a
convertible debenture maturing in 12 months and bearing interest at 12% per
annum. The principal amount of the debenture was increased by $100,000 for
expenses owed or reimbursable to Seller at the issue date of the debenture.
As consideration for this debt restructuring, the Company agreed to
issue to the Seller (i) 180,000 shares of the Company's common stock with piggy
back registration rights; (ii) a warrant to purchase 500,000 shares at $1.00 per
share; and (iii) a warrant to purchase 500,000 shares at $5.00 per share. Under
the agreement, the Seller became the President and Chairman of the Board and
received the right to nominate two members to the Company's Board of Directors
until such time as the President exercised the conversion rights under the
debenture. A value of $78,750 was assigned to the aforementioned stock and
$10,000 to the warrants issued.
F-20
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 7. LOAN RESTRUCTURE (CONTINUED)
The debenture is convertible by the Seller into the Company's common
stock at any time after the issue date prior to payment of the debenture on at
least 30 days advance notice. The conversion price was equal to the lesser of
(1) $.50 per share of common stock or (2) the average of the closing "bid" for
the Company's common stock as reported on NASDAQ for the five trading days
immediately prior to the conversion date. At either the President's or the
Company's option, $1 million of this amount could have been extended for an
additional period of 12 months with interest at 15% per annum.
No interest was paid on the debenture and the $153,033 of interest
accrued from May 19, 1997 to December 31,1997 was added to the debenture
balance.
In November 1997, the President notified the Company of his intention
to convert the debenture into common stock. As inducement for the early
conversion and for the President/Chairman of the Board foregoing all interest on
the debenture after December 31, 1997, an additional $109,967 was added to the
debenture principal balance in 1997.
The resulting $2,366,000 debenture balance was to be converted into
4,732,000 restricted shares of common stock as soon as the Company's articles of
incorporation were amended to increase the number of authorized shares. On March
8, 1999, the Company's Articles of Incorporation were amended to increase the
number of shares authorized from 10,000,000 to 50,000,000. In January 1999,
2,366,000 shares were issued pursuant to conversion of one-half of the debenture
and in March 1999, the remaining 2,366,000 shares were issued in the conversion
of the remaining one-half of the debenture. See Note 21 regarding pro forma
presentation of the issuance of the shares of common stock.
The $238,750 total cost of extending and restructuring the debt and the
$109,967 early conversion inducement were recorded as interest expense in 1997.
NOTE 8. LOANS RECEIVABLE, RELATED PARTIES
At December 31, 1998, the Company had a loan receivable of
approximately $28,000 due from a director. The loan was settled in early 1999 in
exchange of services performed by the director in 1999. Imputed interest on the
loan for 1998 was not material.
F-21
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 9. LOANS AND NOTES PAYABLE, RELATED PARTIES
<TABLE>
<CAPTION>
<S> <C>
Loans payable to the President/Chairman of the Board, interest at 18%,
no specified maturity date. $ 79,079
Loan payable to former CEO and director, interest at 10%, no specified
maturity date. 18,450
Loan payable to current director, interest at 10%, no specified
maturity date. 25,000
Note payable to the President/Chairman of the Board, bearing interest
at 8%, due November 16, 1999. 550,000
Note payable to the President/Chairman of the Board, bearing interest
at 10%, due July 3, 1999. 300,000
--------
$972,529
========
</TABLE>
Interest expense on the related party loans and notes payable amounted
to approximately $63,000 and $538,000 during 1998 and 1997, respectively, and
accrued interest amounted to approximately $80,000 (approximately $70,000 due to
the President) at December 31, 1998.
NOTE 10. OTHER LONG-TERM DEBT
Other long-term debt consists of two loans, principal and interest at
9.70% and 9.25%, payable monthly through August 2000, collateralized by
vehicles. Future required principal payments under these loans are $6,509 for
1999 and $1,960 for 2000.
NOTE 11. COMMITMENTS
LEASE COMMITMENTS
The Company leases its offices, certain operating facilities and
equipment under several operating leases with terms expiring through 2003.
Future minimum lease payments under these operating leases are
approximately as follows:
1999 $ 93,000
2000 86,000
2001 92,000
2002 98,000
2003 34,000
--------
Total $403,000
========
F-22
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 11. COMMITMENTS (CONTINUED)
LEASE COMMITMENTS (Continued)
The Company also rents office space in Costa Rica from the
President/Chairman of the Board. There is no formal agreement regarding the
rental of the Cost Rica property and, accordingly, these arrangements are on a
month-to-month basis.
Rent expense was approximately $118,000 and $84,000 for 1998 and 1997,
respectively. The rent paid by the Company to the President/Chairman of the
Board for the Costa Rica property lease was approximately $20,000 for 1998.
The Company has also entered into lease agreements for ITFS excess capacity for
four channels with each of the Shekinah Network and the Morningstar Educational
Network for use in the LaCrosse System. In October 1997, the FCC granted
Shekinah Network and Morningstar such licenses. The terms of such leases expire
10 years from the license grant date and provide for the negotiation of new
lease agreements upon the expiration of the initial 10-year terms. The Company
is required to pay a monthly subscriber royalty fee based on the number of
subscribers.
JOINT MARKETING AGREEMENT
The Company entered into a joint marketing agreement with a company to
fulfill certain sales to customers for select merchandise. The Company will
advance certain costs to the fulfillment company and share portions of the
earned gross margin on each item on a scheduled basis. The higher the gross
margin, the greater percentage of gross margin earned by the Company.
NOTE 12. PREFERRED STOCK
On November 25, 1996, the Company accepted a Subscription Agreement
from Amber Capital Corporation and Investor Resource Services, Inc. (the
"Buyers") for a total of 500 shares of its Series A Convertible Preferred Stock
at a price of $1,000 per share (the "Preferred Shares"), for a total
subscription price of $500,000. The Buyers delivered $100,000 and promissory
notes for $400,000, at closing. The Buyers paid an additional $100,000 against
the Notes on January 8, 1997. The $300,000 remaining balance on the Notes, which
was due on January 31, 1997, was not paid, and the Company and the Buyers agreed
to terminate the balance of the Subscription Agreements, cancel the Notes and
revert 300 shares of the preferred stock back to the Company.
On March 14, 1997, Aurora Capital purchased 100 shares of the Company's
Series B Convertible Preferred Stock for $100,000. The 300 aggregate shares of
Series A and Series B Convertible Preferred Stock were converted into 1,183,431
shares of common stock on September 16, 1997. During 1997, the Company recorded
a preferred stock dividend of $161,800 which represented the discounted portion
of the conversion rate into common stock determined at the time of issuance.
F-23
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 13. CONVERTIBLE SUBORDINATED DEBENTURES
In April 1998, the Company completed a private offering of 12%
Convertible Subordinated Debentures (the "May Debentures") due on October 31,
1999. Interest is payable monthly. The May Debentures are convertible into
shares of common stock at $2 per share. Debenture holders have the option to
convert up to 50% of the principal amount of the Debentures in the event that
the Company has not exercised its redemption rights at any time prior to
February 28, 1999. If the Company does not offer to redeem the debentures by
that date, Debenture holders have the right to convert the remaining 50% of the
principal amount after July 31, 1999.
The Company received net proceeds of $555,330 ($595,000 less issuance
costs of $39,670). At the time of issuance of the debentures, the market price
of the Company's common stock was higher than the conversion rate, resulting in
a beneficial conversion feature which was limited to the amount of the proceeds
received ($595,000). This amount was treated as deferred interest expense and
recorded as a reduction of the convertible debenture liability with a
corresponding credit to additional paid-in capital. 50% of this amount is being
amortized into interest expense from the issuance dates through February 28,1999
(the first conversion date) and the remaining 50% is being amortized to interest
expense from the issuance dates through July 31, 1999 (the second conversion
date). A total of $390,652 was amortized as interest expense during 1998. The
unamortized discount has been presented as a reduction of the convertible
subordinated debenture balance.
In November 1998, the Company completed a private offering of a 12%
Convertible Subordinated Debenture (the "November Debenture") due on April 30,
2000. Interest is payable quarterly from January 30, 1999, to April 30, 2000.
The November Debenture is convertible into shares of common stock at $2.50 per
share. The Debenture holder has the option to convert up to 50% of the principal
amount of the Debenture in the event that the Company has not exercised its
redemption rights at any time prior to July 30, 1999. If the Company does not
offer to redeem the debentures by that date, the Debenture holder has the right
to convert the remaining 50% of the principal amount after December 31, 1999.
The Company received net proceeds of $500,000 in connection with the
November Debenture. At the time of issuance of the debenture, the market price
of the Company's common stock was higher than the conversion rate, resulting in
a beneficial conversion feature of $325,000. This amount was treated as deferred
interest expense and recorded as a reduction of the convertible debenture
liability with a corresponding credit to additional paid-in capital. 50% of this
amount is being amortized into interest expense from the issuance date through
July 30, 1999 (the first conversion date) and the remaining 50% is being
amortized to interest expense from the issuance date through December 31, 1999
(the second conversion date). A total of $57,449 was amortized as interest
expense during 1998. The unamortized discount has been presented as a reduction
of the convertible subordinated debenture balance.
MAY DEBENTURES
Unpaid principal balance $ 595,000
Less unamortized discount (204,348)
----------
Convertible debenture, net 390,652
==========
F-24
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 13. CONVERTIBLE SUBORDINATED DEBENTURES (CONTINUED)
NOVEMBER DEBENTURE
Unpaid principal balance 500,000
Less unamortized discount (267,551)
Convertible debenture, net 232,449
----------
Total $ 623,101
==========
NOTE 14. COMMON STOCK
COMMON STOCK FOR SERVICES
During 1998, the Company issued a total of 26,000 shares of common
stock for services rendered in 1998 on behalf of 5th Avenue Channel and issued
7,500 shares in payment of legal services included in accounts payable at
December 31, 1997. The issuance of the 33,500 shares was recorded at the closing
price on the day preceding the issuance of the shares totaling $126,939.
CONVERSION OF DEBT INTO COMMON STOCK
During 1998, the holder of a note payable converted the note into
common stock. The note, amounting to $50,000, plus accrued interest, was
converted into 75,000 shares.
NOTE 15. STOCK WARRANTS, CONSULTING AGREEMENTS AND SHARES RESERVED
PUBLICLY TRADED COMMON STOCK PURCHASE WARRANTS
In connection with its initial public offering on May 10, 1995, the
Company sold 1,610,000 redeemable common stock purchase warrants at a price of
$.25 per warrant. Each warrant entitled the holder to purchase, at any time from
the date of the offering through the fifth anniversary date (May 10, 2000), one
share of common stock at a price of $5.75 per share. The warrants are redeemable
at a price of $.25 per warrant under certain circumstances.
PRIVATE PLACEMENT WARRANTS
In August 1994 and December 1, 1994, the Company issued an aggregate of
625,000 common stock warrants as part of the sale of units of its securities.
Such warrants may be exercised within five years from the date of their issuance
at an exercise price of $5.75 per share. The warrants provide for adjustment in
the number of shares underlying the warrants upon the occurrence of certain
events, such as stock dividends, stock splits or other reclassifications of the
Company's common stock, a consolidation or merger of the Company, or a
liquidating distribution of the Company's common stock.
F-25
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 15. STOCK WARRANTS, CONSULTING AGREEMENTS AND SHARES RESERVED
(Continued)
UNDERWRITER STOCK WARRANTS
In connection with the public offering , the Company sold Underwriter's
stock warrants, at a price of $.001 per warrant. Warrants to purchase 100,000
shares of common stock and warrants to purchase an additional 140,000 warrants
were sold. The underwriter's stock warrants are exercisable at a price of $7.50
per share, and the underwriter's warrants are exercisable at a price of $.375
per warrant through May 10, 2000. Each warrant underlying the underwriter's
warrants is exercisable for one share of common stock at an exercise price of
$5.75 per share.
CONSULTING AGREEMENTS
On December 23, 1996, the Company engaged four individuals (the
"Consultants") to provide financial and public relations services to the
Company. The Company issued a total of 200,000 shares of its common stock valued
at $988,000 (fair value) to the Consultants as compensation for the services to
be provided by the Consultants. No costs were expensed as of December 31, 1996
as no services had been performed under the agreements. The $988,000 was charged
to operating expenses in 1997.
In July 1997, the Company entered into a two year consulting agreement
with an investment banking firm (the "Consultant'). Pursuant thereto, the
Company granted the Consultant 500,000 one year warrants exercisable at $1.00
per share, 200,000 one year warrants exercisable at $2.50 per share and 100,000
three year warrants exercisable at $2.50 per share.
A value of $128,000 was assigned to the warrants and was charged to
operating expenses in the second half of 1997. In October 1997, assignees of the
Consultant exercised 450,000 of the one year warrants at $1 per share and the
Company received $450,000. In July 1998, the exercise date for the remaining
50,000 one year warrants was extended and, in September 1998, the assignee of
these 50,000 warrants exercised the warrants at $1.00 per share, for proceeds of
$50,000. See Note 7 for warrants issued to the President/Chairman of the Board
in the restructuring of the $2,000,000 debt.
SHARES RESERVED
As of December 31, 1998, the Company has reserved a total of 10,777,500
shares of common stock for future issuances pursuant to stock warrant, stock
option and convertible debt agreements, including the 4,732,000 shares issued in
1999 for conversion of the convertible debenture (see Note 7), and performance
shares. This total includes 177,000 shares reserved under the stock option plan
for options that have not been granted at December 31, 1998.
F-26
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 16. STOCK OPTION PLAN
In January 1995, the Company adopted a stock option plan (the "SOP"),
pursuant to which officers, directors, key employees and consultants of the
Company are eligible to receive incentive and/or non-qualified stock options.
The SOP covers 200,000 shares of the Company's common stock, $.001 par value.
The SOP is administered by the Board of Directors and will expire in 2005.
Incentive stock options granted under the SOP are exercisable for a period of up
to ten years from the date of grant at an exercise price which is not less than
the fair market value of the common stock on the date of grant, except that the
terms of an incentive stock option granted under the SOP to a stockholder owning
more than 10% of the outstanding common stock may not exceed five years and its
exercise price may not be less than 110% of the fair market value of the common
stock on the date of grant.
The Company has also issued stock options to certain consultants and
non-employee celebrities. The Company has issued 995,000 stock options to the
above consultants. The options are at various exercise prices from $2 to $15 and
expire over three to five year periods.
The Company applies APB Opinion 25, "ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES" and related interpretations in accounting for options issued to
employees and consultants. Compensation cost for stock options is measured as
the market price of the Company's common stock at the date of grant, or
agreement in principle to grant the option, if earlier, over the amount the
recipient must pay to acquire the common stock. Compensation expense of $100,000
was recognized in 1998.
Statement of Financial Accounting Standards No. 123 (SFAS 123),
"ACCOUNTING FOR STOCK-BASED COMPENSATION", requires the Company to provide pro
forma information regarding net income and earnings per share as if compensation
cost for the Company's employee stock options has been determined in accordance
with the fair value based method prescribed in SFAS 123.
The Company estimates the fair value of each stock option at the grant
date by using the Black-Sholes option-pricing model with the following
weighted-average assumptions used for grants in 1998 (no options were granted in
1997); no dividend yield; an expected life of three to five years; 130% expected
volatility, and 5.07% risk free interest rate.
The option valuation model was developed for use in estimating the fair
value of traded options which have no vesting restrictions and are fully
transferable. In addition, valuation models require the input of highly
subjective assumptions including the expected price volatility. Since the
Company's stock options have characteristics significantly different from those
of traded options, and since variations in the subjective input assumptions can
materially affect the fair value estimate, the actual results can vary
significantly from estimated results.
Under the accounting provisions of SFAS 123, the Company's net loss and
loss per share would have been reduced to the pro forma amounts indicated below:
1998 1997
------------- -------------
Net loss:
As reported (Note 18) $ (3,297,941) $ (3,223,764)
Pro forma (4,781,915) (3,223,764)
Loss per share - basic and diluted:
As reported $ (0.81) $ (1.17)
Pro forma (1.18) (1.17)
F-27
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 16. STOCK OPTION PLAN (CONTINUED)
A summary of the status of options under this plan and additional
options, granted outside of the plan as of December 31, 1998 and 1997 and
changes during the year ended on that date are presented below:
<TABLE>
<CAPTION>
1998 1997
------------------------ -----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Balance at beginning of year 23,000 $ 7.64 77,000 $ 7.37
Options granted 995,000 7.14 -- --
Options exercised -- -- -- --
Options expired -- -- (54,000) 7.04
--------- -------- --------- --------
Balance at end of year 1,018,000 $ 7.15 23,000 $ 7.64
========= ======== ========= ========
Options granted during the year at exercise prices
which exceed market price of stock at date of grant:
Weighted average exercise price 935,000 $ 7.45 -- --
Weighted average fair value 935,000 4.17 -- --
Options granted during the year at exercise prices
which equal market price of stock at date of grant:
Weighted average exercise price 60,000 2.25 -- --
Weighted average fair value 60,000 3.78 -- --
</TABLE>
Note: No options were granted during 1997.
The following table summarizes information about options under the plan
and those issued outside of the plan which are outstanding at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------- -------------------------
NUMBER WEIGHTED NUMBER
OUTSTANDING AVERAGE WEIGHTED EXERCISABLE WEIGHTED
RANGE OF AT REMAINING AVERAGE AT AVERAGE
EXERCISE DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
PRICES 1998 LIFE PRICE 1998 PRICE
- ------------- --------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$2.00 - $2.25 295,000 4.3 $ 2.05 295,000 $ 2.05
5.00 - 5.85 209,000 3.0 5.03 209,000 5.03
8.00 - 8.25 205,000 2.9 8.01 205,000 8.01
9.25 - 9.35 9,000 8.0 9.32 9,000 9.32
12.00 200,000 3.0 12.00 200,000 12.00
15.00 100,000 3.0 15.00 100,000 15.00
--------- ---------
1,018,000 4.0 $ 7.15 1,018,000 $ 7.15
========= ======= ========= ========= =========
</TABLE>
F-28
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 17. INCOME TAXES
No credit for income taxes has been reflected in the accompanying
financial statements for 1998 and 1997 because of the significant uncertainty
that exists regarding the realization of such income tax credits (see below).
As of December 31, 1998, the Company had several temporary differences
primarily related to accrued compensation and interest between financial
reporting and income tax reporting. The components of the deferred tax asset as
of December 31, 1998 were approximately as follows:
Deferred income tax assets:
Net operating loss carryforwards $ 3,044,000
Cost associated with conversion of debt 175,000
Other 195,000
--------------
Gross deferred tax asset 3,414,000
Valuation allowance (3,414,000)
--------------
$ -
==============
As of December 31, 1998, the Company estimates that it has net
operating loss carryforwards of approximately $7,800,000 which expire in various
years through 2018; however, the utilization of the benefits of such
carryforwards may be limited, as more fully discussed below. Sufficient
uncertainty exists regarding the realization of these operating loss
carryforwards, and, accordingly, a valuation allowance of $3,414,000, which
related to the net operating losses, and other temporary differences, has been
established.
The Company is delinquent in the filing of various federal, state and
local income and other tax returns. The ultimate determination of the Company's
taxable income, including the amount and expiration dates of net operating loss
carryforwards, is subject to, among other things, certain restrictions as a
result of the late filing of the various tax returns. The Company may also be
subject to possible review and examination of such tax returns by the
appropriate taxing authorities. Additional income taxes, including penalties for
non-compliance and interest, if any, that may be assessed will be charged to
operations when determined.
In accordance with certain provisions of the Tax Reform Act of 1986, a
change in ownership of greater than 50% of a corporation within a three year
period will place an annual limitation on the corporation's ability to utilize
its existing tax benefit carryforwards. Under such circumstances, the potential
benefits from utilization of the tax loss carryforwards as of that date may be
substantially limited or reduced on an annual basis. To the extent that net
operating loss carryforwards, when realized, relate to stock option deductions,
the resulting benefits will be credited to stockholders' equity.
F-29
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 18. LOSS PER SHARE
The following table sets forth the computation of basic and diluted
loss per share for the years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Numerator for basic and diluted earnings (loss) per $(3,297,941) $(3,061,964)
share - net loss
Preferred stock dividends -- 161,800
----------- -----------
Net loss available to common stockholders $(3,297,941) $(3,223,764)
=========== ===========
Denominator for basic and diluted earnings (loss) per
share weighted average shares 4,080,242 2,758,112
=========== ===========
Basic and diluted loss per share $ (0.81) $ (1.17)
=========== ===========
</TABLE>
All convertible instruments, which are convertible into shares of
common stock, were excluded in the computation of diluted loss per share because
their effect would be anti-dilutive.
NOTE 19. SUPPLEMENTAL CASH FLOW INFORMATION
Certain supplemental disclosure of cash flow information and non-cash
investing and financing activities for the years ended December 31, 1998 and
1997 is as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Cash paid during the year for:
Interest $ 73,774 $ 69,344
Non-cash investing and financing activities:
Cancellation of subscription receivable -- 300,000
Additional debt incurred for Costa Rica licenses -- 174,000
Preferred stock dividends -- 161,800
Common stock issued for acquisition 615,000 --
Common stock issued in settlement of debt 99,636 --
</TABLE>
NOTE 20. SEGMENT INFORMATION
OPERATING SEGMENTS, GEOGRAPHIC AND CUSTOMER INFORMATION
During 1998 and 1997, the Company operated in a single industry
segment. The operations of the Company's subsidiaries consist of wireless cable
television systems.
F-30
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 20. SEGMENT INFORMATION (CONTINUED)
OPERATING SEGMENTS, GEOGRAPHIC AND CUSTOMER INFORMATION (Continued)
The Company uses operating income before depreciation, amortization of
licenses and interest to manage its geographic business units. Cost of
developing new businesses is included in corporate until the new business units
generate sufficient revenue to be stand alone operations. Only licenses in use
in Wisconsin are included in Wisconsin assets. The costs of undeveloped licenses
at Stevens Point and Wausau, Wisconsin are included in corporate assets.
Information regarding the Company's geographic business units follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 AND THE YEAR THEN ENDED: CORPORATE COSTA RICA WISCONSIN TOTAL
-----------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue $ -- $ 1,093 $ 360 $ 1,453
======= ======= ======= =======
Operating income (loss) before
Depreciation and amortization (2,120) 149 12 (1,959)
Depreciation (14) (162) (110) (288)
Amortization of licenses -- (292) (27) (319)
------- ------- ------- -------
Operating loss $(2,134) $ (305) $ (125) $(2,564)
======= ======= ======= =======
Identifiable assets $ 2,015 $ 4,220 $ 872 $ 7,107
======= ======= =======
Capital expenditures $ 22 $ 203 $ 4 $ 229
======= ======= ======= =======
December 31, 1997 and the year then ended:
Revenue $ -- $ 700 $ 385 $ 1,085
======= ======= ======= =======
Operating income (loss) before depreciation and
amortization (2,074) 52 30 (1,992)
Depreciation (8) (129) (82) (219)
Amortization of licenses -- (285) (27) (312)
------- ------- ------- -------
Operating loss $(2,082) $ (362) $ (79) $(2,523)
======= ======= =======
Identifiable assets $ 1,338 $ 4,620 $ 1,019 $ 6,977
======= ======= =======
Capital expenditures $ 22 $ 292 $ 2 $ 316
======= ======= ======= =======
</TABLE>
In 1998 and 1997, no single customer represented 10% or more of the
Company's revenue.
NOTE 21. PRO FORMA INFORMATION (UNAUDITED)
As discussed in Note 7, the $2,366,000 debenture payable to the
President/Chairman of the Board is convertible into a total of 4,732,000 shares
of common stock. In January 1999, 2,366,000 shares were issued and in March
1999, the remaining 2,366,000 shares were issued both in connection with the
conversion of the debenture. The accompanying pro forma balance sheet as of
December 31, 1998 gives pro forma effect to the conversion of these convertible
debentures assuming that they had been converted on December 31, 1998.
F-31
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 21. PRO FORMA INFORMATION (UNAUDITED) (CONTINUED)
The following is a supplemental pro forma presentation of net loss per
share assuming that these convertible debentures had been converted into
4,732,000 shares of common stock as of the beginning of 1998:
Numerator for basic and diluted loss per share - net loss $(3,297,941)
Denominator for basic and diluted loss per share - pro forma 8,812,242
Weighted average shares
Supplemental pro forma basic and diluted loss per share $ (.37)
NOTE 22. YEAR END ADJUSTMENTS
During the fourth quarter of 1998, the Company recorded certain
adjustments that are considered material to the operating results of the fourth
quarter of 1998. The following is an analysis of these adjustments:
(INCREASE)
DECREASE
IN NET LOSS
-----------
Recognition of provision for asset impairment $(350,000)
Adjustment of amortization of discount on convertible (127,000)
Subordinated debentures
Recognition of compensation expense on certain stock
options issued (100,000)
----------
$(577,000)
==========
Per share $ (.14)
==========
NOTE 23. PENDING ACQUISITION
In February 1999, the Company reached an agreement in principle to
acquire substantially all of the assets and business operations of International
Broadcast Consultants of America, Inc. (IBC). The terms of the acquisition,
which are subject to final negotiation of the definitive agreement, contemplate
the payment of $450,000 cash and the issuance of 300,000 shares of the Company's
common stock. The acquisition is intended to be effective January 4, 1999, and
will be accounted for under the purchase method of accounting.
The transaction is also anticipated to provide for, among other things,
the execution of employment contracts for the two principals of IBC, one of whom
is a director of the Company.
F-32
<PAGE>
5TH AVENUE CHANNEL CORP.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999 (UNAUDITED)
SEPTEMBER 30,
1999
------------
ASSETS (UNAUDITED)
Current Assets:
Cash and cash equivalents ............... $ 127,882
Investment .............................. 71,400
Accounts receivable, net ................ 254,438
Inventory ............................... 509,731
Loans receivable, related parties ....... 79,674
Prepaid expenses and other current assets 143,103
------------
Total current assets ................ 1,186,228
------------
Investment Receivable ........................ 250,000
Property and Equipment ....................... 1,565,809
Licenses ..................................... 4,411,688
Deferred TV Production costs and other assets 214,991
Acquired Intangibles, net .................... 2,668,779
------------
$ 10,297,495
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 1,546,783
Current portion of long-term debt ....... 88,969
Loans and notes payable, related parties 388,248
Accrued salary, President ............... 405,000
Loan payable, President ................. 2,927,940
Convertible debentures, net ............. 1,060,179
Deferred Revenue ........................ 91,400
Obligation to issue warrants under
co-marketing agreement ................ 220,136
------------
Total current liabilities ........... 6,728,655
------------
Long-Term Debt:
License installment payment plan notes .. 864,893
------------
Total liabilities ................... 7,593,548
------------
Stockholders' Equity:
Common stock ............................ 9,661
Additional paid-in capital .............. 15,255,218
Deficit ................................. (12,560,932)
------------
2,703,947
------------
$ 10,297,495
============
See Notes to Consolidated Financial Statements
F-33
<PAGE>
5TH AVENUE CHANNEL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30,1999 AND 1998
1999 1998
----------- -----------
(UNAUDITED)
Revenue:
Product sales ............................. $ 1,446,197 $ --
Wireless cable ............................ 1,226,144 1,055,470
Internet and television ................... 250,745 --
----------- -----------
Total Revenue .......................... 2,923,086 1,055,470
Direct Costs:
Product sales ............................. 1,125,186 --
Wireless cable ............................ 201,418 161,716
Internet and television ................... 220,136 --
----------- -----------
Total Direct Costs ..................... 1,546,740 161,716
Gross Margin ................................ 1,376,346 893,754
----------- -----------
Operating Expenses:
Selling, general and administrative ... 3,165,319 1,359,608
Website and product design expenses ... 359,040 430,299
Depreciation and amortization ......... 842,186 451,594
----------- -----------
4,366,545 2,241,501
----------- -----------
Loss from Operations ........................ (2,990,199) (1,347,747)
Other Income (Expense):
Accretion of debenture discount ............. (437,080) (175,560)
Interest expense ............................ (327,101) (208,078)
Interest income ............................. -- 1,762
----------- -----------
(764,181) (381,876)
----------- -----------
=========== ===========
Net Loss .................................... $(3,754,380) $(1,729,623)
=========== ===========
Net Loss Per Common Share - Basic and Diluted $ (0.39) $ (0.43)
=========== ===========
Weighted Average Number of Shares Outstanding 9,577,429 4,024,850
=========== ===========
See Notes to Consolidated Financial Statements
F-34
<PAGE>
5TH AVENUE CHANNEL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30,1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities: (Unaudited)
Net loss $(3,754,380) $(1,729,623)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 842,186 635,373
Amortization of discount on convertible subordinated debentures 437,080 --
Stock and options issued for services 101,861 151,938
Marketing revenue (250,000) --
Marketing costs 220,136 --
Change in operating assets and liabilities, net of acquisitions:
(Increase) decrease in accounts receivable (146,129) 2,988
Decrease in inventory 59,066 --
(Increase) decrease in prepaid expenses and other current assets (38,474) 10,871
Increase in accounts payable and accrued liabilities 846,018 321,902
Increase in deferred revenue 20,000 --
----------- -----------
Net cash used in operating activities (1,662,636) (606,551)
----------- -----------
Cash Flows from Investing Activities:
Purchase of property and equipment (594,260) (130,315)
Deferred TV production costs (117,786) --
Net cash received in acquisition of IBC 40,381 --
(Increase) decrease in other assets 16,338 (114,234)
----------- -----------
Net cash used in investing activities (655,327) (244,549)
----------- -----------
Cash Flows from Financing Activities:
Net change from loans from President 1,804,484 206,600
Repayment of loan from related party (96,932) --
Net change in loans to related parties (979) --
Proceeds from exercise of warrants -- 50,000
Proceeds issuance of convertible debenture less $38,918 of costs -- 556,082
Costs of registering common stock (10,851) (32,615)
Proceeds from sale of common stock 500,000 --
Repayment of long-term debt (6,086) (5,658)
----------- -----------
Net cash provided by financing activities 2,189,636 774,409
----------- -----------
Net Decrease in Cash and Cash Equivalents (128,327) (76,691)
Cash and Cash Equivalents, Beginning 256,209 113,207
----------- -----------
Cash and Cash Equivalents, End $ 127,882 $ 36,516
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
F-35
<PAGE>
5TH AVENUE CHANNEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 1999
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The condensed consolidated balance sheet as of September 30, 1999, the
condensed consolidated statements of operations for the three months and nine
months ended September 30, 1999 and 1998, and the condensed consolidated
statements of cash flows for the nine months ended September 30, 1999 and 1998
have been prepared by the Company. In the opinion of management, all adjustments
(which include reclassifications and normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows at
September 30, 1999 and for all periods presented, have been made.
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the Company's
financial statements and notes thereto included in the Company's December 31,
1998 Form 10-KSB. The results of operations for the three and nine month periods
ended September 30, 1999 are not necessarily indicative of the operating results
for the full year.
NOTE 2. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosure of cash flow information for the nine months
ended September 30:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Interest paid during the period $ 16,442 $ 7,850
Non-cash investing and financing activities:
Conversion of debentures $2,366,000
Stock issued for acquisition of IBC 2,463,000
Loan payable for acquisition of IBC, net 450,000
Shares received for services to be performed 71,400
</TABLE>
NOTE 3. PROPERTY AND EQUIPMENT
1999
----------
Leasehold improvements $ 60,365
Furniture & office equipment 212,530
Web site software and hardware 339,364
Vehicles 133,371
TV signal rebroadcast & receiving equipment 1,942,063
----------
2,687,693
Less accumulated depreciation 1,121,884
----------
$1,565,809
==========
F-36
<PAGE>
NOTE 4. LICENSES
LaCrosse, Wisconsin $ 371,493
San Jose, Costa Rica 4,174,000
Stevens Point Wisconsin, net 355,625
Wassau Wisconsin, net 483,736
----------
5,384,854
Less accumulated amortization 973,166
----------
$4,411,688
==========
UNITED STATES LICENSES
On March 28, 1996, the Federal Communications Commission (FCC)
completed its auction of authorizations to provide single channel and
Multi-channel Multi-point Distribution Service (MDS) in 493 Basic trading Areas.
The Company won bids in three markets: Hickory-Lenoir-Morganton, NC;
Wausau-Rhinelander, WI; and Stevens Point-Marshfield-Wisconsin Rapids, WI. The
Company's total bid for these three markets was $3,046,212. The Company made the
full 10% down payment of $304,622 for all three markets but only made the second
10% down payment of $118,946 on the two Wisconsin markets.
In July of 1998, the two Wisconsin licenses were granted to the
Company, subject to the making of installment payments, effective as of July 25,
1997. The Company elected to participate in the installment payment plan, and
two installment payment notes were entered into in the total amount of $951,479.
The two notes are due quarterly over a ten year period commencing in October
1999. The interest rate is the effective rate of ten-year US Treasury
obligations plus 2-1/2%.
In April of 1999, the Company tendered the first interest-only
installment payments, with the conditional endorsement that they were to be
applied to the Wisconsin licenses and not held to make good the Hickory default
(See below). The installment checks were returned because of the conditional
endorsement. The waiver request was resubmitted by the Company on May 14, 1999
and the Company is now awaiting action by the FCC. At September 30, 1999 the
company has accrued but has not paid a total of $194,808 of interest charged by
the FCC on the two notes.
A provision for asset impairment of $350,000 was recorded in the 4th
quarter of 1998 related to the undeveloped Wisconsin licenses obtained as a
result of the FCC auction in 1996.
On September 1, 1996, the unpaid license fee payable of $1,671,175 for
the Hickory, NC, license was defaulted. The Company will be liable to the FCC
for the difference between the Company's winning bid and a lower winning bid
received by the FCC in a subsequent auction of this license. The FCC has not yet
announced plans to re-auction the Hickory, NC, license and no liability is
recorded for the potential shortfall of a re-auction.
COSTA RICA LICENSES
In February 1996 the Company agreed to acquire three companies holding
a total of 18 frequency licenses for broadcast of pay television (i.e. "wireless
cable") services in Costa Rica together with related equipment and contracts
with subscribers. The $4,174,000 total cost of the licenses included a
$2,000,000 note payable in one year with a 3.6% interest rate (see note 7).
F-37
<PAGE>
The entire $4,174,000 purchase price of the three Costa Rican companies
was allocated to the 18 licenses since the value of the other assets acquired
was minimal. The cost of the licenses is being amortized on a straight-line
basis over 15 years.
NOTE 5. DEFERRED TV PRODUCTION COSTS
During the second and third quarters of 1999, the Company incurred
approximately $118,000 of TV production costs. These costs have been deferred
and will be expensed over the expected viewing life of 1-3 years.
NOTE 6. ACQUISITION AND ACQUIRED INTANGIBLES
ACQUISITION OF THE 5TH AVENUE CHANNEL, INC.
Effective December 10, 1998 the Company acquired 100% of the capital
stock of The Fifth Avenue Channel, Inc. ("5th Avenue") for 335,000 shares of the
Company common stock and agreed to issue up to 665,000 additional "performance
shares" as follows: 332,500 shares if 5th Avenue achieves gross revenues in
excess of $10,000,000 for any calendar quarter and the remaining 332,500 shares
if 5th Avenue achieves either gross revenues in excess of $25,000,000 for any
calendar quarter or net income in excess of $1,000,000 for any calendar quarter.
The Company's controlling shareholder owned 65% of the 5th Avenue stock
and accordingly that portion of the acquisition was recorded similar to a
pooling of interests at the majority shareholders historical cost which was
insignificant. The portion of 5th Avenue acquired from the minority shareholders
was recorded at the estimated fair value of the common stock issued. When and if
the performance shares are earned, they will be recorded at the estimated fair
value and included in acquired intangibles.
5th Avenue's primary assets are intangibles and the $615,000 cost of
acquiring the minority shareholders 5th Avenue stock was allocated entirely to
acquired intangibles which is being amortized over 5 years.
ACQUISITION OF IBC
In February of 1999 the Company signed a letter of intent to acquire
all of the assets and business operations of International Broadcast Consultants
of America, Inc (IBC) for $450,000 in cash and 300,000 shares of Company common
stock. IBC was an innovator in the electronic media field, specializing in new
product marketing on cable TV. The operations of IBC have been integrated with
the Company for the entire nine months of 1999.
The acquisition was effective January 4, 1999 and has been recorded as
a purchase. The purchase was completed on May 12, 1999. The total consideration
exceeded the estimated fair market value of the net tangible assets acquired by
approximately $2,260,000. The excess has been recorded as acquired intangibles
and is being amortized over 15 years.
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<PAGE>
A summary of the allocation of the $2,913,000 purchase price to the net assets
acquired is as follows:
Cash $ 40,381
Accounts receivable 66,750
Inventory 568,797
Officer loans 88,406
Equipment and leasehold improvements 44,429
Other assets 26,424
Accounts payable assumed (103,621)
Liabilities assumed (78,874)
Acquired intangibles 2,260,308
Total purchase price $ 2,913,000
NOTE 7. LOAN RESTRUCTURE AND CONVERSION OF DEBENTURE
On May 19, 1997, the Company entered into an agreement with Melvin
Rosen ("Rosen") restructuring the $2 million debt for the Costa Rican licenses
into a convertible debenture maturing in 12 months and bearing interest at 12%
per annum. The principal amount of the debenture was increased $100,000 for
expenses owed or reimbursable to Rosen at the issue date of the Debenture.
As consideration for this debt restructuring, the Company agreed to
issue to Rosen (i) 180,000 shares of the Company's common stock with piggy back
registration rights, (ii) a warrant to purchase 500,000 shares at $1.00 per
share, and (iii) a warrant to purchase 500,000 shares at $5.00 per share. Under
the Agreement, Rosen became the President and Chairman of the Board and received
the right to nominate two members to the Company's Board of Directors.
The Debenture was convertible by Rosen into the Company's common stock
at any time after the issue date. The conversion price was equal to the lesser
of (1) $.50 per share of common stock or (2) the average of the closing "bid"
for the Company's common stock as reported on NASDAQ for the five trading days
immediately prior to the conversion date.
No interest was paid on the Debenture and the $153,033 of interest
accrued from May 19, 1997 to December 31, 1997 was added to the Debenture
balance in 1997.
In November of 1997, Rosen notified the Company of his intention to
convert the Debenture into common stock on or before May 15, 1998. As inducement
for the early conversion and for Rosen foregoing all interest on the Debenture
after December 31, 1997 an additional $109,967 was added to the Debenture
principal balance. The resulting $2,366,000 Debenture balance was converted into
4,732,000 restricted common shares in the first quarter of 1999 after the number
of authorized shares was increased from 10,000,000 to 50,000,000.
NOTE 8. PREFERRED STOCK AUTHORIZED BUT UNISSUED
The Company is authorized to issue up to 5,000,000 shares of "blank
check" preferred stock and to permit the Board of Directors, without shareholder
approval, to fix the rights, preferences and privileges including dividend
rights, conversion rights, terms of redemption or liquidation preferences.
F-39
<PAGE>
NOTE 9. PRIVATE PLACEMENT OF COMMON STOCK
On June 29, 1999 the Company issued 125,000 shares of common stock in a
private placement to accredited investors in exchange for $500,000 in cash. The
Company also agreed to issue three year warrants to purchase (i) 15,000 shares
of common stock at $5.00 per share and (ii) 5,000 shares at $6.00 per share.
NOTE 10. STOCK WARRANTS, OPTIONS AND SHARES RESERVED
PUBLICLY TRADED COMMON STOCK PURCHASE WARRANTS
In connection with its initial public offering on May 10, 1995, the
Company sold 1,610,000 redeemable common stock purchase warrants for $.25 per
warrant. Each warrant entitles the holder to purchase, at any time before May
11, 2000, one share of common stock at a price of $5.75 per share. The warrants
are redeemable by the Company for $.25 per warrant under certain circumstances.
PRIVATE PLACEMENT WARRANTS
In August 1994 and December 1, 1994, the Company issued an aggregate of
625,000 common stock warrants as part of the sale of units of its securities.
The warrants are exercisable at $5.75 per share within five years from the date
of their issuance. The warrants provide for adjustment in the number of shares
underlying the warrants upon the occurrence of certain events, such as stock
dividends, stock splits or other reclassifications of the Company's common
stock, a consolidation or merger of the Company, or a liquidating distribution
of the Company's common stock.
STOCK OPTIONS
As of December 31, 1998 the Company had outstanding stock options to
purchase a total of 1,018,000 shares at prices ranging from $2 to $15.
Approximately 1,000,000 of the options were granted in 1998 to employees and
consultants. Options to purchase a total of 395,000 shares of common stock are
required to be issued at exercise prices ranging from $2 to $16 per share,
pursuant to product marketing agreements with KeyTrade and CRYO-CELL.
During 1999, the Company granted employees options to purchase a total
of 67,500 shares of the Company's common stock at exercise prices equal to the
closing price of the Company's stock at the date of grant plus $0.25. In
addition, the Company granted consultants options to purchase a total of 35,000
shares of the Company's common stock at exercise prices equal to the closing
price of the Company's stock at the date of grant plus $0.25.
The Company applies APB Opinion 25, "Accounting for Stock Issued to
Employees" in accounting for options issued to employees.
The Company applies SFAS 123, "Accounting for Stock-Based Compensation"
in accounting for options issued to non-employees. Compensation expense of
approximately $102,000 was recognized during 1999.
UNDERWRITER STOCK WARRANTS
In connection with the public offering, the Company sold 240,000
Underwriter's stock warrants for $.001 per warrant. They consisted of warrants
to purchase 100,000 shares of common stock at $7.50 per share and warrants to
purchases 140,000 warrants at $.375 each entitling the underwriter to purchase
F-40
<PAGE>
an aggregate of 140,000 shares of common stock at $5.75 per share. The warrants
are exercisable through May 10, 2000.
CONSULTING AGREEMENT
As part of a July 1997 consulting agreement, the Company granted
200,000 one year warrants and 100,000 three year warrants to purchase common
stock at $2.50 per share. The warrants to purchase 200,000 shares were extended
for an additional year in August 1998. The Company has agreed to modify the
terms of the warrants and to extend them.
WARRANTS ISSUED TO SELLER OF COSTA RICAN LICENSES
See Note 7 for warrants to purchase 1,000,000 shares issued to the
President in the restructuring of the $2,000,000 debt.
SHARES RESERVED
At September 30, 1999 the Company reserved 6,523,000 shares of common
stock for future issuance pursuant to the aforementioned stock warrants, options
and debenture conversion agreements.
NOTE 11. 12% CONVERTIBLE DEBENTURES
In early May 1998 the Company completed a private offering of $595,000
of 12% Convertible Subordinated Debentures (the "May Debentures") to accredited
investors. The May Debentures are convertible into common stock at $2 per share.
Interest is payable monthly and the debentures matured on October 31, 1999. The
Company believes that all of the debenture holders will convert to shares of
common stock.
Those debenture holders who do not convert will be paid principal and
all accrued interest.
In November 1998 the Company completed a private offering of $500,000
of 12% Convertible Subordinated Debentures (the "November Debenture") to an
accredited investor. The November Debenture is convertible into common shares at
$2.50 per share. Up to 50 % of the November debentures can be converted after
July 31, 1999 and the remaining 50% can be converted after December 31, 1999
unless redeemed earlier by the Company. Notwithstanding the early redemption by
the Company, the debenture holder may convert no less than 50% of its original
Debenture into common stock. Interest is payable monthly and the November
debenture matures on April 30, 2000.
The Company recorded Additional Paid in Capital totaling $595,000 for
the difference between the closing price of the Company's stock on the date the
May debenture proceeds were received and the $2 conversion price for the May
debentures. Approximately 50% of the $595,000 total discount was amortized as
additional interest expense over the period from receipt of Debenture proceeds
to February 28, 1999, the earliest potential conversion date for 50% of the
Debentures. The remaining 50% of $595,000 was amortized ratably over the 14
months ending July 31, 1999.
The Company recorded Additional Paid in Capital totaling $325,000 for
the difference between the closing price of the Company's stock on the date the
November Debenture proceeds were received and the $2.50 conversion price for the
November debentures. Approximately 50% of the $325,000 total discount was
amortized as additional interest expense over the period from receipt of
Debenture proceeds to July 31, 1999, the earliest potential conversion date for
50% of the Debentures. The remaining 50% of the $325,000 is being amortized
ratably over the 14 months ending December 31, 1999.
F-41
<PAGE>
A total of $437,078 of the discount was amortized as additional
interest expense in the first nine months of 1999. The $34,821 remaining balance
of the discount is included as a reduction of the convertible debenture balance
and will be fully accreted by December 31, 1999.
NOTE 12. CO-MARKETING AGREEMENT
In May of 1999, the Company entered into a two year co-marketing
agreement with a privately-held online securities brokerage firm. Under the term
of the agreement, the brokerage firm is to be featured on the Company's website
and television channel. In return, the brokerage firm is to promote the
Company's products and services on its website. As compensation for promoting
the brokerage firm on its website and television channel, the Company will
receive a total of 500,000 shares of common stock of the brokerage firm, at the
rate of 62,500 shares per quarter over the term of the agreement. In addition,
the Company will receive a fee of $5,000 per month over the term of an exclusive
period, such period to start on the launch of the television channel. As
compensation for the brokerage firm to promote the products and services of the
Company, the Company will issue to the brokerage firm warrants to purchase
195,000 shares of the Company's common stock at $2.00 per share, such warrants
to expire at the end of the agreement.
The Company is valuing the common stock of the brokerage firm using a
40% discount primarily for marketability and other factors, based upon a recent
private offering of the common stock which were offered at $5.00 per share. The
Company is recognizing revenue as the services are performed. Until such time as
the shares of common stock are actually received, the Company has reflected the
asset resulting from the services performed as Investment Receivable in the
consolidated balance sheet. When the shares of common stock are received, they
will be recorded as Investment. For the four months ended September 30, 1999,
the Company recognized revenue of $250,000.
The warrants to be issued were valued at $1,321,414 using the
Black-Sholes option-pricing model. For the four months ended September 30, 1999,
the Company recognized expense of $220,136. The Company is recognizing the
marketing expenses and a related liability for the warrants to be issued as the
services are being received. These costs have been measured based upon the fair
value of the warrants to be issued. At the time the warrants are actually issued
by the Company, the recorded liability will be satisfied and recorded as
stockholders' equity.
F-42
<PAGE>
NOTE 13. SEGMENT INFORMATION
The Company currently operates in three segments, wireless cable TV
services, product sales division, and 5th Avenue financial internet and
television In 1998 the Company only had the wireless cable TV operations in
Costa Rica and Wisconsin. Corporate overhead expenses are included in the
internet and television segment. Information regarding the Company's three
business segments and the geographic business units follows (in thousands):
OPERATING
REVENUES INCOME (LOSS) DEPRECIATION AMORTIZATION
------- ------- ------- -------
Third Quarter - 1999:
Product sales $ 511 $ (230) $ 13 $ --
Wireless cable:
Costa Rica 327 (12) 62 73
Wisconsin 102 (48) 45 7
Internet and TV 251 (877) 21 68
------- ------- ------- -------
Total $ 1,191 $(1,167) $ 141 $ 148
======= ======= ======= =======
Third Quarter - 1998:
Wireless cable:
Costa Rica $ 298 $ (32) $ 34 $ 73
Wisconsin 91 (23) 31 7
Internet and TV -- (413) 7 --
------- ------- ------- -------
Total $ 389 $ (468) $ 72 $ 80
======= ======= ======= =======
Year to Date - 1999:
Product sales $ 1,446 $ (478) $ 37 $ --
Wireless cable:
Costa Rica 974 (27) 172 219
Wisconsin 252 (169) 133 20
Internet and TV 251 (2,316) 54 207
------- ------- ------- -------
Total $ 2,923 $(2,990) $ 396 $ 446
======= ======= ======= =======
Year to Date - 1998:
Wireless cable:
Costa Rica $ 795 $ (159) $ 112 $ 219
Wisconsin 260 (92) 84 21
Internet and TV -- (1,097) 14 --
------- ------- ------- -------
Total $ 1,055 $(1,348) $ 210 $ 240
======= ======= ======= =======
F-43
<PAGE>
NOTE 14. SUBSEQUENT EVENT
In late October and November of 1999, the Company issued a total of
1,950,000 shares of common stock in private transactions to accredited investors
in exchange for $4,462,500 in cash. In addition, the Company has a subscription
agreement to sell an additional 50,000 shares for a total consideration of
$150,000. Approximately $708,000 of the proceeds was used to repay loans from
the President and $321,000 was used to complete the acquisition of IBC. Finders
fees, professional fees and other related costs approximated $350,000.
The following condensed pro-forma balance sheet shows the effect of the
subsequent sales of common stock and repayment of loans:
ASSETS
Cash $ 3,235,708
Other Current Assets 1,058,346
Non Current Assets 9,111,267
------------
Total Assets $ 13,405,321
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities (including a $2,219,727 loan
from the President) 5,698,981
Long-Term Debt and Deferred Revenue 864,893
------------
Total Liabilities 6,563,874
Common Stock 11,661
Additional Paid-in-Capital 19,540,718
Deficit (12,560,932)
------------
6,991,447
Subscription Receivable (150,000)
------------
Total Stockholders' Equity 6,841,447
Total Liabilities and Stockholders' Equity $ 13,405,321
============
F-44
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article VIII of the Company's Amended and Restated Articles of
Incorporation provides that the Company shall indemnify its officers and
directors to the fullest extent permitted by law.
The Company's Bylaws and the Florida Business Corporation Act provide
for indemnification of directors and officers against certain liabilities.
Pursuant to the Company's Bylaws, officers and directors of the Company are
indemnified, to the fullest extent available under Florida law, against expenses
actually and reasonably incurred in connection with threatened, pending or
completed proceedings, whether civil, criminal or administrative, to which an
officer or director is, was or is threatened to be made a party by reason of the
fact that he or she is or was an officer, director, employee or agent of the
Company. The Company may advance expenses in connection with defending any such
proceeding, provided the indemnitee undertakes to repay any such amounts if it
is later determined that he or she was not entitled to be indemnified by the
Company.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Company estimates that its expenses in connection with this
Registration Statement will be as follows:
SEC registration fee.............................................. $ 2,300
Legal fees and expenses........................................... $ 30,000
Accounting fees and expenses...................................... $ 15,000
Miscellaneous..................................................... $ 7,700
--------
Total............................................................. $ 55,000
========
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years the following shares were sold by us
without registration under the Securities Act. No commissions were paid in
connection with any of the following transactions.
1997. On March 14, 1997, we sold 100 shares of our Series B Convertible
Preferred Stock to Aurora Capital for $100,000. On September 16, 1997, the 100
shares of Series B Convertible Preferred Stock and 200 shares of outstanding
Series A Convertible Preferred Stock issued in 1996 were converted into
1,183,431 shares of our common stock. These securities were issued pursuant to
an exemption from registration provided by section 4(2) of the Securities Act.
On May 19, 1997 we entered into an agreement with Melvin Rosen to
restructure a $2,000,000 note issued to him in the acquisition of Canel 19, a
company he owned, into a convertible debenture maturing in 12 months and bearing
interest at 12% per annum. The principal amount of the debenture was increased
by $100,000 for expenses owed or reimbursable to Mr. Rosen at the issue date of
the debenture. As consideration for this debt restructuring, we agreed to issue
to Mr. Rosen (i) 180,000 shares of common stock; (ii) a warrant to purchase
500,000 shares at $1.00 per share; and (iii) a warrant to purchase 500,000
shares of our common stock at $5.00 per share. These securities were issued
pursuant to an exemption from registration provided by section 4(2) of the
Securities Act.
II-1
<PAGE>
In July 1997, we entered into a two-year consulting agreement with an
investment banking firm and granted the investment bankers 500,000 one-year
warrant exercisable at $1.00 per share, 200,000 one-year warrants exercisable at
$2.50 per share, and 100,000 three-year warrants exercisable at $2.50 per share.
In October 1997, assignees of the investment banker exercised 450,000 of the
one-year warrants at $1.00 per share. The securities were issued pursuant to an
exemption from registration provided by Section 4(2) of the Securities Act.
1998. During 1998 we issued a total of 26,000 shares of our common
stock for consulting services and 7,500 shares in payment of legal services. The
securities were issued pursuant to an exemption from registration provided by
Section 4(2) of the Securities Act.
During 1998 a note payable in the principal amount of $50,000 and
accrued interest was converted into 75,000 shares of our common stock. The
securities were issued pursuant to an exemption from registration provided by
Section 4(2) of the Securities Act.
In May 1998, we sold $595,000 of 12% Convertible Subordinated
Debentures due on October 31, 1999. The debentures were converted into 297,500
shares of our common stock at $2.00 per share in December 1999. The securities
were issued pursuant to an exemption from registration provided by Section 4(2)
of the Securities Act.
In July 1998 the remaining 50,000 one-year warrants issued to the
investment banker at $1.00 per share were converted into 50,000 shares of common
stock. The securities were issued pursuant to an exemption from registration
provided by Section 4(2) of the Securities Act.
In November 1998, we sold a $500,000 12% Convertible Subordinated
Debenture due on April 30, 2000. This debenture was converted into 200,000
shares of common stock at $2.50 per share. An additional 22,000 shares were also
issued in lieu of accrued interest. These securities were issued pursuant to an
exemption from registration provided by Section 4(2) of the Securities Act.
In a share exchange agreement effective December 10, 1998, we completed
the acquisition of the Fifth Avenue Channel, Inc. (the "5th Avenue Channel").
Under the Agreement and pursuant to Section 4(2) of the Securities Act, we
exchanged 335,000 shares of our common stock for 100% of the outstanding Common
Stock of 5th Avenue Channel. In connection with this transaction, Ms. Ivana
Trump received options to purchase 700,000 shares at various exercise prices
ranging from $5.00 to $15.00 per share. The options expire in December 2001.
These securities were issued pursuant to an exemption from registration provided
by Section 4(2) of the Securities Act.
1999. In 1999, we issued 300,000 shares of our common stock in
connection with the acquisition of International Broadcast Consultants of
America, Inc. These securities were issued pursuant to an exemption from
registration provided by Section 4(2) of the Securities Act.
In January 1999, Mr. Rosen converted a portion of his debenture into
2,366,000 shares of our common stock in January 1999 and converted the remainder
of the debenture into an additional 2,366,000 shares in March 1999. These
securities were issued pursuant to an exemption from registration provided by
Section 4(2) of the Securities Act.
On June 29, 1999, we sold 125,000 shares of our common stock for
$500,000. We also agreed to issue three-year warrants to purchase 15,000 shares
of common stock at an exercise price of $5.00 per share and 5,000 shares of
common stock at an exercise price of $6.00 per share. These securities were
issued pursuant to an exemption from registration provided by Section 4(2) of
the Securities Act.
II-2
<PAGE>
In November 1999 we issued sold a total of 2,000,000 shares of common
stock in consideration for $4,612,500 in the aggregate. These securities were
issued pursuant to an exemption from registration provided by Section 4(2) of
the Securities Act.
ITEM 27..EXHIBITS.
(2.1) Share Exchange Agreement by and among the Company, IBC
Partners, Melvin Rosen and Ivana Trump effective December 10,
1998, dated February 18, 1999 but executed March 17, 1999.(1)
(2.2) Amendment to Share Exchange Agreement by and among the
Company, IBC Partners, Melvin Rosen and Ivana Trump dated
March 8, 1999 but executed March 17, 1999.(1)
(2.3) Asset Purchase Agreement by and between the Company and
International Broadcast Consultants of America, Inc. effective
as of January 19, 1999 but dated May 12, 1999.
(3.1) Amended and Restated Articles of Incorporation.(3)
(3.2) Bylaws.(4)
(4.1) Specimen Common Stock Certificate.*
(4.2) Specimen Warrant Certificate.*
(5.1) Opinion of Broad and Cassel.*
(10.1) Debt Restructuring Agreement by and between the Company and
Melvin Rosen dated May 19, 1997.(5)
(10.2) Secured Convertible Debenture.(6)
(10.3) Agreement to Convert the Secured Convertible Debenture(7)
(10.4) Consulting Agreement between the Company, Ivana Trump and
Melvin Rosen, effective November 5, 1998 dated February 28,
1999. (8)
(10.5) Lease Agreement between Intracoastal Pacific Limited
Partnership, the Company and International Broadcast
Consultants of America, Inc. dated May 8, 1998.*
(10.6) Employment Agreement with Michael Tedesco dated April 1999.*
(10.7) Employment Agreement with Adam Taylor effective January 5,
1999, but entered into August 3, 1999.*
(10.8) Employment Agreement with Eric Lefkowitz dated May 10, 1999.*
(10.9) Exclusive Television Broadcast and Information Licensing
Agreement between the Company and Zacks Investments Research,
Inc. dated August 24, 1999.*
(10.10) Broadcast Agreement between the Company and The Comcast
Network dated September 22, 1999.*
(10.11) Stock Option Plan*
(10.12) Agreement with Signature Products, Inc.*
(16.1) Letter on Change in Certifying Accountants(9)
(21.1) Subsidiaries of Registrant(10)
(23.1) Consent of Rachlin Cohen & Holtz, LLP*
(23.2) Consent of BDO Seidman, LLP*
(23.3) Consent of Broad and Cassel (included in Exhibit 5.1)
(24.1) Power of Attorney (included on signature page)
(99.1) Financial Statements of International Broadcast Consultants of
America, Inc.(11)
(99.2) Pro Forma Financial Statements giving effect to the
acquisition of certain assets of International Broadcast
Consultants of America, Inc.(12)
- ------------------------
* Filed herewith.
II-3
<PAGE>
(1) Incorporated by reference from Exhibits 2.1 and 2.2 filed with the
Company's Current Report on Form 8-K filed March 25, 1999.
(2) Incorporated by reference from Exhibit 2.3 filed with the Company's
Quarterly Report on Form 10-QSB filed May 17, 1999.
(3) Incorporated by reference from Exhibit 3.1 filed with the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1998.
(4) Incorporated by reference from Exhibit 3.2 filed with the Company's
Registration Statement on Form SB-2, File No. 333-89042, filed on January
26, 1995.
(5) Incorporated by reference from Exhibit 10.1 filed with the Company's
Current Report on Form 8-K filed May 29, 1997.
(6) Incorporated by reference from Exhibit 10.2 filed with the Company's
Current Report on Form 8-K filed May 29, 1997.
(7) Incorporated by reference from Exhibit 10.3 filed with the Company's Annual
Report on Form 10-KSB filed April 15, 1998.
(8) Incorporated by reference from Exhibits 10.4 filed with the Company's
Current Report on Form 8-K filed March 25, 1999.
(9) Incorporated by reference from Exhibit 16.1 filed with the Company's
Current Report on Form 8-K filed February 25, 1999.
(10) Incorporated by reference from Exhibit 21.1 filed with the Company's Annual
Report on Form 10-KSB filed April 23, 1999.
(11) Incorporated by reference from Exhibit 99.1 filed with the Company's
Current Report on Form 8-K filed December 27, 1999.
(12) Incorporated by reference from Exhibit 99.2 filed with the Amendment to the
Company's Current Report on Form 8-K filed December 29, 1999.
ITEM 28. UNDERTAKINGS.
RULE 415 OFFERING. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to: (i) include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
reflect in the prospectus any facts or events which, individually or together,
represent a fundamental change in the information set forth in the Registration
Statement; and (iii) include any additional or changed material information in
the plan of distribution.
(2) For determining liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-4
<PAGE>
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
Offering.
REQUEST FOR ACCELERATION OF EFFECTIVE DATE. Insofar as indemnification for
liabilities arising under the Securities Act of 1933, as amended (the "Act"),
may be permitted to directors, officers or persons controlling the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant 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 Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant 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 Registrant 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 Act and will be governed by the final adjudication of
such issue.
II-5
<PAGE>
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
of the requirements for filing this Registration Statement Form SB-2 and
authorizes this Registration Statement to be signed on its behalf by the
undersigned, in the City of North Miami Beach in the State of Florida on the
27 day of January, 2000.
5TH AVENUE CHANNEL CORPORATION
By: /S/ MELVIN ROSEN
---------------------------------
Melvin Rosen, Chairman of the Board
and President
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated below. Each person whose signature appears
below hereby authorizes Melvin Rosen to execute in the name of such person and
to file, any amendment or post-effective amendment to this Registration
Statement after making such changes to this Registration Statement as the
Registrant deems appropriate, and appoints Melvin Rosen as his attorney-in-fact
to sign and to file any amendment and post-effective amendment to this
Registration Statement.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Melvin Rosen Chairman of the Board January 27, 2000
- ------------------------------------ and President
Melvin Rosen (Principal Executive Officer)
/s/ Dominique Sada Executive Vice President, and January 27, 2000
- ------------------------------------ Chief Financial Officer
Dominique Sada (Principal Financial Officer and
Accounting Officer)
/s/ Eric Lefkowitz Director January 27, 2000
- ------------------------------------
Eric Lefkowitz
/s/ Dennis J. Devlin Director January 27, 2000
- ------------------------------------
Dennis J. Devlin
/s/ Scott Housefield Director January 27, 2000
- ------------------------------------
Scott Housefield
Director January __, 2000
- ------------------------------------
Larry Weinstein
Director January __, 2000
- ------------------------------------
Nick van der Linden
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBITS DESCRIPTION
-------- -----------
(4.1) Specimen Common Stock Certificate.*
(4.2) Specimen Warrant Certificate.*
(5.1) Opinion of Broad and Cassel.*
(10.5) Lease Agreement between Intracoastal Pacific Limited
Partnership, the Company and International Broadcast
Consultants of America, Inc. dated May 8, 1998.*
(10.6) Employment Agreement with Michael Tedesco dated April 1999.*
(10.7) Employment Agreement with Adam Taylor effective January 5,
1999, but entered into August 3, 1999.*
(10.8) Employment Agreement with Eric Lefkowitz dated May 10, 1999.*
(10.9) Exclusive Television Broadcast and Information Licensing
Agreement between the Company and Zacks Investments Research,
Inc. dated August 24, 1999.*
(10.10) Broadcast Agreement between the Company and The Comcast
Network dated September 22, 1999.*
(10.11) Stock Option Plan*
(10.12) Agreement with Signature Products, Inc.*
(23.1) Consent of Rachlin Cohen & Holtz, LLP*
(23.2) Consent of BDO Seidman, LLP*
- --------------
* Filed herewith.
EXHIBIT 4.1
<TABLE>
<CAPTION>
<S> <C>
NUMBER SHARES
TWC 0516 TEL-COM WIRELESS CABLE TV CORPORATION SPECIMEN
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
COMMON STOCK COMMON STOCK
CUSIP 316700 10 3
SEE REVERSE FOR CERTAIN DEFINITIONS
This is to certify that
SPECIMEN
is the owner of
FULLY-PAID AND NON-ASSESSABLE SHARES, OF THE PAR VALUE OF $.001 EACH, OF THE COMMON STOCK OF
Tel-Com Wireless Cable TV Corporation (the "Corporation") transferable on the books of the Corporation in person or by duly
authorized attorney upon surrender of this Certificate properly endorsed. This Certificate is not valid unless countersigned by the
Transfer Agent and registered by the Registrar.
Witness the seal of the Corporation and the facsimile signatures of its duly authorized officers.
NAME CHANGED TO 5TH AVENUE CHANNEL CORP.
Dated:
__________________________________________________ __________________________________________________
SECRETARY PRESIDENT
COUNTERSIGNED AND REGISTERED:
CONTINENTAL STOCK TRANSFER $ TRUST COMPANY
TRANSFER ANGENT
BY:______________________________________________________ AND REGISTRAR,
SPECIMEN
AUTHORIZED SIGNATURE
</TABLE>
<PAGE>
TEL-COM WIRELESS CABLE TV CORPORATION
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES, AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND
THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR
RIGHTS. ANY SUCH REQUEST SHOULD BE ADDRESSED TO THE CORPORATION.
The following abbreviations, when used in the inscription on the fact
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - __________ Custodian __________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right under Uniform Gifts to Minors
of survivorship and not as
tenants in common Act____________
(State)
</TABLE>
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
IDENTIFIYING NUMBER OF ASSIGNEE
______________________________________
______________________________________ ________________________________
_______________________________________________________________________
Please print or typewrite name and address including
postal zip code of assignee
_______________________________________________________________________
_______________________________________________________________________
_________________________________________________________ Shares of the
Common 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 _________________________
Signature:
X ____________________________________
X ____________________________________
Signature Guaranteed by:
SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR
MEMBER FIRM OF A MAJOR STOCK EXCHANGE OR A TRUST COMPANY
The Corporation operates communications properties subject to the
jurisdiction of the Federal Communications Commission under the
Communications Act of 1934, as amended. Said Act and the rules and
regulations of said Commission contain express restrictions on the
transfer of stock of corporations subject thereto, particularly with
respect to alien persons. The right is reserved to refuse to honor any
transfer of the stock of the Corporation which, in the judgment of the
Corporation or its Transfer Agent, would or might constitute a
violation of said Act or rules and regulations. As used in this
context, the word "Alien" shall be construed to include the following:
a person who is a citizen of a country other than the United States,
any entity organized under the laws of a government other than the
government of the United States or any state, territory or possession
of the United States, a government other than the government of the
United States or of any state, territory or possession of the United
States, or a representative of, or an individual or entity controlled
by, any of the foregoing. THE FOLLOWING MUST BE EXECUTED BY THE
ASSIGNEE OF THIS CERTIFICATE BEFORE TRANSFER MAY BE MADE ON THE BOOKS
OF THE CORPORATION.
APPLICATION FOR TRANSFER OF SHARES
The undersigned (the "Applicant") hereby makes application for the
transfer to the name of the Applicant of the number of shares of Stock
set forth above and hereby certifies to the Corporation that:
The Applicant is ________ is not ________ an alien.
The Applicant will _______ will not _________ hold the shares
applied for or any of them for or on behalf of an alien.
The Applicant hereby agrees that on request of the Corporation, he
will furnish proof in support of this certification.
Date: _________________________ _______________________________
Signature of Applicant
SPECIMEN
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.
EXHIBIT 4.2
SPECIMEN COMMON
SHARES Exercisable subject to
the provisions set forth below.
WARRANT
FOR PURCHASE OF COMMON STOCK
OF
TEL-COM WIRELESS CABLE TV CORPORATION
(a Florida corporation)
This Certifies that SPECIMEN (the "holder), for value received and
subject to the provisions hereinafter set forth, is entitled to purchase from
TEL-COM WIRELESS CABLE TV CORPORATION, a Florida corporation (the "Company"),
_____________ shares of the Common Stock of the Company, par value $0.001 per
share ("Common Stock"), no sooner than 9:00 a.m., Eastern time, on the date one
year from the date of this Warrant, and no later than 5:00 p.m. local time,
Orlando, Florida, five (5) years from the date of this Warrant, except as
provided in paragraph 3 below regarding early expiration, for a price of $5.75
per share of Common Stock.
1. EXERCISE. This Warrant may be exercised by the holder hereof (but
only on the conditions hereinafter set forth) as to the whole or any lesser
number of whole shares of Common Stock covered hereby upon surrender of this
Warrant (with the subscription form hereof duly executed) at the executive
offices of the Company, along with payment to the Company of the price
hereinabove set forth for the shares so purchased. If this Warrant is exercised
for less than all of the shares of the Common Stock covered hereby, the holder
shall be entitled to receive a new Warrant covering the number of shares for
which this Warrant shall not have been exercised, if this Warrant is not then
expired.
2. TITLE. This Warrant is issued subject to the condition, and every
holder of this Warrant by accepting the same agrees with every subsequent holder
of this Warrant and with the Company, that title to this Warrant and all rights
hereunder shall be transferable by delivery of this Warrant, duly endorsed. The
Company and all persons dealing with this Warrant may treat the registered owner
hereof or, when presented duly endorsed in blank to a specified person, the
bearer of this Warrant, or such person respectively, as the absolute owner
hereof for all purposes, any notice to the contrary notwithstanding.
3. EARLY EXPIRATION. In the event of a merger or consolidation of the
Company (other than a merger or consolidation in which the Company is the
continuing or surviving Company or which does not result in any reclassification
of outstanding shares of Common Stock) or dissolution of the Company, a notice
thereof shall be furnished to the holder of the Warrant not more than 60 days
nor less than 10 days before the record date (which date shall be specified in
such notice) for determining holders of shares of Common Stock entitled to
receive any securities, properties or monies distributed upon such merger,
consolidation or dissolution. Such notice shall also specify the date on which
the right to exercise the Warrant shall expire, which date shall be the close of
business of the business day immediately preceding the record date for
determination of holders of shares of Common Stock. A copy of such notice shall
be
<PAGE>
mailed to the holder of this Warrant at the address registered with the Company.
Failure to give such notice, or any defect therein, shall not affect the
legality or validity of the merger, consolidation, or dissolution or of any
distributions in connection therewith.
4. COVENANTS. The above provisions are subject to the following:
(a) RESTRICTIONS ON TRANSFERABILITY. The Warrant represented
by this certificate has not been registered under the Securities Act of 1933, as
amended (the "Act") or under the various state securities and investor
protection laws. The Warrant is purchased for investment and not with a view to
distribution or resale, and may not be made subject to a security interest,
pledged, hypothecated, or otherwise transferred without an effective
registration statement for such Warrant under the Act and all applicable state
securities and/or investor protection laws or a prior opinion of counsel,
satisfactory to the Company, that registration is not required under the Act and
such securities and/or investor protection laws. Any shares issued upon the
exercise of this Warrant shall bear the following legend:
The shares represented by this certificate have not been
registered under the Securities Act of 1933 or the securities and/or
investor protection laws of any state. The shares have been acquired
for investment and may not be reoffered, sold, transferred, pledged or
hypothecated in the absence of an effective registration statement for
the shares under the Securities Act of 1933, as amended (the "Act) and
all applicable state securities and/or investor protection laws or a
prior opinion of counsel, satisfactory to the issuing company, that
registration is not required under the Act and such state securities
and/or investor protection laws.
(b) ADJUSTMENTS IN SHARES. In the event that the Company
shall, at any time prior to the expiration date of this Warrant and prior to the
exercise thereof: (i) declare or pay to the holders of the Common Stock a
dividend payable in any kind of shares of stock of the Company; or (ii) change
or divide or otherwise reclassify its Common Stock into the same or a different
number of shares with or without par value, or into shares of any class or
classes; or (iii) consolidate or merge with, or transfer all or substantially
all of its property other than in the usual and regular course of its business
to any other company; or (iv) make any distribution of its assets to holders of
its Common Stock as a liquidation or partial liquidation dividend or by way of
return of capital; then, upon the subsequent exercise of this Warrant, the
holder thereof shall receive for the exercise price, in addition to or in
substitution for the shares of Common Stock to which he would otherwise be
entitled upon such exercise, such additional shares of stock or scrip of the
Company, or such reclassified shares of stock of the Company, or such shares of
the securities or property of the Company, resulting from such consolidation or
merger or transfer, or distribution of such assets of the Company, which he
would have been entitled to receive had he exercised this Warrant prior to the
happening of any of the foregoing events.
(c) RESERVATION OF COMMON STOCK. The Company shall reserve and
withhold from issuance sufficient unrestricted shares of its Common Stock, as
authorized and unissued shares, to enable the Company to issue to the holder
thereof such shares to which the holder may be entitled upon exercise of this
Warrant.
2
<PAGE>
(d) FRACTIONAL SHARES. The Company shall not be required to
issue fractional shares for any reason upon exercise of this Warrant. If, for
any reason, the holder of this Warrant would be entitled, upon the exercise of
any rights evidenced thereby, to receive a fractional interest in a share of
Common Stock, the Company shall, upon such exercise, purchase such fractional
interest for an amount in cash equal to the current value of such fractional
interest as determined by the Board of Directors of the Company, or, if such
shares are publicly traded, the current fair market value of such shares
computed on the basis of the average closing bid and asked prices or closing
quoted market price on the date of exercise as furnished to the Company by any
member or member firm of a registered national securities exchange selected from
time to time by the Company for such purpose.
This Warrant does not confer upon the holder thereof any rights
whatsoever as a shareholder of the Company. Upon the exercise of this Warrant,
the subscription form attached hereto must be duly executed.
This Warrant shall be void unless exercised on or before the close of
business five (5) years from the date hereof or as provided in paragraph 3 above
whichever occurs first.
Witness the seal of the Company and the signatures of its duly
authorized officers.
Dated: ____________________________, 1994.
TEL-COM WIRELESS CABLE TV CORPORATION
By: SPECIMEN
----------------------------------------
Fernand L. Duquette, President
ATTEST:
----------------------------------------
, Secretary
----------------------------
(CORPORATE SEAL)
3
<PAGE>
SUBSCRIPTION FORM
(To be executed if holder desires to exercise the Warrants)
To: Tel-Com Wireless Cable TV Corporation
921 N. Pennsylvania Avenue
Winter Park, FL 32789
The undersigned hereby exercises, according to the terms and conditions
thereof ____________________________________ (____________) shares of common
stock of the warrant rights evidenced by the attached Warrant, and herewith
makes payment of the purchase price in full. Kindly issue all shares of Common
Stock to the undersigned and deliver them to the undersigned at the address
stated below. If such number of shares shall not be all of the shares
purchasable under the attached Warrant, please issue a new Warrant of like tenor
for the balance of the remaining shares purchasable hereunder to be delivered to
the undersigned at the address stated below.
Dated:_________________________ Name: ______________________________
Signature: _________________________
Address: ___________________________
____________________________________
PLEASE ATTACH ORIGINAL WARRANT
<PAGE>
ASSIGNMENT FORM
(To be executed if holder desires to transfer Warrant)
For Value Received, ______________________________________ hereby
sells, assigns, and transfers unto the attached Warrant of Tel-Com Wireless
Cable TV Corporation and does hereby irrevocably constitute and appoint
__________________________________ attorney, to transfer this Warrant on the
books of the Company with full power of substitution.
Dated:_________________________ Name: ______________________________
Signature: _________________________
Address: ___________________________
____________________________________
NOTE:
The signature to the above assignment or subscription (if made by the
registered holder hereof) must correspond with the name as written on the face
of the attached Warrant in every particular, without alteration or enlargement
or any change whatever.
PLEASE ATTACH ORIGINAL WARRANT
EXHIBIT 5.1
BROAD AND CASSEL
ATTORNEYS AT LAW
BOCA RATON o FT. LAUDERDALE o MIAMI
ORLANDO o TALLAHASSEE o TAMPA o WEST PALM BEACH
SUITE 3000
MIAMI CENTER
201 SOUTH BISCAYNE BOULEVARD
MIAMI, FLORIDA 33131
(305) 373-9400
FAX (305) 373-9443
www.broadandcassel.com
January 27, 2000
5th Avenue Channel Corp.
3957 NE 163 Street
North Miami Beach, FL 33162
Re: 5th Avenue Channel Corp. (the "Company")
Ladies and Gentlemen:
You have requested our opinion with respect to the shares of the
Company's common stock, $0.001 par value per share (the "Common Stock"),
included in the Registration Statement filed with the U.S. Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Securities Act"). Any terms not otherwise defined herein shall have the
meanings ascribed to them in the Registration Statement.
As counsel to the company, we have examined the original or certified
copies of such records of the Company, and such agreements, certificates of
public officials, certificates of officers or representatives of the Company and
others, and such other documents as we deem relevant and necessary for the
opinions expressed in this letter. In such examination, we have assumed the
genuineness of all signatures on original documents, and the conformity to
original documents of all copies submitted to us as conformed or photostatic
copies. As to various questions of fact material to such opinions, we have
relied upon statements or certificates of officials and representatives of the
Company and others.
Based on, and subject to the foregoing, we are of the opinion that,
when the shares of Common Stock are issued and delivered as described in the
Registration Statement, the shares of Common Stock will be duly and validly
issued, and the Common Stock will be fully paid and non-assessable.
This opinion has been prepared and is to be construed in accordance
with the Report on Standards for Florida Opinions, dated April 8, 1991, as
amended and supplemented, issued by
<PAGE>
5TH AVENUE CHANNEL CORP.
3957 NE 163 STREET
January 27, 2000
Page 2
the Business Law Section of The Florida Bar (the "Report"). The Report is
incorporated by reference into this opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the use of our name under the caption
"Legal Matters" in the Prospectus constituting part of the Registration
Statement. In giving such consent, we do not thereby admit that we are included
within the category of persons whose consent is required under Section 7 of the
Securities Act, or the rules and regulations promulgated thereunder.
Sincerely,
/s/ Broad and Cassel
BROAD AND CASSEL
EXHIBIT 10.5
INTRACOASTAL MALL
NORTH MIAMI BEACH, FLORIDA
RETAIL LEASE
between
INTRACOASTAL PACIFIC LIMITED PARTNERSHIP
as Lessor,
and
TEL-COM WIRELESS CABLE TV CORPORATION
and
INTERNATIONAL BROADCAST CONSULTANTS OF AMERICA, INC.
as Lessees
Dated: May 8, 1998
<PAGE>
INDEX
ARTICLE PAGE
I. Demised Premises 1
II. Term of Lease and Possession 1
III. Minimum Rent 1
IV. Real Estate, and Other Taxes 2
V, Lessor's Work in the Demised Premises 4
VI, Lessee's Work and Approval of Lessee's
Plans and Specifications 4
VII. Use of Demised Premises 4
VIII. Advertising and Promotional Services 7
IX. Alterations 7
X. Maintenance of Demised Premises,
Indemnification and Insurance 8
XI. Common Areas 11
XII. Mechanic's Lien or Claims 14
XIII. Destruction and Restoration 14
XIV. Property in Demised Premises 15
XV. Access to Demised Premises 16
XVI. Surrender of Demised Premises 16
XVII. Utilities 17
XVIII. Assignment and Subletting 17
XIX. Eminent Domain 19
XX. Default by Lessee 20
XXI. Default by Lessor 24
XXII. Estoppel Certificate, Attornment
and Subordination 25
XXIII. Holding Over 26
XXIV. Quiet Enjoyment 26
XXV. Security Agreement and Security Deposit 26
XXVI. Reimbursement 28
XXVII. Changes and Additions to Shopping Center 28
XXVIII. Title of Articles 28
XXIX. Notices 28
XXX. Definition of Terms 29
XXXI. Invalidity of Particular Provisions 30
XXXII. Provisions Binding 30
XXXIII. Relationship of Parties 31
XXXIV. Brokerage 31
XXXV. Warranty and Authority 31
XXXVI. Relocation of Tenant 32
XXXVII. Miscellaneous 32
Exhibit "A" - Legal Description
Exhibit "B" - Site Plan
Exhibit "C" - Certification of Dates
Exhibit "D" - Lessor's Work
Exhibit "E" - Lessee's Work
Exhibit "F" - Construction Procedures and Regulations
Exhibit "G" - Sign Criteria
Exhibit "H" - Environmental Compliance and Radon Gas
Addendum
Guaranty
<PAGE>
LEASING SUMMARY REPORT
Executed this 8th day of May, 1998, between Intracoastal Pacific Limited
Partnership, the Lessor, and Tel-Com wireless Cable TV Corporation, and
International Broadcast Consultants of America, Inc., the Lessees, for the
purposes of this Lease, the following defined terms have the meanings ascribed
thereto as follows..
LEASE DATE:
LESSOR: Intracoastal Pacific Limited Partnership
LESSEE: Tel-Com Wireless Cable TV Corporation and International Broadcast
Consultants of America, Inc.
LESSEES' MAILING ADDRESS: LESSOR'S MAILING ADDRESS:
3957 N.E. 163rd Street 3789 N.E. 163rd Street
North Miami Beach, Florida 33160 North Miami Beach, Florida 33160
STORE ADDRESS: 3957 N.E. 163rd Street
North Miami Beach, Florida 33160
LESSEES' TRADE NAME: Tel-Com Wireless Cable TV Corporation
LESSEES USE: General Office
DEMISED PREMISES: 4,500 square feet
LEASE TERM:
INITIAL TERM: 5 years
COMMENCEMENT DATE: Upon delivery of space
EXPIRATION DATE: _______________, 2003
MINIMUM ANNUAL RENT (PER SQUARE FOOT, PER ANNUM):
BASE RENT PER SQUARE FOOT MONTHLY ANNUALLY
--------- --------------- ------- --------
Year l $ 13.50 $5,062.50 $60,750.00
Year 2 $ 14.50 $5,437.50 $65,250.00
Year 3 $ 15.50 $5,812.50 $69,750.00
Year 4 $ 16.50 $6,187.50 $74,250.00
Year 5 $ 17.50 $6,562.50 $78,750.00
SECURITY DEPOSIT: $15,187.50
ADDITIONAL RENT:
COMMON AREA MAINTENANCE: Full Pro-Rata Share
(Currently estimated at $1,111,47 per month)
REAL ESTATE TAXES: Full Pro-Rata Share
(Currently estimated at $696.59 per month)
GUARANTOR: Eric Lefkowitz (Guaranty for first year of Lease Term)
GUARANTOR'S MAILING ADDRESS:
LESSEE LESSOR
TEL-COM WIRELESS CABLE INTRACOASTAL PACIFIC LIMITED
TV CORPORATION, a PARTNERSHIP, a Florida limited
Florida corporation partnership
By /s/ Mel Rosen By: RC Intracoastal, Inc.
---------------------------- an Illinois corporation,
Print Name: Mel Rosen Its managing general partner
-------------------
Title: President
------------------------
Date of Execution By: /s/ Michael Schramm
---------------------------------
By Lessee: 5/1/98 Title: Executive Vice President
-------------------- ------------------------------
Date of Execution:
By Lessor: 5/8/98
--------------------------
<PAGE>
LESSEE
INTERNATIONAL BROADCAST CONSULTANTS
OF AMERICA, INC. a
Florida corporation
By: /s/ Eric Lefkowitz
----------------------------
Print Name: Eric Lefkowitz
--------------------
Title: President IBC
-------------------------
Date of Execution:
By Lessee: April 30, 1998
---------------------
<PAGE>
ADDENDUM TO THAT CERTAIN LEASE
DATED 5 - 8 - 98 BY AND BETWEEN
INTRACOASTAL PACIFIC LIMITED PARTNERSHIP AND
TEL-COM WIRELESS CABLE TV CORPORATION,
AND INTERNATIONAL BROADCAST CONSULTANTS
OF AMERICA, INC.,
This addendum is made to the lease dated May 8, 1998 between INTRACOASTAL
PACIFIC LIMITED PARTNERSHIP, as Lessor and TEL-COM WIRELESS CABLE TV
CORPORATION, and INTERNATIONAL BROADCAST CONSULTANTS OF AMERICA, INC., as
Lessees, for that certain premises located at 3957 N.E. 163 Street, North Miami
Beach, Florida, in the Intracoastal Mall in North Miami Beach, Florida (the
Lease). The parties hereto desire to make certain additions to the lease and,
accordingly, it is hereby agreed as follows:
1. LESSEES' WORK Lessees shall be responsible for all furniture, fixtures and
equipment in the Demised Premises as well as all Lessee finishes including but
not limited to paint, wall coverings, window coverings, floor coverings,
cabinetry, woodworkings, and the like.
2. LESSOR'S WORK. Lessor shall construct the Premises in accordance with the
mutually accepted space plan, attached hereto, and in accordance with the
attached building standards.
LESSEE LESSOR
TEL-COM WIRELESS CABLE INTRACOASTAL PACIFIC LIMITED
TV CORPORATION, a PARTNERSHIP, a Florida limited
Florida corporation partnership
By: /s/ Mel Rosen By: RC Intracoastal, Inc.
--------------------------- an Illinois corporation,
Print Name: Mel Rosen Its managing general partner
-------------------
Title: President By: /s/ Michael Schramm
------------------------ --------------------------------
Date of Execution Title: Executive Vice President
------------------------------
By Lessee: 5/1/98 Date of Execution:
-------------------- By Lessor: 5/8/98
-------------------------
LESSEE
INTERNATIONAL BROADCAST CONSULTANTS
OF AMERICA, INC., a
Florida corporation
By: /s/ Eric Lefkowitz
----------------------------
Print Name: Eric Lefkowitz
--------------------
Title: President IBC
-------------------------
Date of Execution:
By Lessee: April 30th
---------------------
<PAGE>
GUARANTY OF LEASE
THIS AGREEMENT made this 8TH day of MAY 1998, by and between ERIC LEFKOWITZ
(hereinafter called "Guarantor") and INTRACOASTAL PACIFIC LIMITED PARTNERSHIP, a
Florida limited Partnership, by RC Intracoastal, Inc., an Illinois corporation
(hereinafter called "Landlord" "Lessor").
WHEREAS, a certain Lease, hereinafter referred to as "Lease", of even date
herewith has been, or will be executed by and between INTRACOASTAL PACIFIC
LIMITED PARTNERSHIP, a Florida limited Partnership, by RC Intracoastal, Inc.
therein and herein referred to as "Landlord" or "Lessor", and TEL-COM WIRELESS
CABLE TV CORPORATION, and INTERNATIONAL BROADCAST CONSULTANTS OF AMERICA, INC.,
therein and herein referred to as "Tenants" or "Lessees" covering certain
premises located at 3957 N.E. 163 Street, North Miami Beach, in Miami-Dade
County, State of Florida; and
WHEREAS, Guarantor has a financial interest in Lessees, and the Lessor
under the Lease requires as a condition to its execution of the Lease that the
undersigned guaranty the full performance of the obligations of the Lessees
under the Lease during the first year of the Lease Term; and
WHEREAS, the undersigned are desirous that Lessor enter into the Lease with
Lessees; and
WHEREAS, Guarantor has examined said Lease and is fully cognizant of the
covenants, conditions and agreements contained therein.
NOW THEREFORE, in consideration of the execution of the Lease by the
Lessor, and in consideration of other good and valuable considerations, receipt
of which are hereby acknowledged, during the first year of the Lease Term, the
undersigned hereby unconditionally guarantees the full and faithful and punctual
performance of each and all of the terms, covenants, agreements and conditions
of the Lease to be kept and performed by the Lessees, their successors and
assigns, in accordance with and within the time
<PAGE>
prescribed by the Lease, including, but not limited to, the payment of all
rentals and other charges to accrue thereunder. The undersigned further agree as
follows:
1. This covenant and agreement on its part shall continue in favor of the
Lessor notwithstanding any extension, modification, amendment, or alteration of
the Lease entered into by and between the parties thereto, or their successors
or assigns, and notwithstanding any assignments of the Lease, with or without
the consent of the Lessor, and no extension, modification, amendment, alteration
or assignment of the Lease, and no forbearance which may be granted Lessees, and
no waiver by Lessor, and no other agreements between Lessor and Lessees (with or
without notice to or knowledge of the undersigned) shall in any manner release
or discharge the undersigned and he does hereby consent thereto.
2, This Guaranty will continue unchanged by any bankruptcy, reorganization
or insolvency of the Lessees or any successor or assignee thereof or by any
disaffirmance or abandonment by a trustee of Lessees.
3. Lessor may, without notice, assign this Guaranty of Lease in whole or in
part and no assignment or transfer of the Lease shall operate to extinguish or
diminish the liability of the undersigned hereunder.
4. The liability of the undersigned under this Guaranty of Lease shall be
primary and in any right of action which shall accrue to Lessor under the Lease,
the Lessor may, at its option, proceed against the undersigned without having
commenced any action or having obtained any judgment against the Lessees.
5. The undersigned shall pay Lessor's attorneys' fees, including appellate
fees, and all costs and other expenses incurred in any collection or attempted
collection or in any negotiations relative to the obligations hereby guaranteed
or in enforcing this Guaranty of Lease against the undersigned, individually and
jointly and severally.
6. The undersigned does hereby waive any and all notices and demands by the
Lessor including, but not limited to, default in the payment of rent or any
other amount contained or reserved in the Lease.
7. The undersigned hereby waves: (a) notice of acceptance of this Guaranty,
(b) demand of payment, presentation, protest, (c) all right to assert or plead
any statute of limitations as to or relating to this Guaranty and the Lease, (d)
any right to require the Lessor to proceed against the Lessees or any other
Guarantor or any other person or entity liable to Lessor, (e) any right to
require Lessor to apply to any default any security deposit or other security it
may hold under the Lease, (f) any right to require Lessor to proceed under any
other remedy Lessor may have before proceeding against Guarantor (f) any right
of subrogation.
<PAGE>
8. The undersigned does hereby subrogate all existing or future
indebtedness of Lessees to Guarantor to the obligations owed to Lessor under the
Lease and this Guaranty.
9. The obligations of Lessees under the Lease to execute and deliver
estoppel statements and financial statements, as therein provided, shall be
deemed to also require the Guarantor hereunder to do and provide the same
relative to Guarantor.
The use of the singular herein shall include the plural. The obligation of
two or more parties shall be joint and several. The terms and provisions of the
Guaranty shall be binding upon and inure to the benefit of the respective
successors and assigns of the parties herein named.
ERIC LEFKOWITZ
/s/ Eric Lefkowitz
- -----------------------------------------
GUARANTOR
Social Security #: ###-##-####
-----------------------
Address: 15645 Collins Avenue
---------------------------------
Miami Beach, Florida 33160
---------------------------------
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INTRACOASTAL MALL LEASE
THIS LEASE, made and entered into this 8th, day of May 1998, by and
Between Intracoastal Pacific Limited Partnership, a Florida limited partnership,
by RC Intracoastal, Inc., an Illinois Corporation, its managing general partner
(hereinafter "Lessor" or "Landlord") and Tel-Com Wireless Cable TV Corporation,
a Florida corporation and International Broadcast Consultants of America, Inc.,
a Florida corporation, (hereinafter collectively referred to as "Lessee" or
"Tenant").
WITNESSETH
In consideration of the payments of rents and other charges provided for
herein and the covenants and conditions hereinafter set forth, Lessor and Lessee
hereby covenant and agree as follows:
ARTICLE I
DEMISED PREMISES
Lessor hereby leases to Lessee and Lessee hereby leases from Lessor the
following described premises (hereinafter "Demised Premises") situated in the
Intracoastal Mall located at the intersection of N.E. 35th Avenue and N.E. 163rd
Street, North Miami Beach, Florida 33160 and legally described on Exhibit "A"
attached hereto and made a part hereof (hereinafter "Shopping Center"), which
premises consist of a store containing approximately Four Thousand Five Hundred
(4,500) square feet overall, identified on the site plan of the Shopping Center
which is designated "Exhibit "B" attached hereto and made a part hereof. The
Demised Premises shall be deemed not to include either the land lying thereunder
or the exterior walls or roof of the building in which the Demised Premises are
located. The street address of the Demised Premises will be 3957 N.E. 163
Street, North Miami Beach, Florida 33160.
ARTICLE II
TERM OF LEASE AND POSSESSION
1. TO HAVE AND TO HOLD for a term to commence upon delivery of the Demised
Premises to Lessee by Lessor (the Commencement Date) and shall end (unless
sooner terminated or extended as hereinafter provided) at midnight on , 2003,
hereinafter the "Term". The possession day shall be the date on which the Lessor
notifies the Lessee in writing that the premises are ready for the Lessee's
occupancy, and at this time the keys to the premises shall be delivered to the
Lessee. Upon the request of the Lessor, Lessee and Lessor, or Lessor's agent,
shall execute a certification in the form of Exhibit "C" attached hereto and
made a part hereof stipulating the Commencement Date and the expiration of the
Term. Lessor shall have no liability to Lessee for any delay in delivery of
possession of the Demised Premises on the Commencement Date.
ARTICLE III
MINIMUM RENT
1 Lessess covenants and agrees to pay Lessor the Minimum Annual Rent, as
set forth on the Leasing Summary report payable in advance in equal monthly
installments in the amount of the monthly rent on the first day of each and
every calendar month during the term or at demand and without setoff or
deductions, for any reason whatsoever: provided, however, concurrently with the
execution hereof, Lesse shall pay Lessor the Minimum Rent for the first full
calendar month of the Term. If the Commencement Date shall occur on a day other
than the first day of the calendar month, or terminate on a day other than the
last day of the calendar month, the monthly Minimum Rent for such months shall
be prorated accordingly.
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2. If Lessee shall fail to pay any installment of Minimum Rent, or any item
of additional rent after the same becomes due and payable, such unpaid amounts
shall bear interest from the due date thereof to the date of payment at a rate
which shall be eighteen percent (18%) per annum, or the maximum rate permitted
by applicable usury laws if such rate is different from eighteen (18%) percent
per annum. In addition thereto, if Lessee shall fail to pay any installment of
Minimum Rent, or any item of additional rent within five (5) days after the date
the same becomes due and payable, then Lessee shall also pay to Lessor a late
payment service charge (herein "Late Charge") contributing to administrative and
overhead expenses equal to the greater of (a) Two Hundred Fifty and No/100
Dollars ($250.00), or (b) five cents (.05) per each dollar so overdue. In
addition thereto, if any check tendered by Lessee to Lessor is returned unpaid,
then Lessee shall also pay to Lessor a Returned Check Charge of $25.00
contributing to administrative and overhead expenses. The provisions herein for
the payment of interest or the Late or RETURNED CHECK Charge shall not be
construed to represent interest but are intended to reimburse Lessor for its
overhead and expense so incurred and shall not be construed to extend the date
for payment of any sums required to be paid by Lessee hereunder or to relieve
Lessee of its obligation to pay all such sums at the time or time herein
stipulated.
3. All sums, other than Minimum Rent, payable under any provisions of this
Lease shall be deemed additional rent, and upon failure of Lessee to promptly
pay any such sum, Lessor shall be entitled to exercise any and all rights and
remedies contained herein or at law for the failure to pay Minimum Rent.
ARTICLE IV
REAL ESTATE AND OTHER TAXES
1. Lessee shall pay as additional rent hereunder its proportionate share
of the real estate taxes from and after the Commencement Date and continuing
during the Term of this Lease including any period during which Lessee shall
transact business in the Demised Premises prior to the Commencement Date of the
Term of this Lease. For the purposes of this Lease, the term "REAL ESTATE TAXES
" shall include all real estate taxes, assessments, water and sewer rents
(except water meter charges and sewer rent based thereon) and other governmental
impositions and charges of every kind and nature whatsoever, extraordinary as
well as ordinary, general and special, foreseen and unforeseen, and each and
every installment thereof (including any interest on amounts which may be paid
in installments) which shall or may, during the Term, be levied, assessed,
imposed, become due and payable, or liens upon, or arising in connection with,
the use, occupancy or possession, of or become due and payable out of, or for,
the Shopping Center or any part thereof, and all costs incurred by Lessor in
contesting or negotiating the same with a governmental authority. Lessee's
proportionate share shall be computed by multiplying the total amount of the
real estate taxes each year by a fraction, the numerator of which shall be the
gross leasable area of the Demised Premises and the denominator of which shall
be the gross leasable area of all building space in THE Shopping Center as
assessed by the Miami-Dade County Taxing Authority in the tax bill for the
Shopping Center and except as provided in Easement and Operating Agreements for
the Shopping Center as of the beginning of the calendar year in which such taxes
are paid. Lessor reserves the right and option to cause one or more separate tax
lots to be established for components of the Shopping Center in which Lessee's
proportionate share of real estate taxes will be computed on the basis of the
component in which the Demised Premises is located. Lessee hereby waives any
rights it may have by statute or otherwise to protest real estate taxes. Lessor
will be pay the Shopping Center's real estate tax bill at par prior to it
becoming delinquent. Lessee will not be responsible for any
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penalties which may be imposed upon Lessor as a result of late payments nor will
it be entitled to any discount resulting from early payment. Nothing herein
contained shall be construed to include as a tax which shall be the basis of
real estate taxes, any inheritance, estate, succession, transfer, gift,
franchise, corporation, income or profit tax or capital levy that is or may be
imposed upon Lessor; provided, however, that if, at any time after the date
hereof, the methods of taxation shall be altered so that in lieu of or as a
substitute for the whole or any part of the taxes now levied, assessed or
imposed on real estate as such, there shall be levied, assessed or imposed (a) a
tax on the rents received from such real estate, or (b) a license fee measured
by the rents receivable by Lessor from the Shopping Center or any portion
thereof, or (c) a tax or license fee imposed upon Lessor which is otherwise
measured by or based in whole or part upon the Shopping Center or any portion
thereof, or (d) an income or franchise tax, or (e) all federal, municipal,
county or state taxes assessed during the terms of this Lease against any
occupancy interest, occupational use, or personal property of any kind, owned by
or placed in, upon or about the Premises by Lessee, then the same shall be
included in the computation of real estate taxes hereunder, computed as if the
amount of such tax or fee so payable were that due if the Shopping Center were
the only property of Lessor subject thereto. In addition to the foregoing,
should any governmental authority acting under any existing or future law,
ordinance or regulation, levy, assess or impose a tax, excise and/or assessment
upon or against this Lease, the execution hereof and/or the Minimum Rent, or any
item of additional rent payable by Lessee to Lessor whether by way of
substitution for or in addition to any existing tax or otherwise, and whether or
not evidenced by documentary stamps or the like, Lessee shall be responsible for
and shall pay such tax, excise and/or assessment, or shall reimburse Lessor for
the amount thereof, as the case may be.
2. Lessee shall, for the first calendar year of the Lease, pay to Lessor
Lessee's proportionate share per month on the first (1st) day of each calendar
month as its estimated payment of real estate taxes (hereinafter "ESTIMATED
REAL ESTATE TAX PAYMENT"). For each year thereafter, Lessee shall pay Lessor as
its Estimated Real Estate Tax Payment on the first (1st) day of each calendar
month one-twelfth (1/12) of Lessee's proportionate share of Lessor's estimate
of the real estate taxes for that year or the amount of Lessee's tax liability
for the preceding calendar year. Lessor shall notify Lessee of the actual
amount due by Lessee for the preceding calendar year whichever formula Lessor
chooses to use. Any amount paid by Lessee which exceeds the actual amount due
shall be credited on the next succeeding payment due pursuant to this section.
If Lessee has paid less than the actual amount due, Lessee shall pay the
difference within ten (10) days of receipt of notice from Lessor. If the Term
of this Lease shall begin or end other than on the first or last day of a
calendar year, these charges shall be billed and adjusted on the basis of such
fraction of a calendar year. Should the taxing authorities include in such real
estate taxes, machinery, equipment, fixtures, inventory or other personal
property or assets of Lessee, then Lessee shall also, pay the entire real
estate taxes for such items. The real estate taxes "for" any year in question
shall be the amount paid by Lessor for the year in question without regard to
when such tax is levied or assessed (e.g. the real estate taxes for 1998 shall
be the tax paid in 1998 whether or not they are levied or assessed in 1998).
Lessee's obligations with respect to payments due during the term of this Lease
pursuant to this Article shall survive the expiration or termination of this
Lease.
3. Lessee agrees to pay to Lessor any sales or use tax or excise tax
imposed or levied against rent or any other charge or payment required hereunder
to be made by Lessee which has been imposed or may be levied by any governmental
agency having jurisdiction thereover.
4. Lessee shall defend and indemnify Lessor against, and Lessee shall save
and hold Lessor harmless from all liability to Lessor arising as a result of any
failure by Lessee to comply with the obligations of Lessee under section 212.031
of (1) (c) of the Florida Revenue Act of 1949, as amended from time to time, to
pay any Florida Sales and Use Tax upon the rent payable by Lessee under this
Lease.
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5. Any payment to be made pursuant to this Article with respect to the real
estate tax year in which this Lease commences or terminates shall bear the same
ratio to the payment which would be required to be made for the full tax year as
that part of such tax year covered by the Term bears to a full tax year.
ARTICLE V
LESSOR'S WORK IN THE DEMISED PREMISES
SEE ADDENDUM
ARTICLE VI
LESSEE'S WORK AND APPROVAL OF LESSEE'S PLANS AND SPECIFICATIONS
1. All of Lessee's signs shall be subject to pre-approval of Lessor and
shall be in accordance with Lessor's sign criteria set forth on EXHIBIT "G"
attached hereto and made a part hereof. Lessee shall maintain said signs in a
good state of repair and save Lessor harmless from any loss, cost, damage, or
expense as a result of the erection, maintenance, existence, or removal of the
same; and shall repair any damage which may have been caused by the erection,
maintenance, existence, or removal of such signs. Upon vacating the Demised
Premises, Lessee shall remove all signs and repair all damage caused by such
removal. Lessee's obligation to observe or perform this covenant shall survive
the expiration or termination of this Lease.
ARTICLE VII
USE OF DEMISED PREMISES
1. (a) Lessee shall operate its business in the Demised Premises under the
trade names Tel-Com Wireless Cable TV, International Broadcast Corporation,
Fifth Avenue Channel, or such other name which is approved by Lessor, and no
other trade name and the Demised Premises shall be occupied and used for the
purpose of a general office (the "PERMITTED USE") and for no other purpose.
Lessee hereby warrants, that it has the full and unfettered right to use
Lessee's trade name and that said use will not in any way infringe on the rights
of others. The foregoing specific use is a material consideration to Lessor in
order that there will be maintained within the Shopping Center an appropriate
tenant mix so as to achieve the maximum gross sales for all tenants and to
assure the continued operation of a specialty shopping center development.
(b) Throughout the term of the Lease, the decor and fixturing of the
Demised Premises, Lessee's merchandise and the operation of Lessee's business
conducted in the Demised Premises shall be consistent with the operation of a
"first-class", "high-quality", general office use as those standards of
operation may be interpreted from time to time during the term of this Lease (as
opposed to a "general", "promotional" or "self-service" store or business).
Lessee shall operate its business at the Demised Premises in as respectable,
reputable, tasteful, competent and dignified manner in order to enhance the
image of the Shopping Center as a specialty shopping center offering quality
name brand merchandise and services and as a desirable place to shop. The
description of the standards of operation of the business conducted in the
Demised Premises as "first class", "high quality" general office use as opposed
to "general", "promotional" or "self -service" is intended only as a description
of the general quality of the merchandise or services
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Lessee may sell and the general quality of customer service, merchandising,
fixturing and decor Lessee must maintain in the operation of the Demised
Premises.
(c) Lessee shall not at any time throughout the term of this Lease
abandon, leave vacant or desert the Demised Premises.
(d) Lessee shall keep the Demised Premises continuously and
uninterruptedly open for business for such hours and days as are customary for
Lessee's business.
(e) Lessee and/or its permitted licensees, concessionaires, sublessees
or assignees shall continuously and without interruption, throughout the term of
this Lease, in good faith, actively use, occupy and operate the entire Demised
Premises, with an inventory of goods and merchandise and a staff of sales
personnel adequate, sufficient and appropriate to operate the Demised Premises
in accordance with the standards contained in subsection (b) of this Paragraph.
(f) Lessor is executing this Lease in reliance upon the covenants
contained in this Paragraph 1 and such covenants are a material element of the
consideration inducing Lessor to enter into and execute this Lease.
2. Lessee shall abide by all reasonable rules and regulations established
by Lessor, from time to time, with respect to the Shopping Center including the
Common Areas (as hereinafter defined) and shall:
(a) Conduct no auction, fire or bankruptcy sales or similar practices.
(b) Display no merchandise outside the Demised Premises nor in any
way obstruct the malls or sidewalks adjacent thereto and store all trash and
refuse in appropriate containers within the Demised Premises and attend to the
daily disposal thereof in the manner designated by Lessor. Lessee shall not burn
any trash or rubbish in or about the Demised Premises or anywhere else within
the confines of the Shopping Center. Lessee shall not operate a garbage grinder
without Lessor's prior consent. If Lessor elects to provide refuse compactor
service in the Shopping Center, Lessee shall use said service exclusively for
disposal of all waste. In the event compactor service is not provided, Lessee
shall use a refuse disposal service approved by Lessor.
(c) Load or unload all merchandise, supplies, fixtures, equipment
and furniture and cause the collection of rubbish in a professional and
business-like manner only through the doors of the Demised Premises. Lessee
shall not permit trailers and/or trucks servicing the Demised Premises to remain
parked in the Shopping Center beyond those periods necessary to service Lessee's
operations and in no event shall such trailers and/or trucks remain parked in
the Shopping Center overnight or beyond the closing hour of the Shopping Center.
(d) Keep the inside and outside of all glass in the windows and
doors of the Demised Premises clean; keep the Demised Premises in a careful,
safe, clean and proper manner and free of insects, rodents, vermin and other
pests; regularly clean and, when necessary replace all floor treatment
(including carpet) which adjoins any mall area; not permit any rubbish or refuse
of any nature emanating from the Demised Premises to accumulate in the mall
areas or rear delivery areas; and not permit the plumbing facilities within or
servicing the Demised Premises to be used for any purposes other than for which
they were constructed, and no foreign substances of any kind shall be thrown
therein.
(e) Not solicit business in Common Areas or distribute any
handbills or other advertising matter or maintain any sign in
the Common Areas.
(f) Prevent the Demised Premises from being used in any way which
may be a nuisance, annoyance, inconvenience or damage to the other
tenants or occupants of the Shopping Center, including, without
limiting the generality of the foregoing, the operation
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of any instrument or apparatus or equipment or the carrying on of any trade or
occupation which emits an odor discernible outside of the Demised Premises and
which may be deemed offensive in nature, or noise by the playing of any musical
instrument or radio or television or the use of a microphone, loudspeaker,
electrical equipment or other equipment which may be heard outside of the
Demised Premises.
(g) Not exhibit, inscribe, paint, or affix any sign, advertisement,
notice or other lettering on any part of the outside of the Demised Premises or
of the building of which the Demised Premises are a part, or inside the Demised
Premises if visible from the outside, without first obtaining Lessor's written
approval thereof. Lessee further agrees to maintain such sign, lettering, etc.,
as may be approved, in good condition and repair at all times. Lessor shall have
the right, without notice to Lessee and without, any liability for damage to the
Demised Premises reasonably caused thereby, to remove any items displayed or
affixed in violation of the foregoing provisions.
(h) Maintain the heating, ventilating and air-conditioning equipment
servicing the Demised Premises at comfortable temperatures.
(i) Not use, occupy, suffer or permit the Demised Premises or any part
thereof to be used or occupied for any purpose which may be
contrary to law or to the rules or regulations of any public
authority or which may be prohibited by or violate any of
Lessor's insurance policies or the rules or regulations of the
Fire Insurance Rating Organization having jurisdiction or any
similar body, or which will increase any insurance rates and
premiums on the Demised Premises, the building of which it forms
a part and/or any other buildings or improvements in the Shopping
Center. If as a result of: (i) any failure of Lessee, or anyone
claiming by, through or under Lessee, to comply with the
provisions of the preceding sentence; or (ii) the use and
occupancy of the Demised Premises by Lessee or anyone claiming
by, through or under Lessee, whether or not Lessor has consented
to the same; or (iii) Lessee's failure, to use and/or
continuously to occupy and operate Lessee's business in the
Demised Premises in the manner provided for in this Lease; or
(iv) Lessee's abandonment of the Demised Premises, the insurance
rates applicable to any policies of insurance carried by Lessor
governing the Demised Premises or the Shopping Center property or
the rental income to be derived therefrom shall be increased,
Lessee shall pay Lessor within ten (10) days after Lessor's
demand therefore, as additional rent hereunder, the entire
portion of the premiums for said insurance which shall be
attributable to such higher rates. In determining whether any
increase in such rates is the result of any of the aforementioned
acts or omissions of Lessee or anyone claiming by, through or
under Lessee, a schedule or rule book issued by the applicable
rating organization or the rating procedures or rules of Lessor's
insurance companies shall be conclusive evidence of the times and
charges which make up the insurance rates and premiums on the
Demised Premises, or the Shopping Center. If any such insurance
carried by Lessor shall be cancelled by the insurance carrier as
a result of any of the aforementioned acts or omissions of Lessee
or anyone claiming through or under Lessee, Lessee shall
indemnify, have and hold harmless Lessor against and from all
damages, costs and expenses which Lessor may sustain by reason
thereof. Nothing contained herein shall permit a use other than
the Permitted Use. Lessee shall promptly comply with all present
and future laws, regulations or rules of any county, state,
federal and other governmental authority and any bureau and
department thereof, and of the National Board of Fire
Underwriters or any other body exercising similar function which
may be applicable to the Demised Premises, including the making
of any required structural changes thereto. If Lessee shall
install any electrical equipment that overloads the lines in the
Demised Premises, Lessee shall make whatever changes are
necessary to comply with the requirements of the insurance
underwriters and governmental authorities having jurisdiction
thereover.
(ii)
(j) Keep its display window, including window or shadow boxes, in
the Demised Premises dressed and illuminated and its signs and
exterior lights well lighted everyday of the Term of the Lease
from dusk to 9:30 pm., excluding Sundays and Holidays.
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(k) To use such name for the Shopping Center as Lessor shall
designate in all advertising in newspapers, radio, television and other media.
(l) Not operate vending machines, pinball machines, or electronic
games or similar devices.
(m) Lessee shall not overload the floors of the Demised Premises
beyond their designed weight-bearing capacity. Lessor reserves the right to
direct the positioning of all heavy equipment, furniture and fixtures which
Lessee desires to place in the Demised Premises so as to distribute properly the
weight thereof, and to require the removal of any equipment or furniture which
exceeds the weight limit specified.
(n) Lessee shall not cause, use or permit any hazardous or toxic
substance, material or waste to be brought into the Demised Premises or the
Shopping Center or used, handled, stored or disposed of in, on or about the
Demised Premises or the Shopping Center and Lessee shall comply with the terms,
covenants and provisions of EXHIBIT "H" attached hereto and made a part hereof.
(o) It is understood Lessee knows and controls its business, its
employees and agents and its operation in the Demised Premises, and that all
applicable zoning, occupancy and other requirements pertaining to the Demised
Premises are matters of public record. Lessee represents and warrants its use
and occupancy of the Demised Premises comply with same, and agrees it shall, at
its sole cost and expense, comply with all zoning, occupancy and other
requirements of all municipal, county, state, federal and other applicable
governmental authorities, now in force, pertaining to its use of the Demised
Premises, and shall secure all necessary permits therefore and shall faithfully
observe, in the use of the Demised Premises, all applicable municipal and county
ordinances and state and federal statutes now in force, or which may hereafter
be in force. Lessee shall obtain any required certificate of occupancy with
respect to its use of the Demised Premises within thirty (30) days from the
commencement of the Term hereof and shall deliver a copy thereof to Lessor
within said thirty (30) day period.
3. If either Lessee fails to keep or perform any covenant or term included
in Paragraph 2 of this Article or violates any such covenant or term, and if
Lessee fails to cure such failure or violation promptly after notice from Lessor
and with all due diligence, Lessor may, in addition to any and all other
remedies Lessor may have under this Lease or at law or in equity, (a) enjoin
such Lessee from any further failure or violation hereunder or (b) cure or
prosecute the curing of such failure or violation and all expenses in connection
with such cure or prosecution of such cure of such failure or violation,
including without limitation legal fees, shall be deemed additional rent and
paid by Lessee together with the next installment of Minimum Rent due under this
Lease; provided, however, if Lessee shall be in breach of its obligations
included under Paragraph 3 of this Article on three (3) or more occasions during
any twenty-four (24) month period, then such failure shall be deemed a
noncurable default.
ARTICLE VIII
ADVERTISING AND PROMOTIONAL SERVICES
INTENTIONALLY DELETED
ARTICLE IX
ALTERATIONS
Lessee shall not make or permit to be made any alterations, improvements and/or
additions of any kind or nature to the Demised Premises or any part thereof
accept by and with the approval of Lessor, which approval shall be in Lessor's
sole ownership discretion. All alterations, improvements and additions to the
Demised Premises shall be made in
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accordance with plans and specifications prepared by Lessee and approved by
Lessor and in accordance with all applicable building codes. The approval by
Lessor of the plans and specifications shall not constitute the assumption of
any liability on the part of Lessor for their compliance or conformity with
applicable building codes and the requirements of this Lease or for their
accuracy, and Lessee shall be solely responsible for such plans and
specifications. Such alterations, improvements and additions to the Demised
Premises shall be done in a good workmanlike manner using first-quality
materials and shall at once when made or installed be deemed to have attached to
the fee and to have become the property of Lessor and shall remain for the
benefit of Lessor at the end of the Term, or other expiration of this Lease, in
as good order and condition as they were when installed, reasonable wear and
tear excepted; provided, however, if prior to the termination of this Lease, or
within fifteen (15) days thereafter, Lessor so directs, Lessee shall promptly
remove the alterations, improvements, additions, fixtures and installations
which were placed in the Demised Premises by Lessee and which are designated in
said notice and repair any damage occasioned by such removal and in default
thereof, Lessor may effect said removals and repairs at Lessee's expense. In the
event of making such alterations, improvements and/or additions as herein
provided, Lessee shall protect, indemnify, save and hold harmless Lessor from
all expense, liens, claims or damages to either persons or property arising out
of, or resulting from the undertaking or making of such alterations,
improvements and/or additions including, without limitation, mechanic's liens or
other liens claimed or filed or building code violations attributable to such
work.
ARTICLE X
MAINTENANCE OF DEMISED PREMISES, INDEMNIFICATION AND INSURANCE
1. Lessor shall, as a Common Area Maintenance Cost (as hereinafter
defined), keep and maintain the roof over the Demised Premises and structural
portions of the Demised Premises in good repair, provided that Lessee shall give
Lessor prior notice of the necessity for such repairs and further provided, that
any damage thereto shall not have been caused by any act or negligence of
Lessee, its employees, agents, invitees, subtenants, licensees, assignees or
contractors, in which event such damage shall be promptly repaired by Lessee,
subject to the supervision of Lessor. Other than as herein provided, Lessor
shall not be responsible to maintain or make any improvements or repairs of any
kind, in or upon the Demised Premises.
2. Lessee shall keep and maintain in good order, condition and repair
(which repair shall mean replace if necessary) the Demised Premises and every
part thereof, except as herein before provided, including, without limitation,
the exterior and interior portions of all doors, door checks, security gates,
windows, glass, utility facilities, plumbing and sewage facilities within the
Demised Premises or under the floor slab including free floors up to the main
sewer line, fixtures, heating, air-conditioning including the air conditioning
mechanical equipment located on rooftop and electrical and drain pipes servicing
the air conditioning equipment serving the Demised Premises and interior walls,
floors and ceilings, including compliance with applicable building codes. Lessee
shall contract for, in its own name, and shall pay for a qualified service
contractor to inspect, adjust, clean and repair heating, ventilating and air
conditioning equipment, including changing filters on a quarterly basis.
Heating, ventilating and air-conditioning units shall be set for continuous fan
operation during the hours the Shopping Center is open and such units' dampers
shall be adjusted to a minimum ten percent (10%) outside air setting. If
Lessee's use of the Demised Premises results in special exhaust requirements,
Lessee shall have exhaust fans interlocked with the make-up air units. If Lessee
refuses or neglects to commence of complete any of the obligations above set
forth promptly and adequately, Lessor may , but shall not be required to, make
or complete said maintenance or repairs and Lessee shall pay the cost thereof to
Lessor upon demand as additional rent.
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3. (a) Lessee shall protect, defend, indemnify, save and hold harmless
Lessor and/or any fee owner or ground or underlying Lessors of the Shopping
Center, against and from any and all claims, demands, fines, suits, actions,
proceedings, orders, decrees and judgments of any kind or nature by, or in favor
of, anyone whomsoever, and against and from any, and all costs, damages and
expenses, including attorneys fees, resulting from, or in connection with, loss
of life, bodily or personal injury or property damage arising, directly or
indirectly, out of, or from, or on account of, any accident or other occurrence
in, upon, at or from the Demised Premises, or occasioned in whole or in part
through the use and occupancy of the Demised Premises or any improvements
therein or appurtenances thereto, or by any act or omission of Lessee or any
subtenant, concessionaire or licensee of Lessee, or their respective employees,
agents, contractors or invitees in, upon, at or from the Demised Premises or its
appurtenances or any Common Areas of the Shopping Center.
(b) Lessee, and all those claiming by, through and under Lessee,
shall store their property in and shall occupy and use the Demised Premises and
any improvements therein and appurtenances thereto, and all other portions of
the Shopping Center, solely at their own risk, and Lessee, and all those
claiming by, through or under Lessee, hereby release Lessor, to the full extent
permitted by law, from all claims of every kind, including loss of life,
personal or bodily injury, damage to merchandise, equipment, fixtures or other
property, or damage to business or for business interruption, arising, directly
or indirectly, out of, or from, or on account of, such occupancy and use, or
resulting from any present or future condition or state of repair thereof.
(c) Lessor shall not be responsible or liable at any time to
Lessee, or to those claiming by, through or under Lessee, for any loss of life,
bodily or personal injury, or damage to property or business, or for business
interruption, that may be occasioned by any failure by any tenants or occupants
of the Shopping Center to comply with any of the terms of their leases or
agreements or that may be occasioned by or through the acts, omissions or
negligence of any other persons, or any other tenants or occupants of the
Shopping Center.
(d) Lessor shall not be responsible or liable at any time for any
defects, latent or otherwise, in any buildings or improvements in the Shopping
Center or any of the equipment, machinery, utilities, appliances or apparatus
therein, nor shall Lessor be responsible or liable at any time for loss of life,
or injury or damage to any person or to any property or business of Lessee, or
those claiming by, through or under Lessee, caused by, or resulting from, the
bursting, breaking, leaking, running, seeping, overflowing or backing up of
water, steam, gas or sewage, in any part of the Demised Premises or caused by,
or resulting from, acts of God or the elements, or resulting from any defect or
negligence in the occupancy, construction, operation or use of any buildings or
improvements in the Shopping Center, including the Demised Premises, or any of
the equipment, fixtures, machinery, appliances or apparatus therein.
(e) Lessee shall give prompt notice to Lessor in case of fire or
other casualty or accidents in the Demised Premises, or in the building of which
the Demised Premises forms a part, or of any defects thereof or in any of its
fixtures, machinery or equipment.
(f) In the event Lessor, without fault on its part, shall be made
a party to any litigation commenced by or against Lessee, then Lessee shall pay
Lessor all costs and expenses, including reasonable attorneys fees, which Lessor
may sustain by reason thereof.
(g) The provisions of this Paragraph 3 shall apply and become
effective from and after the Commencement Date and shall survive the expiration
or earlier termination of this Lease.
4. Lessor shall carry standard fire and extended coverage insurance,
insuring the improvements constructed by Lessor upon the Shopping Center,
including Lessor's Work
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in the Demised Premises provided by Lessor, for not less than any amount
required by Lessor's mortgagee, if any, including any deductible permitted by
Lessor's mortgagee.
5. Lessee hereby covenants and agrees at all times during the original term
of this Lease to cause to be maintained and enforced on behalf of Lessor and
property manager, the following insurance coverages: (a) comprehensive
commercial general liability insurance with limits of not less than One Million
($1,000,000) Dollars each occurrence, One Million ($1,000,000) Dollars products
and completed operation, Two Million ($2,000,000) Dollars general aggregate, One
Million ($1,000,000) Dollars personal and advertising injury, One Million
($1,000,000.00) Dollars on account of bodily injury or death and Five Hundred
Thousand ($500,000.00) Dollars for damage to property, including water damage,
arising out of any one occurrence; (b) standard fire and extended coverage
insurance, including vandalism and malicious mischief endorsements, in an amount
,adequate to cover the full replacement value of all improvements on the Demised
Premises and of Lessee's merchandise, trade fixtures, furnishings, wall
coverings, carpeting, drapes, equipment and all other items of personal property
of Lessee located on or within the Demised Premises; (c) plate glass insurance
covering all plate glass in the Demised Premises; (d) if there is a boiler or
air conditioning equipment serving the Demised Premises (whether installed in,
adjoining, above or beneath the same), broad form boiler and machinery insurance
in the amount of One Hundred Thousand ($100, 000) Dollars; (e) business
interruption insurance in an amount adequate to cover payment of all rent,
minimum, additional and otherwise, for one year; (f) Workers' Compensation
insurance at statutory limits for the states in which the operations are being
performed, including employer's liability limits of not less than Five Hundred
Thousand ($500,000) Dollars each accident/injury, Five Hundred Thousand
($500,000) Dollars each employee/disease and Five Hundred Thousand ($500,000)
Dollars policy limit, (g) Commercial Automobile Coverage at limits of One
Million ($1,000,000) Dollars covering all owned, non-owned and hired
automobiles; and (h) and umbrella liability policy the limits of which shall not
be less than Two Million ($2,000,000) Dollars each occurrence, Two Million
($2,000,000) Dollars aggregate, with coverage to follow underlying commercial
liability policy, employer's liability and commercial coverage.
The commercial general liability insurance shall include the
following coverage: (a) premises operation; (b) blanket contractual; (c)
independent contractors; (d) completed operations (e) broad form property
damage; (f) host liquor; and (g) broad form vendors -if applicable.
6. All insurance policies required hereunder shall be issued in the names
of and for the benefit of Lessor, its designee(s) and Lessee, by one or more
responsible insurance companies rated an A+ or better per A.M. and Best and
approved by Lessor and licensed to do business in the State of Florida and, at
Lessee's option, such insurance may be carried under blanket policy, covering
the Demised Premises and any other of Lessee's stores provided the provisions of
such blanket policy comply with the terms of this Lease and coverage with
respect to the Demised Premises is separately allocated therein. The
comprehensive general liability insurance shall specifically insure Lessee's
liability under Article X, Paragraph 3 hereof. All insurance policies required
under Paragraph 5 of this Article shall contain the following endorsements:
(a)That such insurance may not be cancelled or amended or not renewed with
respect to Lessor except upon thirty (30) days prior written notice from the
insurance company to Lessor; (b) that Lessee shall be solely responsible for the
payment of all premiums under such policy and that Lessor shall have no
obligation for the payment thereof: and (c) that in event of payment of any lose
covered by such policy, Lessee's Insurance shall be made primary over any other
valid and collectible insurance available to such additional insured and Lessor
shall be paid first by the insurance company for its loss.
7. A company issued certificate of insurance in a form satisfactory to
Lessor shall be in place with Lessor prior to the Demise of the Premises. Lessee
shall deliver to Lessor certificates or memoranda of insurance for all policies
of insurance to be procured by Lessee within ten (10) days of the inception of
such policies and, at least ten (10) days
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prior to the expiration of any such policies, Lessee shall deliver to Lessor
certificates or memoranda of insurance evidencing the renewal of such policies.
No change in coverage should be effected without written permission from Lessor.
Lessee shall carry insurance on its own personal property, equipment,
improvements and betterments for which Lessee is delineated to have
responsibility and glass at 100% value on a Special Cause of Loss (All Risk)
Form, naming Lessor as loss payee with respect to the improvements and
betterments. The certificate of insurance should delineate the specific dollar
value of the improvements and betterments. The minimum limits of any insurance
coverage to be maintained by Lessee hereunder shall not limit Lessee's liability
under Paragraph 3 of this Article.
ARTICLE XI
COMMON AREAS
1. Lessor hereby grants to Lessee, during the term of this Lease, the
nonexclusive right to use, in common with all others so entitled, the Common
Areas (as hereinafter defined) for pedestrian and vehicular traffic. The Common
Areas shall be subject to the exclusive control and management of Lessor and to
such rules and regulations as Lessor may, from time to time, adopt and Lessor
reserves the right to change the areas, locations and arrangement of parking
areas and other Common Areas; to enter into, modify and terminate easements and
other agreements pertaining to the maintenance and use of the parking areas and
other Common Areas; to close any or all portions of the Common Areas to such
extent and for such time as may, in the sole discretion of Lessor's counsel, be
legally necessary to prevent a dedication thereof or the accrual of any rights
to any person or to the public therein; to close temporarily, if necessary, any
part of the Common Areas in order to discourage noncustomer parking; and to make
changes, additions, deletions, alterations or improvements in and to such Common
Areas, including methods of ingress to and egress from such Common Areas,
provided that there shall be no unreasonable obstruction of Lessee's right of
ingress to or egress from the Demised Premises.
2. Lessor shall operate, maintain and repair the Common Areas and
improvements within the Shopping Center in such manner as Lessor shall in its
sole discretion determine. For these services Lessee shall pay as additional
rent its proportionate share of the Common Area Maintenance Costs (as
hereinafter defined) from and after the Commencement Date and continuing during
the Term of this Lease, including any period during which Lessee shall transact
business in the Demised Premises prior to the Commencement Date of the term of
this Lease. For the purposes of this Article, the term "COMMON AREA MAINTENANCE
COSTS" shall mean all costs, expenses and other charges incurred in connection
with the ownership, management, operation, insurance, maintenance and repair of
the Common Areas and improvements within the Shopping Center, and shall include,
but not be limited to, the costs and expenses of [the following subsections (a)
through (j) are for definition only and are not to be construed so as to impose
any obligations or limitations on Lessor]:
(a) garbage and trash removal; maintenance, repair and replacement of all
parking lot surfaces, service areas and courts, including, cleaning,
sweeping, painting, striping and repaving; maintenance, repair and
replacement of sidewalks, curbs, screens, flagpoles, bicycle racks,
Shopping Center identification signs, traffic signals, and other
traffic markers and signs;
(b) maintenance, repair and replacement of (i) storm and sanitary drainage
systems, including disposal plants and lift stations and retention
ponds or basins; (ii) irrigation systems: (iii) electrical, gas, water
and telephone systems: (iv) lighting systems (including bulbs, poles
and fixtures): (v) emergency water and sprinkler systems: (vi) other
utility systems: (vii) heating, ventilating and air conditioning
systems: and (viii) security systems, including any utility charges in
connection with any of the foregoing systems:
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(c) interior and exterior planting, replanting and replacing of flowers,
shrubbery, plants, trees and other landscaping;
(d) maintenance, repair, replacement and substitution of and for all
portions of the buildings, both interior and exterior, on Lessor's
Parcel (excluding the Demised Premises and premises leased to other
tenants), including, but not limited to, floors, floor coverings,
ceilings, walls, roofs and roof flashings, canopies, skylights, signs,
planters, benches, fountains, elevators, escalators and stairs, fire
exits, doors and hardware, windows, glass and glazing;
(e) premiums or contributions for insurance, including, without
limitation, liability insurance for personal injury, death and
property damage; insurance against liability for defamation and claims
of false arrest occurring in and about the Common Areas; workers'
compensation; broad form all peril insurance covering the Common Areas
in the Shopping Center which may include flood insurance, earthquake
insurance, boiler insurance and/or rent insurance, [for the purposes
of this provision of subsection (e), Common Areas shall be deemed to
include the Demised Premises and premises leased to other tenants];
(f) maintenance, repair and acquisition costs (rental fees and/or purchase
price or in lieu of purchase price, the annual depreciation allocable
thereto) of all security devices, machinery and equipment used in the
operation and maintenance of the Common Areas, and all personal
property taxes and other charges incurred in connection with such
security devices, machinery and equipment:
(g) all license and permit fees, and all parking surcharges that may
result from any environmental or other laws, rules, regulations,
guidelines or orders; the cost of obtaining and operating public
transportation or shuttle bus systems as used in connection with
bringing customers to the Shopping Center or if required by any
environmental or other laws, rules, regulations, guidelines or orders,
(h) installation and operation of music program services and loudspeaker
systems;
(i) personnel, including, without limitation, security and maintenance
people on the Shopping Center, the mall manager and assistant mall
manager, secretaries and mall management bookkeepers (including,
without limitation, the payroll taxes and employer benefits of such
personnel); and
(j) Lessor's administrative overhead in an amount equal to fifteen percent
(15%) of the total Common Area Maintenance Costs.
3. (a) "LESSEE'S PROPORTIONATE SHARE" means the amount arrived at by
multiplying Common Area Maintenance Costs or Lessor's Estimate (hereinafter
defined) as the case may be by a fraction, the numerator of which is the gross
leasable area of the Demised Premises and the denominator of which is the gross
leasable area of all building space leased in the Shopping Center, provided (i)
to the extent certain expenses are, in Lessor's sole discretion specifically
allocable to the office building which comprises a portion of the Shopping
Center or are allocable pursuant to Easement and Operating Agreements the
Shopping Center, such expenses shall not be included for the purpose of
determination of Common Area Maintenance Costs and (ii) to the extent certain
expenses are, in Lessor's sole discretion, specifically allocable to the mall
and not the office building, the denominator referred to above shall, with
respect to referenced expenses, not include the gross leaseable area of the
office building.
(b) "Lessor's Estimate" means the total amount of Common Area
Maintenance Costs as estimated by Lessor for each Lease Year.
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(c) Lessee will pay to Lessor, Lessee's Initial Proportionate
Share on the date the first Minimum Rent payment is due and payable hereunder
and on the first day of each and every month thereafter during the first Lease
Year. Thereafter, during each Lease Year Lessee will pay to Lessor on the dates
minimum rental payments are due and payable, a sum equal to one-twelfth (1/12th)
of Lessee's Proportionate Share of Lessor's Estimate. In the event the actual
Common Area Maintenance Costs during any month in any Lease Year exceed Lessor's
projection for such month and it becomes apparent to Lessor that Lessee's
monthly payments will not pay Lessee's Proportionate Share for such Lease Year,
the Lessor may give written notice to Lessee of any such expected deficiency and
in such notice may increase the monthly payments being made by Lessee to Lessor
hereunder.
(d) After the end of each Lease Year, Lessor shall deliver to
Lessee a statement showing the cost of operating and maintaining the Common
Areas as hereinabove set forth and further showing Lessee's Proportionate Share.
In the event the total monthly payments made by Lessee for Shopping Center
Operating Costs exceeds Lessee's Proportionate Share for such Lease Year, then
Lessor will apply any such coverage towards the next succeeding monthly
payments. In the event the total monthly payments made by Lessee for Common Area
Maintenance Costs are less than Lessee's Proportionate Share for such Lease
Year, then Lessee shall pay any such deficiency to Lessor immediately upon
demand. The obligations of Lessee to pay Lessee's Proportionate Share shall
survive the termination of this Lease.
4. Lessee shall cause it and its employees to park only in the outer areas
of the parking lot or such places as provided and designated from time to time
by Lessor for employee parking, except that Lessee may permit six (6) of its
executives to park in the inner areas of the parking lot during regular business
hours Monday through Friday from 9:00 a.m. to 5:00 p.m. ("executive parking").
Notwithstanding such authorization for executive parking, Lessee acknowledges
and understands that neither its employees nor its executives may park in those
spaces designated as "restaurant parking" on the Site Plan attached hereto as
Exhibit "B". Further, in the event that the Restaurant (Shooters, or its
successors or assigns), commences valet parking, spaces for "executive parking"
may not be available. Such valet parking shall not include any spaces
immediately adjacent to the Demised Premises during normal business hours,
Monday through Friday, 9:00 a.m. to 5:00 p.m. In such event, Lessor shall notify
Lessee of same and authorization for executive parking shall be rescinded.
Within ten (10) days after a request by Lessor, Lessee, shall deliver to
Lessor a list of Lessee's and its executives' and employees' automobiles
(designating each automobile as "executive" or "employee"), which such list
shall set forth the description of and the license numbers assigned to such
automobiles and their state of issue. Thereafter, Lessee shall advise Lessor of
any changes, additions or deletions in such list. If any automobile appearing on
said list is parked in an area of the Shopping Center other than the area
designated by Lessor at any time after Lessor has given notice to Lessee or
Lessee's store manager that the same automobile has previously been parked in
violation of this provision, then Lessee shall pay to Lessor the sum of Ten
Dollars ($10) per day for each such automobile for each day (or part thereof) it
is parked in violation of this provision. Lessee shall pay such sum to Lessor
within ten (10) days after receipt of notice from Lessor. In addition to the
foregoing, Lessee hereby authorizes Lessor in such event to, remove from the
Shopping Center any of Lessee's automobiles, or automobiles belonging to
Lessee's employees or executives, and/or to attach violation stickers or notices
to such automobiles, and Lessee hereby waives and releases Lessor and hereby
indemnifies and holds Lessor harmless for all claims, liabilities, costs and
expenses which may arise therefrom.
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ARTICLE XII
MECHANIC'S LIEN OR CLAIMS
Lessee shall not permit to be created nor to remain undischarged any lien,
encumbrance or charge arising out of any work of any contractor, mechanic,
laborer or material man which might be or become a lien or encumbrance or charge
upon the Demised Premises or the Shopping Center of which the Demised Premises
is a part or the income therefrom and Lessee shall not suffer any other matter
or thing whereby the estate, right and interest of Lessor in the Demised
Premises or in the Shopping Center of which the Demised Premises is a part might
be impaired. Neither Lessor's Parcel nor the Shopping Center of which Lessor's
Parcel is a part shall not be subject to attachment. The Lessee herein shall not
have any authority to create any liens for labor or materials on the Lessor's
interest in the Demised Premises and all persons contracting with the Lessee for
the destruction or removal of any facilities or other improvements or for the
erection, installation, alteration or repair of any facilities or other
improvements on or about the Demised Premises, and all materialmen, contractors,
subcontractors, mechanics and laborers are hereby charged with notice that they
must look only to the Lessee and the Lessee's interests in the Demised Premises
to secure the payment of any bill for work done or material furnished at the
request or instruction of Lessee. Lessee shall include in all contracts and
subcontracts for work to be performed on Lessee's behalf at the Demised Premises
provisions wherein such contractor or subcontractor acknowledges that Lessor has
no liability under such contracts and subcontracts and that such contractor or
subcontractor waives any right it may have to lien or attach the Shopping
Center. If any lien or notice of lien on account of an alleged debt of Lessee or
any notice of contract by a party engaged by Lessee or Lessee's contractor to
work in the Demised Premises shall be filed against the Demised Premises or the
Shopping Center of which the Demised Premises is part, Lessee shall, within
twenty (20) days after notice of the filing thereof, cause the same to be
discharged of record by payment, deposit, bond, order of a court of competent
jurisdiction or otherwise. If Lessee shall fail to cause such lien or notice of
lien to be discharged within the period provided, then Lessor, in addition to
any other rights or remedies, may, but shall not be obligated to, discharge the
same by either paying the amounts claimed to be due or by procuring the
discharge of such lien by deposit or by bonding proceedings; and in any such
event, Lessor shall be entitled, if Lessor so elects, to defend any prosecution
of an action for foreclosure of such lien by the lienor or to compel the
prosecution of an action for foreclosure of such lien by the lienor and to pay
the amount of the judgment in favor of the lienor with interest, costs and
allowances. Any amount paid by Lessor and all costs and expenses, including
attorney fees, incurred by Lessor in connection therewith, together with
interest thereon at the maximum legal rate from the respective dates of Lessor's
making of the payment or incurring of the cost and expense, shall be paid by
Lessee to Lessor on demand as additional rent. Nothing in this Lease shall be
construed as in any way constituting a consent or request by Lessor, expressed
or implied, by inference or otherwise, to any contractor, subcontractor, laborer
or materialman for the performance of any labor or the furnishing of any
materials for any specific or general improvement, alteration or repair of or to
the Demised Premises or to any part thereof.
ARTICLE XIII
DESTRUCTION AND RESTORATION
1. If the Demised Premises shall be damaged to the extent of fifty Percent (50%)
or more of the cost of replacement thereof by any insured casualty of damaged by
any uninsured casualty, Lessor shall have the option to rebuild or terminate
this Lease to be exercised by notice to Lessee given not more than ninety (90)
days from the later to occur of the date of such damage or an insured loss, the
date Lessor receives it's final insurance adjustment. If Lessor elects to
rebuild Lessor shall, at its expense shall proceed with so much of the
restoration of the Demised Premises as was included in Lessors Work
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pursuant to Article V. All repairs and restorations of the Demised Premises not
so included shall be performed by Lessee in conformance with Article VI. The
parties shall promptly commence and diligently proceed with their restoration
obligations hereunder.
2. If the Demised Premises shall be damaged to the extent of less than
fifty percent (50%) of the cost of replacement, by fire or other casualty
covered by Lessor's policy of fire and extended coverage insurance, during the
term of this Lease, then Lessor shall, at its expense, proceed with so much of
the restoration of the Demised Premises as was included in Lessor's Work
pursuant to Article V. All repairs and restorations of the Demised Premises not
so included shall be performed by Lessee in conformance with Article VI.
3. In the event of total destruction of the Demised Premises, Lessee's rent
shall completely abate from the date of such destruction. If Lessor elects to
rebuild as aforesaid, Lessee's rent shall completely abate from the date of such
destruction until Lessor substantially completes its work and delivers the space
to Lessee, or upon the date when Lessee opens for business, whichever event
shall first occur. In the event of a partial destruction or damage whereby
Lessee shall be deprived of the occupancy and use of only a portion of the
Demised Premises, then Minimum Rent shall be equitably apportioned according to
the area of the Demised Premises which is unusable by Lessee, until such time as
the Demised Premises are repaired or restored as provided herein.
4. In the event any portion of the Shopping Center is damaged or destroyed
to such an extent that Lessor, in its, sole discretion, elects to discontinue
operation of the Shopping Center, Lessor may cancel this Lease by giving Lessee
notice of its election and this Lease shall terminate and shall become null and
void ninety (90) days after said notice.
5. Each party hereto (hereinafter "Releasing Party") hereby releases the
other (hereinafter "Released Party") from any liability which the Released Party
would but for this paragraph, have had to the Releasing Party arising out of or
in connection with any accident or occurrence or casualty (a) which is or would
be covered by a standard fire and extended coverage policy (with vandalism and
malicious mischief endorsement attached) or by a sprinkler leakage or water
damage policy in the State of Florida regardless of whether or not such coverage
is being carried by the Releasing Party, and (b) to the extent of recovery under
any other casualty or property damage insurance being carried by the Releasing
Party at the time of such accident or occurrence or casualty, which accident or
occurrence or casualty may have resulted in whole or in part from any act or
neglect of the Released Party, its officers, agents or employees; provided,
however, the release hereinabove set forth shall become inoperative and null and
void if the Releasing Party contracts for the insurance required to be carried
under the terms of this Lease with an insurance company which (a) takes the
position that the existence of such release vitiates or would adversely affect
any policy so insuring the Releasing Party in a substantial manner and notice
thereof is given to the Released Party, or (b) requires the payment of a higher
premium by reason of the existence of such release, unless in the latter case
the Released Party, within ten (10) days after notice thereof from the Releasing
Party, pays such increase in premium. Notwithstanding anything contained in this
Lease to the contrary, Lessor shall not be liable for any damage to person or
property arising from the negligent act or omission of any other tenant or
occupant of the Shopping Center; and Lessee hereby expressly waives any claim
for such damages.
ARTICLE XIV
PROPERTY IN DEMISED PREMISES
1. All leasehold improvements, such as light fixtures, heating and
air-conditioning equipments, and other construction to be done by Lessee as
required herein, shall when
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installed attach to the fee and become and remain the property of Lessor. Such
property shall not be removed unless replaced with like property. All store
fixtures or trade fixtures, signs, wall coverings, carpeting and drapes shall
remain the property of Lessee, subject at all times to Lessor's lien for Minimum
Rent and all items of additional rent which may become due to Lessor under this
Lease. Lessee shall not seek or pursue so-called "industrial revenue bond"
financing without the consent of Lessor, which such consent shall be in Lessor's
sole discretion.
2. Lessee shall pay, before delinquency all taxes assessed against Lessee's
fixtures, furnishings, leasehold improvements, equipment and stock-in-trade
placed in or on the Demised Premises. Any such taxes included in Lessor's tax
bills and paid by Lessor shall be due and payable as additional rent within ten
(10) days after billings therefore are rendered to Lessee.
ARTICLE XV
ACCESS TO DEMISED PREMISES
1. Lessee shall permit Lessor or Lessor's agents, mortgagees or ground
lessees to inspect or examine the Demised Premises at any reasonable time and
shall permit Lessor to make such repairs, alterations, improvements or additions
in the Demised Premises or to the building of which the Demised Premises is a
part, that Lessor may deem desirable or necessary or which Lessee has covenanted
herein to do and has failed so to do, without the same being construed as an
eviction of Lessee in whole or in part and Minimum Rent and all items of
additional rent shall in no manner abate while such repairs, alterations,
improvements or additions are being made by reason of loss or interruption of
the business of Lessee because of the prosecution of such work. The fact that
Lessor may make inspections of the Demised Premises shall not be either
constructive or actual notice to Lessor of any conditions which might exist on
the Demised Premises.
2. Lessor reserves the right to display a "For Sale" sign at any time, and
also, after notice from either party of intention to terminate this Lease, or at
any time within three (3) months prior to the expiration of this Lease, a "For
Rent" sign, or both "For Rent" and "For Sale" signs, and all of said signs shall
be placed upon such part of the Demised Premises as Lessor shall require, except
on display windows or doors leading into the Demised Premises. Prospective
purchasers or tenants authorized by Lessor may inspect the Demised Premises at
reasonable hours at anytime. If during the last month of the term Lessee, shall
have removed all or substantially all of the Lessee's property, and shall have
ceased doing business in the Demised Premises, Lessor may immediately enter the
Demised Premises and prepare them for any future tenant. Furthermore, Lessor may
allow such future tenant to occupy the Demised Premises. These acts shall have
no effect upon Lessee's obligations under this Lease and Lessee shall be
entitled to no abatement or diminution of rent as a result thereof, except that
in the event such future Lessee makes any payment for the period up until the
expiration of this Lease, Lessee shall be entitled to an abatement of rent for
such period.
ARTICLE XVI
SURRENDER OF DEMISED PROPERTY
1. Lessee shall deliver and surrender to Lessor possession of the Demised
Premises upon expiration of this Lease, or its earlier termination as herein
provided, broom clean and in as good condition and repair as the same shall be
as the Commencement Date, or in as good condition the same may have been
subsequently put by Lessor during the continuance of the term, ordinary wear and
tear and damage by fire or the element beyond Lessee control excepted.
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2. Lessee shall remove all property of Lessee and all alterations,
additions and improvements as to which Lessor shall have made the election
hereinbefore provided, repair all damage to the Demised Premises caused by such
removal, and restore the Demised Premises to the condition in which they were
prior to the installation of the articles so removed. Any property not so
removed at the expiration of the term hereof, and as to which Lessor shall have
not made said election, shall be deemed to have been abandoned by Lessee, and
may be retained or disposed of by Lessor, as Lessor shall desire. Lessee's
obligation to observe or perform this covenant shall survive the expiration or
termination of this Lease.
ARTICLE XVII
UTILITIES
1. Lessee shall contract for, in its own name, and shall pay before
delinquency, for all utility services rendered or furnished to the Demised
Premises, including heat, air conditioning, water, gas, electricity, fire
protection, sewer and rubbish rental, sewage treatment facilities and the like,
together with all taxes levied or other charges on such utilities. If Lessor
shall supply any such services, or if any such services are required to be paid
for by Lessor under a master meter, Lessee shall purchase same from Lessor at
charges not in excess of the charges Lessee would have paid to any public
utility corporation or governmental agency in the area supplying the same or
similar service, plus an additional ten percent (10%) for Lessor's overhead
costs. Any such charges for service supplied by Lessor shall be deemed
additional rent and shall be due and payable within ten (10) days after billing
therefore are rendered to Lessee. In no event shall Lessor be liable for the
quality, quantity, failure or interruption of such service to the Demised
Premises. Lessee's obligations for the payment of charges due during the term of
this Lease pursuant to this Article shall survive the expiration or termination
of this Lease.
2. Lessor may, with notice to Lessee, or without notice in the case of an
emergency, cut off and discontinue gas, water, electricity and any or all other
utilities whenever such discontinuance is necessary in order to make repairs or
alterations. No such action by Lessor shall be construed as an eviction or
disturbance of possession or as an election by Lessor to terminate this Lease,
nor shall Lessor be in any way responsible or liable under such action.
3. Lessee shall cooperate with Lessor's reasonable directives to reduce
energy consumption, including installation of new energy efficient equipment or
the modification or replacement of existing equipment, as the case may be. In
the event any governmental authority shall order mandatory energy conservation
or if Lessor elects voluntarily to cooperate in energy conservation at the
request of any governmental authority, including, but not limited to, a
reduction in operating hours or lighting usage, then Lessee shall comply with
such requirements. Lessee's compliance with such requirements shall not entitle
Lessee to any abatement of rent or damages for any injury or inconvenience
occasioned thereby, nor shall it be construed as an eviction or disturbance of
possession.
ARTICLE XVIII
ASSIGNMENT AND SUBLETTING
1. Lessee shall not, voluntarily, involuntarily or by operation by law,
sell, mortgage, pledge, encumber or in manner transfer or assign this Lease, in
whole or in part, or sublet the whole or any part of the Demised Premises, or
permit any other persons to occupy same without the prior written consent of
Lessor, references elsewhere herein to assignees, subtenants or other persons
not with standing. In the event that Lessee requests permission to either assign
this Lease, or to sublet the whole or any part of the
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Demised Premises, or this Lease is deemed to be assigned pursuant to Paragraph 2
of this Article, then Lessor may, in its sole and absolute discretion, elect to
consent or withhold consent. Any request by Lessee for Lessor's consent must be
by written notice as required in Article XXIX hereof. Such notice will contain
the name and address of the proposed assignee or sublessee and the terms of any
assignment or sublease and such other date concerning the assignee or sublessee
as Lessee shall have obtained. If Lessor's consent be obtained (no inference
being intended herein that Lessor is in any way obligated to grant such
consent), then, in addition to such other conditions as Lessor shall have then
imposed, if any, such assignment or subletting shall be subject to and
conditioned upon the following.- (a) at the time of any such proposed assignment
or subletting, Lessee shall not be in default under any of the terms, conditions
or covenants of this Lease; (b) the proposed assignee or sublessee shall occupy
the Demised Premises and conduct its business in accordance with the terms,
conditions and covenants of this Lease, including the Permitted Use; (c) that if
the Minimum Rent or any additional rent or charges required to be paid by any
such proposed assignee or sublessee exceeds the Minimum Rent and/or items of
additional rent reserved hereunder, then Lessee shall pay to Lessor monthly the
entire amount of such excess, which shall be deemed additional rent; (d) Lessee
and its proposed assignee or sublessee shall execute, acknowledge and deliver to
Lessor a fully executed counterpart of a written assignment of lease or
sublease, as the case may be, duly consented to by any Surety of this Lease by
the terms of which: (i) in case of an assignment, Lessee will assign to such
proposed assignee Lessee's entire interest in this Lease, together with all
prepaid rents hereunder, and the proposed assignee will accept said assignment
and assume and agree to perform, directly for the benefit of Lessor, all of the
terms, conditions and covenants of this Lease on Lessee's part to be performed
hereunder; or (ii) in case of a subletting, the sublease will in all respects be
subject and subordinate to all of the terms, conditions and covenants of this
Lease and the proposed sublessee thereunder will agree to be bound by and to
perform all of the terms, conditions and covenants of this Lease and the
proposed sublessee thereunder will agree to be bound by and to perform all of
the terms, conditions and covenants of this Lease on Lessee's part to be
performed hereunder, except the payment of Minimum Rent and all items of
additional rent reserved hereunder, which Lessee shall continue to pay to
Lessor; (e) notwithstanding any such assignment or subletting under the term of
this Article, both Lessee and any Surety or Guarantor of this Lease will
acknowledge that, notwithstanding such assignment or sublease and the consent of
Lessor thereto, both Lessee and any Surety or Guarantor of this Lease will not
be released or discharged from any liability whatsoever under this Lease and
will continue liable thereon with the same force and effect as though no
assignment or sublease had been made; and (f) Lessee shall pay to Lessor,
Lessor's administrative costs, overhead and attorneys fees in connection with
such assignment or subletting. The acceptance of rent from any other person
shall not be deemed to be a waiver of any of the provisions of this Lease or to
be a consent to the assignment of this Lease or the subletting of the Demised
Premises.
2. If at any time during the term of this Lease, any part or all of its
outstanding voting stock, if Lessee is a corporation, or any interest in the
partnership, if Lessee is a partnership, shall be transferred by sale,
assignment, bequest, inheritance, operation of law, or other disposition so as
to result in a change in the present effective voting control of Lessee by the
person or persons owning a majority of said outstanding voting stock or
majority interest in the partnership, as the cause maybe on the date of this
Lease, then such event shall constitute an assignment for the purpose of this
Lease. In the event there is a Surety or Guarantor of this Lease, then if
anytime during the term of this Lease (a) any part or all of such Surety or
Guarantor's outstanding voting stock, if such Surety or Guarantor is a
corporation, or any interest in the partnership, if such Surety or Guarantor is
a partnership, shall be transferred by sale, assignment, bequest, inheritance,
operation of law or other disposition so as to result in a change in the
present effective voting control of such Surety or Guarantor by the person or
persons owning a majority of said outstanding stock or majority interest in the
partnership, as the case maybe, on the date of this Lease, or (b) such Surety
or Guarantor is dissolved, Lessee shall so notify Lessor. Such notice shall be
effective in accordance with this Article XVIII, Paragraph 2 only if said
notice shall include or state all of the following: (a) that said notice is
given
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pursuant to Article XVIII, Paragraph 2 of this Lease; (b) the occurrences giving
rise to such notice, stated with particularity as to the effective dates,
parties involved or affected and the shares or interests affected; (c) in the
event of a transfer of shares or a partner's interest, a recent financial
statement (certified by an independent Certified Public Accountant) of the
transferee or transferees, and (d) that Lessor shall have thirty (30) days from
receipt of such notice to terminate this Lease as described in this Article
XVIII, Paragraph 2. Lessor shall have the right, at its option, to terminate
this Lease by notice to Lessee given within thirty (30) days after Lessor's
receipt of such notice from Lessee. In the event Lessor receives other notice of
such transfer or of the dissolution of such Surety or Guarantor, then Lessor
shall have the right, at its option, within ninety (90) days after receipt of
such other notice, to terminate this Lease or to declare an Event of Default
under Article XX of this Lease. The foregoing provisions shall not apply to any
corporation if, and so long as, all the outstanding voting stock is listed on a
National Securities Exchange as defined in the Securities Exchange Act of 1934,
as amended. For the purposes of this Paragraph 2, stock ownership shall be
determined in accordance with the principles set forth in Section 544 of the
Internal Revenue Code of 1954, as the same existed on August 16, 1954, and the
term "voting stock" shall refer to the shares of stock regularly entitled to
vote for the election of directors of the corporation.
ARTICLE XIX
EMINENT DOMAIN
1. In the event the Demised Premises or any part thereof shall be
permanently taken or condemned or transferred by agreement in lieu of
condemnation for any public or quasi-public use or purpose by any competent
authority, whether or not this Lease shall be terminated, the entire
compensation award therefore, both leasehold and reversion, shall belong to
Lessor without any deduction therefrom for any present or future estate of
Lessee and Lessee hereby assigns to Lessor all its right, title and interest to
any such award. Lessee shall execute all documents required to evidence such
result. Lessee shall, however, be entitled to claim, prove and receive in such
condemnation proceedings such award as may be allowed for trade fixtures and
other equipment installed by it, but only if or to the extent such award shall
be in addition to the award for the land and the building and other improvements
(or portions thereof) containing the Demised Premises and only if or to the
extent such award does not diminish any award to Lessor.
2. If the entire Demised Premises shall be taken, condemned or transferred
as aforesaid, then this Lease shall terminate and shall become null and void
from the time possession thereof is required for public use, and from that date,
the parties hereto shall be released from further obligation thereunder, but in
the event a portion only of the Demised Premises itself shall be so taken,
condemned or transferred, then Lessor may elect to terminate this Lease or, at
its own expense, repair and restore the portion not affected by the taking, and
thereafter the Minimum Rent to be paid by Lessee shall be equitably and
proportionately adjusted.
3. In the event a portion of the Shopping Center-shall be taken, condemned
or transferred as aforesaid and as a result thereof Lessor, in its sole
discretion, elects to discontinue the operation of the Shopping Center, Lessor
may cancel this Lease by giving Lessee notice of its election and this Lease
shall terminate and shall become null and void ninety (90) days after said
notice and the provisions with respect to the awards shall be as set forth in
Paragraph 1 of this Article.
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ARTICLE XX
DEFAULT BY LESSEE
1 (a) In the event of any failure of Lessee to pay any rent or other sums
when due hereunder, or if this Lease or any portion of Lessee's interest
hereunder be assigned or the Demised Premises or any portion thereof be sublet,
either voluntarily or by operation of law, except as herein provided, or if
Lessee shall be in breach of its obligation included under Article VII,
paragraph 1 of this Lease, or if Lessee shall be in breach of its obligations
included under Article VIII, Paragraph 3 or if Lessee defaults in performing any
of the other terms, conditions or covenants of this Lease to be observed or
performed by Lessee for more than three (3) days after notice of such default
has been given to Lessee, or if Lessee or an agent of Lessee shall falsify any
report required to be furnished to Lessor pursuant to the terms of this Lease,
or suffer this Lease to be taken under any writ of execution, then, and in any
one or more of such events (herein "Event OF DEFAULT"), Lessor shall have the
immediate right to reenter the Demised Premises, either by summary proceedings,
by force or otherwise, and to dispossess Lessee and all other occupants
therefrom and remove and dispose of all property therein or at Lessor's
election, to store such property in a public warehouse or elsewhere at the cost
of, and for the account of Lessee, all without service of any notice of
intention to reenter and with or without resort to legal process (which Lessee
hereby expressly waives) and without Lessor being deemed guilty of trespass or
becoming liable for any loss or damage which may be occasioned thereby. Upon the
occurrence of any such Event of Default, Lessor shall also have the right, at
its option, in addition to and not in limitation of any other right or remedy,
to terminate this Lease by giving Lessee three (3) days notice of cancellation
and upon the expiration of said three (3) days, this Lease and the term hereof
shall end and expire as fully and completely as if the date of expiration of
such three (3) day period were the date herein definitely fixed for the end and
expiration of this Lease and the term hereof and thereupon, unless Lessor shall
have theretofore elected to reenter the Demised Premises, Lessor shall have the
immediate right of reentry, in the manner aforesaid, and Lessee and all other
occupants shall quit and surrender the Demised Premises to Lessor, but Lessee
shall remain liable as hereinafter provided; provided, however, that if Lessee
shall default (i) in the timely payment of any Minimum Rent or any item of
additional rent payable hereunder or in the timely reporting of Adjusted Gross
Sales as required by Article III hereof and any such default shall continue or
be repeated for two (2) consecutive months, or for a total of four (4) months in
any period of twelve (12) months, or (ii) in the performance of any other
covenants of this Lease more than six (6) times, in the aggregate, in any period
of twelve (12) months then, notwithstanding that such defaults shall have been
cured within the period after notice as above provided, any further similar
default shall be deemed to be deliberate and Lessor thereafter may serve said
three (3) day notice of cancellation without affording to Lessee an opportunity
to cure such further default.
(b) If by reason of the occurrence of any such Event of Default,
the term of this Lease shall end before the date therefore originally fixed
herein, or Lessor shall reenter the Demised Premises, or Lessee shall be
ejected, dispossessed, or removed therefrom by summary proceedings or in any
other manner, Lessor at any time thereafter may relet the Demised Premises, or
any part or parts thereof, either in the name of Lessor or as agent for Lessee,
for a term or terms which, at Lessor's option, may be less than or exceed the
period of the remainder of the Term hereof or which otherwise would have
constituted the balance of the Term and grant concessions or free rent. Lessor
shall receive the rents from such reletting and shall apply the same, first, to
the payment of any indebtedness other than Minimum Rent or any item of
additional rent due hereunder from Lesee to Lessor: second, to the payment of
such expenses as Lessor may have incurred, in redecorating, subdividing, or
otherwise preparing the Demised Premises for reletting, including brokerage and
attorney fees: and the residue if any, Lessor shall apply to the fullfillment
of the terms, conditions and covenants of Lessee hereunder and Lessee hereby
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waives all claims to the surplus, if any. Lessee shall be liable for and shall
pay Lessor any deficiency between the Minimum Rent and all items of additional
rent reserved herein and the net avails as aforesaid, of reletting, if any, for
each month of the period which otherwise would have constituted the balance of
the Term. Lessee shall pay such deficiency on an accelerated basis as provided
under subsection (d) below or, at Lessor's sole option, in monthly installments
on the rent days specified in this Lease, and any suit or proceeding brought to
collect the deficiency for any month, either during the Term or after any
termination thereof, shall not prejudice or preclude in any way the rights of
Lessor to collect the deficiency for any subsequent month by a similar suit or
proceeding. Lessor shall in no event be liable in any way whatsoever for the
failure to relet the Demised Premises or, in the event of such reletting, for
failure to collect the rents reserved thereunder. Lessor is hereby authorized
and empowered to make such repairs, alterations, decorations, subdivisions or
other preparations for the reletting of the Demised Premises as Lessor shall
deem fit, advisable and necessary, without in any way releasing Lessee from any
liability hereunder, as aforesaid. Lessor shall have a valid and subsisting lien
for the payment of all rentals, charges and other sums to be paid by Lessee and
reserved hereunder (including all costs and expenses incurred by Lessor in
recovering possession of the Demised Premises and the reletting thereof as
provided under this Article XX, Paragraph 1 which shall be deemed to be
additional rent) upon Lessee's goods, wares, equipment, signs, fixtures,
furniture and other personal property situated in the Demised Premises, and such
property shall not be removed therefrom without the consent of Lessor until the
arrearages in Minimum Rent and all items of additional rent then due to Lessor
hereunder shall have first been paid and discharged. Upon the occurrence of an
Event of Default by Lessee, Lessor may, in addition to any other remedies
provided herein or by law, enter upon the Demised Premises and take possession
of any and all goods, wares, equipment, signs, fixtures, furniture and other
personal property of Lessee situated in the Demised Premises without liability
for trespass or conversion, and sell the same with or without notice at public
or private sale, with or without having such property at the sale, at which
Lessor or its assigns may purchase, and apply the proceeds thereof less any and
all expenses connected with the taking of possession and the sale of the
property, as a credit against any sums due from Lessee to Lessor. Any surplus
shall be paid to Lessee, and Lessee shall pay any deficiency forthwith, after
demand. Lessor, at its option may foreclose said lien in the manner provided by
law. The lien, herein granted to Lessor shall be in addition to any Lessor's
lien that may now or at any time hereafter be provided by law.
(c) No such reentry or taking possession of the Demised Premises by
Lessor shall be construed as an election on its part to terminate this Lease
unless notice of such intention be given to Lessee or unless the termination
thereof shall result as a matter of law or be decreed by a court of competent
jurisdiction. Notwithstanding any such reletting without termination, Lessor may
at any time thereafter elect to terminate this Lease for such previous breach.
(d) In the event this Lease is terminated pursuant to the provisions of
this Article XX, Paragraph 1, or terminates pursuant to the provisions of
Article XX, Paragraph 1, or terminates pursuant to the provisions of Article XX,
Paragraph 2 hereof, Lessor may recover from Lessee all damages it may sustain
reason of Lessee's default, including the cost of recovering the Demised
Premises and attorney's fees, and, upon so electing and in lieu of the damages
that may be recoverable under subsection (b) above, Lessor shall be entitled to
recover from Lessee, as and for Lessor's damages, an amount equal to the
difference between the Minimum Rent plus all items of additional rents reserved
hereunder for the period which otherwise would have constituted the balance of
term of this lease and the then present rental value of the Demises Premises for
such period, both discounted in accordance with accepted financial practice to
the then present worth, at the average rate established and announced for United
State Treasury Bills, with a maturity of thirteen (13), weeks at the four (4)
weekly auctions held immediately prior to the date of such termination [the four
(4) week average bill rate], all of which shall immediately be due and payable
to Lessee to Lessor. In determining the rental value of the Demised Premises,
the rental realized by any reletting, if such reletting be
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accomplished by Lessor within a reasonable time after the termination of this
Lease, shall be deemed prima facie to be the rental value, but if Lessor shall
not undertake to relet or having undertaken to relet, has not accomplished
reletting, then it will be conclusively presumed that the Minimum Rent and all
items of additional rent reserved under this Lease represent the rental value of
the Demised Premises for the purposes hereof (in which event Lessor may recover
from Lessee, the full total of all Minimum Rent and all items of additional rent
due hereunder, discounted to present value as hereinbefore provided). Lessor
shall be obliged, however, to account to Lessee for the Minimum Rent and
additional rents received from persons using or occupying the Demised Premises
during the period representing that which would have constituted the balance of
the term of this Lease, but only at the end of said period, and only if Lessee
shall have paid to Lessor its damages as provided herein, and only to the extent
of sums recovered from Lessee as Lessor's damage, Lessee waiving any claim to
any surplus. Nothing herein contained, however, shall limit or prejudice the
right of Lessor to prove and obtain as damages by reason of such termination, an
amount equal to the maximum allowed by any statute or rule of law in effect at
the time when, and governing the proceedings in which, such damages are to be
proved, whether or not such amount be greater, equal to, or less than the
amounts referred to in subsection (b) or in this subsection (d) of this Article
XX.
(e) The parties hereby waive trial by jury in any action, proceeding or
counterclaim brought by either party against the other on any matter whatsoever
arising out of, or in any way connected with, this Lease, the relationship of
Lessor and Lessee created hereby, Lessee's use or occupancy of the Demised
Premises, and/or any claim for injury or damage. In the event Lessor commences
any action or proceeding for nonpayment of Minimum Rent or any items of
additional rent due hereunder, Lessee shall not interpose any counterclaim of
any nature or description in any such action or proceeding. The foregoing,
however, shall not be construed as a waiver of Lessee's right to assert such
claim in a separate action or proceeding instituted by Lessee.
(f) Lessee hereby expressly waives any and all rights of redemption
granted by or under any present or future laws, in the event Lessee
shall be evicted or dispossessed from the Demised Premises for any cause, or
Lessor reenters the Demised Premises following the occurrence of any Event of
Default hereunder, or its Lease is terminated before the expiration date thereof
originally fixed herein.
(g)- No waiver of any covenant or condition or of the breach of any
covenant or condition of this Lease shall be taken to constitute a waiver
of any subsequent breach of such covenant or condition nor to justify or
authorize the nonobservance on any other occasion of the same or of any other
covenant or condition hereof, nor shall the acceptance of Minimum Rent or any
item of additional rent by Lessor at any time when Lessee is in default under
any covenant or condition hereof, be construed as a waiver of such default or of
Lessor's right to terminate this Lease on account of such default, nor shall any
waiver or indulgence granted by Lessor to Lessee be taken as an estoppel against
Lessor, it being expressly understood that if at any time Lessee shall be in
default in any of its covenants or conditions hereunder, an acceptance by Lessor
of Minimum Rent or any item of additional rent during the continuance of such
default or the failure on the part of Lessor promptly to avail itself of such
other rights or remedies as Lessor may have, shall not be construed as a waiver
of such default, but Lessor may at any time thereafter, if such default
continues, terminate this Lease on account of such default in the manner herein
provided. No covenant, condition or term of this Lease shall be deemed to have
been waived by Lessor, unless such be waiver in writing by Lessor.
(h) In the event of any breach or threatened breach by Lessee of
any of the terms and provisions of this Lease, Lessor shall have the right to
injunctive relief as if no other remedies were provided herein for such breach.
(i) The rights and remedies herein reserved by, or granted to,
Lessor are distinct, separate and cumulative, and the exercise of any one of
them shall not be deemed to preclude, waive or prejudice Lessor's right to
exercise any or all others.
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(j) Lessee hereby expressly waives any right to assert a defense
based on merger and agrees that neither the commencement of any action or
proceeding, nor the settlement thereof, nor the entry of judgment therein, shall
bar Lessor from bringing any subsequent actions or proceedings from time to
time.
(k) If an Event of Default shall occur hereunder prior to the date
fixed as the commencement of any renewal or extension of this Lease, whether by
a renewal option herein contained or by a separate agreement, Lessor may cancel
such option or agreement for renewal or extension of this Lease, upon two (2)
days notice to Lessee.
(l) Wherever in this Lease Lessor has reserved or is granted the
right of "reentry" into the Demised Premises, the use of such word is not
intended, nor shall it be construed, to be limited to its technical legal
meaning.
(m) In the event that Lessor should bring suit for the possession
of the Demised Premises, for the recovery of any sum due under this Lease, or
because of the breach of any covenant of this Lease, or for any other relief
against Lessee, declaratory or otherwise, or should Lessee bring any suit for
any relief against Lessor, declaratory or otherwise, arising out of this Lease,
and should Lessor prevail in any such suit, or should such suit be settled in
favor of Lessor, Lessee shall pay Lessor all costs, expenses and reasonable
attorney's fees, including appellate fees, that Lessor may have incurred in
connection therewith, which shall be deemed to have accrued on the commencement
of such suit and shall be enforceable whether or not such suit is prosecuted to
judgment.
(n) Lessee waives and releases any claim arising out of or related
to the payment of Percentage Rent by any successor tenant in the Demised
Premises, to whom Lessor may relet the Demised Premises, but nothing contained
herein shall obligate Lessor to relet in the event Lessee shall default
- -hereunder.
(o) Any action, suit or proceeding relating to, arising out of or
in connection with the terms, conditions and covenants of this Lease may be
brought by Lessor against Lessee in the County or Circuit Court of the 11th
Judicial Circuit in and for Miami-Dade County, Florida. Lessee hereby waives any
objection to jurisdiction or venue in any proceeding before said Court.
2. If at any time after the execution of this Lease, Lessee or any Surety
or Guarantor of this Lease shall commence, in any court pursuant to any statute
either of the United States or of any state, an insolvency or bankruptcy
proceeding (including, without limitation, a proceeding for liquidation,
reorganization or for adjustment of debts of any individual with regular
income), or if such a proceeding is commenced against Lessee or any Surety or
Guarantor of this Lease and either an order for relief is entered against such
party or such party fails to secure a discharge of the proceeding with thirty
(30) days of the filing thereof, or if Lessee or any Surety or Guarantor of this
Lease becomes insolvent or is unable or admits in writing its inability to pay
its debts as they become due, or makes an assignment for the benefit of
creditors or petitions for or enters into an arrangement with its creditors or a
custodian or receiver is appointed or takes possession of Lessee's or any such
Surety's or Guarantor's property, whether or not a judicial proceeding is
instituted in connection with such arrangement or in connection with the
appointment of such custodian or receiver (each of the foregoing events are
hereinafter referred to as an ("ACT OF BANKRUPTCY"), then Lessor, besides other
rights or remedies it may have, shall have the immediate right to terminate this
Lease or reenter without terminating this Lease and to dispose Lessee and all
other occupants therefrom and remove and dispose of all property therein or, at
Lessor's election, to store such property in a public warehouse at the cost of,
and for the account of, Lessee all without service of any notice of intention to
reenter and with or without resort to legal process (which Lessee hereby
expressly waives) and without being deemed guilty or trespass or becoming liable
for any loss or damage which may be occasioned thereby, and Lessor may retain as
partial damages, and not as a penalty, any prepaid rents and any Security
Deposits and Lessor shall also be entitled to exercise such rights and remedies
to recover from Lessee as
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damages such amounts as are specified in Article XX, Paragraph 1 hereof, unless
any statute or rule of law governing the proceedings in which such damages are
to be proved shall lawfully limit the amount of such claims capable of being so
proved, in which case Lessor shall be entitled to recover, as and for liquidated
damages, the maximum amount which may be allowed under any such statute or rule
of law. Lessee acknowledges that the continued operation of business in the
Demised Premises in the manner and upon the terms set forth in this Lease are of
a special importance to the commercial viability of the Shopping Center.
Therefore, in the event this Lease is not cancelled and terminated as set forth
in this Paragraph 2, then Lessee, and the trustee in bankruptcy or other
representative of Lessee, or, in the event of an assignment, Lessee's assignee
shall, prior to the assumption of this Lease by such representative or trustee
or assignee, comply with all of the provisions of Article XVIII hereof and, in
addition, provide adequate assurance to Lessor.- (a) of the source of rent and
other consideration payable under this Lease; (b) that any Percentage Rate
payable under this Lease shall not decline substantially after the date of such
assumption or assignment, as the case may be; (c) that assumption or assignment
of this Lease will not breach substantially any provision in any other lease,
financing agreement, or master agreement relating to the Shopping Center; (d) of
the continued use of the Demised Premises in accordance with the Permitted Use
only, Lessee hereby acknowledging that only in the operating of such business
for the Permitted Use may Lessor be adequately assured that assumption or
assignment of this Lease will not disrupt substantially the tenant mix or
balance in the Shopping Center; (e) that the quality of goods to be sold in the
Demised Premises will not decline; (f) that the operation of the business in the
Demised Premises shall continue to be of the high standard compatible with
Lessor's other tenants in the Shopping Center; (g) that Lessee's suppliers of
merchandise or goods for sale in the Demised Premises are willing to continue to
furnish such merchandise and goods as are of the same quality and caliber as
theretofore sold in the Demised Premises; (h) of the source of funds necessary
to pay for Lessee's merchandise and goods to be sold in the Demised Premises,
all on a current basis; (i) of the continuous operation of business in the
Demised Premises in strict accordance with the requirements of Article VII,
Paragraph 1, subsection (d) hereof; 0) that the design and furnishings of the
Demised Premises shall continue to be acceptable to Lessor in accordance with
the terms hereof; and (k) of such other matters as Lessor may reasonably require
at the time of such assumption or assignment. The furnishing of assurances in
accordance with the foregoing, or as may be directed by a court of competent
jurisdiction, shall not be deemed to waive any of the covenants or obligations
of Lessee set forth in this Lease. In the event that any person assuming this
Lease, or taking the same by assignment, shall desire to make alterations to the
Demised Premises, Lessor may further require adequate assurance, by lien and
completion bond, cash deposit or such other means as Lessor may approve, of the
source of payment for the estimated cost of any work to be performed in
connection therewith, and that Lessor may require the delivery prior to the
commencement thereof of waivers of lien from all contractors or subcontractors
engaged to perform such alterations. Notwithstanding the foregoing, such
alterations shall be subject in all respects to the rights and obligations of
Lessor or Lessee relating to such alterations, including, without limitation,
those set forth in Article IX hereof.
ARTICLE XXI
DEFAULT BY LESSOR
1. Lessor shall in no event be charged with default in the performance of
any of its obligations hereunder unless and until Lessor shall have failed to
perform such obligations within thirty (30) days (or within such additional time
as is reasonably required to correct any such default) after notice to Lessor by
Lessee properly specifying wherein Lessor has failed to perform any such
obligations.
2. If the holder of record of any mortgage(s) covering the Shopping Center
shall have given prior notice to Lessee that it is the holder thereof and such
notice includes the
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address at which notices to such mortgagee(s) are to be sent, then Lessee shall
give to said holder simultaneously within any notice given to Lessor to correct
any default of Lessor as hereinabove provided. The holder of record of such
mortgage(s) shall have the right, but not the obligation, within thirty (30)
days after receipt of said notice, to correct or remedy such default before
Lessee may take any action under this Lease by reason of such default. Any
notice of default given Lessor shall be null and void unless simultaneous notice
has been given to said mortgagee(s).
ARTICLE XXII
ESTOPPEL CERTIFICATE, ATTORNMENT AND SUBORDINATION
1. Within ten (10) days after the request by Lessor, Lessee shall deliver
to Lessor a written and acknowledged statement in favor of Lessor or any
prospective purchaser or mortgagee of the Shopping Center or any other part
thereof certifying (a) that Lessee is the tenant under this Lease; (b) that
Lessor has completed construction of the Demised Premises (or if Lessor has not
completed construction of the Demised Premises, then stating the construction
items to be completed by Lessor); (c) that all contributions, if any, required
by Lessor for improvements to the Demised Premises have been paid in full to
Lessee (or if such contributions, if any, have not been paid in full to Lessee,
then stating the amount of contribution remaining to be paid to Lessee); (d)
that Lessee has accepted possession of and now occupies the Demised Premises;
(e) the Commencement Date and the date on which the Term of this Lease expires;
(f) that no default exists under this Lease (or if defaults exist, then
specifically stating such defaults); (g) that this Lease is unmodified and in
full force and effect (or if there have been modifications, that the same is in
full force and effect as modified and stating the modifications); (h) that
Lessee's interest under this Lease has not been assigned or encumbered, and the
Demised Premises have not been sublet (or if there have been assignments or
encumbrances or the Demised Premises have been sublet, then stating such
assignments, encumbrances or subleases and providing copies of all documents
relevant thereto)- (i) the amount of Minimum Rent and all items of additional
rent payable under this Lease and the dates to which the Minimum Rent and all
items of additional rent payable under this Lease have been paid; j) that Lessee
is not entitled to any credit, offset or deduction against any Minimum Rent and
any item of additional rent due under this Lease (or if Lessee is entitled to a
credit, offset or deduction, then stating the amount of such credit, offset or
deduction); (k) that Lessee does not have any options or rights to renew or
cancel this Lease (or if Lessee shall have options or rights to renew or cancel
this Lease, then stating such options or rights); (1) that there are no actions,
whether voluntary or otherwise, pending against Lessee under the bankruptcy or
insolvency laws of the United States or any state thereof (or if there are
actions pending against Lessee under bankruptcy or insolvency laws of the United
State or any state thereof, then stating such actions); and (m) such other
matters or information as Lessor may reasonably require, it being intended that
any such statement delivered pursuant to this Article may be relied upon by
Lessor or any prospective purchaser or mortgagee of Lessor's Parcel or any part
thereof.
2. Upon request of Lessor, Lessee shall, in the event any proceedings are
brought for the foreclosure of, or in the event of exercise of the power of sale
under any mortgage made by Lessor covering the Demised Premises, attorney to the
purchaser upon any such foreclosure or sale and recognize such purchaser as
Lessor under this Lease.
3. Upon request of Lessor, Lessee shall, in writing, subordinate its rights
hereunder to any ground leases or to the lien of any mortgage or mortgages, or
the lien resulting from any other method or financing or refinancing, now or
hereafter in force against the Shopping Center, or any portion thereof of which
the Demised Premises are a part, or against any building hereafter placed upon
the Shopping Center by which the Demised Premises are a part, and to all
advances made or hereinafter to be made upon the security thereof.
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4. Lessee, upon request of any party in interest, shall execute promptly
such instruments or certificates to carry out the intent of Paragraphs 1, 2 and
3 above. Lessee hereby irrevocably appoints Lessor as attorney-in-fact for
Lessee with full power and authority to execute and deliver in the name of
Lessee any such instruments or certificates.
5. This Lease shall not be recorded without the prior consent of Lessor and
if Lessee records this Lease without Lessor's consent, then Lessee shall be
deemed in default of this Lease. Upon the request of Lessor, Lessee shall
execute a short form of this Lease which may be recorded in Lessor's sole
discretion.
ARTICLE XXIII
HOLDING OVER
If Lessee or any party claiming under Lessee shall remain in possession of
all or any part of the Demised Premises after the expiration of the term of this
Lease, no tenancy or interest in the Demised Premises shall result therefrom but
such holding over shall be an unlawful detainer and all such parties shall be
subject to immediate eviction and removal, and Lessee shall pay upon demand to
Lessor during any period which Lessee shall hold the Demised Premises after the
term has expired, as rent for said period, a sum equal to all Percentage Rent
and all items of additional rent provided for in this Lease plus an amount
computed at the rate of double the Minimum Rent for such period.
ARTICLE XXIV
QUIET ENJOYMENT
Lessor agrees that if Lessee pays the Minimum Rent, Percentage Rent and all
items of additional rent herein provided and shall perform all of the covenants
and agreements herein stipulated to be performed on Lessee's part, Lessee shall,
at all times during said term, have the peaceable and quiet enjoyment and
possession of the Demised Premises without any manner of hindrance from Lessor
or any persons lawfully claiming through Lessor, except as to such portion of
the Demised Premises as shall be taken under the power of eminent domain.
ARTICLE XXV
SECURITY AGREEMENT AND SECURITY DEPOSIT
1. For valuable consideration and as security for the payment of Minimum
Rent and all items of additional rent becoming due hereunder, Lessee hereby
grants to Lessor a first security interest and lien in the following described
collateral.- (a) all inventory in the Demised Premises at any time during the
term of this Lease; (b) all equipment and other personalty placed in the Demised
Premises at any time during the term of this Lease; and (c) all of the proceeds
of said inventory, equipment and personalty. Upon the request of Lessor, Lessee
shall promptly execute and deliver to Lessor such Uniform Commercial Code
financing statements as may be required to further perfect such security
interest.
2. Upon the happening of any of the following events or conditions, namely:
(a) default in the payment of Minimum Rent or any item of additional rent or
performance of any of the obligations or of any covenant or liability referred
to under this Lease and/or (b) making of any levy, seizure or attachment of the
collateral: and/or (c) death, dissolution, termination of existence, insolvency,
business failure, appointment of a receiver, assignment for the benefit of
creditors by, or the commencement of any proceeding under any bankruptcy or
insolvency laws against Lessee or any Surety or
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Guarantor of this Lease: thereupon, or any time thereafter (such default not
having previously been cured), Lessor shall then have all the remedies of a
secured party under the laws of the State in which the Demised Premises are
located, including, without limitation, thereto, the right to take possession of
the collateral and for that purpose Lessor may enter upon the Demised Premises
to protect the collateral and to realize upon by sale at retail or in bulk,
and/or at Lessor's option, remove the same therefrom for the purposes aforesaid.
Lessor shall give Lessee at least ten (10) days prior notice of any public sale
thereof or of the date after which any private sale or any other intended
disposition is to be made, and at any such sale Lessor may purchase the
collateral.
3. The aforesaid security agreement and the first security interest on the
collateral shall be terminated and released when all of the Minimum Rent and all
items of additional rent becoming due during the term of this Lease have been
paid in full and Lessee has delivered the Demised Premises to Lessor in
accordance with this Lease.
4. Lessee shall deliver to Lessor the total sum of Fifteen Thousand One
Hundred Eighty-Seven 50/100 ($15,187.50) Dollars upon execution of this Lease
hereinafter referred to as "SECURITY DEPOSIT", to be held by Lessor as security
for the full and faithful performance by Lessee of each and every term,
condition and covenant of this Lease on the part of Lessee to be observed and
performed, it being expressly understood that such Security Deposit is not an
advance payment of rental or a measure of Lessor's damages in the case of
default by Lessee. Lessor will not be required to account for the use of such
Security Deposit, to keep such Security Deposit sequestered or to pay interest
on such Security Deposit. Such Security Deposit shall not be mortgaged,
assigned, transferred or encumbered by Lessee without the consent of Lessor and
any such act on the part of Lessee shall be without force and effect and shall
not be binding upon Lessor. If any of the Minimum Rent or any item of additional
rent payable by Lessee to Lessor shall be overdue and unpaid or should Lessor
make p6yments on behalf of Lessee, or should Lessee fail to perform any of the
terms of this Lease, then Lessor may, at its option, and without prejudice to
any other remedy which Lessor may have on account thereof, appropriate and apply
said entire Security Deposit or so much thereof as may be necessary to
compensate Lessor toward the payment of Minimum Rent or any item of additional
rent due from Lessee or towards any loss, damage or expense sustained by Lessor
resulting from such default on the part of Lessee; and in such event Lessee
shall forthwith upon demand restore said Security Deposit to the original sum
deposited. In the event Lessee shall fully and faithfully comply with all of the
terms, covenants and conditions of this Lease and promptly pay all of the
Minimum Rent and all items of additional rent as they fall due to Lessor, any
remaining balance of such Security Deposit shall be returned by Lessor to Lessee
following the date of the expiration or termination of this Lease and the
surrender of the Demised Premises by Lessee in compliance with the provisions of
this Lease. In the event any bankruptcy, insolvency, reorganization or other
creditor debtor proceedings shall be instituted by or against Lessee, or its
successors or assigns, or any Surety or Guarantor of this Lease, such Security
Deposit shall be deemed to be applied first to the payment of any Minimum Rent
and any item of additional rent due Lessor for all periods prior to the
institution of such proceedings and the balance, if any, of such Security
Deposit may be retained by Lessor in partial liquidation of Lessor's damages.
Lessor may deliver the Security Deposit by Lessee hereunder to the purchaser of
Lessor's interest in the Demised Premises in the event that such interest be
sold or transferred and, thereupon, Lessor shall be discharged and released from
all further liability with respect to such Security Deposit or the return
thereof to Lessee, and Lessee shall look solely to the new lessor for the return
of said Security Deposit, and this provision shall also apply to any subsequent
transferees. No holder of a mortgage or deed or trust or lessor under a ground
or underlying a lease to which this Lease is or may be subordinate shall be
responsible in connection with the Security Deposit hereunder, unless such
mortgagee or holder of such deed or trust or lessor or shall have actually
received the Security Deposit hereunder.
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ARTICLE XXVI
REIMBURSEMENT
All terms, covenants and conditions herein contained, to be performed by
Lessee, shall be performed at its sole cost and expense and if Lessor shall pay
any sum of money or do any act which requires the payment of money, by reason of
the failure, neglect or refusal of Lessee to perform such term, covenant or
condition, the sum of money so paid by Lessor shall be deemed additional rent
and shall be payable by Lessee to Lessor with the next succeeding installment of
rent together, with interest thereon from the respective dates of Lessors making
of the payment at the lesser of (a) the interest rate announced publicly by
Citibank N.A. in New York, New York, from time to time as its prime rate plus
two percent (2%) or (b) the maximum rate permitted by law. All sums payable by
Lessee to Lessor under this Lease shall be paid in legal tender of the United
States of America without any prior demand or notice therefore and without any
deduction or setoff whatsoever and shall be payable at the place designated for
the delivery of notices to Lessor at the time of payment unless otherwise
designated by Lessor.
ARTICLE XXVII
CHANGES AND ADDITIONS TO SHOPPING CENTER
1. Lessor shall have the exclusive right to use all or any part of the
roof over the Demised Premises and exterior walls (excluding the storefront) of
the Demised Premises for any purpose; to erect in connection with the
construction thereof, temporary scaffolds and other aids to construction on the
exterior of the Demised Premises, provided that access to the Demised Premises
shall not be denied; and to install, maintain, use, repair and replace pipes,
ducts, conduits and wires leading through the Demised Premises and serving other
parts of the Shopping Center in locations which will not materially interfere
with Lessee's use thereof. In addition to the foregoing, Lessor may make any use
it desires of the side and rear walls of the Demised Premises, provided that
there shall be no encroachment upon the interior of the Demised Premises. Lessor
hereby reserves the right at any time to make alterations or additions to, and
to build additional stories on, the building in which the Demised Premises are
contained and to build adjoining the same. Lessor also reserves the right to
construct other buildings or improvements in the Shopping Center from time to
time and to make alterations thereof or additions thereto and to build
additional stories on such building or buildings and to construct deck or
elevated parking facilities in the Shopping Center and to change the methods of
ingress to and egress from the Shopping Center and to incorporate additional
land into Lessor's Parcel and build thereon.
ARTICLE XXVIII
TITLES OF ARTICLES
The titles of the articles throughout this Lease are for convenience and
reference only, and the words contained therein shall in no way be held to
explain, modify, amplify or aid in the interpretation, construction or meaning
of the provisions of this instrument.
ARTICLE XXIX
NOTICES
Any notice, request, demand, approval, consent or other communication which
Lessor or Lessee maybe required or permitted to give to the other party shall be
in writing and
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either personally delivered or forwarded by postage prepaid, certified mail,
return receipt requested, addressed-
To the Lessor at: 3789 N.E. 163rd Street
North Miami Beach, Florida 33160
To the Lessee at.- 3957 N.E. 163rd Street
North Miami Beach, Florida 33160
or to the Demised Premises if such communication is to Lessee, or to such other
address as either party shall have designated by notice to the other.
ARTICLE XXX
DEFINITION OF TERMS
1. "LEASE YEAR" shall mean each twelve (12) month period beginning
with the Commencement Date of this Lease, and each anniversary thereof.
"PARTIAL LEASE YEAR" shall mean any period prior to the first Lease
Year or any period subsequent to the last Lease Year. Lessor, at
Lessor's option may select from time to time any other fiscal
twelve-month period and such period shall thereafter be the Lease Year.
2. "GROSS LEASABLE AREA" shall mean the actual number of square feet of
floor space of all floors, basements and mezzanines of the Demised
Premises without deduction or exclusion for any space occupied or used
by columns, stairs or other interior construction or equipment within
the exterior faces of exterior walls, except party walls (walls shared
by separate tenants), in which case the center of the wall in question
shall be used instead of the exterior face thereof.
3. "SHOPPING CENTER' shall mean, as the same shall be changed from time
to time, the land and buildings and other improvements from time to
time constituting integrated retail shops or other businesses which
Lessor and others have constructed or intend to construct or cause to
be constructed on Lessor's Parcel.
4. "LESSOR'S Parcel" shall mean that portion (or portions) of the land
in the Shopping Center and the buildings and other improvements
thereon which at any time in question Lessor owns or which Lessor
leases as tenant under a sale leaseback or under a ground lease or
sublease or which Lessor maintains pursuant to Easement and Operating
Agreements affecting the Shopping Center, it being understood that
Lessor may not own or control portions of the Shopping Center. Any
portion of Lessor's Parcel that may be permanently taken or condemned
or transferred by agreement in lieu of condemnation for any public or
quasi public use or purpose by any competent authority, upon such
taking, condemnation or transfer shall be excluded from Lessor's
Parcel.
5. COMMON Areas" shall mean all areas, facilities and improvements
provided from time to time for the general common use or benefit of
the tenants, and other occupants, their officers, agents, employees,
invitees and customers, including, without limitation, the mail, all
parking areas, roadways, pedestrian sidewalks, truckways, access
roads, driveways, ramps, loading docks, delivery areas, courts,
arcades, service corridors, malls, concourses, landscaped and vacant
areas, elevators and escalators and stairs not contained in lease
areas, retaining walls, package pick-up stations, drinking fountains,
public restrooms and comfort stations, lounges, first aid station,
directory equipment, information facilities, public meeting rooms,
auditorium, maintenance rooms, mall office rooms, lighting facilities,
bus stops, taxi stands, storm and sanitary sew systems, utility lines,
and water filtration and treatment facilities, including but not
limited to disposal plants and lift stations and retention ponds or
basins, whether located within or outside of the Shopping Center.
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6. "PERSON" shall include "corporation, firm or association as used in
this indenture of Lease and when required by the context, each number
(singular or plural) shall include all numbers, and each gender shall
include all genders; and, unless the context otherwise requires.
7. "Lessor", so far as covenants or obligations on the part of Lessor
are concerned, shall be limited to mean and include only the owner (or
lessee of the ground or underlying lease of which this Lease is a
sublease) for the time being of Lessor's Parcel. If Lessor's Parcel, or
the ground or underlying lease, be sold or transferred, the seller (or
assignor of the ground or underlying lease of which this Lease is a
sublease) shall be automatically and entirely released of all covenants
and obligations under this Lease from and after the date of such
conveyance or transfer, provided the purchaser on such sale (or the
sublessee or assignee of the ground or underlying lease as aforesaid)
has assumed and agreed to carry out all covenants and obligations of
Lessor hereunder, it being intended hereby that the covenants and
obligations contained in this Lease to be performed on the part of
Lessor shall be binding upon Lessor, its successors and assigns, only
during their respective successive period of ownership. Notwithstanding
anything to the contrary provided in this Lease, it is specifically
understood and agreed by Lessor and Lessee that there shall be
absolutely no personal liability on the part of Lessor, or its
successor, or any partners or corporate shareholders of Lessor, or its
successors, with respect to any of the terms, conditions and covenants
of this Lease, and that Lessee shall look solely to the interest of
Lessor in Lessor's Parcel for the satisfaction of each and every remedy
of Lessee in the event of any breach by Lessor of any terms, conditions
and covenants of this Lease to be observed or performed by Lessor.
8. "Lessee", shall mean each, either and both of the above-named
Lessees. Said Lessees shall be jointly and severally liable for all of
the covenants and obligations of the Lessee under this Lease. Lessor
shall be entitled to rely on notice from either Lessee to bind both
Lessees. A default of the terms of this Lease by either Lessee shall
constitute a default by both Lessees. When giving notice to Lessee, a
single written notice delivered by Lessor to the Lessee's address set
forth in Article XXIX shall satisfy Lessor's notice obligation.
ARTICLE XXXI
INVALIDITY OF PARTICULAR PROVISIONS
If any term or provision of this Lease or the application thereof to any
person or circumstances shall to any extent be invalid or unenforceable, the
remainder of this Lease, or the application of such term or provision to persons
or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and enforced to the fullest extent permitted by law;
provided, however, in the event Lessee's obligation to pay Percentage Rent or
Lessee's obligation to continuously operate its business in the Demised Premises
is deemed invalid or unenforceable, then Lessor may terminate this Lease by
giving Lessee notice of its election and this Lease shall terminate and become
null and void thirty (30) days after said notice.
ARTICLE XXXII
PROVISIONS BINDING
Accept as herein otherwise expressly provided, the terms and provisions
hereof shall be binding upon and shall inure to the benefit of the heirs,
executors, administrators, successors and permitted assigns, respectively, of
Lessor and Lessee. Each term and each provision of this Lease to be performed by
Lessee shall be construed to be both an independent covenant and a condition.
The reference contained to successors and
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assigns of Lessee is not intended to constitute a consent to assignment by
Lessee, but has reference only to those instances in which Lessor may have given
consent to a particular assignment.
ARTICLE XXXIII
RELATIONSHIP OF PARTIES
Nothing contained in this Lease shall be deemed or construed by the parties
hereto or by any third party to create the relationship of principal and agent
or of partnership or of joint venture or of any association whatsoever between
Lessor and Lessee, it being expressly understood and agreed that neither the
computation of rent nor any other provisions contained in this Lease nor any act
or acts of the parties hereto shall be deemed to create any relationship between
Lessor and Lessee other than the relationship of landlord and tenant.
ARTICLE XXXIV
BROKERAGE
Lessee covenants, warrants and represents to Lessor that there was no
broker instrumental in consummating this Lease and that no conversation or prior
negotiations were had by Lessee with any broker concerning the renting of the
Demised Premises. Lessee shall protect, indemnify, save and hold harmless Lessor
against and from all liabilities, claims, losses, costs, damages and expenses,
including attorney's fees, arising out of, resulting from or in connection with
a breach of the foregoing covenant, warranty and representation.
ARTICLE XXXV
WARRANTY AND AUTHORITY
Lessee hereby represents and warrants that (a) there are no proceedings
pending or so far as Lessee knows threatened before any court or administrative
agency that would materially adversely affect the financial condition of Lessee
or the ability of Lessee to enter into this Lease or the validity or
enforceability of this Lease; (b) there is no provision of any existing
mortgage, indenture, contract or agreement binding on Lessee which would
conflict with or in any way prevent the execution, delivery or performance of
the terms of this Lease; (c) the financial statements of Lessee provided to
Lessor in connection with this Lease are complete and correct and fairly present
the financial condition of Lessee as of the date and for the period referred to
therein and have been prepared in accordance with generally accepted accounting
principles; and (d) there has been no material adverse change in the financial
condition of Lessee since the date of such financial statement and to the
knowledge of Lessee, no such material adverse changes are pending or threatened.
Lessee acknowledges that Lessor is executing this Lease in reliance upon the
foregoing representation and warranty and that such representation and warranty
is a material element of the consideration inducing Lessor to enter into , and
execute this Lease. If this Lease is executed by more than one party (whether
any such party is an individual or a corporation, partnership, limited
partnership, joint venture, sole proprietorship or any other firm, person or
entity), the parties executing this Lease shall be jointly and severally liable
hereunder. If Lessee is a corporation, then the officers of Lessee executing
this Lease on behalf of Lessee represent and warrant that this Lease has been
authorized and approved by the Board of Directors of Lessee at a duly held
meeting of the Board of Directors of Lessee (or pursuant to a valid unanimous
vote of the Board of Directors of Lessee) and copies of applicable resolutions
of such Board of Directors approving this Lease are annexed hereto.
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ARTICLE XXXVI
RELOCATION OF TENANT
INTENTIONALLY DELETED
ARTICLE XXXVII
MISCELLANEOUS
1. This writing contains the entire agreement, all of the covenants,
stipulations and provisions agreed upon by the parties hereto and no agent,
representative, salesman or officer of either party to this lease has authority
to alter or change the terms and conditions hereof and neither party is or shall
be bound by any statement or representation either oral or written not in
conformity herewith. It is understood and agreed that the leased property
described in this lease has been inspected by the Lessee or the Lessee's duly
authorized agent, that the same is and has been leased by the Lessee as a result
of the inspection and not upon any representations made by the Lessor or its
officers, agents, salesmen, representatives, or any Leasing Agents, and that the
Lessee hereby expressly waives any and all claims for damages or for
cancellation of this lease because of any representation made by any leasing
agent or person whatsoever other than as contained in this Lease, and the Lessor
will not be responsible for or liable on account of any inducements, promises,
representations, or agreement not set forth in this lease.
2. No modification of this Lease shall be binding unless such modification
shall be in writing and signed by the parties hereto. Lessee hereby further
recognizes and agrees that the submission of this Lease for examination by
Lessee does not constitute an offer or an option to Lease the Demised Premises,
nor is it intended as a reservation of the Demised Premises for the benefit of
Lessee, nor shall this Lease have any force or validity until and unless a copy
of it is returned to Lessee duly executed by Lessor.
3. Whenever a period of time is herein prescribed for action to be taken by
Lessor, Lessor shall not be liable or responsible for and there shall be
excluded from the computation of any such period of time, any delays due to
strikes, riots, of any such period of time, any delays due to strikes, riots,
acts of God, shortages of labor or materials, war, governmental laws,
regulations or restrictions or any other causes of any kind whatsoever which are
beyond the reasonable control of Lessor.
4. The laws of the State of Florida shall govern the interpretation,
validity, performance, and enforcement of this Lease. If any provision of this
Lease should be held to be invalid or unenforceable, the validity and
enforceability of the remaining provisions of this Lease shall not be affected
thereby.
5. The terms, provisions and covenants contained in this Lease shall inure
to the benefit of and be binding upon the parties hereto and their respective
heirs, successors in interest and legal representatives except as otherwise
herein expressly provided.
6. The parties intend whenever Lessor's consent or approval is expressly or
impliedly required by any provision of this Lease, the consent or approval may
be granted or withheld arbitrarily in Lessor's sole discretion unless otherwise
specifically stated in such provision.
7. To the extent permitted by law and applicable policies of insurance,
each party hereto hereby waives any right it may have to a jury trail in the
event of litigation between Lessee and Lessor pertaining to this Lease.
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8. (a) This is a Lease of real property in a shopping center within the
meaning of Section 365(b)(3) of the Bankruptcy Code, 11 U.S. C. Section
365(b)(3).
(b) If Lessee proposes to assign this Lease pursuant to the
provisions of the Bankruptcy Code, 11 U.S. C. Section 101, ET SEQ., (the
"BANKRUPTCY CODE") to any person or entity who shall have made a BONA FIDE offer
to accept an assignment of this Lease on terms acceptable to the Lessee, then
notice of such proposed assignment, setting forth (i) the name and address of
such person; (ii) all of the terms and conditions of such offer; and (iii) the
adequate assurance to be provided Lessor to assure such person's future
performance under the Lease, including, without limitation, the assurance
referred to in Section 365(b)(3) of the Bankruptcy Code, shall be given to the
Lessor by the Lessee no later than twenty (20) days after receipt by the Lessee,
but in any event no later than ten (10) days prior to the date that the Lessee
shall make application to a court of competent jurisdiction for authority and
approval to enter into such assignment and assumption, and Lessor shall
thereupon have the prior right and option, to be exercised by notice to the
Lessee given at any time prior to the effective date of such proposed
assignment, to accept an assignment of this Lease upon the same terms and
conditions and for the same consideration, if any, as the BONA FIDE offer made
by such person, less any brokerage commissions which may be payable out of the
consideration to be paid by such person for the assignment of this Lease.
Any person or entity to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code, U.S. C. Section 101, ET SEQ., shall be deemed
without further act or deed to have assumed all of the obligations arising under
this Lease on and after the date of such assignment. Any such assignee shall
upon demand execute and deliver to Lessor an instrument confirming such
assumption.
Notwithstanding anything in this Lease to the contrary, all amounts payable
by Lessee to or on behalf of Lessor under this Lease, whether or not expressly
denominated as rent, shall constitute rent for the purposes of Section 502(b)(6)
of the Bankruptcy Code, 11 U.S.C. Section 502(b)(6).
9. The Rider to Lease and the Leasing Summary Report attached hereto are
hereby incorporated herein by reference.
IN TESTIMONY WHEREOF, Lessor and Lessee have caused this Lease to be signed
as of the day and year first above written.
LESSEE LESSOR
TEL-COM WIRELESS CABLE INTRACOASTAL PACIFIC LIMITED
TV CORPORATION, a PARTNERSHIP, a Florida limited
Florida corporation partnership
By: /s/ Mel Rosen By: RC Intracoastal, Inc.
--------------------------- an Illinois corporation,
Its managing general partner
Print Name: Mel Rosen By: /s/ Michael Schramm
------------------- --------------------------------
Title: President Title: Executive Vice President
------------------------ ------------------------------
Date of Execution Date of Execution:
By Lessee: 5/1/98 By Lessor: 5/8/98
-------------------- -------------------------
LESSEE
INTERNATIONAL BROADCAST
CONSULTANTS OF AMERICA, INC.,
a Florida corporation
By: /s/ Eric Lefkowitz
----------------------------
Print Name: Eric Lefkowitz
--------------------
Title: President IBC
-------------------------
Date of Execution:
By Lessee: 4/30
---------------------
33
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
Being a portion of Tract "A" and Lots 1 through 20, Block 19 and also that
vacated street known as N.E. 165th Street extending from N.E. 35th Avenue
Eastward to the Western boundary of Lots 5 and 6; thence Southerly to S.R. 826,
all in Block 19 of EASTERN SHORES 2ND ADDITION according to the Plat thereof,
recorded in Plat Book 65 at Page 43 of the Public Records of Miami-Dade County,
Florida, being more particularly described as follows:
Begin at the Southwest corner of Lot 20 of said Block 19; thence North
00*-53'-14" East along the West line of said Lot 20 for 120.31 feet to the
Northwest corner of said Lot 20, thence North 860-46'-13" East along the North
line of said Block 19 for 1696.36 feet to the Northeast corner of Lot 6 of said
Block 19; thence South 04*-46'-53" East along the Easterly line of said Block 19
for 663.68 feet to a point on the Northerly right-of-way line of S.R. 826, per
O.R. Book 12103, page 1685 of the Public Records of Miami-Dade County, Florida;
the following two (2) courses being along said Northerly right-of-way line; (1)
thence South 830-09'-49" West for 77.17 feet to a point of curvature of a
1952.86 foot radius curve leading to the left; (2) thence Westerly along said
curve through a central angle of 020-49'-34" for an arc of 96.32 feet; the
following two (2) courses being along the Easterly and Northerly lines of the
Warranty Deed granted to Miami Dade Water and Sewer Authority as described in 0.
R. Book 11323, page 1086 of the Public Records of Miami-Dade County, Florida;
(1) thence North 040-50'-25" West for 102.70 feet; (2) thence South 860-46-13"
West for 75.11 feet (75.19 feet Deed); thence North 640-54'-39" West along said
Northerly line of Miami Dade Water and Sewer property and the Northerly line of
the property granted to Florida Power and Light Company as described in O.R.
Book 6829, page 118 of the Public Records of Miami-Dade County, Florida for
57.61 feet (57.66 feet Deed) to the Northeast corner of the corrective Warranty
Deed granted to Florida Power and Light Company as recorded in O.R. Book 270,
page 60 of the Public Records of Miami-Dade County, Florida; the following two
(2) courses being along the Northerly and Westerly boundaries of said Florida
Power and Light property; (1) thence South 85'-09'-35" West for 150.00 feet; (2)
thence South 040-50'-25" East for 150.33 feet (Deed 150.00 feet) to a point on
the Northerly right-of-way line of S.R. #826 per property described in Parcel
104, Case Number 84-15796, Miami-Dade County, Florida, said point lying on a
circular curve leading to the left whose radius point bears South 070-24'-51"
East for 1757.28 feet- thence Westerly along said Northerly right-of-way line
through a central angle of 00'-58'-46" for an arc of 30.04 feet to the Southeast
corner of Parcel 103 of said Case No. 84-15796, the following four (4) courses
being along exterior lines of said Parcel 103; (1) thence North 040-50'-25" West
for 48.89 feet; (2) thence South 790-08'-15" West for 192.97 feet; (3) thence
South 580-36'-07" West for 322.22 feet to a point of curvature of a 50.00 foot
radius curve leading to the left; (4) thence Westerly and Southerly along said
curve through a central angle of 900-00'-00" for an arc of 78.54 feet; thence
South 580-36'-07" West along said Northerly right-of-way line of S.R. 826 as
described in Parcel 104 per said Case 84-15796, said lint also being the
Southeasterly line of said Tract "A" for 312.25 feet to a point of curvature of
a 25.00 foot radius curve leading to the right; thence Westerly and Northerly
along said curve being along the Southerly line of said Tract "A" through a
central angle of 90-00'-00" for an arc of 39.27 feet to a point of tangency:
thence North 31 - 23' - 48" West along the south westerly line of said Tract "A"
and its Northwesterly prolongation thereof, said Westerly line being also the
Easterly right-of-way line of N.E. 35th Avenue for 1066.59' feet to a point of
the center line of said vacated and abandoned N.E. 165th St: thence North 86 -
46' - 13" East along said center line for 35.79 feet: thence North 03-13'-47"
West for 30.00 feet to the POINT OF BEGINNING.
LESS AND EXCEPT THE FOLLOWING TWO PARCELS
<PAGE>
PARCEL 1 (BUILDING AREA)
A portion of Lots 5 and 6, Block. 19 of Eastern Shores 2nd Addition according to
the Plat thereof as recorded in Plat Book 65 at Page 43 of the Public Records of
Miami-Dade County, Florida being more particularly described as follows:
Commence at the northwest corner of Lot 20 in said Block 19; thence North 86"
46'13" East along the north line of said Block 19 for 1654.17 feet; thence South
03' 13'47" East for 79.67 feet to the point of beginning; thence South 040
42'23" East for 125.22 feet; thence South 85' 31'04" West for 71.47 feet; thence
North 05' 02,31 " West for 23.96 feet, thence South 85' 25'51 " West for 29.07
feet; thence North 050 02,31 " West for 100.88 feet; thence North 850 16'25"
East for 30.68 feet- thence North 04' 54'54" West for 9.59 feet; thence North 85
0 08'37" East for 19.48 feet; thence South 05 * 09'31 " East for 9.62 feet;
thence North 850 17'21" East for 51.07 feet to the point of beginning.
PARCEL 2 (PARKING AREA)
The East 70.00 feet of Lot 8 and all of Lot 7 and a portion of Lot 6, Block 19
of Eastern Shores 2nd Addition according to the Plat thereof as recorded in Plat
Book 65 at Page 43 of the Public Records of Miami-Dade County, Florida all being
more particularly described as follows-
Commence at the Northwest corner of said Lot 20 in said Block 19; thence North
860 46'13" East, along the North line of said Block 19 for 1231.36 feet to the
point of beginning; thence continue North 86 0 46'13" East along the previously
described course for 318.98 feet; thence South 050 02'31" East for 150.07 feet
to the South line of said Lot 6; thence South 86- ' 46-13" West along the South
line for 152.89 feet to the Southwest corner of said Lot 6; thence North 040
49'24" West along the West line of said Lot 6 for 30.01 feet; thence South 86 0
46'13" West along the Southerly line of said Lots 7 and 8 for 170. 00 feet;
thence North 030 13'47" West along the West line of the East 70.00 feet of said
Lot 8 for 120.00 feet to the point of beginning.
<PAGE>
EXHIBIT "G"
SIGN CRITERIA
Lessee shall install and maintain at all times, subject to the terms of the
Lease including, without limitations, Article VII, Section 3(g), a sign on the
exterior of the premises.
Said sign shall be no more than 75% of the store front width of the Demised
Premises, shall contain only Lessee's name, shall be no more than 18" in height
and shall contain no more than two (2) lines. The signage color shall conform to
the colors approved by the Lessor.
Said sign shall be constructed of individual cutout letters with plastic
faces and metal sides and each letter shall be internally self illuminated.
There shall be no exposed neon tubing. No sign may be added to the Demised
Premises without prior written approval of Lessor and must be in conformance
with applicable laws of the City of North Miami Beach.
<PAGE>
EXHIBIT "H"
ENVIRONMENTAL COMPLIANCE
AND RADON GAS
Lessee shall not install, store use, treat transport or dispose (or knowingly
permit or acquiesce in the installation, storage, use, treatment, transportation
or disposal by Lessee, its agents, employees, independent contractors, or
subtenants) on the Demised Premises of any (a) asbestos in any form; (b) area
formaldehyde foam insulation; (c) transformers or other equipment which contain
dielectric fluid containing levels of polychlorinated byphenyls in excess of 50
parts per million; or (d) any other chemical, material, air pollutant, toxic
pollutant, waste, or substance which is regulated as toxic or hazardous or
exposure to which is prohibited, limited or regulated by the Resource
Conservation Recovery Act, the Comprehensive and Environmental Response
Compensation and Liability Act, the Hazardous Materials Transportation Act, the
Toxic Substances Control Act, the Clean Air Act, and the Clean Water Act or any
other federal, state, county, regional, local or other governmental authority or
which, even if not so regulated, may or could pose a hazard to the health and
safety of the occupants of the Demised Premises or the Shopping Center- and
which is either (i) present in amounts in excess of that permitted or deemed
safe under applicable law or (ii) handled, stored or otherwise used in any
manner which is prohibited or deemed unsafe under applicable law. (The
substances referred to in (a), (b), (c), or (d) are collectively referred to
herein as "HAZARDOUS MATERIALS").
Lessee shall, at Lessee's own expense, comply with any presently existing or
hereafter enacted environmental cleanup responsibility laws affecting Lessee's
operation of the Demised Premises ("CLEANUP LAWS"). Lessee, at Lessee's own
expense, shall properly dispose of all waste and other hazardous materials
generated from its use of the Premises as a general office facility and shall,
at its own expense, comply with any and all usage, cleanup and or disposal laws
affecting Lessee's operation of the Demised Premises. Lessee shall, at Lessee's
own expense, make all submissions to, provide all information to, and comply
with all requirements of the appropriate governmental authority ("AUTHORITY")
under the Cleanup Laws. Should any Authority require that a cleanup plan be
prepared and that a cleanup be undertaken because of the existence of Hazardous
Materials which were installed, stored, used, treated, transported, disposed of,
spilled or discharged on the Demised Premises during the Term of this Lease,
Lessee shall, at Lessee's own expense, prepare and submit the required plans and
financial assurances and carry out the approved plans. At no expense to Lessor,
Lessee shall promptly provide all information requested by Lessor for
preparation of affidavits or other documents required by Lessor to determine the
applicability of the Cleanup Laws to the Demised Premises, and shall sign the
affidavits promptly when requested to do so by Lessor. Lessee shall indemnify,
defend and hold harmless Lessor from all fines, suits, procedures, claims,
cleanup or removal costs and all actions of any kind arising out of or in any
way connected with the installation, storage, use, treatment, transporting,
disposal, spillage or discharge of Hazardous Materials on the Demised Premises
by Lessee, its agents, employees, independent contractors or subtenants during
the Term of this Lease; and from all fines, suits, procedures, claims and
actions of any kind arising out of Lessee's failure to provide all information,
make all submissions and take all steps required by the Authority under the
Cleanup Laws or any other environmental law. Lessee's obligations and
liabilities under this paragraph shall continue so long as Lessor remains
responsible for Hazardous Materials at the Demised Premises that were installed,
stored, used, treated, transported, disposed of, spilled or discharged during
the Term of the Lease by Lessee, it agents, employees, independent contractors
or subtenants. Tenants failure to abide by the terms of this paragraph shall be
restrainable by injunction.
Lessee shall promptly supply Lessor with any notices, correspondence and
submissions made by Lessor to appropriate governmental authorities of the United
States Environmental Protection Agency ("EPA"); the United States Occupational
Safety and
<PAGE>
Health Administration ("OSHA"), or any other local, state or federal authority
that requires submission of any information concerning environmental matters of
hazardous waste or substances. Lessee's liability pursuant to the terms of this
provision shall survive termination of this Lease.
RADON GAS
Radon is a naturally occurring radioactive gas that when it has accumulated in a
building in sufficient quantities, may present health risk 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. This notice is given pursuant to 404.056(6) Florida Statutes.
<PAGE>
LESSORS WORK
BUILDING STANDARDS
EXHIBIT "D"
Lessor will construct the demised premises according to the architects plans and
specifications which will include "building standard" components as listed
herein, Any additional work be at the Lessee's sole cost and expense.
INTERIOR PARTITIONS
1. 3 5/8" metal studs with 1/2" sheetrock, taped, spackled and ready to
receive tenant finishes and meet local building codes. All office walls
will be at a 10' height and will constructed up to the underneath of
the ceiling.
2. Office doors will be 6'8" and will be hollow core doors, paint grade
with ADA approved hardware
CEILING
1 2 X 4 white grid
2 2 X 4 lay-in standard acoustical tiles - white
LIGHTING/ELECTRICAL
1 2 X 4 standard tube light fixtures - not to exceed one fixture per
100 sq. ft.
2. One 100 amp electrical service or equivalent if, existing premises were
previously occupied .
3. One duplex outlet as code required Per linear feet
4. Two dedicated service outlets at the equipment area.
5. One voice conduit per office.
6. Two emergency exit lights or as local building Code requires.
7. One dedicated outlet for exterior store front sign.
NOTE Additional outlets to accommodate computer systems, data locations and
office networking will be at tenants expense
FLOORING
I. Concrete floor throughout.
NOTE: Purchase and installation of all floor coverings will be at tenant's
expense
STOREFRONT AND REAR EXITS
1. Existing storefront locations as indicated on the approved space plan
2. Rear exit doors will be located as per the approved space plan.
FIRE SPRINKLERS
1. Sprinkler system shall meet all local fire and building codes.
2. Location of heads will be placed per office locations as indicated on
approved space plan.
HVAC
1. HVAC system complete with distribution ducts and diffusers to
accommodate approved space plan.
2. HVAC unit connected to panel and running with one thermostat per unit.
NOTE: Any separate unit required to accommodate tenants equipment room will
be at tenants expense.
<PAGE>
EXHIBIT "E"
LESSEE'S WORK
SEE ADDENDUM
<PAGE>
EXHIBIT "F"L
CONSTRUCTION PROCEDURES AND REGULATIONS
<PAGE>
ADDENDUM TO THAT CERTAIN LEASE DATED MAY 8, 1998 BY
AND BETWEEN INTRACOASTAL PACIFIC LIMITED PARTNERSHIP AND
TEL-COM WIRELESS CABLE TV CORPORATION AND
INTERNATIONAL BROADCAST CONSULTANTS OF AMERICA, INC.
This Addendum is made to the lease dated May 8,1998 between Intracoastal
Pacific Limited Partnership, as Lessor and Tel-Com Wireless Cable TV
Corporation, a Florida corporation and International Broadcast Consultants of
America, Inc-, as Lessees, for that certain premises consisting of 4,500 square
feet (the original Demised Premises) located at 3957 N.E. 163 Street, North
Miami Beach, Florida, in the Intracoastal Mail in North Miami Beach, Florida
(the Lease). The parties hereto desire to expand the size of the original
Demised Premises by a separate additional 1,300 square feet, and, accordingly,
it is hereby agreed as follows:
1. EXPANSION OF DEMISED PREMISES. The original Demised Premises shall be
increased by 1,300 square feet (the Expansion Space) which is located in the
Intracoastal Mail at 3953 N.E. 163rd Street, North Miami Beach, Florida. Upon
delivery of the Expansion Space to Lessees, Lessees shall pay to Lessor
additional Minimum Rent for the Expansion Space as follows-
BASE RENT PER SQUARE FOOT MONTHLY ANNUALLY
Year 1 $ 13.50 $1,462.50 $17,550.00
Year 2 $ 14,50 $1,570.83 $18,850.00
Year 3 $ 15.50 $1,679.17 $20,150.00
Year 4 $ 16.50 $1,787.50 $21,450.00
Year 5 $ 17.50 $1,895.83 $22,750.00
Said amount shall be in addition to the Minimum Rent set forth in the
Lease.
2. SECUIRITY DEPOSIT. Upon delivery of the Expansion Space, Lessees shall
deliver to Lessor an additional Security Deposit of $3,900.00, making the total
Security Deposit $118,087.50.
3. ArtiClE1 XXXVI (Relocation of Tenant), intentionally deleted from the
Lease, shall apply to the Expansion Space pursuant to the following terms:
ARTICLE XXXVI
RELOCATION OF TENANT
Lessor expressly reserves the right to remove Lessees from the Expansion
Space and to relocate Lessees in some other space of Lessor's choosing of
approximately the same dimensions and size within the Shopping Center. If said
relocation occurs after Lessees have expended money to improve or prepare the
Expansion Space for occupancy, then Lessor shall, at Lessor's sole cost and
expense, prepare the new premises to substantially the same condition as the
Expansion Space was in prior to notice of relocation and Lessor shall otherwise
reimburse Lessees for any costs directly attributable to said relocation. Lessor
shall have the right, in Lessor's sole discretion, to use such decoration; and
materials from the existing Expansion Space, or other materials so that the
space in which Lessees are relocated shall be comparable in its interior design
and decoration to the Expansion Space from which Lessees are removed. Any
provisions pertaining to the rentable area of the Expansion Space shall be
applied to the space in
<PAGE>
which Lessees are relocated on the same basis as said provisions were applied to
the Expansion Space from which Lessees are removed.
Lessor shall notify Lessees in writing of Lessor's intention to relocate
the Expansion Space (Notice of Relocation). In the event that Lessees do not
wish to relocate the Expansion Space, Lessees shall have the option to terminate
the Lease for the Expansion Space only. Lessees: shall so notify Lessor in
writing within twenty (20) days of Lessees' receipt of Lessor's Notice of
Relocation. In the event that Lessees timely give such notice, Lessees shall
vacate the Expansion Space within 90 days of the initial Notice of Relocation.
In the event that Lessees do not so notify Lessor, Lessees agree that
Lessor's exercise of its election to remove and relocate Lessees shall not
terminate the Lease, as amended, or release Lessees, in whole or in part, from
Lessees' obligation to pay rent and other charges and to perform the covenants
and agreements hereunder for the full term of the Lease, as amended.
4. All other terms and conditions in the original Lease Agreement shall
remain in full force and effect.
LESSOR: INTRACOASTAL PACIFIC LIMITED
PARTNERSHIP, a Florida limited
partnership
By: RC Intracoastal, Inc.
an Illinois corporation,
its managing and general partner
ATTEST:
By: /s/ Scott Cronizton By: /s/ Michael Schramm
------------------------------ -------------------------------------
Name: Scott Cronizton Name: Mike Schramm
---------------------------- -----------------------------------
Title: Vice President Title: Senior Executive Vice President
--------------------------- ----------------------------------
LESSEE: TEL-COM WIRELESS CABLE
TV CORPORATION
a Florida corporation
ATTEST:
By: /s/ Ximena Astralaga By: /s/ Samuel Simkin
------------------------------ -------------------------------------
Name: Ximena Astralaga Name: Samuel Simkin
---------------------------- -----------------------------------
Title: Office Manager Title: Vice President
--------------------------- ----------------------------------
LESSEE: INTERNATIONAL BROADCAST
CONSULTANTS OF AMERICA, INC.,
a Florida corporation
ATTEST:
By: /s/ Ximena Astralaga By: /s/ Eric Lefkowitz
------------------------------ -------------------------------------
Name: Ximena Astralaga Name: Eric Lefkowitz
---------------------------- -----------------------------------
Title: Office Manager Title: President
--------------------------- ----------------------------------
<PAGE>
ADDENDUM TO THAT CERTAIN LEASE DATED MAY 8,1998 BY
AND BETWEEN INTRACOASTAL PACIFIC LIMITED PARTNERSHIP AND
TEL-COM WIRELESS CABLE TV CORPORATION AND
INTERNATIONAL BROADCAST CONSULTANTS OF AMERICA, INC.
This Addendum is made to the lease dated May 8, 1998 between Intracoastal
Pacific Limited Partnership, as Lessor and Tel-Com Wireless Cable TV
Corporation, a Florida corporation and International Broadcast Consultants of
America, Inc., as Lessees, for that certain premises consisting of 4,500 square
feet (the original Demised Premises) located at 3957 N.E.163 Street, North Miami
Beach, Florida, in the Intracoastal Mail in North Miami Beach, Florida (the
Lease). The parties hereto desire to expand the size of the original Demised
Premises by a separate additional 1,300 square feet, and, accordingly, it is
hereby agreed as follows:
1. EXPANSION OF DEMISED PREMISES. The original Demised Premises shall be
increased by 1,300 square feet (the Expansion Space) which is located in the
Intracoastal Mail at 3953 N.E. 163rd Street, North Miami Beach, Florida. Upon
delivery of the Expansion Space to Lessees, Lessees shall pay to Lessor
additional Minimum Rent for the Expansion Space as follows:
BASE RENT PER SQUARE FOOT MONTHLY ANNUALLY
Year 1 $ 13.50 $1,462.50 $17,550.00
Year 2 $ 14.50 $1,570.83 $18,850.00
Year 3 $ 15.50 $1,679.17 $20,150.00
Year 4 $ 16.50 $1,787.50 $21,450.00
Year 5 $ 17.50 $1,895.83 $22,750.00
Said amount shall be in addition to the Minimum Rent set forth in the
Lease.
2. SECURITY DEPOSIT. Upon delivery of the Expansion Space, Lessees shall
deliver to Lessor an additional Security Deposit of $3,900.00, making the total
Security Deposit $18,087.50.
3. Article XXXVI (Relocation of Tenant), intentionally deleted from the
Lease, shall apply to the Expansion Space pursuant to the following terms:
ARTICLE XXXVI
RELOCATION OF TENANT
Lessor expressly reserves the right to remove Lessees from the Expansion
Space and to relocate Lesees in some other space of Lessor's choosing of
approximately the same dimensions and size within the Shopping Center. If said
relocation occurs after Lessees have expended money to improve or prepare the
Expansion Space for occupancy, then Lessor shall, at Lessor's sole cost and
expense, prepare the new premises to substantially the same condition as the
Expansion Space was In prior to notice of relocation and Lessor shall otherwise
reimburse Lessees for any costs directly attributable to said relocation. Lessor
shall have the right, in Lessor's sole discretion, to use such decoration; and
materials from the existing Expansion Space, or other materials so that the
space in which Lessees are relocated shall be comparable in its interior design
and decoration to the Expansion Space from which Lessees are removed. Any
provisions pertaining to the rentable area of the Expansion Space shall be
applied to the space in
<PAGE>
which Lessees are relocated on the same basis as said provisions were applied to
the Expansion Space from which Lessees are removed.
Lessor shall notify Lessees in writing of Lessor's intention to relocate
the Expansion Space (Notice of Relocation)- In the event that Lessees do not
wish to relocate the Expansion Space, Lessees shall have the option to terminate
the Lease for the Expansion Space only. Lessees shall so notify Lessor in
writing within 10 days of Lessees' receipt of Lessor's Notice of Relocation. In
the event that Lessees timely give such notice, Lessees shall vacate the
Expansion Space within 90 days of the initial Notice of Relocation.
In the event that Lessees do not so notify Lessor, Lessees agree that
Lessor's exercise of its election to remove and relocate Lessees shall not
terminate the Lease, as amended, or release Lessees, in whole or in part, from
Lessees' obligation to pay rent and other charges and to perform the covenants
and agreements hereunder for the full term of the Lease, as amended.
4- All other terms and conditions in the original Lease Agreement shall
remain in full force and effect.
LESSOR: INTRACOASTAL PACIFIC LIMITED
PARTNERSHIP, a Florida limited
partnership
By: RC Intracoastal, Inc.
an Illinois corporation,
its managing and general partner
ATTEST:
By: By: /s/ Michael Schramm
------------------------------ -------------------------------------
Name: Name: Mike Schramm
---------------------------- -----------------------------------
Title: Title: Senior Executive Vice President
--------------------------- ----------------------------------
LESSEE: TEL-COM WIRELESS CABLE
TV CORPORATION
a Florida corporation
ATTEST:
By: /s/ Ximena Astralaga By: /s/ Samuel H. Simkin
------------------------------ -------------------------------------
Name: Ximena Astralaga Name: Samuel H. Simkin
---------------------------- -----------------------------------
Title: Office Manager Title: Vice President
--------------------------- ----------------------------------
LESSEE: INTERNATIONAL BROADCAST
CONSULTANTS OF AMERICA, INC.,
a Florida corporation
ATTEST:
By: /s/ Ximena Astralaga By: /s/ Eric Lefkowitz
------------------------------ -------------------------------------
Name: Ximena Astralaga Name: Eric Lefkowitz
---------------------------- -----------------------------------
Title: Office Manager Title: President
--------------------------- ----------------------------------
<PAGE>
EXHIBIT "C"
CERTIFICATION OF DATES
Reference is made to that certain Retail Lease dated the 8th day of May,
1998, by and between INTRACOASTAL PACIFIC LIMITED PARTNERSHIP, a Florida limited
partnership, ("Lessor") and TEL-COM WIRELESS CABLE TV CORPORATION, a Florida
corporation and INTERNATIONAL BROADCAST CONSULTANTS OF AMERICA, INC.
("Lessees"), demising certain space in the shopping center located at the
intersection of N.E. 35th Avenue and N.E. 163rd Street, North Miami Beach,
Miami-Dade County, Florida
Pursuant to the provisions of Article 11, Paragraph 1, of the above Lease,
Lessor and Lessees, intending to be legally bound hereby agree that the term of
said Lease commenced on the 25th day of August, 1998, and shall end on the 31st
day of August, 2003, at midnight, unless sooner terminated or extended as
therein provided.
IN WITNESS WHEREOF, the parties hereto have duly executed this Exhibit "C"
to said Retail Lease, this day of , 1998.
LESSOR INTRACOASTAL PACIFIC LIMITED
PARTNERSHIP, a Florida limited
partnership
By: RC Intracoastal, Inc.
an Illinois corporation,
its managing general partner
ATTEST:
By: By: /s/ Michael Schramm
------------------------------ -------------------------------------
Name: Name: Michael Schramm
---------------------------- -----------------------------------
Title: Title: Senior Executive Vice President
--------------------------- ----------------------------------
LESSEE: TEL-COM WIRELESS CABLE
TV CORPORATION
a Florida corporation
ATTEST:
By: /s/ Ximena Astralaga By: /s/ Samuel H. Simkin
------------------------------ -------------------------------------
Name: Ximena Astralaga Name: Samuel H. Simkin
---------------------------- -----------------------------------
Title: Office Manager Title: Vice President
--------------------------- ----------------------------------
LESSEE: INTERNATIONAL BROADCAST
CONSULTANTS OF AMERICA, INC.,
a Florida corporation
ATTEST:
By: /s/ Ximena Astralaga By: /s/ Eric Lefkowitz
------------------------------ -------------------------------------
Name: Ximena Astralaga Name: Eric Lefkowitz
---------------------------- -----------------------------------
Title: Office Manager Title: President
--------------------------- ----------------------------------
<PAGE>
EXHIBIT "C"
CERTIFICATION OF DATES
Reference is made to that certain Retail Lease dated the 81h day of May,
1998, by and between INTRACOASTAL PACIFIC LIMITED PARTNERSHIP, a Florida limited
partnership, ("Lessor") and TEL-COM WIRELESS CABLE TV CORPORATION, a Florida
corporation and INTERNATIONAL BROADCAST CONSULTANTS OF AMERICA, INC.
("Lessees"), demising certain space in the shopping center located at the
intersection of N.E. 35th Avenue and N.E. 163rd Street, North Miami Beach,
Miami-Dade County, Florida.
Pursuant to the provisions of Article 11, Paragraph 1, of the above Lease,
Lessor and Lessees, intending to be legally bound hereby agree that the term of
said Lease commenced on the 25th day of August, 1998, and shall end on the 31st
day of August, 2003, at midnight, unless sooner terminated or extended as
therein provided.
IN WITNESS WHEREOF, the parties hereto have duly executed this Exhibit "C"
to said Retail Lease, this day of , 1998.
LESSOR INTRACOASTAL PACIFIC LIMITED
PARTNERSHIP, a Florida limited
partnership
By: RC Intracoastal, Inc.
an Illinois corporation,
its managing and general partner
ATTEST:
By: By: /s/ Michael Schramm
------------------------------ -------------------------------------
Name: Name: Michael Schramm
---------------------------- -----------------------------------
Title: Title: Senior Executive Vice President
--------------------------- ----------------------------------
LESSEE: TEL-COM WIRELESS CABLE
TV CORPORATION
a Florida corporation
ATTEST:
By: /s/ Ximena Astralaga By: /s/ Samuel H. Simkin
------------------------------ -------------------------------------
Name: Ximena Astralaga Name: Samuel H. Simkin
---------------------------- -----------------------------------
Title: Office Manager Title: Vice President
--------------------------- ----------------------------------
LESSEE: INTERNATIONAL BROADCAST
CONSULTANTS OF AMERICA, INC.,
a Florida corporation
ATTEST:
By: /s/ Ximena Astralaga By: /s/ Eric Lefkowitz
------------------------------ -------------------------------------
Name: Ximena Astralaga Name: Eric Lefkowitz
---------------------------- -----------------------------------
Title: Office Manager Title: President
--------------------------- ----------------------------------
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into this
____ day of April, 1999 by and between 5TH AVENUE CHANNEL RETAIL, INC. (the
"Company"), a Florida corporation and a wholly-owned subsidiary of 5th Avenue
Channel Corp., a Florida corporation (the "Parent"), and MICHAEL J. TEDESCO (the
"Employee").
WITNESSETH:
WHEREAS, the Company operates the direct to retail business of the
Parent and its other subsidiaries (the "Business"); and
WHEREAS, subject to the terms and conditions hereinafter set forth, the
Company desires to employ the Employee as the Company's Chief Operating Officer,
and the Employee desires to be so employed by the Company.
NOW, THEREFORE, in consideration of the mutual promises set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. RECITALS. The foregoing recitals are true and correct and are
incorporated herein by this reference.
2. EMPLOYMENT. In exchange for the "Compensation" (as hereinafter
defined) and subject to the other terms and conditions hereinafter set forth,
the Company hereby employs the Employee to render the "Employee Duties" (as
described in Section 3 below) as an employee of the Company, and the Employee
hereby accepts such employment.
3. TERM. This Agreement shall commence on the date hereof and shall
continue to be in effect for one (1) year from the date of this Agreement
("Term"), unless terminated prior to the end of the Term in accordance with
Section 6 of this Agreement. At the end of the Term, this Agreement shall be
automatically renewed for consecutive additional one-year periods ("Renewal
Terms") unless either party provides written notice of non-renewal to the other
not less than ninety (90) days prior to the end of the Term or any such renewal
term.
4. EMPLOYEE DUTIES. For purposes of this Agreement, "Employee Duties"
shall mean serving the Company as its President and Chief Operating Officer,
responsible for overseeing all of the Company's operations and such other duties
and responsibilities consistent with the Employer's corporate offices and
positions which the company's Board of Directors or CEO, from time to time may
assign. The Employee's performance of the Employee Duties shall be subject to
the direction of the Company's CEO. The Employee shall devote full attention and
render exclusive, full-time services to the Company and shall be an employee
solely of the Company according to the terms of this Agreement.
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4. The Company's executive offices shall be located Pelham, New York,
during the term of this agreement, and the Employee will not be required to
relocate or transfer his principal residence from the immediate vicinity of New
York.
5. COMPENSATION. In exchange for the Employee's performance of the
Employee Duties hereunder, the Company hereby agrees to pay the Employee the
following compensation (collectively, the "Compensation"):
(a) BASE SALARY. The Company shall pay the Employee a gross
annual base salary (the "Base Salary") of One Hundred Two Thousand Dollars
($102,000). Salary shall be paid by the Company in accordance with the Company's
regular payroll practices but not less often than every month during the Term.
The Company's Board of Directors shall review the Employee's Salary annually and
may increase it if the Employee's performance justifies such an increase, in an
amount not less than $12,240 per annum.
(b) INCENTIVE COMPENSATION. In addition to the Base Salary
described in Section 5(a), the Employee shall be entitled to receive monthly
incentive compensation equal to one percent (1%) of the Company's gross sales
receipts from sales of products and services during the then preceding month,
less freight, customary trade discounts, allowances, credits, change backs, and
adjustments for exchanges or returns. For purposes of determining incentive
compensation hereunder, sales proceeds are considered received upon actual
receipt by the Company of payment from purchasers of products and services sold
to them. Under approved circumstances, the Company may elect to exclude certain
unrelated sales from the employees monthly incentive compensation and such
excluded sales shall be consented to by the Executive.
(c) DISCRETIONARY BONUS. In addition to the Salary described in
Section 4(a), after completion of one full year of continuous employment with
the Company and expressly contingent on the Company exceeding its yearly sales
projections under its business plan for the then prior year (as set forth in the
attached schedule), the Employee shall be entitled to receive each subsequent
year options under the Company's 1995 Stock Option Plan (the "Plan") at no cost
to purchase an aggregate of 50,000 shares of the Parent's common stock, $.001
par value per share (the "Common Stock"). Said options, if granted, shall have
an exercise price equal to the fair market value of the Common Stock on the date
of grant and shall be otherwise governed by the terms of the Plan.
(d) STOCK OPTIONS. The Company agrees to grant to the Employee
options under the Plan to purchase a total of 24,000 shares of the Parent's
Common Stock at an exercise price equal to $7.25 per share, said options to
accrue at the rate of 2,000 shares per month of the Employee's employment with
the Company beginning on the date of this Agreement, but accrued options shall
not vest until the Employee has completed six (6) months of continuous
employment with the Company and to grant to the Employee options under the plan
to purchase a total of 30,000 shares of the Parent's common stock at an exercise
price equal to $7.25 per share, during the second year of this Agreement. Except
as provided in this Agreement, the options shall be governed by the terms of the
Plan.
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(e) WITHHOLDING. The Company shall deduct or withhold from all
Compensation payable hereunder all amounts required to be deducted or withheld
from Compensation pursuant to state or federal law.
(f) Other Benefits.
(i) FRINGE BENEFITS. Employee shall be entitled to
Company-paid $1,000,000 term life insurance, Company-paid health, medical,
dental and hospitalization insurance coverage as well as any pension,
profit-sharing plan and any other fringe benefit plans or programs, whether now
existing or hereafter established for participation of comparably situated
employees, such as but not limited to the Company's 401(k) plan, and a cash
automobile allowance of $5,000 per year.
(ii) [EXPENSE REIMBURSEMENT. It is contemplated that, in
connection with his employment hereunder, the Employee may incur business,
entertainment and travel expenses. The Company agrees to promptly reimburse the
Employee in full for all preapproved reasonable, ordinary and necessary
business, entertainment and other related expenses, including travel expenses,
incurred or expended by him incident to the performance of his duties hereunder,
and incurred or expended in accordance with the Company's policies with respect
to such expenses, upon submission by the Employee to the Company of such
vouchers or expense statements satisfactorily evidencing such expenses as may be
reasonably required by the Company or its accountants.]
(iii) VACATIONS AND HOLIDAYS. Employee shall be entitled to
paid vacations and holidays in accordance with the companies politics in effect
from time to time for its senior executive officers, but not less than three (3)
weeks of vacation during each fiscal year.
6. TERMINATION.
(a) BY COMPANY - FOR CAUSE. The Company shall have the right to
terminate the employment of the Employee for cause immediately upon providing
written notice to the Employee. For purposes of this Agreement, "cause" shall
mean only the occurrence of any of the following, each of which shall be deemed
a breach of this Agreement:
(i) Employee's failure (other than as a result of illness or
mental or physical disability), within seven (7) days after written notice from
the Company, to cure any material breach of the Employee Duties or any of his
other obligations under this Agreement;
(ii) Employee's habitual and material negligence in the
performance of the Employee Duties or the Employee's negligence otherwise, which
in either event results in a material loss to the Company; In no event shall the
results of the Company's operations or any business judgment made in good faith
by the Executive constitute an independent basis for termination for cause of
the Executive's employment under this agreement.
(iii) Employee's commission of any act of corporate theft,
misappropriation of funds, breach of duty as an officer of the Company or other
willful misconduct, act of dishonesty or intentional harm against or to the
Company;
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(iv) Employee's conviction of or pleading nolo contendere to
any felony;
(v) Employee's failure to perform his duties hereunder on
account of an incapacitating physical or mental condition for sixty (60) or more
work days in any six (6) month period ("Permanent Disability"). If there is any
dispute as to whether the Employee has suffered a permanent disability, the
Employee shall submit to an examination by a physician whose selection shall be
agreed upon by both the Employee and the Company, and whose determination shall
be binding; or
(vi) Employee's failure to abide by the Company's policies
or procedures, including, but not limited to the Company's policy against
disclosure of "Confidential Information" (as hereinafter defined), sexual
harassment and discrimination.
(vii) The Employee's employment under this shall terminate
upon his death. In such event, his estate shall be entitled to receive the
Executive's base salary and other benefits to which the Employee is entitled
under this agreement up to the effective date of such termination.
In the event the Company elects to terminate the Employee's
employment hereunder as set forth above, the Company shall give written notice
to such effect to the Employee, which notice shall describe in reasonable detail
the actions of the Employee constituting cause.
(b) BY EMPLOYEE - FOR CAUSE. The Employee shall have the right to
terminate his employment under this Agreement for cause immediately upon sending
written notice to the Company in the event the Company fails, within thirty (30)
days of written notice from the Employee, to cure any breach of its obligations
under this Agreement.
(c) SEVERANCE PAY. If this Agreement is terminated by the
Company, without cause then (without limiting any other rights or claims which
employee may have in respect of the Company's breach of contract or otherwise),
the Employee shall be entitled to receive from the Company his Base Salary and
the other benefits referred to in Par. 4, but not any Incentive Bonus under Par.
5 or other incentive bonus, from the date of such termination through the end of
the term. If the Company elects not to renew this Agreement at the end of the
First Year Term, then the Employee shall be entitled to receive from the Company
50% of his Base Salary and other benefits referred to in Par, 5 but not any
Incentive Bonus under Par. 5 or other Incentive Bonus. If the Company elects not
to renew this Agreement during the renewal term it may do so at the beginning of
month 22 on three months notice, and the Employee shall be entitled to receive
from the Company three months severance consisting of 25% of his Base Salary and
other benefits referred to in Par. 5 but not any Incentive Bonus under Par. 5 or
other Incentive Bonus. Such severance shall be paid monthly beginning at the end
of the term of this Agreement. The Employee shall be entitled to Severance Pay
in all other situations of three months severance consisting of 25% of his Base
Salary and other benefits referred to in Par. 5.
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7. CONFIDENTIAL INFORMATION AND COMPETITION.
(a) CONFIDENTIAL INFORMATION. The Employee hereby acknowledges
that he will or may be making use of, acquiring and adding to confidential
information of a special and unique nature and value affecting and relating to
the Company and the Parent and their respective operations, including, but not
limited to, their respective businesses, the identities of their respective
customers and suppliers, their respective data base information, prices paid by
the Company and the Parent for inventory, their respective business practices,
marketing strategies, expansion plans, contracts, business records and other
records, trade secrets, inventions, techniques, know-how and technologies,
whether or not patentable, and other similar information relating to the Company
and the Parent (all the foregoing regardless of whether same was known to the
Employee prior to the date hereof is hereinafter referred to collectively as
"Confidential Information"). The Employee further recognizes and acknowledges
that all Confidential Information is the exclusive property of the Company and
the Parent, is material and confidential, and greatly affects the legitimate
business interests, goodwill and effective and successful conduct of the Company
and the Parent's respective businesses. Accordingly, the Employee hereby
covenants and agrees that he will use the Confidential Information only for the
benefit of the Company and the Parent and shall not at any time, directly or
indirectly, either during the Term of this Agreement or afterward, divulge,
reveal or communicate any Confidential Information to any person, firm,
corporation or entity whatsoever, or use any Confidential Information for his
own benefit or for the benefit of others.
8. MISCELLANEOUS.
(a) NOTICES. All notices, demands or other communications given
hereunder shall be in writing and shall be deemed to have been duly given only
upon hand delivery thereof or upon the first business day after mailing by
United States registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
To Company: 5th Avenue Channel, Inc.
3957 N.E. 163d Street
North Miami Beach, FL 33160
Attn: Melvin Rosen, President
To Employee: Michael J. Tedesco
330 Third Avenue
Pelham, NY 10803
or to such other address or such other person as any party shall designate, in
writing, to the other for such purposes and in the manner hereinabove set forth.
(aa) ATTORNEY FEES. The Company agrees to pay the regular
hourly fees of the Employees personal attorney relating solely to the
negotiation and review of this agreement, not to exceed an aggregate fee of
$1,250.00.
(b) ENTIRE AGREEMENT. This Agreement sets forth all the promises,
covenants, agreements, conditions and understandings between the parties hereto
with respect to the subject
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matter contained herein, and supersedes all prior and contemporaneous
agreements, understandings, inducements or conditions with respect to said
subject matter, expressed or implied, oral or written, except as herein
contained.
(c) AMENDMENT. The parties hereby irrevocably agree that no
attempted amendment, modification, termination, discharge or change
(collectively, "Amendment") of this Agreement shall be valid and effective,
unless the parties shall unanimously agree in writing to such Amendment.
(d) NO WAIVER. No waiver of any provision of this Agreement shall
be effective unless it is in writing and signed by the party against whom it is
asserted, and any such written waiver shall only be applicable to the specific
instance to which it relates and shall not be deemed to be a continuing or
future waiver.
(e) GENDER AND USE OF SINGULAR AND PLURAL. All pronouns shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the party or parties, or their personal representatives, successors
and assigns may require.
(f) COUNTERPARTS. This Agreement and any amendments may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together will constitute one and the same instrument.
(g) HEADINGS. The article and section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of the Agreement.
(h) GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of Florida and any proceeding arising
between the parties in any manner pertaining or related to this Agreement shall,
to the extent permitted by law, be held in Miami-Dade County, Florida.
(i) FURTHER ASSURANCES. The parties hereto will execute and
deliver such further instruments and do such further acts and things as may be
reasonably required to carry out the intent and purposes of this Agreement.
(j) THIRD PARTY BENEFICIARY. This Agreement is made solely and
specifically among and for the benefit of the parties hereto, and their
respective successors and assigns subject to the express provisions hereof
relating to successors and assigns, and no other person other than the Parent
shall have any rights, interest or claims hereunder or be entitled to any
benefits under or on account of this Agreement as a third-party beneficiary or
otherwise.
(k) PROVISIONS SEVERABLE. This Agreement is intended to be
performed in accordance with, and only to the extent permitted by, all
applicable laws, ordinances, rules, and regulations of the jurisdiction in which
the parties do business. If any provision of this Agreement, or the application
thereof to any person or circumstances shall, for any reason or to any extent,
be invalid or unenforceable, the remainder of this Agreement and the application
of such provision to other persons or circumstances shall not be affected
thereby, but rather shall be enforced to the greatest extent permitted by law.
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(l) LITIGATION. If any party hereto is required to engage in
litigation against any other party hereto, either as plaintiff or as defendant,
in order to enforce or defend any rights under this Agreement, and such
litigation results in a final judgment in favor of such party ("Prevailing
Party"), then the party or parties against whom said final judgment is obtained
shall reimburse the Prevailing Party for all direct, indirect or incidental
expenses incurred, including, but not limited to, all attorneys' fees, court
costs and other expenses incurred throughout all negotiations, trials or appeals
undertaken in order to enforce the Prevailing Party's rights hereunder.
(m) REPRESENTATION BY EMPLOYEE. Employee hereby represents and
warrants that he is not a party to any agreement, contract or understanding,
whether of employment or otherwise, which would in any way restrict or prohibit
him from undertaking or performing employment with the Company in accordance
with the terms and conditions of this Agreement,
(n) MERGER, ETC. OF THE COMPANY. In the event of a future
disposition of (or including) the properties and business of the company,
substantially or in its entirety, by merger, consolidation, sale of assets, or
otherwise, then the Company may elect either:
(a) To assign this agreement and all of the Company's rights
and obligations under this agreement to the acquiring or surviving corporation,
provided, that such acquiring or surviving corporation shall assume in writing
all of the obligations of the Company under this agreement.
(b) To terminate this agreement upon at least 30 written
notice and the payment to
the Executive of the compensation provided for in Par. 6c of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
WITNESSES: COMPANY:
5TH AVENUE CHANNEL RETAIL,
INC., a Florida corporation
/S/ JULIE CROSBY By: /S/ ADAM TAYLOR
- --------------------- -------------------------
Adam Taylor
/S/ JULIE CROSBY Executive Vice President
- ---------------------
EMPLOYEE:
/S/ ANNETTE RUBIN /S/ MICHAEL J. TEDESCO
- --------------------- ------------------------
ANNETTE RUBIN MICHAEL J. TEDESCO
- ---------------------
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EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into this
day of August 3, 1999 with an effective date of January 5, 1999 by and between
5TH AVENUE CHANNEL CORP. (the "Company"), a Florida corporation ADAM TAYLOR (the
"Employee").
WITNESSETH:
WHEREAS, the Company operates an internet, television and marketing
business (the "Business"); and
WHEREAS, subject to the terms and conditions hereinafter set forth, the
Company desires to employ the Employee and the Employee desires to be so
employed by the Company.
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto hereby agree as follows:
1. RECITALS. The foregoing recitals are true and correct and are
incorporated herein by this reference.
2. EMPLOYMENT. In exchange for the "Compensation" (as hereinafter
defined) and subject to the other terms and conditions hereinafter set forth,
the Company hereby employs the Employee to render his services as an employee of
the Company, and the Employee hereby accepts such employment.
3. TERM. This Agreement shall commence on the date hereof and shall
continue to be in effect for one (1) year from the effective date of this
Agreement ("Term"), unless terminated prior to the end of the Term in accordance
with Section 6 of this Agreement. At the end of the Term, this Agreement shall
be automatically renewed for consecutive additional one-year periods ("Renewal
Terms") unless either party provides written notice of non-renewal to the other
not less than ninety (90) days prior to the end of the Term or any such renewal
term.
4. EMPLOYEE DUTIES. For purposes of this Agreement, "Employee Duties"
shall mean serving the Company in whatever responsibilities the parties mutually
agree upon as amended from time to time. The Employee shall devote full
attention and render exclusive, full-time services to the Company and shall be
an employee solely of the Company according to the terms of this Agreement.
5. COMPENSATION. In exchange for the Employee's performance of the
Employee Duties hereunder, the Company hereby agrees to pay the Employee the
following compensation (collectively, the "Compensation"):
(a) BASE SALARY. The Company shall pay the Employee a gross
annual base salary (the "Base Salary") of One Hundred Two Thousand Dollars
($100,000). Salary shall be paid by the Company in accordance with the Company's
regular payroll practices but not less
<PAGE>
often than every month during the Term. The Company's Board of Directors shall
review the Employee's Salary annually and may increase it if the Employee's
performance justifies such an increase.
(b) STOCK OPTIONS. The Company agrees to grant to Employee
options at no cost to purchase 5,000 shares/month of the Company's common stock,
$.001 par value per share, every month for the term of this Agreement, at an
exercise price equal to $.25 above the then market value of an average of five
days prior to the grant date except the first 35,000 shares which will be grated
at $5 per share. The options will vest ratably over a three-year period
beginning from the grant date. Except as provided in this agreement, the options
shall be governed by the terms the Company's option plan.
(c) OTHER BENEFITS.
(i) FRINGE BENEFITS. Employee shall be entitled to
Company-paid $1,000,000 term life insurance, Company-paid health, medical,
dental and hospitalization insurance coverage as well as any pension,
profit-sharing plan and any other fringe benefit plans or programs, whether now
existing or hereafter established for participation of comparably situated
employees, such as but not limited to the Company's 401(k) plan.
(ii) EXPENSE REIMBURSEMENT. It is contemplated that, in
connection with his employment hereunder, the Employee may incur business,
entertainment and travel expenses. The Company agrees to promptly reimburse the
Employee in full for all preapproved reasonable, ordinary and necessary
business, entertainment and other related expenses, including travel expenses,
incurred or expended by him incident to the performance of his duties hereunder,
and incurred or expended in accordance with the Company's policies with respect
to such expenses, upon submission by the Employee to the Company of such
vouchers or expense statements satisfactorily evidencing such expenses as may be
reasonably required by the Company or its accountants. In addition, the company
agrees to provide the Employee with a $1,000 per month automobile reimbursement.
(iii) VACATIONS AND HOLIDAYS. Employee shall be entitled to
paid vacations and holidays in accordance with the companies politics in effect
from time to time for its senior executive officers, but not less than three (3)
weeks of vacation during each fiscal year.
6. TERMINATION.
(a) BY COMPANY - FOR CAUSE. The Company shall have the right to
terminate the employment of the Employee for cause immediately upon providing
written notice to the Employee. For purposes of this Agreement, "cause" shall
mean only the occurrence of any of the following, each of which shall be deemed
a breach of this Agreement:
(i) Employee's failure (other than as a result of illness or
mental or physical disability), within seven (7) days after written notice from
the Company, to cure any material breach of the Employee Duties or any of his
other obligations under this Agreement;
(ii) Employee's habitual and material negligence in the
performance of the Employee Duties or the Employee's negligence otherwise, which
in either event results in a
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material loss to the Company; In no event shall the results of the Company's
operations or any business judgment made in good faith by the Executive
constitute an independent basis for termination for cause of the Executive's
employment under this agreement.
(iii) Employee's commission of any act of corporate theft,
misappropriation of funds, breach of duty as an officer of the Company or other
willful misconduct, act of dishonesty or intentional harm against or to the
Company;
(iv) Employee's conviction of or pleading nolo contendere to
any felony;
(v) Employee's failure to perform his duties hereunder on
account of an incapacitating physical or mental condition for sixty (60) or more
work days in any six (6) month period ("Permanent Disability"). If there is any
dispute as to whether the Employee has suffered a permanent disability, the
Employee shall submit to an examination by a physician whose selection shall be
agreed upon by both the Employee and the Company, and whose determination shall
be binding; or
(vi) Employee's failure to abide by the Company's policies
or procedures, including, but not limited to the Company's policy against
disclosure of "Confidential Information" (as hereinafter defined), sexual
harassment and discrimination.
(vii) The Employee's employment under this shall terminate
upon his death. In such event, his estate shall be entitled to receive the
Executive's base salary and other benefits to which the Employee is entitled
under this agreement up to the effective date of such termination.
In the event the Company elects to terminate the Employee's
employment hereunder as set forth above, the Company shall give written notice
to such effect to the Employee, which notice shall describe in reasonable detail
the actions of the Employee constituting cause.
(b) BY EMPLOYEE - FOR CAUSE. The Employee shall have the right to
terminate his employment under this Agreement for cause immediately upon sending
written notice to the Company in the event the Company fails, within thirty (30)
days of written notice from the Employee, to cure any breach of its obligations
under this Agreement.
(c) SEVERANCE PAY. If this Agreement is terminated by the Company
without cause then (without limiting any other rights or claims which employee
may have in respect of the Company's breach of contract or otherwise), the
Employee shall be entitled to receive from the Company his Base Salary, which
will be a minimum of three months' base salary, and the other benefits referred
to in Par. 5 excluding Paragraph 5 (b). If the Company elects not to renew this
Agreement at the end of the First Year Term, then the Employee shall be entitled
to receive from the Company three months' Base Salary and other benefits
referred to in Par. 5 excluding paragraph 5(b).
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7. CONFIDENTIAL INFORMATION AND COMPETITION.
(a) CONFIDENTIAL INFORMATION. The Employee hereby acknowledges
that he will or may be making use of, acquiring and adding to confidential
information of a special and unique nature and value affecting and relating to
the Company and the Parent and their respective operations, including, but not
limited to, their respective businesses, the identities of their respective
customers and suppliers, their respective data base information, prices paid by
the Company and the Parent for inventory, their respective business practices,
marketing strategies, expansion plans, contracts, business records and other
records, trade secrets, inventions, techniques, know-how and technologies,
whether or not patentable, and other similar information relating to the Company
and the Parent (all the foregoing regardless of whether same was known to the
Employee prior to the date hereof is hereinafter referred to collectively as
"Confidential Information"). The Employee further recognizes and acknowledges
that all Confidential Information is the exclusive property of the Company and
the Parent, is material and confidential, and greatly affects the legitimate
business interests, goodwill and effective and successful conduct of the Company
and the Parent's respective businesses. Accordingly, the Employee hereby
covenants and agrees that he will use the Confidential Information only for the
benefit of the Company and the Parent and shall not at any time, directly or
indirectly, either during the Term of this Agreement or afterward, divulge,
reveal or communicate any Confidential information to any person, firm,
corporation or entity whatsoever, or use any Confidential Information for his
own benefit or for the benefit of others.
8. MISCELLANEOUS.
(a) NOTICES. All notices, demands or other communications given
hereunder shall be in writing and shall be deemed to have been duly given only
upon hand delivery thereof or upon the first business day after mailing by
United States registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
To Company: 5th Avenue Channel Corp.
3957 N.E. 163rd Street
North Miami Beach, FL 33160
Attn: Melvin Rosen, President
To Employee: Adam Taylor
279 Atlantic Avenue
North Miami, Fl 33160
or to such other address or such other person as any party shall designate, in
writing, to the other for such purposes and in the manner hereinabove set forth.
(b) ENTIRE AGREEMENT. This Agreement sets forth all the promises,
covenants, agreements, conditions and understandings between the parties hereto
with respect to the subject matter contained herein, and supersedes all prior
and contemporaneous agreements, understandings, inducements or conditions with
respect to said subect matter, expressed or implied, oral or written, except as
herein contained.
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(c) AMENDMENT. The parties hereby irrevocably agree that no
attempted amendment, modification, termination, discharge or change
(collectively, "Amendment") of this Agreement shall be valid and effective,
unless the parties shall unanimously agree in writing to such Amendment.
(d) NO WAIVER. No waiver of any provision of this Agreement shall
be effective unless it is in writing and signed by the party against whom it is
asserted, and any such written waiver shall only be applicable to the specific
instance to which it relates and shall not be deemed to be a continuing or
future waiver.
(e) GENDER AND USE OF SINGULAR AND PLURAL. All pronouns shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the party or parties, or their personal representatives, successors
and assigns may require.
(f) COUNTERPARTS. This Agreement and any amendments may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together will constitute one and the same instrument.
(g) HEADINGS. The section headings contained in this Agreement
are inserted for convenience only and shall not affect the meaning or
interpretation of the Agreement.
(h) GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of Florida and any proceeding arising
between the parties pertaining to this Agreement shall, to the extent permitted
by law, be held in Miami-Dade County, Florida.
(i) FURTHER ASSURANCES. The parties hereto will execute and
deliver such further instruments and do such further acts and things as may be
reasonably required to carry out the intent and purposes of this Agreement.
(j) NO THIRD PARTY BENEFICIARY. This Agreement is made solely and
specifically among and for the benefit of the parties hereto, and their
respective successors and assigns subject to the express provisions hereof
relating to successors and assigns, and no other person other than the Parent
shall have any rights, interest or claims hereunder or be entitled to any
benefits under or on account of this Agreement as a third-party beneficiary or
otherwise.
(k) PROVISIONS SEVERABLE. This Agreement is intended to be
performed in accordance with, and only to the extent permitted by, all
applicable laws, ordinances, rules, and regulations of the jurisdiction in which
the parties do business. If any provision of this Agreement, or the application
thereof to any person or circumstances shall, for any reason or to any extent,
be invalid or unenforceable, the remainder of this Agreement and the application
of such provision to other persons or circumstances shall not be affected
thereby, but rather shall be enforced to the greatest extent permitted by law.
(l) LITIGATION. If any party hereto is required to engage in
litigation against any other party hereto, either as plaintiff or as defendant,
in order to enforce or defend any rights under this Agreement, and such
litigation results in a final judgment in favor of such party ("Prevailing
Party"), then the party or parties against whom said final judgment is obtained
shall reimburse the Prevailing Party for all direct, indirect or incidental
expenses incurred, including,
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but not limited to, all attorneys' fees, court costs and other expenses incurred
throughout all negotiations, trials or appeals undertaken in order to enforce
the Prevailing Party's rights hereunder.
(m) REPRESENTATION BY EMPLOYEE. Employee hereby represents and
warrants that he is not a party to any agreement, contract or understanding,
whether of employment or otherwise, which would in any way restrict or prohibit
him from undertaking or performing employment with the Company in accordance
with the terms and conditions of this Agreement.
(n) MERGER, ETC. OF THE COMPANY. In the event of a future
disposition of (or including) the properties and business of the company,
substantially or in its entirety, by merger, consolidation, sale of assets, or
otherwise, then the Company may elect either:
(i) To assign this agreement and all of the Company's rights
and obligations under this agreement to the acquiring or surviving corporation,
provided, that such acquiring or surviving corporation shall assume in writing
all of the obligations of the Company under this agreement.
(ii) To terminate this agreement upon at least 30 written
notice and the payment to the Executive of the compensation provided for in this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
COMPANY:
5TH AVENUE CHANNEL CORP., a
Florida corporation
By: /S/ MELVIN ROSEN
----------------------------
Melvin Rosen
President
EMPLOYEE:
/S/ ADAM TAYLOR
----------------------------
ADAM TAYLOR
6
EXHIBIT 10.8
5TH AVE. CHANNEL
May 10, 1999
Mr. Eric Lefkowitz
3957 N.E. 163rd Street
North Miami Beach, Florida 33160
Re: Employment Agreement
Dear Eric:
This is to confirm the terms and conditions of your employment by 5th
Avenue Channel Corp., a Florida corporation ("5TH AVENUE"), pursuant to our
agreement which has been implemented as of the beginning of 1999.
1. EMPLOYMENT TERM. You shall be employed by 5th Avenue for a term of
five years, which began on January 1, 1999 and which shall continue through
December 31, 2003. 5th Avenue shall have the right to extend your term of
employment for three (3) successive one-year periods, by so notifying you in
writing by a date no later than November 30 of each year in which 5th Avenue
elects to extend your employment term.
2. TITLE AND DUTIES. Your position with 5th Avenue shall include the
title of Senior Vice President, and you shall be in charge of all marketing and
sales. Your duties shall include the continuation of the same duties you
performed as president of International Broadcast Consultants of America, Inc.
("IBC") prior to the acquisition by 5th avenue of the assets and business
operations of IBC.
3. COMPENSATION. You shall be paid an annual salary of $150,000 in
equal installments on the same dates that 5th avenue pays its other senior
executives their regular salaries, together with annual bonuses and stock
options to be based upon the performance of 5th Avenue's business operations.
Your salary for the period ending December 31, 1999 shall total such $150,000
amount, notwithstanding that this letter agreement is dated in May 1999. In
addition, you shall receive a bonus for the months of December 1998 and January
1999 for services rendered to 5th Avenue during that time, as we have previously
agreed.
4. OTHER EMPLOYMENT BENEFITS. You also shall receive the same health
insurance, life insurance, and disability insurance coverage and benefits that
5thAvenue provides to its other senior executives, and 5th Avenue shall
reimburse you for all reasonable business expenses incurred by you on behalf of
5th Avenue. You shall also be authorized to use and shall receive 5th Avenue
credit cards and a 5th Avenue cellular telephone for 5th Avenue business
purposes. You also shall be entitled to all salary continuation benefits that
5th Avenue provides its senior executives, for any partial or total disability
that you may suffer.
5. SEVERANCE BENEFITS. In the event you are terminated by 5th Avenue or
any successor or assignee of 5th Avenue, prior to the end of the initial term or
any extended term of
The 5th Avenue Channel
3957 N.E. 163rd Street, North Miami Beach, Florida 33160
(305) 947-3010/Fax (305) 919-8154/email [email protected]
<PAGE>
your employment, without Cause (as defined below), you shall receive the full
remaining salary and health insurance benefits (or reimbursement for the cost of
COBRA insurance) for the entire remaining two-year term or extended term,
promptly upon your termination. Termination "FOR CAUSE" shall mean termination
based upon (A) a material and substantial breach of fiduciary duties to 5th
Avenue; (B) repeated, continual and flagrant failure to perform your duties as
requested by the 5th Avenue Board of Directors; (C) conviction of, or admission
to, a crime involving moral turpitude; or (D) engaging in business activities in
conflict with the business activities of 5th Avenue.
This employment agreement shall inure to the benefit of and shall be
binding upon any of 5th avenue's successors or assigns. In order to confirm the
above stated terms and conditions of your employment by 5th Avenue, please
countersign this letter agreement, below.
Sincerely,
5th Avenue Channel Corp.
By: /S/ MELVIN ROSEN
----------------------------------
Melvin Rosen, President
I agree to the above terms and conditions of employment.
/S/ ERIC LEFKOWITZ
- ---------------------------
Eric Lefkowitz
The 5th Avenue Channel
3957 N.E. 163rd Street, North Miami Beach, Florida 33160
(305) 947-3010/Fax (305) 919-8154/email [email protected]
EXHIBIT 10.9
EXCLUSIVE TELEVISION, BROADCAST AND INFORMATION
LICENSING AGREEMENT
This Agreement is made this 24th day of August, 1999, by and between 5TH AVENUE
CHANNEL CORP. (5th Ave"), a corporation organized under the laws of the State of
Florida and having its principal place of business at 3957 N.E. 163rd Street,
North Miami, Florida 33160 and ZACKS Investment Research Incorporated ("ZACKS"),
a corporation organized under the laws of the State of Illinois and having its
principal place of business at 155 North Wacker Drive, Chicago, Illinois 60606.
WHEREAS, ZACKS is in the business of providing certain equity research, analysis
and investment information as specifically set forth in Schedule A hereto (the
"Information"); and WHEREAS, 5th Ave desires to license a customized version of
the Information from ZACKS for the purpose of providing direct access to the
Information via its 5th Ave web site and television stations. WHEREAS, both
parties desire to work together to develop television and video streaming and
programming sales. NOW, THEREFORE, in consideration of the foregoing and of the
mutual promises set forth herein, the parties agree as follows:
SECTION 1. OBLIGATIONS OF ZACKS
1.1 ZACKS shall provide the Information, listed in Schedule A, to 5th Ave for
use in the development and production of the 5th Ave web site and television
programs. ZACKS will provide 5th Ave with a File Transfer Protocol (FTP) account
allowing 5th Ave access to a secure database containing all files listed in
Schedule A.
1.2 ZACKS shall perform, at its expense, all technical development and support
work necessary to meet its obligation to create the information and FTP
Directories for 5th Ave as required hereunder. Such technical development and
support work shall include, without limitation, support and technical
assistance, available Monday through Friday 9am to 5pm CST via the technical
support phone number to 5th Ave as necessary to enable 5th Ave to receive the
ZACKS information in the agreed upon formats.
1.3 ZACKS will provide a product that is timely, newsworthy, reliable and
scalable to 5th Ave's needs. 5th Ave may periodically review the quality of
services delivered by ZACKS.
1.4 ZACKS agrees to provide to 5th Ave any data or services as outlined in
Schedule A from a third party at it's absolute cost.
1.5 ZACKS shall provide 5th Ave with back-up support for questions regarding the
ZACKS information. Said support shall include, but not be limited to, providing
a support person from ZACKS specifically designated to respond to 5th Ave
inquiries. The ZACKS liaison with 5th Ave will be Evan Rullman (800) 767-3771ext
167 and Brett Bernstein (800) 767-3771 ext 258 and will be available 7:00
AM-4:00 PM CST Monday through Friday.
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1.6 ZACKS shall promptly notify 5th Ave if ZACKS learns of any unauthorized use
of 5th Ave intellectual property in connection with the Internet Services, and
ZACKS agrees to use its best efforts to cooperate with 5th Ave efforts to
protect its interests with respect to the 5th Ave Internet Services.
1.7 Joint Production and Distribution of ZACKS/5th Ave Audio and Video Clips
o ZACKS will use the technical facilities provided by 5th Ave to
produce at least 5 " talking heads " per day based on audio
interviews with brokerage analysts and ZACKS analysts
o ZACKS will provide editorial direction for the creation of the
broadcasts live from the trading floor of Sharpe Capital and
broadcasts of remote analyst interviews
o ZACKS will actively sell this audio/video web content to as
many web sites as possible, and will split the revenues from
such sales on a 50/50 gross basis with 5th Ave
o ZACKS will archive the video clips on ZACKS servers and will
deliver them to ZACKS web clients in a streaming audio/video
format and will also make it available to 5th Ave customers
1.8 Inclusion of 3rd Party Clips
ZACKS will make reasonable efforts to acquire for distribution the following
elements of investment related streaming video.
a. Analyst EPS conference Calls
b. Brokerage firm Investment Conferences
c. Industry Conferences
For these 3rd party audio / video clips ZACKS will provide the editorial
direction and 5th Ave will provide the technical facilities, any required camera
crews, and pay all costs to create video clips from these events, and to convert
existing clips created by 3rd parties into audio/video formats for sale by ZACKS
and use by 5th Avenue Channel.
1.9 Ownership and Copyrights
During the term of this Agreement and upon termination of this Agreement, ZACKS
and 5th Ave will each have equal ownership rights in those video clips, for
which 3rd parties do not have copyrights and 5th Ave may use the clips for its
own purposes subject to the provision that any usage of the clips must include
the entire clip and cannot include an edited version of the clip, without ZACKS
written authorization. ZACKS retains unilateral approval rights of any use of
the ZACKS name, information and trademarks prior to use. Furthermore, ZACKS
shall have the right to prevent any usage of the clips that ZACKS may deem to be
misleading, illegal, obscene, in violation of other ZACKS agreements, or
inconsistent with the general image that ZACKS desires to present to the public.
Notwithstanding the above, if ZACKS has given 5th Avenue Channel direction to
shoot a clip as defined in Section 2.8 these clips are deemed to be approved by
ZACKS and not in violation of any other ZACKS agreements. In consideration of
the above,
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5th Ave will give to ZACKS, for ZACKS to use at its discretion, one hundred
(100) thirty (30) second incentive spots to help ZACKS close large content
agreements.
1.10 Other ZACKS Responsibilities
o ZACKS will use its best efforts to sell the 5th Ave financial
suite.
o ZACKS will use its best efforts to sell the 5th Ave's Net
Video Finance content
o ZACKS will use its best efforts to sell any streaming video
produced at a split of 50/50 of gross revenues.
o ZACKS has the obligation to send out advertising packages to
all of it's respective clients and prospective clients. For
these efforts, ZACKS will receive 20% of the net revenues that
are collected by ZACKS or 5th Ave for advertisement on
5thavenuechannel.com and 5th Avenue Television Channel.
Payments will be made to ZACKS 15 days after 5th Ave is paid.
ZACKS is an independent sales agent and has no obligation to
produce commercials or to manage account collections.
SECTION 2. OBLIGATIONS OF 5TH AVE
2.1 5TH Ave will format and post the information listed in Schedule A at its
sole discretion and in whatever manner 5th Ave sees fit to correspond with the
continuity of the 5th Ave's websites and other financial products produced by
5th Ave, without compromising the integrity and contextual nature of ZACKS'
information. 5th Ave will not manipulate, as defined as to the falsification of
any data to influence skillfully to one's advantage, ZACKS' information nor will
5th Ave identify any information not provided directly from ZACKS as information
provided by ZACKS.
2.2 5th Ave will provide one or more graphic and/or text links with ZACKS
attribution and branding at the bottom of all pages containing information
delivered by ZACKS (the "ZACKS Content Pages"), subject to 5th Ave guidelines
and as otherwise set forth herein.
2.3 Hypertext and/or graphic links from the ZACKS Content Pages will be directed
to ZACKS Investment Research Internet site (WWW.ZACKS.COM), both of which shall
include ZACKS' individual subscription based product offerings. (The content and
design of the co-branded pages are subject to approval by 5th Ave.) 5th Avenue
will produce 30-60-90 second commercials or a 30 minute infomercial related to
the ZACKS' products that 5th Ave offers, which will drive traffic to 5th Ave's
website. All subscription revenues derived from the 5th Ave websites' links to
ZACKS or through 5th Ave's 800 telephone #'s will be on a revenue share basis
wherein ZACKS will remit fifty percent (50%) of gross revenues to 5th Ave on a
monthly basis. For traffic derived from sites other than 5th Ave that 5th Ave
generates, ZACKS will pay to 5th Ave 10% of gross revenues.
2.4 5th Ave shall provide text links on all pages displaying ZACKS information
to read "Data Provided by ZACKS Investment Research" and "WWW.ZACKS.COM"; text
links on the co-branded page shall state: "Free Trial to ZACKS Premium
Services", and a link to the co-branded page shall also be placed on a page
within the 5th Ave's web sites business section pages other than the ZACKS
Information Pages.
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2.5 5th Ave agrees to produce, host and air television shows, commercials, game
shows, instructional videos, infomercials, etc., as agreed among the parties
from time to time. Furthermore, 5th Ave agrees that the cost of all man hours,
production, maintenance and hosting of these shows, other than the availability
and cost of analysts which Zack's will pay, is solely the responsibility of 5th
Ave.
2.6 5th Ave shall work with ZACKS in producing a press release announcing the
relationship between the parties, the details, contents and timing of which
shall be by mutual agreement.
2.7 5th Ave shall provide ZACKS with a branded e-commerce product site in which
all revenues derived via the product on ZACKS.com shall be split on a 10% of net
revenue basis, as defined as gross revenues minus costs of goods.
2.8 Other 5th Ave Responsibilities
o 5th Ave will install and equip a "video clip production
facility" at ZACKS offices, provide required supplies and pay
all out of pocket costs for the operation of the facility,
including any technical personnel required, other than the
existing ZACKS infrastructure and equipment for the purpose of
creating "ZACKS/5th Avenue talking head" video clips featuring
ZACKS reporter interviews with brokerage analysts and with
ZACKS own analysts.
o Under direction of ZACKS, 5th Ave will create and pay complete
expenses for the production of at least two 30-60 second video
clips live, each day, from the trading floor at Sharpe Capital
(Wall Street Source).
o Under direction of ZACKS, 5th Ave will create and pay complete
expenses for the production of at least 5 analyst interviews
per month with brokerage analysts selected by ZACKS, located
at brokerage firm offices, in NY and other cities, selected by
Zacks.
o 5th Ave will deliver these video clips to ZACKS in digital
files suitable to the needs of ZACKS for redistribution as per
the Agreement in a timely fashion suitable for "real media
streaming video" format suitable for delivery over the
Internet.
o 5th Avenue Channel will actively sell this audio/video web
content to as many web sites as possible and will split the
revenues from such sales on a 50/50 basis with ZACKS.
2.9 5th Ave Description of Production
30, 60 and 120 second spots, are to be produced by 5th Ave at 5th Ave's expense.
The spots will be co-branded with ZACKS and 5th Avenue Channel and will drive
traffic to 5th Ave's web sites. The spots will be provided to ZACKS at no charge
to ZACKS for use by ZACKS in any way it wishes. Productions will be property of
ZACKS with no associated royalties due. Should ZACKS redistribute the
productions as in the sale of Content, the revenue will be split in accordance
with Section 3.2 as noted above.
5th Ave will produce, at no cost to ZACKS, ongoing television programming
co-branded with ZACKS and 5th Avenue Channel. 5th Ave anticipates beginning with
two hours around market
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open and two hours at market close. Additional programming will be developed
after the first levels are implemented.
SECTION 3. LICENSE AND OWNERSHIP
3.1 ZACKS hereby grants to 5th Ave a non-exclusive worldwide royalty-free right
and license to copy and incorporate the Information all video and audio produced
by ZACKS and 5th Avenue Channel into the 5th Ave's Internet sites and Television
Channel and to make the information available to users of the 5th Ave's Internet
sites to be viewed, downloaded or copied in any form deemed appropriate by 5th
Ave. This shall include, but not be limited to, putting the ZACKS Information
into digital electronic form and continuing the ZACKS Information with other
images, photographs, animation, video, audio, text, user interfaces, software
and other information as 5th Ave may choose. However, the ZACKS Wall Street
Source news is only to be used in the television programming aspect of this
Agreement. Under no circumstance should the ZWSS News be posted on any internet
site that 5TH AVENUE CHANNEL CORP is the owner, operator or partner of. Posting
of the ZWSS news on the internet is in violation of this Agreement and such
action would constitute termination of this entire Agreement effective
immediately.
ZACKS hereby grants to 5th Ave an exclusive, worldwide royalty-free right and
license to copy and incorporate the Information into the 5th Ave's television
stations, programs, affiliates, satellites and paid programming. 5th Ave shall
also have the exclusive right to use the ZACKS name and information in
television as well as the rights to have it co-branded with ZACKS and
5thavenuechannel.
3.2 Except for the licenses granted herein, ZACKS shall retain all ownership
rights in and to the Information. Nothing contained herein shall be deemed to
transfer to 5th Ave any ownership rights therein. Specifically, 5th Ave does not
have the right to resell or redistribute the Information in any form to any
parties.
3.3 Nothing in this Agreement shall impair 5th Ave rights at all times to make
use of, without obligation to ZACKS, similar information which has been, without
infringement upon ZACKS copyright or trade secrets, independently obtained by
5th Ave or which have become publicly known, whether before or after execution
of this Agreement. Furthermore, 5th Ave may procure, market and display
information at any time which may be competitive with the Information
contemplated herein.
SECTION 4. FEES AND BILLING
4.1 5th Ave agrees to pay a licensing fee for all rights granted within this
Agreement of $875,340. These payments will be made monthly over the 60 month
term of this Agreement. Monthly payments will be $14,589.
4.2 5th Ave agrees to produce, host and air television shows, commercials, game
shows, instructional videos, infomercials etc. as outlined in Schedule A.
Furthermore, 5th Ave agrees that the cost of all man hours, production,
maintenance and hosting of these shows, other than the availability and cost of
analysts which Zack's will pay, is solely the responsibility of 5th Ave.
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4.3 Initial billing cycle will begin in February 2000. ZACKS will deliver an
invoice for the licensing fees listed above. 5th Ave may remit payments in
excess of the minimum monthly fee listed and may discontinue payments once the
total sum payments of the Agreement have been met.
4.4 5th Ave and ZACKS agree to keep all proper records and books of account and
all proper entries therein relating to the moneys payable pursuant to this
Agreement.
4.5 In the event that ZACKS elects to create a special Audio/Video portal or
page on its own website, 5th Ave shall share in 35% of any advertising revenues
generated on such pages.
4.6 Notwithstanding the non-exclusive Internet provision in Paragraph 3.1
herein, ZACKS and 5th Ave agree to split gross revenues from the sale of the
Zacks proprietary information listed in Part A of Schedule A attached on a 50/50
basis for all revenue generated from Latin America and from the worldwide
Spanish speaking market.
SECTION 5. TERM AND TERMINATION
5.1 Initial Term and Renewals
The initial term of this Agreement shall commence as of the date first written
above and shall continue for a period of five (5) years after February 1, 2000.
Thereafter, 5th Ave retains the unilateral option of extending the term for
consecutive five year terms and to request negotiations for any additional files
or service upgrades to this Agreement.
5.2 Termination.
(a) If either party shall default in the performance of or compliance
with any provision contained in this Agreement and such default shall not have
been cured within 60 days after written notice thereof shall have been given to
the appropriate party, the party giving such notice may then give further
written notice to such other party terminating this Agreement, in which event
this Agreement, and the license granted hereunder, shall terminate on the date
specified in such further notice.
(b) If either party should discontinue operation (or any portion
thereof which is specifically referenced in this Agreement), either party may
cancel this Agreement upon thirty (30) days' prior written notice to the other
party.
(c) Either party may terminate this Agreement by written notice to the
other and may regard the other party as in default of this Agreement, if the
other party becomes insolvent, makes a general assignment for the benefit of
creditors, files a voluntary petition of bankruptcy, suffers or permits the
appointment of a receiver for its business or assets, or becomes subject to any
proceedings under any bankruptcy or insolvency law, whether domestic or foreign,
or has wound up or liquidated, voluntarily or otherwise. In the event that any
of the above events occurs, that party shall immediately notify the other party
of its occurrence.
(d) Upon termination of this contract by 5th Ave or ZACKS, 5th Ave will
immediately delete all files and data items transferred from ZACKS under section
Schedule A, or derived
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from such transferred files, that are stored on the 5th Ave servers or in any
databases or systems under 5th Ave control. No ZACKS data in any form shall
remain in the possession of 5th Ave after this contract has been terminated.
SECTION 6. ADVERTISING OR PROMOTION
Neither party shall make, publish or distribute (whether in print,
electronically or otherwise) any public announcements, press releases,
advertising, marketing, promotional or other materials that use the other
party's names, logos, trademarks or service marks or refer to the other party
with regard to the execution or performance of this Agreement without the prior
written consent of the other, which consent shall not be unreasonably withheld.
If within ten (10) days after delivery of samples of such material, the
receiving party has not notified the sending party of its disapproval, such
material shall be deemed approved.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1 ZACKS represents and warrants that (i) it has all rights in and to all
copyrights, patents and other proprietary rights associated with the information
that are necessary to market, distribute and license the information, (ii) the
Information is not defamatory and does not violate a third party's right of
privacy or any other right, and (iii) ZACKS has the unrestricted right and
authority to enter into this Agreement and to grant the rights and license
hereunder with respect to the Information.
7.2 5th Ave represents and warrants that it has the authority to enter into this
Agreement and the rights and licenses necessary to enter into and perform its
obligations under this Agreement.
7.3 EXCEPT AS EXPRESSLY SET FORTH HEREIN, NEITHER PARTY MAKES, AND EACH PARTY
SPECIFICALLY DISCLAIMS, ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO WARRANTIES OF TITLE OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR APPLICATION AND IMPLIED
WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, NEITHER PARTY REPRESENTS OR WARRANTS
THAT IT WILL CONTINUE TO OPERATE ITS SITES IN THEIR CURRENT FORM, THAT THE SITES
WILL BE ACCESSIBLE WITHOUT INTERRUPTION, THAT THE SITES WILL MEET THE
REQUIREMENTS OR EXPECTATIONS OF THE OTHER PARTY, OR THAT ANY MATERIALS ON THE
SITES OR THE SERVER THAT MAKES THE SITES AVAILABLE ARE FREE FROM ERRORS,
DEFECTS, DESIGN FLAWS OR OMISSIONS.
SECTION 8. LIMITATION OF LIABILITY
UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR
INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES (EVEN IF THAT
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES) ARISING FROM THE USE
OR INABILITY TO USE THE INFORMATION OR ANY OTHER PROVISION OF THIS AGREEMENT,
INCLUDING,
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BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS.
SECTION 9. INDEMNITY
Indemnification by ZACKS: ZACKS hereby indemnifies and holds 5th Ave
and its affiliates, directors, officers and employees harmless against any and
all penalties, damages, costs, judgments, attorney's fees or any other expenses
incurred in connection with (a) claims by any person or entity with respect to
the ZACKS Web site or the Information provided by ZACKS maintained on ZACKS web
site and; (b) any breach by ZACKS of the terms, representations and warranties
set forth in this Agreement.
Indemnification by 5th Ave: 5th Ave hereby indemnifies and holds ZACKS
and its directors, officers and employees harmless against any and all
penalties, damages, costs, judgments, attorney's fees or any other expenses
incurred in connection with (a) claims against ZACKS by any person or entity in
connection with 5th Ave's provision of or inability to provide access to the
ZACKS web site or the Information except for which ZACKS has agreed to indemnify
5th Ave as set forth in section 8 herein; and (b) any breach by 5th Ave of the
terms, representations and warranties set forth in this Agreement.
SECTION 10. ARBITRATION
Any dispute or controversy between the parties to this Agreement relating to or
arising out of this Agreement, including but not limited to matters reserved for
mutual agreement shall be settled by Arbitration with the rules of the (1) New
York Stock Exchange - if NYSE Arbitration is available and (2) the American
Arbitration Association in all other cases.
SECTION 11. CONFIDENTIALITY
The parties acknowledge that, in the course of their dealings hereunder, each
may acquire information about the other, its business activities and operations,
its technical information and its trade secrets, all of which are proprietary
and confidential (the "Confidential Information"). Both parties agree that the
terms of this Agreement shall be deemed Confidential Information of each party.
Each party hereby agrees that: (i) all Confidential Information shall remain the
exclusive property of the owner; (ii) it shall maintain and shall use prudent
methods to cause its employees and agents to maintain, the confidentiality and
secrecy of the Confidential Information; (iii) it shall not, and shall use
prudent methods to ensure that its employees and agents do not, copy, publish,
disclose to others or use (other than pursuant to the terms hereof) the
Confidential Information; and (iv) it shall return or destroy all copies of
Confidential Information upon request of the other party. Notwithstanding the
foregoing, Confidential Information shall not include any information to the
extent it (i) is or becomes a part of the public domain through no act or
omission on the part of the receiving party, (ii) is disclosed to third parties
by the disclosing party without restriction on such third parties, (iii) is in
the receiving party's possession, without actual or constructive knowledge of an
obligation of confidentiality with respect thereto, at or prior to the time of
disclosure under this Agreement, (iv) is disclosed to the receiving party by a
third party having no obligation of confidentiality with respect thereto, (v) is
independently developed by the receiving party without reference to
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the disclosing party's Confidential Information or (vi) is released from
confidential treatment by written consent of the disclosing party.
SECTION 12. MISCELLANEOUS
(a) NOTICES. All notices, requests and other communications hereunder
will be in writing and will be delivered in person, or sent by certified mail,
return receipt requested, overnight courier service, or by facsimile to the
address or facsimile number of the party set forth in this letter, or to such
other addresses or numbers as may be stipulated in writing by the parties
pursuant hereto. Unless otherwise provided, notice will be effective on the date
it is officially recorded as delivered by return receipt or equivalent or by
facsimile confirmation date.
(b) ENTIRE AGREEMENT; AMENDMENT; ASSIGNMENT. This Agreement, together
with any appendices or other attachments hereto, sets forth the entire
understanding between the parties and supersedes any and all oral or written
agreements or understandings between the parties as to the subject matter of
this Agreement. This Agreement may be modified only in a document signed by both
parties. This Agreement shall be binding upon and shall inure to the benefit of
the undersigned parties and their respective successors and permitted assigns.
Neither party may assign this Agreement, or sublicense, assign or delegate any
right or duty hereunder without the prior written consent of the other.
(c) SURVIVAL OF CERTAIN PROVISIONS. Notwithstanding the termination or
expiration of this Agreement, the rights and obligations in Sections above and
any commissions accruing to 5th Ave but not paid prior to termination or
expiration of this Agreement, shall survive termination or expiration of this
Agreement for up to but not exceeding three (3) calendar months.
(d) FORCE MAJEURE. In no event shall either party be liable one to the
other for any delay or failure to perform hereunder, which delay or failure to
perform is due to causes beyond the control of said party including, but not
limited to, governmental restrictions, exchange or market rulings, labor strike,
war, act of civil or military authority, sabotage, epidemic, flood, earthquake,
fire, other natural disaster, or any other event, condition or occurrence beyond
the reasonable control of such party.
(e) WAIVER. The failure of either party at any time to require
performance by the other party of any provision hereof shall in no way affect
the full right to require such performance at any time thereafter, nor shall the
waiver by either party of a breach of any provision hereof be taken or held to
be a waiver of any succeeding breach of such provision or as a waiver of the
provision itself.
(f) SEPARABILITY. If any provision of this Agreement or the application
thereof to any person or circumstances shall to any extent be held to be invalid
or unenforceable, the remainder of the Agreement, or the application of such
provisions to persons or circumstances as to which it is not held to be invalid
or unenforceable, shall not be affected thereby, and each provision shall be
valid and be enforced to the fullest extent permitted by law.
(g) RELATIONSHIP OF THE PARTIES. This Agreement does not and shall not
be deemed to constitute a partnership or joint venture between the parties and
neither party nor any of their
9
<PAGE>
respective directors, officers, employees or agents shall, by virtue of the
performance of their obligations under this Agreement, be deemed to be an agent
or employee of the other.
(h) GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with the laws of the State of Illinois without regard to its
conflict of law principles.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and do
each hereby warrant and represent that their respective signatory whose
signature appears below has been and is on the date of this Agreement duly
authorized by all necessary and appropriate corporate action to execute this
Agreement.
5TH AVENUE CHANNEL CORP. ZACKS INVESTMENT RESEARCH INCORPORATED
By: /S/ MELVIN ROSEN By: /S/ LEONARD ZACKS
----------------------------- ---------------------------------
Melvin Rosen Leonard Zacks
President President
10
<PAGE>
SCHEDULE A
DESCRIPTION AND UPDATE FREQUENCY OF LICENSED INFORMATION TO 5TH AVE
Information
ZACKS will make available to 5th Ave the following reports for the ZACKS
Universe of over 6,000 North American equities (US Exchanges and Canadian
issues).
DATA FILES
FILE
A. ALL ZACKS PROPRIETARY FILES INCLUDING BUT NOT LIMITED TO:
Expected Report Date (Daily)
Consensus Earnings Estimates (Daily)
Estimate Revision Trend (Daily)
EPS Surprises (Intra-Day)
Historical EPS Surprises (Daily)
Earnings Growth Rates (Daily)
Broker Recommendation Trend (Daily)
Brokerage Research Abstracts (Daily)
Industry Sector Analysis (ZN 7 - Weekly)
Detailed Estimate Revision File (ZN 8 - Daily)
Company Description
Quarterly Income Statement
Quarterly Balance Sheet
Annual Cash Flow
Price File (Z Price, high, low, close, volume, change)
Price/Volume History to '91
Expected Dividend Report Date
ZACKS PDF Snapshot Files (Research Wizard)
B. ALL ZACKS WALL STREET SOURCE FILES INCLUDED BUT NOT LIMITED TO:
Overview-Heads Up, Market Overview, Morning Call, ZWSS News, Economic Numbers,
Economic
Calendar
Daily Monitor-Hot Page, Newsstand, Rumors
Corporate Events-Highlights, Earnings, Stock Splits, Buybacks, Meetings, IPO's,
IPO Pricings
Research-Corporate Information, Deals, Upgrades/Downgrades (ZWSS
News only to be used in television according to this contract)
EXHIBIT 10.10
CN8, The Comcast Network
Broadcast Agreement
<TABLE>
<CAPTION>
<S> <C>
Contract No. 1717 Quote No. A-517
- ------------------------------------------------------------ ---------------------------------------------------------
AGREEMENT between 5TH AVENUE FINANCIAL called "Customer" and the Comcast Network (CN8), to broadcast programs (or
furnish services) as specified below, subject to the standard provisions on back hereof, except as deleted or changed
hereon or on a rider attached hereto and made a part hereof:
- ------------------------------------------------------------ ---------------------------------------------------------
PROGRAM NAME: 5th Avenue Financial DATE OF PRODUCTION:
Approximately 11/1/99 thru 10/30/00
NUMBER OF PROGRAMS: Two hours of live TRAVEL RATE: _________/hr.
financial programming each day between 10 AM
And 12 PM, Mon - Fri
SET-UP RATE: ____ / hr. PRODUCTION RATE: ____/hr.
OVERTIME ___/hr. FROM ____ POST PRODUCTION RATE: ___/hr.
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
CLIENT'S REPRESENTATIVE: ADDRESS:
Mel Rosen
fax (305) 919-8154
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
CHECK HERE IF RIDER(s) ATTACHED XX
TITLE(s): "EXCLUSIONS TO SERVICES PROVIDED" (as production or transmission costs to CN8)
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
ADDITIONAL INFORMATION: Whereas Customer is producing financial programming for broadcast and CN8 will broadcast said
programming, both parties have agreed to the following: Customer will transmit this programming to CN8 via satellite
transmission on or about November 1, 1999. The commitment by CN8 to broadcast the aforementioned financial show is
based on CN8's approval of the Customer pilot, which will be available on or about October 15, 1999. Customer
understands that CN8 will have approval of the on-air look of aforementioned programming. Should said programming not
meet CN8's standards, programming will not begin on or about November 1, 1999, as indicated above. Customer will
maintain the standard acceptable to CN8 throughout the programming year, or programming will be subject to
cancellation.
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
FINAL BILLING INSTRUCTIONS: Customer will pay CN8 the sum of Twenty Thousand, Eight Hundred Fifty Dollars ($20,850.00)
per month in advance so long as the agreement remains in effect. Additionally, Customer will also develop a revenue
sharing plan of its transactional revenues derived from the aforementioned programming, which will be credited against
the monthly payment. In return for the above, Customer will receive seventy-five (75) 30-second commercials per week
from CN8 to be aired on CN8 to promote the aforementioned programming. Both CN8 and Customer agree to develop a
commercial platform in order to share advertising inventory, and develop a revenue sharing plan based on sales of said
advertising inventory.
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
WITNESS our hands and seal this 22 day of September, 1999.
ACCEPTED BY: ACCEPTED BY:
CN8, The Comcast Network Customer
----------------------------------------
By: /S/ BOB BUBECK By: PRESIDENT - MELVIN ROSEN
------------------------------------------ ---------------------------------------------
General Manager Title:
------------------------------------------
Address: 3957 NE 163 STREET
----------------------------------------
City: N. MIAMI BEACH State: FL, 33162
-------------------------- ----------
- ------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
EXHIBIT 10.11
TEL-COM WIRELESS CABLE TV CORPORATION
1995 STOCK OPT10N PLAN
Tel-Com Wireless Cable TV Corporation, a Florida corporation (the
"Company"), hereby adopts a stock option plan (the "Plan") for its key
employees, officers, directors and consultants, in accordance with the following
terms and conditions.
1. PURPOSE OF THE PLAN. The purpose of the Plan is to advance the
growth and development of the Company by affording an opportunity to executives,
consultants and key employees of the Company as well as directors of the Company
and its affiliates to purchase shares of the Company's common stock and to
provide incentives for them to put forth maximum efforts for the success of the
Company's business. The Plan is intended to permit certain designated stock
options granted under the Plan to qualify as incentive stock options under
Section 422A of the Internal Revenue Code of 1986.
2. DEFINITIONS. For- purposes of this Plan, the following capitalized
terms shall have the meanings set forth below:
(a) "Board of Directors" means the board of directors of the
Company.
(b) "Code" means the Internal Revenue Code of 1986, as
currently in effect or as hereafter amended.
(c) "Company" means Tel-Com Wireless Cable TV Corporation, a
Florida corporation.
(d) "Eligible Employee" means all directors, consultants,
officers, and executive, managerial, and other key employees of the Company or
any Parent or Subsidiary. In order to be eligible for an Incentive Stock Option,
a director or a consultant must also be a common law employee of the Company as
provided in Section 422A of the Code; however, in order to be eligible for a
Nonqualified Stock Option, a director or consultant need not be a common law
employee of the Company.
(e) "Incentive Stock Option(s)" means a stock option granted
to an Eligible Employee to purchase shares of Stock which is intended to qualify
as an "incentive stock option," as defined in Section 422A of the Code.
(f) "Nonqualified Stock Option(s)" means a stock option
granted to an Eligible Employee to purchase shares of Stock which is not
intended to qualify as an "incentive stock option" as defined in Section 422A of
the Code.
(g) "Option" means any unexercised and unexpired Incentive
Stock Option or Nonqualified Stock Option issued under this Plan, or any portion
thereof remaining unexercised and unexpired.
<PAGE>
(h) "Option Agreement" means a written agreement by and
between the Company and an Optionee setting forth the terms and conditions of
the Option granted by the Board of Directors to such Optionee.
(i) "Optionee" means any Eligible Employee who is granted an
Option as provided in the Plan.
(j) "Parent" means any present or future "parent corporation"
of the Company, as such term is defined in Section 425(e) of the Code, which the
Board of Directors of the Company has elected to be covered by the Plan.
(k) "Plan" shall mean the Company's 1995 Stock Option Plan.
(l) "Stock" means authorized and unissued shares of the
Company's Common Stock, $.001 par value per share.
(m) "Subsidiary" means any present or future "subsidiary
corporation" of the Company, as such term is defined in Section 425(f) of the
Code, which the Board of Directors has elected to be covered by the Plan.
(n) Where applicable, the terms used in this Plan have the
same meaning as the terms used in the Code and the regulations and rulings
issued thereunder and pursuant thereto, with reference to Options.
3. STOCK SUBJECT TO OPTION.
(a) TOTAL NUMBER OF SHARES. The total number of shares of
Stock which may be issued by the Company to all Optionees under this Plan is
200,000 shares. The total number of shares of Stock which may be so issued may
be increased only by a resolution adopted by the Board of Directors and approved
by the shareholders of the Company.
(b) EXPIRED OPTIONS. If any Option granted under this Plan is
terminated or expires for any reason whatsoever, in whole or in part, the shares
(or remaining shares) of Stock subject to that particular Option shall again be
available for grant under this Plan.
4. ADMINISTRATION OF THE PLAN.
(a) BOARD OF DIRECTORS. This Plan shall be administered by the
Board of Directors who may, from time to time, issue orders or adopt
resolutions, not inconsistent with the provisions of the Plan, to interpret the
provisions and supervise the administration of the Plan. All determinations
shall be by the affirmative vote of a majority of the members of the Board of
Directors at a meeting, or reduced to writing and signed by all of the members
of the Board of Directors. Subject to the Company's Bylaws, all decisions made
by the Board of Directors in selecting Optionees, establishing the number of
shares and terms applicable to each Option, and in construing the provisions of
this Plan shall be final, conclusive and binding on all persons, including the
Company, shareholders, Optionees, and purchasers of shares pursuant to this
Plan. No member of the Board of Directors shall be liable for any action or
determination made in good faith with respect to the Plan or an Option granted
hereunder.
2
<PAGE>
(b) STOCK OPTION PLAN COMMITTEE. The Board of Directors may
from time to time appoint a Stock Option Plan Committee consisting of not less
than two (2) directors (the "Committee"). The Board of Directors may delegate to
such Committee full power and authority to take any action required or permitted
to be taken by the Board of Directors under this Plan, subject to restrictions
on affiliate participation under the Securities Exchange Act of 1934, pertaining
to, among other things, Section 16(b). The Board of Directors may from time to
time, in its sole discretion, remove members from or add members to the
Committee. Vacancies may be filled by the Board of Directors only. Where the
context requires, the Board of Directors shall mean the Committee, if appointed,
for matters dealing with administration of the Plan.
(c) COMPLIANCE WITH INTERNAL REVENUE CODE. The Board of
Directors (or Committee if appointed) shall at all times administer this Plan
and make interpretations hereunder in such a manner that Options granted
hereunder designated as Incentive Stock Options will meet the requirements of
Section 422A of the Code.
5. SELECTION OF OPTIONEES.
(a) DISCRETION OF THE BOARD OF DIRECTORS. In determining which
Eligible Employees shall be offered Options, as well as the terms thereof, the
Board of Directors shall evaluate, among other things, (i) the duties and
responsibilities of Eligible Employees, (ii) their past and prospective
contributions to the success of the Company, (iii) the extent to which they are
performing and will continue to perform outstanding services for the benefit of
the Company, and (iv) such other factors as the Board of Directors deems
relevant.
(b) LIMITATION ON GRANT OF OPTIONS. An Incentive Stock Option
may not be granted to any Optionee if the grant of such Option to such Optionee
would otherwise cause the aggregate fair market value (determined at the time
the Option is granted) of the Stock for which Options are exercisable for the
first time by such Optionee under all incentive stock option plans of the
Company during any calendar year to exceed $100,000. Nonqualified Stock Options
may be granted to Eligible Employees at the sole discretion of the Board of
Directors.
6. OPTION AGREEMENT. Subject to the provisions of this Plan, each
Option granted to an Optionee shall be set forth in an Option Agreement upon
such terms and conditions as the Board of Directors determines, including a
vesting schedule. Each such Option Agreement shall incorporate the provisions of
this Plan by reference. The date of the grant of an Option is the date specified
in the Option Agreement. Any Option Agreement shall clearly identify such
Options as Incentive Stock Options or Nonqualified Stock Options.
7. OPTION PRICES.
(a) DETERMINATION OF OPTION PRICE. The option price for Stock
shall not be less than one hundred percent (100%) of the fair market value of
the Stock on the date of the grant of such Options. The option price for Stock
granted to an Eligible Employee who possesses more than ten percent (10%) of the
total combined voting power of all classes of common stock of the Company shall
not be less than one hundred ten percent (110%) of the fair market value of the
Stock on the date of the grant of such Option.
3
<PAGE>
(b) DETERMINATION OF FAIR MARKET VALUE. For the purpose of
this Plan, the fair market value of the Stock on the date of granting an Option
shall be determined by the Board of Directors in accordance with the applicable
regulations under the Code.
(c) DETERMINATION OF STOCK OWNERSHIP. For purposes of
paragraphs 7 and 8, an Optionee's common stock ownership shall be determined by
taking into account the rules of constructive ownership set forth in Section
425(d) of the Code.
8. TERM OF OPTION. The term of an Option may vary within the sole
discretion of the Board of Directors, provided, however, that the term of an
Incentive Stock Option granted to an Eligible Employee shall not exceed ten (10)
years from the date of grant of such Incentive Stock Option. An Incentive Stock
Option may be canceled only in connection with the termination of employment or
death of the Optionee (as more particularly described in paragraph 9 hereof) or
any unauthorized attempted transfer or assignment of the Option (as more
particularly described in paragraph 10 hereof). A Nonqualified Stock Option may
be canceled only in connection with the termination of employment (or consulting
contract) or death of an Optionee, the removal or resignation of an Optionee who
is a director, or any unauthorized attempted transfer or assignment of the
Option.
9. EXERCISE OF OPTION.
(a) LIMITATION ON EXERCISE OF OPTION. Except as otherwise
provided herein, the Board of Directors, in its sole discretion, may limit an
Option by restricting its exercise in whole or in part to specified vesting
periods or until specified conditions have occurred. The vesting periods and any
restrictions will be set forth in the Option Agreement.
(b) EXERCISE PRIOR TO CANCELLATION. An Option shall be
exercisable only during the term of the Option as long as the Optionee is in
"Continuous Employment' with the Company or is continually on the Board of
Directors of the Company or any Parent, Subsidiary, or any successor thereof
Notwithstanding the preceding sentence, as long as the Option's term has not
expired, an Option which is otherwise exercisable in accordance with its
provisions shall be exercisable;
(i) for a period ending ninety (90) days after the
termination of the Optionee's Continuous Employment with the Company, unless the
Optionee was terminated for Cause by the Company, in which case the Option
terminates on the effective date of termination of employment; or
(ii) for a period ending ninety (90) days after the
removal or resignation of the Optionee from the Board of Directors, which such
Optionee has served; or
(iii) by the estate of the Optionee, within one (1)
year after the date of the Optionee's death, if the Optionee should die while in
the Continuous Employment of the Company or while serving on the Board of
Directors of the Company or any Parent, Subsidiary, or any successor thereof; or
4
<PAGE>
(iv) within one (1) year after the Optionee's
employment with the Company terminates, if the Optionee becomes disabled during
Continuous Employment with the Company and such disability is the cause of
termination.
For purposes of this Plan, the term "Continuous Employment" shall mean
the absence of any interruption or termination of employment (or termination of
a consulting contract) with the Company or any Parent or Subsidiary which now
exists or hereafter is organized or acquired by the Company. Continuous
Employment with the Company shall not be considered interrupted in the case of
sick leave, military leave, or any other leave of absence approved by the
Company or in the case of transfers between locations of the Company or between
any Parent or Subsidiary, or successor thereof. The term "Cause" as used in this
subparagraph 9(b) shall mean: (i) commission of a felony or a charge of theft,
dishonesty, fraud or embezzlement; (ii) failure to adhere to Company's
reasonable directives and policies, willful disobedience or insubordination;
(iii) disclosing to a competitor or other unauthorized person, proprietary
information, confidences or trade secrets of the Company or any Parent or
Subsidiary; (iv) recruitment of Company or any Parent or Subsidiary personnel on
behalf of a competitor or potential competitor of the Company, any Parent or
Subsidiary, or any successor thereof, or (v) solicitation of business on behalf
of a competitor or potential competitor of the Company, any Parent or
Subsidiary, or any successor thereof.
(c) METHOD OF EXERCISING AN OPTION. Subject to the provisions
of any particular Option Agreement, including any provisions relating to vesting
of an Option, an Optionee may exercise an Option, in whole or in part, by first
providing written notice to the Company stating in such written notice the
number of shares of Stock such Optionee elects to purchase under the Option, and
the time of the delivery thereof, which time shall be at least fifteen (15) days
after the giving of such notice, unless an earlier date shall have been mutually
agreed upon. Upon receipt of such written notice, the Company shall provide the
Optionee with that information required by the applicable state and federal
securities laws. If, after receipt of such information, the Optionee desires to
withdraw such notice of exercise, the Optionee may withdraw such notice of
exercise by notifying the Company, in writing, prior to the time set forth for
delivery of the shares of Stock. In no event may an Option be exercised after
the expiration of its term. The date of exercise shall be the date a proper
notice of exercise is received by the designated Company authority. An Optionee
is under no obligation to exercise an Option or any part thereof.
(d) PAYMENT FOR OPTION STOCK. The exercise of any Option shall
be contingent upon prior or simultaneous receipt by the Company of cash or a
certified bank check to its order, shares of the Company's Common Stock, or any
combination of the foregoing in an amount equal to the full option price of the
shares of Stock being purchased. For purposes of this paragraph 9, shares of the
Company's Common Stock that are delivered in payment of the option price shall
be valued at their fair market value, as determined under the provisions of this
Plan. In the alternative, the Board of Directors may, but is not required to,
accept a promissory note, secured or unsecured, in the amount of the option
price made by the Optionee on terms and conditions satisfactory to the Board of
Directors.
(e) NET ISSUE EXERCISE. Notwithstanding any provisions herein
to the contrary, if the fair market value of one share of Stock is greater than
the full option price of such
5
<PAGE>
share of Stock (at the date of calculation as set forth below), in lieu of
exercising any Option for cash, the Optionee may elect to receive Stock equal to
the value (as determined below) of the Option (or the portion thereof being
exercised) by delivery to the designated Company authority of the properly
completed and endorsed Notice of Exercise of Option, in which event the Company
shall issue to the Optionee a number of shares of Stock computed using the
following formula:
X = Y(A-B)
------
A
Where X = the number of shares of Stock to be issued to the
Optionee
Y = the number of shares of Stock purchasable under the
Option or, if only a portion of the Option is being
exercised, the portion of the Option being exercised
(at the date of such calculation)
A = the fair market value of one share of the Company's
Stock (at the date of such calculation)
B = the full Option price of one share of Stock being g
purchased (as adjusted to the date of such
calculation)
For purposes of the above calculation, fair market value of one share of Stock
shall be determined by the Company's Board of Directors in good faith; provided;
however, that where there is a public market for the Company's Stock, the fair
market value per share shall be the average of the closing bid and asked prices
of the Company's Stock quoted in the Over-The-Counter Market Summary or of the
closing prices quoted on the NASDAQ National Market System or on any exchange on
which the Stock is listed, whichever is applicable, as published in the Western
Edition of the WALL STREET JOURNAL (or, if not so reported, as otherwise
reported by the NASDAQ System) for the five (5) trading days prior to the date
of determination of fair market value.
(f) DELIVERY OF STOCK TO OPTIONEE. Provided the Optionee has
delivered proper notice of exercise and full payment of the option price, the
Company shall undertake and follow all necessary procedures to make prompt
delivery of the number of shares of Stock which the Optionee elects to purchase
at the time specified in such notice. Such delivery, however, may be postponed,
without postponing the actual date of exercise, at the sole discretion of the
Company, to enable the Company to comply with any applicable procedures,
regulations or listing requirements of any governmental agency, stock exchange
or regulatory authority. As a condition to the issuance of shares of Stock, the
Company may require such additional payments from the Optionee as may be
required to allow the Company to withhold any income taxes which the Company
deems necessary to insure the Company that it can comply with any federal or
state income tax withholding requirements.
10. NONTRANSFERABILITY OF OPTIONS. Except as otherwise provided in
paragraph 9(b)(iii) and (iv) hereof, an Option granted to an Optionee may be
exercised only during such Optionee's lifetime by such Optionee. An Option may
not be sold, exchanged, assigned,
6
<PAGE>
pledged, encumbered, hypothecated or otherwise transferred except by will or by
the laws of descent and distribution. No Option or any right thereunder shall be
subject to execution, attachment or similar process by any creditors of the
Optionee. Upon any attempted assignment, transfer, pledge, hypothecation or
other encumbrance of any Option contrary to the provisions hereof, such Option
and all rights thereunder shall immediately terminate and shall be null and void
with respect to the transferee or assignee.
11. COMPLIANCE WITH THE SECURITIES LAWS.
(a) OPTIONEE'S WRITTEN STATEMENT. The Board of Directors may,
in its sole discretion, require that at the time an Optionee elects to exercise
his option, he shall furnish a written statement to the Company that he is
acquiring such shares of Stock for investment purposes only and that he has no
intention of reselling or otherwise disposing of such Stock, along with a
written acknowledgment that the Option and the shares of Stock pertaining to the
Option are not registered under the Securities Act of 1933, as amended (the
"Act"), the Florida securities laws, or any other state securities laws. In the
event that shares of Stock subject to the Option are registered with the
Securities and Exchange Commission, an Optionee shall no longer be required to
comply with this subparagraph 11(a).
(b) REGISTRATION REQUIREMENTS. If at any time the Board of
Directors determines, in its sole discretion, that the listing, registration or
qualification of the shares of Stock subject to an Option upon any securities
exchange or under any state or federal securities laws, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the issuance or purchase of shares
thereunder, then the Option may not be exercised, in whole or in part, unless
such listing, registration, qualification, consent or approval shall have been
effected or obtained (and the same shall have been free of any conditions not
acceptable to the Board of Directors).
(c) RESTRICTIONS ON TRANSFER OF SHARES. Subject to the
Company's repurchase agreement and right of first refusal, as more particularly
set forth in paragraph 14 hereof, the shares of Stock acquired by an Optionee
pursuant to the exercise of an Option hereunder shall be freely transferable;
provided, however, that such shares of Stock may not be sold, transferred,
pledged or hypothecated, unless (i) a registration statement covering the
securities is effective under the Act and appropriate state securities laws, or
(ii) an opinion of counsel, satisfactory to the Company, that such sale,
transfer, pledge or hypothecation may legally be made without registration of
such shares under federal or state securities laws has been received by the
Company.
(d) RESTRICTIVE LEGEND. In order to enforce the restrictions
imposed upon shares of Stock under this Plan, the Company shall make appropriate
notation in its stock records or, if applicable, shall issue an appropriate
stock transfer instruction to the Company's stock transfer agent. In addition,
the Company may cause a legend or legends to be placed on any certificates
representing shares of Stock issued pursuant to this Plan, which legend or
legends shall make appropriate reference to such restrictions in substantially
the following form:
"The shares of Common Stock evidenced by this certificate have
been issued under the Tel-Com Wireless Cable TV Corporation
7
<PAGE>
1995 Stock Option Plan (the "Plan") and are subject to the
terms and provisions of such Plan.
These shares have not been registered under the Securities Act
of 1933, as amended (the "Act"), the Florida Securities and
Investor Protection Act or any other state securities laws,
and, therefore, cannot be sold unless they are subsequently
registered under the Act and any applicable state securities
laws or an exemption from registration is available.
These shares are subject to a repurchase agreement and right
of first refusal as set forth in the Stock Option Agreement
dated __________________, by and between the shareholder and
Tel-Com Wireless Cable TV Corporation, and any sale, transfer,
gift, pledge, or encumbrance of these shares is subject to
this repurchase agreement and right of first refusal."
12. CHANGES IN CAPITAL STRUCTURE OF COMPANY. In the event of a capital
adjustment resulting from a stock dividend, stock split, reclassification,
recapitalization, or by reason of a merger, consolidation, or other
reorganization in which the Company is the surviving corporation, the Board of
Directors shall make such adjustment, if any, as it may deem appropriate in the
number and kind of shares authorized by this Plan, or in the number, option
price and kind of shares covered by the Options granted. The Company shall give
notice of any adjustment to each Optionee and such adjustment shall be deemed
conclusive. The foregoing adjustments and the manner of application of the
foregoing provisions shall be determined solely by the Board of Directors, and
any such adjustment may provide for the elimination of fractional shares.
13. REORGANIZATION. DISSOLUTION OR LIQUIDATION. In the event of the
dissolution or liquidation of the Company, or any merger or combination
involving the Company, in which the Company is not a surviving corporation, or a
transfer by the Company of substantially all of its assets or property to
another corporation, or in the event any other corporation acquires control of
the Company in a reorganization within the meaning of Section 368(a) of the
Code, all outstanding Options shall thereupon terminate, unless such Options are
assumed or substitutes therefor are issued (within the meaning of Section 425(a)
of the Code) by the surviving or acquiring corporation in any such merger,
combination or other reorganization. Notwithstanding the previous sentence, the
Company shall give at least fifteen (15) days written notice of such transaction
to holders of unexercised Options prior to the effective date of such merger,
combination, reorganization, dissolution or liquidation. The Board of Directors,
in its sole discretion, may elect to accelerate the vesting schedules of all
Options previously issued upon such notice, and the holders thereof may, in such
event, exercise such Options prior to such effective date, notwithstanding any
time limitation previously placed on the exercise of such Options.
8
<PAGE>
14. OPTION TO REPURCHASE; RIGHT OF FIRST REFUSAL.
(a) COMPANY'S OPTION. Any Stock purchased pursuant to this
Plan shall be subject to an option to repurchase such Stock by the Company until
the Company becomes publicly held. Such option may be exercised by the Company
during said period only in the event of the Optionee's voluntary termination of
employment or the involuntary termination of employment of the Optionee (except
in the event of a sale or liquidation of the Company in an acquisition), or in
the event of the resignation or removal of the Optionee from the Board of
Directors of the Company or any Parent, Subsidiary or successor thereof, or in
the event of the Optionee's death (the "Terminating Events"). The Company must
elect to exercise the option to repurchase within sixty (60) days following a
Terminating Event, otherwise such option shall expire. In order to exercise the
option, the Company must notify the Optionee of its intent to exercise its
option by mailing a notice to the Optionee or the representative of the
Optionee's estate at the last address contained in the Company's files for such
Optionee. Such notice shall state that the Company intends to exercise its
option and shall state the purchase price per share which will be paid by the
Company and the date on which such option will be exercised, which date will not
be earlier than ten (10) days following the date of mailing said notice nor
later than sixty (60) days following the date of the Terminating Event (the
"Termination Date"). Such purchase price shall be the fair market value of the
Stock as determined by the Board of Directors as of the Termination Date. The
purchase price shall be evidenced by a promissory note, bearing interest at the
applicable federal rate under Section 1274(d) of the Code, which note may be
paid in full at any time without penalty. Payments on said note shall be made in
three (3) equal annual installments commencing six (6) months after the
Termination Date.
(b) RIGHT OF FIRST REFUSAL. Until the Company becomes publicly
held, the Company will have the irrevocable right, privilege, and option to
purchase any Stock purchased by the Optionee pursuant to an Option at any time
when the Optionee or any subsequent holder of said Stock ("Holder") receives a
bona fide offer to purchase part or all of said Stock by any other party, which
offer is acceptable to such Optionee or Holder, at the same price and upon the
same terms as such other party offers for the Stock or at fair market value of
the Stock as determined by the Board of Directors, whichever price is lower. If
the Optionee or Holder objects to the fair market value set by the Board of
Directors, the Optionee has the right to have the Stock appraised by a
qualified, independent appraiser with the cost of such appraisal to be paid by
the Optionee or Holder. After such appraisal, the Company shall have the option
to purchase the Stock on the terms of the bona fide offer or the appraisal,
whichever is less. The Optionee or Holder will, upon receipt of such an offer,
notify the Board of Directors of such offer and provide the Board with a copy of
the written offer signed by the offeror, and the Company will then be allowed
thirty (30) days from the date the Board of Directors receives such notice, not
counting the day of receiving the same, within which to notify the Optionee or
Holder of the Company's intention to exercise this option. Thereafter, the
Company shall enter into an agreement in writing with the Optionee or Holder
within fifteen (15) days to effectuate the purchase. Payment shall be deemed to
have been made by the Company, its successor or assignee, upon the deposit of a
check for the full purchase price in the U.S. Mail, addressed to the Optionee at
the Optionee's last known address. No Optionee or Holder may sell Stock to any
other party until he has conformed to the requirements of this paragraph 14 and
the Company has failed or refused to exercise its option. This right of first
refusal will continue until the Company becomes publicly held. As used in this
paragraph 14, "Optionee" shall include the executor or
9
<PAGE>
administrator of the estate of the Optionee or the person to whom the Stock
shall pass by will or by the laws of descent and distribution.
(c) DELIVERY OF STOCK CERTIFICATES. Upon receipt of any
notice, pursuant to paragraphs 14(a) or 14(b) hereof from the Company, the
Optionee shall deliver the certificates representing such shares of Stock to the
Company within ten (10) days from the date of such notice, along with a properly
executed stock power authorizing the Company to transfer said shares to the
Company, its successor or assignee.
15. ESCROW. In order to enforce the restrictions imposed upon shares
under this Plan, the Board of Directors or Stock Option Plan Committee may
require any Optionee to enter into an Escrow Agreement providing that the
certificates representing shares issued pursuant to this Plan shall remain in
the physical custody of an escrow holder until any or all of such restrictions
have terminated.
16. APPLICATION OF FUNDS. All proceeds received by the Company from the
exercise of Options shall be paid into its treasury and such proceeds shall be
used for general corporate purposes.
17. OPTIONEE'S RIGHTS AS A HOLDER OF SHARES.
(a) PRIOR TO EXERCISE. No Optionee or his legal
representatives, legatees or distributees, as the case may be, will be, or will
be deemed to be, a holder of any share of Stock subject to an Option unless and
until stock certificates representing such shares of Stock are issued to such
person or persons pursuant to the terms of this Plan. Except as otherwise
provided in paragraph 12 of this Plan, no adjustment shall be made for dividends
or other rights for which the record date occurs prior to the date such stock
certificate is issued.
(b) DIVIDENDS. Purchasers of Stock pursuant to this Plan will
be entitled, after issuance of their stock certificates, to any dividends that
may be declared and paid on the shares of Stock registered in their names. A
stock certificate representing dividends declared and paid in shares of Stock
shall be issued and delivered to the purchaser after such shares have been
registered in the purchaser's name. Such stock certificate shall bear the
legends set forth above and shall be subject to the provisions of this Plan, the
Option Agreement and any escrow arrangement.
(c) VOTING RIGHTS. Purchasers of shares of the Stock shall be
entitled to receive all notices of meetings and exercise all voting rights of a
shareholder with respect to the shares of Stock purchased.
18. AMENDMENT AND TERMINATION OF THE PLAN.
(a) DISCRETION OF THE BOARD OF DIRECTORS. The Board of
Directors may amend or terminate this Plan at any time; provided, however, that
(i) any such amendment or termination shall not adversely affect the rights of
Optionees who were granted Options prior thereto, (ii) any such amendment shall
not result in a "modification" of any Option within the meaning of Section
425(h) of the Code, and (iii) any amendment which increases the total
10
<PAGE>
number of shares of Stock covered by this Plan or changes the definition of
Eligible Employee shall be subject to obtaining the approval of the Company's
shareholders.
(b) AUTOMATIC TERMINATION. This Plan shall terminate ten (10)
years after its approval by the shareholders of the Company or its adoption by
the Board of Directors, whichever is earlier, unless the Board of Directors
shall, in its discretion, elect to terminate this Plan at an earlier date.
Options may be granted under this Plan at any time and from time to time prior
to termination of the Plan under this subparagraph 18(b). Any Option outstanding
at the time the Plan is terminated under this subparagraph 18(b) shall remain in
effect until the Option is exercised or expires.
19. MISCELLANEOUS.
(a) NOTICES. All notices and elections by an Optionee shall be
in writing and delivered in person or by mail to the President or Treasurer of
the Company at the principal office of the Company.
(b) EFFECTIVE DATE OF THE PLAN. The effective date of this
Plan shall be the earlier of the date on which the Board adopts the Plan, or the
date of its approval by the shareholders of the Company.
(c) EMPLOYMENT. Nothing in the Plan or in any Option granted
hereunder, or in any Stock Option Agreement relating thereto shall confer upon
any employee of the Company or any Subsidiary, or any successor thereof, the
right to continue in the employ of the Company or any Subsidiary.
(d) PLAN BINDING. The Plan shall be binding upon the
successors and assigns of the Company.
(e) GENDER. Whenever used herein, nouns in the singular shall
include the plural, and the masculine pronoun shall include the feminine gender.
(f) HEADINGS. Captioned headings of paragraphs and
subparagraphs hereof are inserted for convenience and reference, and constitute
no part of the Plan.
(g) APPLICABLE LAW. The validity, interpretation and
enforcement of this Plan are governed in all respects by the laws of the State
of Florida and the United States of America.
Adopted by the Board of Directors on JANUARY 18, 1995.
Adopted by the Shareholders on JANUARY 18, 1995.
11
EXHIBIT 10.12
[5TH AVENUE CHANNEL LETTERHEAD]
June 7, 1999
Signature Products, Inc.
20828 Lassen Street
Chatsworth, CA 91311
Dear Al,
Effective this date, this letter will act as our Exclusive Agreement between,
Signature Products, Inc. ("Vendor"), and 5th Avenue Channel Retail, Inc. (the
"Distributor"), regarding the patented flip top cosmetic ring known as Glamour
Rock (the "Products").
1. The Vendor hereby appoints the Distributor for the term of this
Agreement, and the Distributor hereby accepts the appointment, as the
Vendor's sole and exclusive distributor for the sale, distribution and
servicing of the Products (as defined below) in the Territory (as
defined below).
2. This Agreement applies to all products manufactured or distributed by
the Vendor (collectively, the "Products"). The definition of Products
shall include private labels of the Products.
3. The Distributor shall have the exclusive rights to market the Products
throughout the United States, Canada, and South America (the
"Territory"), with the exceptions of Department store Brands, and
retailers associated with Gryphon Development such as Bath and Body
Works and the Limited. Additional exceptions include the Gap, Claire's
and Icings as well as direct sales companies such as Amway, Avon, Nu
Skin and Mary Kay. The Vendor agrees not to sell the Products to
entities or individuals other than the Distributor for Mass Retail
Distribution. The Vendor shall forward to the Distributor all inquiries
and orders received by the Vendor concerning sales and/or marketing of
the Products and reorders from customers who purchased a Product from
the Distributor.
4. The Vendor hereby authorizes the Distributor to use the Vendor's
trademarks and tradenames during the term of this Agreement.
Furthermore, the Vendor hereby authorizes the Distributor to attach a
mailing label with the Distributor's name, address and telephone number
on the Products and the Vendor's literature. The Vendor will leave
reasonable space on its literature and Products for the Distributor to
attach its mailing list.
<PAGE>
5. The Distributor will use his best efforts to aggressively promote and
obtain sales and distribution of the Products, and to stimulate
interest in, the Products within the Territory. In consideration
thereof, the Vendor hereby agrees not to authorize or permit any other
dealer or distributor to sell the Products in the Territory during the
Term of the Agreement.
6. The Vendor agrees to provide the Distributor at no cost commercial
catalogs, leaflets, other printed documentation and any video or B-roll
footage it owns to the Distributor for use by the Distributor in its
marketing efforts. The Vendor will at its sole discretion:
(a) Assist the Distributor to prepare such other catalogs, leaflets,
and printed documentation as the parties agree is desirable for the
marketing of the Products in the Territory;
(b) Provide a spokesperson, an expert, interview footage and live
testimonials in connection with the Distributor's marketing program for
the Products; and
(c) Provide training, literature, photographs and other support
materials concerning the Distributor's marketing program for the
Products.
7. The Distributor has the rights to produce and air direct response
television programs for the Products after getting written approval
from HTC for each separate television program and prior to the
production of a program.
8. The Vendor represents and warrants that it is the owner of the
trademarks and tradenames utilized with the Products and such
trademarks and tradenames do not and will not infringe any valid United
States trademark or tradename. The Vendor shall be responsible for
registering the trademarks and tradenames for the Products in the
locations where the Distributor markets the Products.
9. The Vendor agrees to sell its Products to the Distributor in accordance
with the terms set forth $1.73 each with or without a display. (90)
Ninety days before the end of the initial term we will discuss a new
selling price for the distributor that takes into consideration the
market for the product at that time.
An advance payment of $.65 each will be paid to the Vendor by the
Distributor no later than 7 days following the receipt of a valid
purchase order by the distributor. Trhe balance will be paid no later
than (45) Forty-five days after the vendor ships and invoices the
order. The distributor will be responsible for all commissions (to its
representatives), cash discounts, retailer advertising allowances,
charge backs, and freight. The vendor will be responsible for
reasonable Trade Advertising, Public Relations and promotion of the
product. When and if the Vendor offers Products for sale, the prices
for which are not set forth in this agreement, the Vendor and the
Distributor agree to update the agreement to include the prices of such
Products.
<PAGE>
10. The Term of this Agreement shall be for a period of (1) one-year
beginning on the date of this Agreement and ending at midnight on June
6, 2000 (the "Term of the Agreement"). Thereafter, the Distributor
shall have the option to extends this Agreement for an additional (1)
one-year term (the "Renewal Option"). The Distributor shall exercise
the Renewal Option by providing the Vendor with written notice of its
intention to do so not less than 60 days before the expiration of the
initial term hereof.
11. This Agreement may be terminated before the expiration of the initial
term or any renewal term as follows:
By mutual written consent of the parties hereto; or
By written notice to a party hereto if such party shall fail in any
respect to comply with the terms, covenants and conditions of this
Agreement to be complied with by it and shall fail to remedy such
failure within 30 days after receipt of written notice thereof from the
other party hereto; PROVIDED, HOWEVER, that, if such default cannot by
its nature be cured within 30 days, then the defaulting party shall be
given a reasonable opportunity to cure the same.
12. All notices and other communications given or made pursuant hereto
shall be in writing and shall be deemed to have been given or made if
in writing and delivered personally, or sent by registered or certified
mail (postage prepaid, return receipt requested) to the parties at the
following addresses:
13. This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof, and supersedes all
other agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
VENDOR:
Signature Products Inc.
20828 Lassen Street
Chatsworth, CA 91311
By: /S/ ALFRED BOOTH
------------------------------------
Name: Alfred Booth
Title: President
DISTRIBUTOR:
5th AVENUE CHANNEL RETAIL, INC.
629 FIFTH AVENUE 2ND FLOOR
PELHAM, NEW YORK 10803
By: /S/ MICHAEL J. TEDESCO 6/7/99
------------------------------------
Name: Michael J. Tedesco
Title: President
EXHIBIT 23.1
Rachlin Cohen & Holtz LLP
Certified Public Accountants & Consultants
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form SB-2 of 5th Avenue Channel Corp., of our report
dated April 20, 1999 (which report contains an emphasis paragraph relating to
certain liquidity and profitability considerations) relating to the consolidated
financial statements of 5th Avenue Channel Corp., as of December 31, 1998 and
for the year ended December 31, 1998 appearing in such Prospectus. We also
consent to the references to us under the heading "Expert" in the Prospectus.
RACHLIN COHEN & HOLTZ LLP
Miami, Florida
January 24, 2000
One Southeast Third Avenue, Tenth Floor, Miami, Florida 33131
Tel 305-377-4228 o Fax 305-377-8331
Offices in: Miami o Ft. Lauderdale o Boca Raton o West Palm Beach o Stuart
EXHIBIT 23.2
BDO SEIDMAN, LLP
100 S.E. 2nd Street, Suite 2200
Miami, Florida 33131
Telephone: (305) 381-8000
Fax: (305) 374-1138
5th Avenue Channel Corp.
(formally known as Tel-Com Wireless Cable TV Corporation)
North Miami Beach, FL
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated March 27, 1998, relating to the
consolidated financial statements of 5th Avenue Channel Corp. (formally known as
Tel-Com Wireless Cable TV Corporation), which is contained in that Prospectus,
and to the incorporation in the Prospectus by reference of our report dated
March 27, 1998, relating to the consolidated financial statements of 5th Avenue
Channel Corp. (formally known as Tel-Com Wireless Cable TV Corporation)
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
Miami, Fl
January 25, 2000
