UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934.
For the fiscal year ended June 28, 1997 .
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934. For the transition period from ______________ to _________________.
Commission file number 0-26618 .
MAKO MARINE INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
FLORIDA 65-0501535
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4355 N.W. 128TH STREET MIAMI, FLORIDA 33054
(Address of principal executive offices)
(305) 685 - 6591
(Issuers telephone number)
Securities registered under Section 12(g) of the Exchange Act:
Common Stock , $.01 par value
Redeemable Common Stock Purchase Warrants
(Title of each class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrants' knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [ X ]
Issuer's revenues for the most recent fiscal year $19,060,911.
As of September 24, 1997 the aggregate market value of the issuer's voting stock
held by non-affiliates of the issuer (1,725,000 shares of common stock) was
approximately $2,156,250.
As of September 24, 1997, the number of shares outstanding of the issuer's
common stock was 9,055,000.
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MAKO MARINE INTERNATIONAL, INC.
FISCAL YEAR 1997 FORM 10-KSB ANNUAL REPORT
TABLE OF CONTENTS
PART I
Page
Item 1. Description of Business..................................... 3
Item 2. Description of Properties....................................9
Item 3. Legal Proceedings...........................................10
Item 4. Submission of Matters to a Vote of Security Holders........11
PART II
Item 5. Market for Common Equity and Related Stockholder
Matters.................................................12
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................13
Item 7. Financial Statements........................................18
Item 8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure.....................18
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16(a) of
the Exchange Act........................................18
Item 10. Executive Compensation......................................20
Item 11. Security Ownership of Certain Beneficial Owners and
Management..............................................21
Item 12. Certain Relationships and Related Transactions..............23
Item 13. Exhibits and Reports on Form 8-K............................24
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PART I
Item 1. DESCRIPTION OF BUSINESS
General
The Company designs, manufactures and sells offshore boats under the brand names
Mako and, since the Tracker Transaction (see below), Seacraft and Silver King.
Prior to the consummation of the Tracker Transaction, Mako's principal product
lines were center console, walkaround cabin and flats fishing boats, which range
from 16 to 33 feet in length, ranging in retail price from $14,000 to $140,000.
Since the consummation of the Tracker Transaction, Mako's product lines have
been broadened to include Seacraft brand boats, which range from 21 to 25 feet
in length, and in retail price from $25,000 to $72,000 and Silver King brand
boats, which range from 16 to 18 feet in length, and in retail price from
$13,000 to $35,000. Sales are primarily concentrated on the eastern coast of the
United States, with particular emphasis on Florida. The balance of the Company's
sales are made in the gulf coast, great lakes and west coast regions of the
United States and in foreign markets.
Development of Mako Marine International, Inc.
Mako Marine International, Inc. ("Mako" or the "Company") was incorporated in
Florida in June 1994. Its principal executive offices are located at 4355 N.W.
128th Street, Miami, Florida 33054.
The Company commenced active operations in August 1994 when it acquired the boat
manufacturing assets of Mako Marine, Inc. ("Old Mako") from an affiliate. Old
Mako began producing fiberglass boats for serious sportsfishermen in 1967.
However, from 1989 until it ceased operations in 1994, Old Mako experienced
severe negative cash flows and substantial losses as a result of a significant
downturn in the motorized pleasure boat industry shortly after it completed a
program of expansion.
In February 1994, CreditAmerica Venture Capital, Inc. ("CAVC") was formed by an
investor group, headed by Douglas W. Baena, to facilitate the financing of Old
Mako's operations. Thereafter, CAVC acquired Old Mako's defaulted long-term debt
and, in an August 1994 foreclosure sale, acquired substantially all of the boat
manufacturing assets of Old Mako. The Company then purchased such assets from
CAVC.
During August 1995, the Company completed an initial public offering (the "IPO")
in which it issued and sold 1,725,000 units each consisting of one share of the
Company's $.01 par value common stock (the "Common Stock") and one redeemable
Common Stock purchase warrant with an exercise price of $4.00 per share
("Warrant"). The Company received net proceeds of $5,307,423, including net
proceeds of $389,700 from the exercise of an over-allotment option.
The Company's initial strategy was to take advantage of what it perceived as the
early stages of a recovery within the boating industry. To accomplish this
objective the Company, through a new management team, sought to improve its
relationship with dealers, expand its dealer network, and institute operating
efficiencies in the manufacturing process. The Company believes that initially,
it was successful in improving dealer relations and restoring dealer confidence
in Mako products; however, the Company has not achieved similar success in
reducing its excessive manufacturing costs and selling, general and
administrative expenses have increased significantly. Accordingly, the Company
suffered a net loss of $4.04 and $2.95 million in fiscal 1997 and 1996,
respectively. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and "Financial Statements."
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Tracker Transaction
On January 16, 1997, the Company sold to Tracker Marine, L.P., a Missouri
limited partnership ("Tracker") 6,400,000 newly issued shares of Common Stock
(the "Mako Shares") for a purchase price consisting of cash in the amount of
$4,140,000 and assets relating to the manufacture and distribution of saltwater
boats (the "Tracker Transaction"). The Mako Shares, together with Tracker's
contemporaneous purchase of 930,000 shares of Common Stock from CAVC (the "CAVC
Shares") resulted in Tracker's acquisition of a total of 7,330,000 shares of
Common Stock, representing approximately 80.9% of the then outstanding shares of
Common Stock.
Mako Products
The Company's product lines are principally center console models and, to a
lesser extent, walkaround cabin models. Its commercial division manufactures and
sells various patrol and other boats for federal, state and local as well as
foreign governmental use. For the year ended June 28, 1997, center console
models accounted for approximately 81% of the units sold.
Center Console. The Company's center console series, on which the Mako
reputation among serious sportfishermen was built, consists of models ranging
from 17 to 33 feet in length. In an attempt to improve manufacturing
efficiencies, the Company has reduced the number of center console models from
12 to seven.
Mako's center console models have a two-piece hull, featuring an integral
stringer system and deck with built-in storage, livewells and fishboxes, which
provides a large cockpit area. The Mako center console boats, with their large
capacity fuel tank, allow anglers to reach remote fishing areas.
Walkaround Cabin. The Company recognizes that many consumers generally use their
boats for cruising, diving and enjoying the water with family and friends. For
these enthusiasts, the Company manufactures walkaround cabin models, ranging
from 22 to 29 feet in length, each of which provides 360 degree access to the
boat, the comfort of a cabin area and, in most models, a stand-up head
compartment. The comforts offered by the walkaround cabin models include a
V-bunk, galley, a dinette table and storage areas which make these boats
suitable for overnight trips. In addition, the walkaround cabin models offer
cockpit space suitable for fishermen and divers. In an attempt to improve
manufacturing efficiencies, the Company has reduced the number of walkaround
cabin models from four to three.
Professional Flats Boats. Mako professional flats boat models have been
discontinued for fiscal 1998.
Commercial and Governmental Products
The Company has reinvigorated its Commercial Products Division, which markets
Mako patrol and other boats to federal, state and local as well as foreign
governments and commercial entities. In many cases, the Company works with a
government agency to design a customized boat suitable to such customer's
specific needs. During fiscal year 1997, the Company continued its on-going
relationship with a foreign government involving the production and sale of
patrol boats.
Seacraft Products
The Company currently manufactures three center console boats under the Seacraft
brand name, ranging in length from 21 to 25 feet. Seacraft brand boats are being
marketed as premier custom boats for serious sportfishermen.
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Silver King Products
Silver King's flats boats currently consist of four models which offer the
protected shallow water angler a shallow draft fishing platform. Flats boats can
come equipped with poling platforms that enable the users to maneuver the boats
in very shallow water. To meet the angler's needs, these models offer stable,
soft, dry riding hulls with built-in livewells, release wells and storage
compartments.
Marketing, Sales and Distribution
For the year ended June 28, 1997, approximately 55% of the Company's sales were
made in Florida and 25% were distributed geographically on the eastern seaboard
from Maine to Georgia.
Domestic sales of the Company's boats are made through a network of independent
dealers throughout the United States. These dealers are not exclusive to the
Company and carry the boats of other companies, including some which may be
competitive with the Company's products. The territories served by any
particular dealer are usually exclusive to that dealer and in an effort to
protect the interests of existing dealers, the Company uses discretion in
locating new dealers. No single domestic dealer accounted for more than ten
percent of the Company's sales during fiscal year 1997. Management does not
believe that the loss of any particular dealer would have a materially adverse
effect on the Company's business.
Most boats are pre-sold to a dealer before entering the production line.
Although a sales order can be canceled prior to the start of construction, it is
uncommon for a dealer to do so. The Company generally has been able to sell to
another dealer any boat for which an order has been canceled. Historically,
cancellations have not had a material effect on the Company.
In most cases, boats are sold to dealers under "floor plan" financing
arrangements through one of two third-party financing companies, or on a
cash-on-delivery basis. The floor plan financing arrangements provide financing
to dealers to buy inventory at wholesale prices from the Company and resell such
inventory at retail prices. Each floor plan arrangement allows the Company to
request the respective lender to finance the sale of inventory by the Company to
a dealer, subject to the dealer having an approved credit line with the lender.
If the lender should foreclose on any inventory because a dealer fails to repay
financing provided by the lender, the Company is obligated to repurchase such
inventory from the lender at a price equal to the amount then due and owing on
the financing instrument. If the Company accepts for return from a dealer any
inventory subject to a financing instrument, whether or not any substitution is
made for such returned inventory, the Company must reimburse the lender for the
original amount of the invoice on which financing was given. During fiscal years
1997 and 1996, returns were insignificant.
The marine industry is highly seasonal, with retail sales strongest in the
months of February through July. The Company's business is also affected by
weather patterns. Unseasonably cool weather and prolonged winter conditions may
lead to a shorter selling season, particularly in the Northeast. The Company
manages the level and timing of sales to dealers by the use of a variety of
programs and incentives.
The Company's "Mako Partners Program" supports the Company's relationship with
its dealers. Under the Program, domestic dealers elect representatives to meet
with the Company's management and staff on a periodic basis. These
representatives convey to the Company information gathered from the dealers
based on experience in their showrooms and contact with customers. New products,
improvements to existing products, advertising concepts and financing programs
which respond to the needs of dealers and consumers are identified by the
representatives and discussed with the Company's management.
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The Company believes that it must actively assist dealers in the growth of their
dealerships to further solidify their relationships. The Company has training
programs both for company personnel and dealer sales representatives to enhance
sales to customers.
Many Mako boat owners belong to one of the approximately 20 Mako boat owners'
clubs around the United States and Europe. Most clubs host monthly meetings,
invite speakers and educate members on marine safety and other boating-related
topics. Clubs also hold fishing tournaments, barbecues and weekend excursions.
The Company maintains a consumer service department to answer questions and to
advise consumers about the use of its products. An independent company has been
retained to conduct customer satisfaction surveys with dealers and retail
purchasers.
Advertising
Advertising consists of space in printed media, such as boating magazines, and
point-of-sale product literature, as well as annual participation in
approximately 20 large boat shows nationwide. The marketing of boats to retail
customers is the direct responsibility of the dealer whose efforts are
supplemented by the Company through advertising in boating magazines and
participation in regional, national, and international boat shows. The Company
promotes its boats not only for fishing, but for family recreational use capable
of a broad variety of uses. Additionally, the Company's advertisements stress
the high resale value of its boats. In connection with the Tracker Transaction,
the Company acquired the exclusive right for a period of five years to advertise
its saltwater boat products in a catalog published by an affiliate of Tracker
aimed toward serious sportsfishermen.
Design, Engineering and Development
The Company's design, engineering and development activities are conducted by a
small experienced staff and are closely linked to the process of marketing the
Company's products. Consistent with the Company's strategy, during the 1997
fiscal year, the Company improved existing models in response to the perceived
needs and demands of consumers, as ascertained through the Mako Partners
Program.
Manufacturing
The manufacturing process for the hulls, liners and decks consists primarily of
the "laying-up" by hand of resins and high quality fiberglass materials in molds
designed and in many cases constructed by the Company's engineering and tooling
department. Decks and liners are bonded to the hulls using bonding agents,
screws, and fiberglass to achieve strong, unified construction. The Company
manufactures some metal parts used in the construction of its boats. The Company
does not manufacture the engines used on its boats.
In connection with its "Post-Acquisition Analysis" (as hereinafter defined),
Tracker concluded, among other things, that the Company's principal facility
located in Miami, Florida (the "Principal Facility") is inefficient in terms of
layout and work force proficiency, is occupied by the Company at a rental
believed to be above market rates and will require replacement of significant
amounts of obsolete machinery and equipment. Retooling in connection with the
1998 model will also be required for the Company to be able to effectively
compete by introducing new boat models for the Miami and other boat shows
scheduled during the first quarter of calendar 1998. Thus, while the
manufacturing capacity at the Principal Facility is sufficient to accommodate
its current and anticipated future needs, it is not believed that such capacity
can be achieved under current conditions in an efficient manner. See
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations - Overview" and "Liquidity and Capital Resources."
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Recreational power boats must be certified by the manufacturer to meet the
United States Coast Guard specifications. In addition, safety is subject to
federal regulation under the Boat Safety Act of 1971, as amended (the "Boat
Safety Act"), pursuant to which boat manufacturers may be required to recall
products for replacement of parts or components that have demonstrated defects
affecting safety. The Company has never had to conduct a product recall under
the Boat Safety Act. The Company also requires its boats to meet the industry
standard set by the National Marine Manufacturers Association Certification
Program, which is broader than the United States Coast Guard specifications.
Product Warranty and Product Liability
The Company warrants its products against defects in material and workmanship
for periods of one to twelve years. Pursuant to the warranties such products can
be returned to the Company, its dealers or authorized service centers for
repair. Engines included on the boats are warranted by the engine manufacturer.
While the Company endeavors to sell safe products, the possibility exists that
someone may claim personal injury or environmental damage resulting from use of
products purchased from the Company. Product liability awards have not had a
material impact on the Company and to the Company's knowledge did not have a
material impact on Old Mako. While the Company maintains third-party product
liability insurance which it believes to be adequate, there can be no assurance
that the Company will not experience legal claims in excess of its insurance
coverage or claims which are ultimately not covered by such insurance.
Furthermore, if any significant claims are brought against the Company, the
Company's business might be adversely affected by the related negative
publicity.
Suppliers
The Company uses a variety of raw materials in the manufacture of its boats.
Resin, fiberglass, foam and gelcoat are available from a limited number of
suppliers at competitive prices. Certain of the Company's raw materials are
purchased from single suppliers, but such materials are readily available from
other suppliers at competitive prices.
The Company entered into an agreement with the Mercury Marine Division of
Brunswick Corporation ("Brunswick") under which the Company was required to
purchase a substantial portion of its marine engine requirements. The agreement
was amended as of January 16, 1997 to provide for a revised pricing formula for
the engines purchased by the Company thereunder and the elimination of any
minimum purchase requirements. The revised pricing formula will result in a
lower cost to the Company for its acquisition of engines, which is a major
component of the Company's products. The agreement, as amended, expires on
December 31, 2008. At June 28, 1997, the Company was indebted to Brunswick in
the amount of approximately $653,000, which debt is collateralized by a security
interest in certain of the Company's patents and trademarks. The loan is
repayable, in part, from rebates on the purchase of engines under the agreement.
The agreement also provides to Brunswick a right of first offer in connection
with the proposed sale of substantially all of the Company's assets or the sale
of 50% or more of any class of voting securities to a person or entity engaged
in the marine industry, which first offer was declined with respect to the
Tracker Transaction.
Competition
The segment of the marine industry in which the Company operates is highly
competitive. Competition is based on product quality, innovation, price and
customer service. The Company's competitors vary according to product line.
Among the Company's competitors are several major manufacturers of boats
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for fishing and family use. These competitors are well-established, have
reputations for success in the development and sales of products, and have
significantly greater financial, marketing, distribution, personnel and other
resources than the Company. In view of the current financial condition of the
Company and the inefficiencies associated with its manufacturing facility, it is
not likely that the Company will be able to compete successfully unless the
Company is able to obtain significant capital funding. Manufacturers that
compete directly with the Company's Mako and Seacraft brand products include
Pursuit, Grady White, Boston Whaler (owned by Brunswick), Contender, Proline
(owned by American Marine Holdings), Hydrasport (owned by OMC), Regulator,
Angler and Dusky. Manufacturers that compete with Company's Silver King brand
products include Maverick, Hewes and Action Craft.
Patents
The Company believes that its patents and the Mako, Silver King and Seacraft
trademarks are valuable assets, as they are identified with and are important to
the sale of its products. The Company's trademarks are registered with the
United States Patent and Trademark office and in a number of foreign countries.
Substantially all of the Company's assets, including its patents and trademarks,
are pledged to secure indebtedness. If the Company defaults on its indebtedness
and one or more of the Company's creditors foreclose upon its security interest
in the Company's assets, in particular its patents and trademarks, such loss
would have a material and adverse effect on the Company's business and
operations.
Environmental
The Company's operations are subject to numerous federal, state and local laws
and regulations relating to the environment and health, safety and other
regulatory matters. Certain materials used in boat manufacturing, such as resin
and various cleaning solvents, are classified by federal and state governments
as "hazardous material." Control of these substances is regulated by the United
States Environmental Protection Agency (the "EPA") and state environmental
protection agencies which require reports and inspect facilities to monitor
compliance. In addition, under "CERCLA" any generator of hazardous waste sent to
a hazardous waste disposal site is potentially responsible for the clean up,
remediation and response costs required at such site in the event that the site
is not properly closed by the owner or operator, irrespective of the amount of
waste sent to the site. The Company believes that it has obtained all material
permits and that its facilities and operations are in substantial compliance
with all material applicable environmental laws and regulations. Nevertheless,
future events, such as changes in or modified interpretations of existing laws
or regulations or enforcement policies may give rise to additional compliance
costs that could have a material adverse effect on the Company.
Pursuant to the 1990 Amendments to the Clean Air Act, the EPA has been studying
the impact of marine engines on the environment. The Company anticipates that by
1998 the EPA will adopt regulations establishing air emissions standards for new
marine engines. To the extent that such regulations, when finally adopted, make
it more costly to acquire a marine vessel equipped with an engine, such
regulations could have a material adverse effect on the Company's business.
In connection with its due diligence review conducted in connection with the
Tracker Transaction, certain potential environmental issues related to the
property upon which the Principal Facility is located (the "Property") were
discovered and additional testing and analysis was undertaken to determine the
extent of such contamination and whether or not such contamination arises from
on-site or off-site sources. By amendatory letter agreement dated January 16,
1997 among the Company, CAVC and Tracker, the parties agreed that CAVC would
deposit in escrow the sum of $1,310,000 to secure CAVC's obligations
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with respect to any cleanup and other remedial costs and expenses resulting from
those environmental issues ("Remedial Costs"). Under the terms of such
amendatory letter agreement, the Company is obligated to pay the first $100,000
of Remedial Costs. Thereafter, such costs are paid in consecutive increments of
$200,000 and $50,000 by CAVC and the Company, respectively, until the Remedial
Costs reach $1,710,000. As a result of the foregoing, the Company is responsible
for payments of up to $400,000 with respect to the first $1,710,000 of Remedial
Costs, and for such amounts, if any, in excess of $1,710,000. Additional reports
received from the environmental engineers during the third quarter of fiscal
year 1997 appear to confirm management's previously disclosed preliminary belief
that a majority of the potential contamination on, in or under the Property
comes from off-site sources, and that the Company will not incur material losses
as a result of its limited obligation with respect to the Remedial Costs.
Discussions have been held with the Florida Department of Environmental
Resources and Management ("DERM") to determine what, if any, remedial action is
appropriate. Representatives of DERM have informally indicated that based upon
the facts presented to them, DERM does not intend to require any remedial action
on the part of the Company. Based primarily upon this indication from DERM, the
Company has released from escrow the sum of $1,000,000.
Employees
The Company has engaged Vincam Human Resources, Inc. ("Vincam") to provide human
resource management services. Vincam employs approximately 200 full-time workers
at the Company's manufacturing facility, and is responsible for providing all
employee benefits, including workers compensation insurance coverage, and
certain other services. The Company's contract with Vincam is for a term of one
year, and is automatically renewed unless terminated pursuant to its terms,
however, such contract may be terminated at any time upon 30 days written notice
by the Company and under certain other circumstances. The Company believes that
a termination of this contract would not have a material adverse effect on the
Company.
Item 2. PROPERTY
The Company's 10 acre, 220,000 square foot manufacturing facility located in
Miami, Florida is leased under a triple net lease (the "Lease") which expires on
July 31, 2001, from Robert Schwebke, the founder of Old Mako. The Company pays
an annual aggregate base rental of $542,400 and real estate taxes associated
with the property. The Lease also grants the Company two seven-year renewal
options. Based primarily on the due diligence review performed by Tracker in
connection with the Tracker Transaction, the Company believes that the rental
payable under the Lease is above current prevailing market rates. Accordingly,
on January 16, 1997, the Company entered into an amendment of the Lease to
provide for (i) an option on the part of the Company to terminate the Lease on
January 16, 1999 upon the giving of appropriate notice of the exercise of such
option and the payment of a lease termination fee in the amount of $330,000, and
(ii) a one-year option on the part of the Company to purchase the property at a
purchase price of $5.0 million. The Lease is subordinate to two separate
mortgages in the aggregate amount of approximately $1.6 million. Payments by the
Company under the Lease approximate payments required for debt service and real
estate taxes. Both before and after the acquisition of the assets of Old Mako,
there have been, and continue to be, defaults relating primarily to payment of
real estate taxes under the mortgages. The holder of the first mortgage had
agreed to forbear from exercising its remedies (including foreclosure) until
February, 1997, which forbearance has not been reinstated. The holder of the
second mortgage for which the last payment is owed in June 2000, has not waived
past defaults consisting primarily of the failure to pay Old Mako's real estate
taxes. The Company believes that (i) it is not likely that either mortgage
holder would institute foreclosure proceedings on the Principal Facility unless
additional defaults by the landlord should occur and, (ii) if foreclosure
proceedings were commenced, the Company could either acquire the Principal
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Facility or find suitable alternative premises to house its facility on terms at
least as favorable as those contained in the Lease. However, an unplanned
relocation to new premises caused by foreclosure proceedings would likely cause
significant production delays at a substantial expense.
As part of the consideration to Mako in connection with the Tracker Transaction,
Tracker assigned to the Company its ground lease of real property located in
Punta Gorda, Florida together with its boat manufacturing facility situated
thereon (the "Punta Gorda Facility"). Such ground lease provides for monthly
rental payments of $2,675. Because of its physical size, the Punta Gorda
Facility is not suitable to serve as the principal manufacturing facility of the
Company. While its role was initially thought to be that of a backup facility to
handle special or overflow situations, the Company has determined the cost of
maintaining the Punta Gorda Facility is not warranted in light of such limited
use. Accordingly, all of the machinery and other assets formerly located at the
Punta Gorda Facility have been moved to the Principal Facility, and the
Company's interest in the Punta Gorda Facility is currently being offered for
sale to third parties. The Company does not expect to incur a material loss in
connection with the sale of its Punta Gorda Facility.
Item 3. LEGAL PROCEEDINGS
The Company has been named as a defendant in several lawsuits involving the
operations of Old Mako. On or about September 14, 1994, an action was commenced
in St. Lucie County, Florida seeking recovery of $209,541.31 for legal services
performed on behalf of Old Mako plus costs and prejudgment interest. The amended
complaint initially served on the Company seeks the successor liability of the
Company for the debt and an avoidance of the transfer of assets from Old Mako to
the Company, alleging an assumption of the debts of Old Mako by Company due to a
mere continuation of Old Mako or by a de facto merger and the fraudulent
transfer of assets of Old Mako to the Company. A second amended complaint filed
on or about October 30, 1996 and a third amended complaint filed on or about
April 17, 1997 restate essentially the same claims against the Company.
Litigation is in the discovery stage.
On or about December 8, 1994, an action was commenced in Dade County, Florida
seeking recovery of the sum of $166,603.63 plus interest and costs. The
complaint alleged that the Company wrongfully and intentionally exercised
dominion and control, and diverted to its own use, the raw materials sold to Old
Mako and subject to plaintiff's security interest. The Company filed a motion to
dismiss the complaint, and the complaint was dismissed. An amended complaint was
filed and the Company has filed a motion to dismiss the amended complaint. The
amended complaint alleges essentially the same claims against the Company as the
original complaint. The Court has not yet ruled on the motion to dismiss which
has been pending since July 1995. Litigation is in the discovery stage.
On or about August 2, 1995, an amended impleader complaint was filed in Dade
County, Florida seeking an aggregated recovery of foreign judgments "in excess"
of $400,000, attorney fees and costs ("First Suit"). At the same time an
independent action was also filed in Dade County, Florida with a virtually
identical complaint ("Second Suit"). It is expected that these lawsuits will be
consolidated or the Second Suit dismissed. Both the First Suit complaint and the
Second Suit complaint allege that the manner in which the Company acquired the
assets of Old Mako resulted in a de facto merger or in a fraudulent transfer by
Old Mako. The plaintiffs alternatively seek to avoid the transfer of the assets
of Old Mako to the Company or the successor liability of the Company for the
plaintiffs' foreign judgments against Old Mako. The Company has filed a motion
for summary judgment in the First Suit asserting that no de facto merger
occurred and that the assets were rightfully transferred. The Court entered
summary judgment in favor of the Company with respect to the de facto merger
liability claim, and deferred ruling upon the fraudulent transfer claims until a
future hearing. Litigation is in the discovery stage. There has been no
significant activity regarding this matter since September 1996.
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In June 1996, the Company was named as a defendant in a suit alleging that the
Company breached a sales representation agreement between the plaintiffs and Old
Mako which was expressly or impliedly assumed by the Company. The complaint
seeks relief of $501,800. The Company filed a motion for summary judgment in
April 1997, which was denied by the Court in July 1997. Litigation is in the
discovery stage.
In July 1996, an action was commenced in Palm Beach County, Florida against the
Company seeking an unspecified amount in damages. The plaintiff alleges that the
Company breached the 1996 model year dealer agreement by appointing another
dealer within its territory, the appointment of a new dealer in its territory
tortiously interfered with its business relationship with its customers and the
new dealer and the Company conspired to tortiously interfere with its business
relationship with its customers and to unfairly compete. In addition, the
plaintiff seeks declaratory judgment that the Florida Deceptive and Unfair Trade
Practices Act was violated by the appointment of a new dealer in its territory.
A first amended complaint filed in September 1996 restates essentially the same
allegations. Litigation is in the discovery stage.
The Company has denied liability in all of the aforementioned actions and
believes that they are defensible. CAVC has agreed to indemnify the Company for
any losses and expenses in excess of $150,000 arising out of claims against the
Company for liabilities of Old Mako that were not assumed in August 1994, except
legal fees and expenses incurred in the lawsuits described in items the first
two paragraphs of this Section. CAVC acknowledges that the lawsuits described in
the first three paragraphs of this section are within the scope of the indemnity
and the Company has no reason to believe that CAVC will not fulfill its
obligations under such indemnity. While there can be no assurance as to the
ultimate outcome of these actions, the Company believes that such actions will
not have a material adverse effect on the Company's financial position or
operations.
Additionally, in August, 1997, a purported class action lawsuit was commenced in
the United States District Court, Southern District of Florida against the
Company and other defendants seeking an injunction to prevent the merger of
TRACKAQ, Inc. ("Merging Company"), a wholly-owned subsidiary of Tracker, with
and into the Company pursuant to a Plan of Merger under which Tracker would
acquire for cash the entire equity interest of the Company (the "Merger
Transaction"). Alternatively, the plaintiff seeks to rescind the Merger
Transaction if consummated or an accounting and damages due to the consummated
Merger Transaction. The plaintiff class generally alleges that the defendants
have violated fiduciary obligations owed to the plaintiff class in pursuing the
Merger Transaction. Service of summons and complaint is in process. Tracker,
Merging Company and the Company believe that this action is without merit and
have filed a motion to dismiss the action for, among other things, plaintiff's
failure to state a cause of action.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth
quarter of 1997.
11
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Until January 2, 1997, the Company's Common Stock and Warrants were quoted and
traded on the NASDAQ SmallCap Market under the symbols "MAKO" and "MAKOW",
respectively. Since January 2, 1997 the Company's Common Stock and Warrants have
been traded on the NASDAQ Bulletin Board. The following table sets forth the
high and low closing sale prices for the Company's Common Stock and Warrants for
each of the four quarters of the fiscal years 1996 and 1997:
Fiscal Year 1996 High Low
Common Stock
First Quarter.............................$4.500 $4.000
Second Quarter............................ 4.500 3.125
Third Quarter............................. 4.375 3.000
Fourth Quarter............................ 5.000 3.625
Warrants
First Quarter.............................$1.375 $0.750
Second Quarter............................ 1.125 0.625
Third Quarter............................. 1.188 0.625
Fourth Quarter............................ 1.125 0.625
Fiscal Year 1997 High Low
Common Stock
First Quarter.............................$ 4.625 $ 2.375
Second Quarter............................ 3.750 2.375
Third Quarter............................. 3.250 1.375
Fourth Quarter............................ 2.225 1.500
Warrants
First Quarter.............................$ 1.188 $ 0.500
Second Quarter............................ 1.266 0.625
Third Quarter............................. 1.013 0.375
Fourth Quarter............................ 0.438 0.250
These quotations reflect interdealer prices without retail markup, markdown or
commission and may not necessarily represent actual transactions.
As of the close of business on September 24, 1997, there were approximately 40
registered holders of record of the Company's Common Stock, and 22 holders of
record of the Warrants.
The Company has not declared a cash dividend on its Common Stock subsequent to
the IPO. In view of its financial condition, the Company does not anticipate
that any dividends will be declared on its Common Stock in the foreseeable
future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The timing, amount and form of dividends, if any, will
depend, among other things, on the Company's results of operations, financial
condition, cash requirements and other factors deemed relevant by the Board of
Directors.
12
<PAGE>
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
On January 16, 1997, the Company sold to Tracker 6,400,000 newly issued Mako
Shares for a purchase price consisting of cash in the amount of $4,140,000 and
assets relating to the manufacture of saltwater boats, including Tracker's
manufacturing facility located in Punta Gorda, Florida, its "Seacraft" and
"Silver King" brands of saltwater fishing boats and the exclusive right over a
five-year period to advertise at preferred rates the Company's saltwater boat
products in a catalog published by an affiliate of Tracker that distributes
annually more than 40 million catalogs worldwide. The Mako Shares, together with
Tracker's contemporaneous purchase of 930,000 shares from CAVC resulted in
Tracker's acquisition of a total of 7,330,000 shares of Common Stock,
representing approximately 80.9% of the then (and currently) outstanding shares
of Common Stock.
For tax and business reasons, Tracker required, as a condition of effecting the
Tracker Transaction, that it acquire not less than an 80% equity interest in the
Company and that Tracker have the ability to retain such equity interest to the
extent its percentage equity interest in the Company was reduced as a result of
the issuance of shares pursuant to the publicly-traded Warrants or other
warrants or options to acquire shares of Common Stock which were outstanding on
the closing date (collectively, the "Derivative Securities"). Accordingly, the
agreement providing for the Tracker Transaction (the "Stock Purchase Agreement")
provides, among other things, that in addition to the Mako Shares acquired by
Tracker pursuant to the Stock Purchase Agreement, during the period beginning on
the Closing Date (January 16, 1997) and ending 90 business days following the
exercise, redemption or expiration of the Warrants, the Company will issue to
Tracker (i) 1,800,000 shares, if the market price of the Common Stock is $5.00
or more during a period of ten consecutive trading days, (ii) an additional
1,800,000 shares, if the price of the Mako Common Stock is $6.00 or more during
a period of ten consecutive trading days, and (iii) an additional 3,629,000
shares, if the market price of the Common Stock is $7.00 or more during a period
of ten consecutive trading days. The expiration date of the Warrants is August
23, 2000. The Stock Purchase Agreement also provides Tracker with an option to
acquire additional shares of Common Stock at $1.50 per share. The option is
designed to permit Tracker to maintain an 80% interest in the Company to the
extent that Derivative Securities are exercised in the future. There are
currently outstanding Derivative Securities to purchase 3,622,900 shares of
Common Stock, which expire at varying dates through 2001.
Because of the magnitude of the loss sustained by the Company for the quarter
ended March 29, 1997 and the impact of such loss on the Company's cash position,
Tracker began a review and analysis of the Company's business operations and
prospects for fiscal years 1998, 1999 and beyond (the "Post- Acquisition
Analysis"). Based upon this Post-Acquisition Analysis, Tracker concluded that
significant additional funding of the Company's operations would be required in
order for the Company to achieve reasonable levels of profitability within a
three to five year time frame. With the assistance of its financial and legal
advisors, Tracker concluded that the Merger Transaction, whereby Tracker would
acquire the entire equity interest of the Company for a fair cash consideration
to the holders of the Company's Common Stock (other than Tracker or its
affiliates), Warrants and other Derivative Securities (collectively, the
"Publicly-Held Securities"), was in the best interest of the Company and all of
the shareholders of the Company. The proposed Merger Transaction was publicly
announced on August 8, 1997 and a Schedule 13E-3 relating to the proposed Merger
Transaction was filed with the Securities Exchange Commission on September 8,
1997.
13
<PAGE>
The proposed Merger Transaction will become effective upon the filing of
Articles of Merger with the Florida Department of State, which is expected to
occur approximately (but not less than) 30 days following the mailing of the
Transaction Statement to the holders of the Publicly-Held Securities, subject to
the outcome of certain recently commenced litigation seeking, among other
things, to enjoin the consummation of the proposed Merger Transaction. Upon
consummation of the proposed Merger Transaction, Mako will become a wholly-owned
subsidiary of Tracker.
On August 12, 1997, Richard Bogen, on behalf of himself and purportedly on
behalf of all other shareholders of the Company as of August 12, 1997, filed
suit in the United States District Court, Southern District of Florida, against
Tracker, Merging Company (a wholly-owned subsidiary of Tracker formed for the
purpose of effecting the proposed Merger Transaction), the Company and each of
the directors of the Company seeking, among other things, to enjoin the
consummation of the proposed Merger Transaction and to obtain money damages.
Although still in the early stages of litigation, the Company believes the suit
to be without merit and, together with Tracker and Merging Company, has filed a
motion to dismiss this lawsuit.
The Company continued to incur substantial losses and to operate on a negative
cash flow basis during the months of July and August, 1997. Moreover, the
Company believes that it will continue to generate a negative cash flow
throughout fiscal 1998 and it is expected that substantial infusions of working
capital will be required during fiscal 1998. In view of its current financial
condition, the Company believes that it is unlikely that the Company will be
able to obtain such working capital from traditional third party sources and
that the logical and perhaps only source of such funding will be Tracker.
However, Tracker has indicated to the Company and has stated in the Schedule
13E-3 referred to above that it currently has no intention of providing such
funding so long as there remained outstanding any of the Publicly-Held
Securities.
The report of the Company's independent auditors on the Company's financial
statements for fiscal 1997 contains an explanatory paragraph expressing the
substantial concern of such auditors about the Company's ability to continue as
a going concern.
If the Company is unable to obtain additional funding for its operations,
substantial curtailment or suspension of certain of the Company's operations
will be required. The Company believes that such curtailment and/or suspension
would have a material impact upon the ability of the Company to compete in the
marketplace, thereby negatively and materially impacting its current low sales
levels. In such event, it is likely that the Company would continue to incur
losses and generate negative cash flow from operations for the foreseeable
future, and as a result thereof, the Company's ability to continue as a going
concern would be in doubt.
14
<PAGE>
Results of Operations
The following table is included solely for use in comparative analysis of the
results of operations and to facilitate Management's Discussion and Analysis.
See Note 3 to Notes to Financial Statements.
<TABLE>
<CAPTION>
Old Basis New Basis Combined
January 30, 1996 to January 17, 1997 Year Ended
January 16, 1997 to June 28, 1997 June 28, 1997
<S> <C> <C> <C>
Net Sales $ 9,767,501 $ 9,293,410 $ 19,060,911
Cost of Sales 9,121,285 8,623,935 17,745,220
----------- ----------- -----------
Gross Profit 646,216 669,475 1,315,691
Selling, General and
Administrative Expenses 2,882,054 2,104,123 4,986,177
----------- ----------- -----------
Loss from Operations: (2,235,838) (1,434,648) (3,670,486)
----------- ----------- -----------
Other Income (Expense):
Interest Income - 51,791 51,791
Interest Expense (205,427) (107,846) (313,273)
Other, net (91,165) (14,867) (106,032)
---------- ----------- -----------
Total Other Income (Expense) (296,592) (70,922) (367,514)
---------- ----------- -----------
Net Loss $ (2,532,430) $ (1,505,570) $ (4,038,000)
============= ============= =============
</TABLE>
Year ended June 28, 1997 compared with the year ended June 29, 1996
Net Sales
Net sales were $19,060,911 and $19,141,970 for fiscal years ended 1997 and 1996,
respectively, representing a slight decrease of $81,059 or .4%. This sales
decrease is attributable to (i) industry wide slower retail sales and (ii)
manufacturing delays in producing two new models early in the fiscal year (a 25
foot center console which replaced an older model and a 33 foot center console)
offset by the additional $727,939 sales of Seacraft and Silver King brand boats.
Sales discounts and allowances have been reclassified from selling, general and
administrative expenses to net sales (the "Reclassification"). Net sales are
reported net of sales discounts and allowances. Accordingly, net sales reported
for fiscal 1997 and 1996 do not include sales discounts and allowances of
$1,047,173 and $721,361, respectively.
Cost of Products Sold and Gross Profit
Gross profit was $1,315,691 (6.9% of net sales) and $1,324,303 (6.9% of net
sales) for the fiscal years 1997 and 1996, respectively, representing a slight
increase of $8,612 or $.7%. The Company's inadequate gross profit margin is a
result of excessive costs of products sold in relation to net sales. Cost of
products sold, which were $17,745,220 in fiscal 1997 as compared to $17,817,667
in fiscal 1996, continued to be abnormally high. The Company's manufacturing
15
<PAGE>
cost structure is comprised of relatively high fixed costs as a result of Old
Mako's 1989 expansion of its manufacturing capacity. The most significant
components of the Company's embedded fixed costs include depreciation expense of
molds and equipment, rent, real estate taxes, property insurance and maintenance
expense. Production was not sufficient to fully absorb these fixed costs. Labor
inefficiencies (due in part to the unavailability of certain components and
parts during the winter months) continue to have an adverse effect on gross
margin. Also, the Company experienced inefficiencies from the start-up of the
Seacraft and Silver King lines.
Included in the cost of goods sold for fiscal 1997 was the effect of the reduced
engine costs of approximately $270,000 as a result of an amendment to the
Company's Engine Supply Contract with its principal supplier of outboard engines
to provide for, among other things, a revised pricing formula.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the year ended June 28, 1997,
increased $1,122,835 (or 29.1%) to $4,986,177 from $3,863,342 for the
corresponding period of the prior year, which amounts include the effect of the
Reclassification. The increase is a result of: (i) increased advertising
expenditures of $290,000 (due in part to Seacraft and Silver King) in the year
ended June 28, 1997 compared to the year ended June 29, 1996; (ii) higher
selling and administrative salaries of approximately $60,000; (iii)
approximately $285,000 in increased warranty costs and reserve; (iv) increased
professional fees amounting to approximately $235,000 primarily associated with
the Tracker Transaction; (v) amortization of goodwill associated with the
Tracker Transaction amounting to approximately $70,000 (vi) increased charge to
allowance for bad debts and returns of approximately $75,000 and (vii) increases
in miscellaneous costs of approximately $110,000. The amount of goodwill
amortization for fiscal 1997 is based upon management's estimate of the
recoverability of the carrying value of the goodwill based upon management's
projection of results of operations and cash flow on a going concern basis
assuming the proposed Merger Transaction will be completed and that Tracker will
provide the funding required for the Company's operations. As required by
generally accepted accounting principles, the Company will continue such
evaluation on a periodic basis. If the Company shall determine that no source of
funding is available or that the Company will not otherwise be able to recover
the carrying value of the goodwill, an impairment loss, which could be equal to
all or substantially all of the then current carrying value of the goodwill,
would be recognized in that period. See Note 1 to Notes to Financial Statements.
Other Income and Expenses
Other net expenses decreased to $106,032 for the fiscal year 1997 from $173,057
for the fiscal year 1996. Other expenses incurred during fiscal 1997 consisted
primarily of a $100,000 charge to environmental expenses related to the testing
and analysis performed by the Company in connection with the Tracker
Transaction. Other expenses for fiscal 1996 consisted primarily of the
amortization of $165,054 of certain bridge loan costs.
Income Taxes
At June 28, 1997, the Company had a net operating loss carryforward of
approximately $9,530,000 to offset future taxable income. Due to the ownership
changes resulting from the IPO and the Tracker Transaction, the amount of net
operating loss carryforwards which may be utilized in any one year, is limited
to approximately $800,000.
16
<PAGE>
Liquidity and Capital Resources
The following table is included solely for use in comparative analysis of the
liquidity and capital resources and to facilitate Management's Discussion and
Analysis. See Note 3 to Notes to Financial Statements.
<TABLE>
<CAPTION>
Old Basis New Basis Combined
January 30, 1996 to January 17, 1997 Year Ended
January 16, 1997 to June 28, 1997 June 28, 1997
<S> <C> <C> <C>
Operating Activities
Net Loss $ (2,532,430) $ (1,505,570) $ (4,038,000)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation 382,613 413,278 795,891
Amortization of excess of cost over
value of net assets acquired -- 69,589 69,589
Provision for doubtful accounts 61,000 52,000 113,000
Compensation cost - stock options
granted -- 63,600 63,600
Changes in operating assets and liabilities:
Decrease (increase) in accounts
receivable 1,019,918 (772,198) 247,720
Decrease (increase) in
inventories 142,355 (748,237) (605,882)
Decrease (increase) in prepaids
and other assets (196,632) 62,434 (134,198)
Increase in accounts payable,
accrued expenses and accrued
interest payable 1,043,702 179,167 1,222,869
---------- ---------- ---------
Net cash used in
operating activities (79,474) (2,185,937) (2,265,411)
---------- ------------ -----------
Investing Activities:
Purchase of property and equipment (125,809) (80,674) (206,483)
--------- ---------- -----------
Financing Activities:
Proceeds from borrowings -- --
Principal payments on debt and
indemnities (320,098) (160,200) (480,298)
Issuance of common stock -- 4,140,000 4,140,000
Increase in due to affiliate -- 45,987 45,987
--------- ---------- ---------
Net cash provided by
financing activities (320,098) 4,025,787 3,705,689
----------- ----------- ----------
Net increase (decrease) in
cash and cash equivalents (525,381) 1,759,176 1,233,795
Cash and Cash Equivalents,
beginning of period 530,123 4,742 530,123
---------- ----------- ----------
17
<PAGE>
Cash and Cash Equivalents,
end of period $ 4,742 $ 1,763,918 $1,763,918
========= =========== ==========
Supplemental Disclosure of Cash
Flow Information:
Interest paid $ 167,028 $ 296,286 $ 463,314
========== ========== ==========
</TABLE>
Historically, the Company's internally generated cash flow has not been
sufficient to finance its operations.
During August 1995, the Company completed the IPO which generated net proceeds
of $5,307,423. The Company initially anticipated that the IPO proceeds, together
with existing resources and cash generated from future operations would be
sufficient to satisfy the anticipated cash requirements of the Company for 18 to
24 months from the date of the IPO.
On January 16, 1997, the Company sold the Mako Shares to Tracker for a purchase
price consisting of cash, in the amount of $4,140,000 and certain assets of
Tracker relating to the manufacture and sale of saltwater boats. Reference is
made to the "Overview" section above for a more complete description of the
Tracker Transaction.
During the year ended June 28, 1997, the Company used $2,265,411 for operating
activities, $206,483 for investing activities, and was provided net cash of
$3,705,689 from financing activities.
The cash used by operating activities resulted from the Company's net loss of
$4,038,000, and an increase in inventories and prepaid assets (such as insurance
and boat show costs) of $605,882 and $134,198, respectively. Cash was provided
by an increase in accounts payable and accrued expenses of $1,222,869, a
decrease in accounts receivable of $247,720 and an increase in the allowance for
doubtful accounts of $113,000, and non-cash expenses for depreciation,
amortization, and a provision associated with the issuance of stock options to
non-employees amounting to $795,891, $69,589 and $63,600, respectively.
The cash used by financing activities resulted from the purchase of property and
equipment approximating $206,000.
The cash provided by financing activities from the Tracker Transaction resulted
from an issuance of Common Stock with cash received of $4,140,000 and an
increase in a due to affiliate of $45,987. Uses of cash included principal
payment on debt and indemnities totaling $480,298.
As indicated above, it is expected that the Company, which continued to incur
substantial losses and to operate on a negative cash flow basis during fiscal
1997, will continue to generate negative operating cash flow throughout 1998.
Further, the Company believes that unless it is able to obtain additional
funding of its operations, substantial curtailment or suspension of certain of
the Company's operations will be required. See "Overview" and Note 2 to the
Financial Statements.
18
<PAGE>
Tracker, which owns approximately 80.9 percent of the outstanding Common Stock,
intends to effect the proposed Merger Transaction whereby Tracker would acquire
the entire equity interest of the Company for a fair cash consideration to the
holders of the Publicly-Held Securities, whereupon the Company would become a
wholly-owned subsidiary of Tracker. Tracker has indicated to the Company (and in
the Schedule 13E-3 referred to above) that Tracker would be unwilling to provide
such funding so long as any of the Publicly-Held Securities remain outstanding.
Inflation
Although the effects on the Company cannot be accurately determined, the Company
does not believe that inflation has had a material impact on the results of
operations for the periods presented. The Company believes it has been able to
minimize the effects of inflation by improving its purchasing efficiency, and to
a lesser degree, increasing selling prices of its products.
Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards ("SFAS") No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
which is effective for fiscal years beginning after December 15, 1995. SFAS No.
121 requires losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the asset's carrying amount. SFAS
No. 121 also addresses the accounting for long-lived assets that are expected to
be disposed of. The Company has adopted SFAS No. 121 in fiscal 1997 and, based
on current circumstances, the Statement has not had a material impact on the
financial condition, operations or cash flows of the Company.
In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based
Compensation". SFAS 123 allows companies to continue to account for their stock
option plans in accordance with Accounting Principles Board ("APB") Opinion No.
25 but encourages the adoption of a new accounting method which requires the
recognition of compensation expense based on the estimated fair value of
employee stock options. Companies electing not to follow the new fair value
based method are required to provide expanded footnote disclosures, including
pro forma net income and earnings per share, determined for fiscal years
beginning after December 15, 1995. Management continues to account for its stock
option plans in accordance with APB Opinion No. 25 and provides supplemental
disclosures as required by SFAS No. 123. See note 11.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share" effective
for fiscal years ending after December 15, 1997. SFAS No. 128 simplifies the
calculation of earnings per share to measure the performance of an entity over a
reporting period for both basic earnings per share and diluted earnings per
share. SFAS No. 128 will not have an impact on the Company's reported loss per
share.
19
<PAGE>
Item 7. FINANCIAL STATEMENTS
See the financial statements and supplementary data listed in the accompanying
Index to the Financial Statements on Page F-1 herein.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
In January 1997, the Company engaged Arthur Andersen LLP as its new independent
accountant, replacing BDO Seidman, LLP (the "Former Accountant") which Former
Accountant had served as the Company's independent accountant. The decision to
change accountants was unanimously approved by the Board of Directors of the
Company.
The Report of the Former Accountant on the financial statements of the Company
for fiscal year 1996 stated that in view of the recurring losses suffered by the
Company and its negative cash flow from operations, substantial doubt existed as
to the Company's ability to continue as a going concern. There were no
disagreements with the Former Accountant, whether or not resolved, on any manner
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which, if not resolved to the satisfaction of the
Former Accountant, would have caused it to make reference to the subject matter
of the disagreement(s) in connection with its Report.
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The following table sets forth certain information concerning the
directors and executive officers of the Company:
Name Age Position
Kenneth Burroughs 41 Chief Executive Officer,
Chairman of the Board and
Director
Richard N. Reyenger 49 President
Stephen W. Smith 50 Vice-President and Chief
Financial Officer
Joe C. Greene 61 Secretary and Director
Douglas W. Baena 55 Director
Bruce Foerster 56 Director
Susie Henry 46 Director
Joseph J. Messina 42 Director
Larry Mueller 50 Director
20
<PAGE>
Kenneth Burroughs has served as a director of the Company since the
Tracker Transaction was consummated in January 1997. Mr. Burroughs was appointed
president, chief executive officer and chairman of the board in March 1997. Mr.
Burroughs resigned as president in May 1997. Since August 1994, Mr. Burroughs
has served as president of JLM, the sole general partner of Tracker. For more
than five years prior thereto, he was president of Skeeter Products, Inc., a
Kilgore, Texas company engaged in the manufacture and sale of freshwater fishing
boats. Mr. Burroughs also serves as a director of the National Association of
Boat Manufacturers.
Richard N. Reyenger has served as president of the Company since May
1997. Prior thereto, Mr. Reyenger served as vice president of sales for Outboard
Marine Corporation since 1994. Between 1991 and 1994 Mr. Reyenger served as
senior vice president of sales and marketing for Boston Whaler. For more than 12
years prior thereto, Mr. Reyenger served in various general management positions
with Outboard Marine Corporation. Mr. Reyenger serves on the board of directors
of the National Association of Boat Manufacturers.
Stephen W. Smith has served as vice president and chief financial
officer of the Company since March 1997. Since July 1994, Mr. Smith has served
as vice president - finance (chief financial officer) of Tracker. From September
1992 to July 1994, Mr. Smith served as the controller of Tracker.
Joe C. Greene has served as a director of the Company since the Tracker
Transaction was consummated in January 1997. Mr. Greene is the Managing Partner
of Greene & Curtis, L.L.P, a Missouri limited liability partnership, and has
been engaged in the practice of law in Springfield, Missouri for more than 30
years. He is also the general counsel of Bass Pro, L.P. and Tracker. Mr. Greene
is also a director of O'Reilly Automotive, Inc. (engaged in the auto parts sales
business), the president and a director of the Missouri Sports Hall of Fame, a
director of Commerce Bank, NA, and the secretary and a director of BASSGEC
Management Company.
Douglas W. Baena has served as a director of the Company since the
Company's inception in June 1994. Mr. Baena has previously served as chairman of
the board and chief executive officer of the Company from its inception in June
1994 until March 1997 and its president from inception to January 1995 and from
July 1996 to the March 1997. Prior to June 1994, Mr. Baena was a private
investor. Mr Baena is the president, a director and significant shareholder of
CAVC and the sole shareholder of CreditAmerica, Inc. ("CreditAmerica"), an
equipment leasing and finance company.
Bruce S. Foerster has served as a director of the Company since January
1996. Since January 1995, Mr. Foerster has been the president and chief
executive officer of South Beach Capital Markets Advisory Corporation, a firm
which he founded that provides corporate financial advisory and financial public
relations services. Between June 1992 and December 1994, Mr. Foerster served as
managing director, Equity Syndicate, for Lehman Brothers. For more than five
years prior thereto, he was the managing director, Equity Transactions
Group/Equity Syndicate, for PaineWebber Incorporated. Mr. Foerster also serves
as a director and trustee of eight mutual funds of the Pilgrim America Group, a
director of Aurora Capital, Inc. and governor-elect of the Philadelphia Stock
Exchange.
Susie Henry has served as a director of the Company since the Tracker
Transaction was consummated in January 1997. Since December 1993, Ms. Henry has
been the executive vice president of Bass Pro, L.P. and JLM. For more than five
years prior thereto, she served as vice president of Bass Pro Shops, Inc., the
predecessor of Bass Pro, L.P. Ms. Henry also serves on the board of directors of
BASSGEC Management Company.
21
<PAGE>
Joseph J. Messina has served as a director of the Company since the
Company's inception in June 1994. Mr. Messina previously served as the Company's
president and chief operating officer from January 1995 to June 1996. Between
April 1978 and January 1992 Mr. Messina was employed by Vendor Funding Co.,
Inc., an equipment leasing company. Since January 1992, he has been employed by
Ameristar Capital Corporation, an equipment leasing company which he owns. Mr.
Messina is an officer, director and shareholder of CAVC.
Larry Mueller has served as a director of the Company since the Tracker
Transaction was consummated in January 1997. For more than the past five years,
Mr. Mueller has been a private investor and the president of Springfield Credit,
L.L.C., a Missouri limited liability company owned by him, which is engaged in
the finance business. Mr. Mueller also serves on the boards of directors of
Commerce Bank, N.A. and BASSGEC Management Company.
Item 10. EXECUTIVE COMPENSATION
The following table summarizes information concerning cash and
non-cash compensation paid to or earned by the named executive officers for all
services rendered in all capacities to the Company and its predecessors.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation(1)
Name of Principal Other Annual
Position Year Salary Bonus Compensation
<S> <C> <C> <C> <C>
Kenneth Burroughs(2) 1997 -0- -0- -0-
Chairman and Chief Executive 1996 - - -
Officer 1995 - - -
Douglas W. Baena(3) 1997 127,500 -0- 18,750(4)
1996 170,000 -0- -0-
1995 84,000 -0- -0-
- ------------------------
<FN>
(1) In addition to $20,192 in salary paid to Mr. Reyenger, a total of
$118,000 of other compensation has been accrued of which (i) $25,000
was paid in May 1997; (ii) $25,000 was paid in August 1997; (iii)
$25,000 is payable in November 1997; and (iv) $43,000 is due and
payable upon the relocation of Mr. Reyenger's personal residence to the
Miami, Florida area.
(2) Mr. Burroughs, who was appointed Chairman and Chief Executive Officer
in March 1997, receives no salary or other compensation from the
Company.
(3) Mr. Baena resigned as Chairman of Board and Chief Executive Officer in
March 1997.
(4) As a result of Mr. Baena's resignation as chairman and chief executive
officer, he began receiving severance payments under the terms of his
employment agreement. See below.
</FN>
</TABLE>
Employment Contract with Named Executive Officer
Douglas W. Baena was employed as the Company's chairman and chief
executive officer until March 1997. Pursuant to his employment agreement dated
January 1, 1995, and subsequently amended on June 28, 1995 and January 16, 1997
22
<PAGE>
(the "Employment Agreement"), Mr. Baena was entitled to receive an annual salary
of $170,000 and certain bonus compensation subject to specific performance goals
being achieved. The Employment Agreement provides that in the event Mr. Baena's
termination he is entitled to a severance payment in the amount of $75,000
payable upon in twelve equal consecutive monthly payments of $6,250. As
indicated above, Mr. Baena's employment with the Company ceased in March 1997,
and the severance payment installments commenced in April 1997. The Employment
Agreement does not contain a non-compete provision, however, if Mr. Baena
engages in any Competitive Activity (as defined in the Employment Agreement) he
forgoes his right to receive the remainder of any unpaid portion of the
severance payment that he would otherwise be entitled to receive.
Director Compensation.
Under the Company's present director compensation plan, each
non-employee director of the Company is entitled to receive $2,500 per quarter.
Directors are also entitled to be reimbursed for expenses incurred by them in
attending meetings of the Board of Directors and its committees.
During fiscal year 1997, Mr. Foerster received $10,000 for his services
as a director of the Company. In connection with Mr. Messina's resignation as
the Company's president and chief operating officer in June 1996, Mr. Messina
entered into a one-year consulting agreement with the Company, dated June 28,
1996, pursuant to which he received $50,000 during the fiscal year. Except for
Mr. Foerster and Mr. Messina, no current director received any compensation for
services rendered to the Company.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners and Management
The following table provides information, as of September 4, 1997 with
respect to (i) any person known to the Company to be the beneficial owner of
five percent or more of the outstanding shares of the Company's Common Stock,
(ii) each Director and certain executive officers of the Company, and (iii) all
Directors and executive officers as a group. For the purpose of computing the
percentage of the shares of Common Stock owned by each person or group listed in
this table, any shares not outstanding which are subject to options or warrants
exercisable within 60 days have been deemed to be outstanding and owned by such
person or group, but have not been deemed to be outstanding for the purpose of
computing the percentage of the shares of Common Stock owned by any other
person. Except as otherwise indicated below, the Company believes that each of
the persons named below possesses sole voting and investment power with respect
to the shares of Common Stock beneficially owned by such person.
Amount and Nature
of Beneficial Percent of
Name and Address of Ownership of Shares Class
Beneficial Owner of Common Stock Outstanding
Douglas W. Baena 52,500(1) *
70 Creek Road
Wading River, NY 11792
Joseph J. Messina 37,500(2) *
44 Madison Avenue
New York, NY 10017
23
<PAGE>
Bruce S. Foerster 15,000(3) *
4045 Sheridan Avenue
Suite 432
Miami Beach, FL 33140
Kenneth Burroughs (4) *
2845 South Oak Avenue
Springfield, MO 65804
Susie Henry** (4) *
2524 East Broadmoor
Springfield, MO 65804
Larry Mueller** (4) *
4237 East Serenade
Springfield, MO 65809
Joe C. Greene (4) *
1340 East Woodhurst
Springfield, MO 65804
Stephen W. Smith (5) *
3721 South Burge Avenue
Springfield, MO 65807
Richard N. Reyenger (6) 35,000(7) *
4355 N.W. 128th Street
Miami, FL 33054
TRACKAQ, Inc. 7,330,000(8) 80.9%
2500 East Kearney
Springfield, MO 65803
All Directors and executive 140,000 1.5%
officers as a group (9 persons)
* Less than one percent
** Susie Henry is the sister, and Larry Mueller is the brother-in-law, of
John L. Morris. See note 8 below.
(1) Includes: 12,500 shares that may be purchased upon exercise of Public
Warrants; 5,000 shares, of which 2,500 shares may be purchased upon
exercise of Public Warrants held by Mr. Baena's former wife (as to
which he disclaims beneficial ownership); and 20,000 shares, of which
10,000 shares may be purchased upon exercise of Public Warrants, held
in trust for the benefit of Mr. Baena's children.
24
<PAGE>
(2) Includes: 5,000 shares that may be purchased upon exercise of Public
Warrants and 25,000 shares that may be purchased upon exercise of an
option granted by the Company's Board of Directors.
(3) Consists of shares that may be purchased upon exercise of options
granted under the Company's 1995 Stock Option Plan.
(4) Designated by Tracker pursuant to the stock purchase agreement between
the Company and Tracker and appointed by the Company's Board of
Directors effective upon the consummation of the Tracker Transaction.
No shares of Common Stock are beneficially owned by any of the four
Tracker designees.
(5) Mr. Smith, the Company's Vice President and Chief Financial Officer,
owns beneficially no shares of Common Stock.
(6) Mr. Reyenger was appointed President effective May 27, 1997 (the
"Commencement Date").
(7) Consists of shares that may be purchased upon the exercise of an option
(the "Reyenger Option") granted by the Board at an option price of
$2.125 per share (the closing price on the first trading day preceding
the Commencement Date), which option is exercisable in whole and from
time to time in part during the 60 month period commencing on the
Commencement Date.
(8) All of these shares were acquired by Tracker pursuant to the
acquisition of the Mako Shares and the CAVC Shares on January 16, 1997
and were contributed by Tracker to Merging Company (a Florida
corporation and wholly owned subsidiary of Tracker) on August 7, 1997.
Tracker is a Missouri limited partnership whose sole general partner is
JLM Management Company ("JLM"), a privately-held Missouri corporation.
Through his revocable trust, John L. Morris, of Springfield, Missouri,
is the indirect beneficial owner of all of the outstanding capital
stock of JLM. Accordingly, Mr. Morris, JLM and Tracker may also be
considered the beneficial owners of these shares.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Douglas W. Baena and Joseph W. Messina, each of whom are current
directors of the Company, have been directors of the Company since its inception
and, through their interest in CAVC, control CAVC which was the principal
shareholder of the Company until the consummation of the Tracker Transaction.
The Company believes that Messrs. Baena and Messina own directly or indirectly
8.3% and 2.1%, respectively, of the stock of CAVC, and constitute all of the
directors of CAVC. As a result of their equity interest in CAVC immediately
prior to the sale of the CAVC Shares to Tracker, Messrs. Baena and Messina had
an indirect beneficial interest in 200,400 shares and 51,166 shares,
respectively, of the CAVC Shares.
In February 1994, CAVC, which had recently been formed by a group of
investors, including Douglas W. Baena and Joseph J. Messina (through his
wholly-owned corporation), agreed to provide Mako Marine, Inc. ("Old Mako") with
working capital advances, and, upon certain conditions, to acquire Old Mako's
defaulted bank debt. Thereafter, CAVC acquired such defaulted debt by paying the
bank $500,000 in cash and giving the bank its promissory note in the principal
amount of $1.5 million. In August 1994, CAVC foreclosed on the defaulted bank
debt and acquired substantially all of the boat manufacturing assets of Old
Mako, consisting primarily of property and equipment, patents and trademarks,
accounts and inventory. Concurrently therewith, CAVC agreed to indemnify Robert
Schwebke, the founder of Old Mako, to the extent of approximately $816,400,
25
<PAGE>
against certain preacquisition tax liabilities of Old Mako. CAVC also assumed
certain liabilities of Old Mako of approximately $1 million. CAVC then conveyed
the acquired assets of Old Mako to the Company in exchange for (a) 930,000
shares of Common Stock, (b) $900,000 of purchase money debt from the Company
(the "CAVC Debt"), (c) the assumption by the Company of CAVC's $1.5 million note
payable to the bank, (d) the Company's assumption of CAVC's indemnity
obligations to Robert Schwebke and (e) the Company's assumption of the certain
of Old Mako's liabilities.
As of June 28, 1997, the outstanding balance of the CAVC Debt was
$900,000. The CAVC Debt bears interest at the rate of nine percent per annum and
is payable in 24 monthly installments, commencing in November 1997. The
obligation is secured by the Company's inventory, accounts receivable, property
and equipment and intangibles and is partially subordinated to certain other
indebtedness of the Company, including indebtedness to CreditAmerica, Inc.,
discussed below.
From time to time, CreditAmerica, Inc. ("CreditAmerica"), an equipment
leasing and finance company wholly-owned by Mr. Baena, has made revolving credit
advances to the Company for working capital purposes. As of June 28, 1997, the
outstanding principal balance owed by the Company to CreditAmerica was $385,906.
This obligation bears interest at the rate of nine percent per annum and is
collateralized by the Company's accounts receivable and inventories.
Merging Company, a wholly owned subsidiary of Tracker, is the parent
organization of the Company by virtue of its ownership of 80.9% of the Common
Stock. Merging Company acquired its ownership interest from Tracker pursuant to
a contribution agreement dated August 7, 1997. Tracker is a Missouri limited
partnership whose sole general partner is JLM Management Company ("JLM"), a
privately-held Missouri corporation. Through his revocable trust, John L.
Morris, of Springfield, Missouri, is the indirect beneficial owner of all of the
outstanding capital stock of JLM.
As a condition to the closing of the Tracker Transaction, Tracker
required that the employment agreement of certain officers of the Company,
including Mr. Baena, be amended to provide for, among other things, the
Company's right to terminate such employment agreements upon reasonable notice
and severance pay. Mr. Baena's employment agreement was amended to provide for
such termination upon the giving of at least 30 days prior written notice and,
upon such termination, a severance pay of $75,000 payable in 12 monthly
installments of $6,250 each. As previously announced, Mr. Baena's employment
with the Company as its Chief Executive Officer was terminated and Mr. Baena is
currently receiving severance pay in accordance with his employment agreement,
as amended.
26
<PAGE>
PART III
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibits are submitted as a separate section of this Report
immediately following the "Exhibit Index."
(b) Reports on Form 8-K
A report on Form 8-K/A was filed with the Commission dated
March 17, 1997 further amending the Company's prior report on
Form 8-K (dated January 30, 1997) and providing financial
statements and related information.
A report on Form 8-K was filed with the Commission dated March
17, 1997 disclosing the appointment of Kenneth Burroughs as
Chairman of the Board, President and Chief Executive Officer,
Steven W. Smith as Vice President and Chief Financial Officer
and Joe C. Greene as Secretary, effective March 17, 1997.
27
<PAGE>
MAKO MARINE INTERNATIONAL, INC.
FINANCIAL STATEMENTS AS OF JUNE 28, 1997 AND JUNE 29, 1996
TOGETHER WITH
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
MAKO MARINE INTERNATIONAL, INC.
INDEX
Index to Financial Statements F-1
Report of Independent Certified Public Accountants F-2
Financial Statements
Balance Sheets F-3
Statements of Operations F-5
Statements of Stockholders' Equity F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-9
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Mako Marine International, Inc.:
We have audited the accompanying balance sheet of Mako Marine International,
Inc. as of June 28, 1997 and the related statements of operations, stockholders'
equity and cash flows for the period from June 30, 1996 to January 16, 1997 and
the period from January 17, 1997 to June 28, 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. The
financial statements of Mako Marine International, Inc. as of and for the year
ended June 29, 1996, were audited by other auditors whose report dated August
21, 1996, included an explanatory paragraph with respect to the Company's
ability to continue as a going concern.
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 financial statements referred to above present fairly, in
all material respects, the financial position of Mako Marine International, Inc.
as of June 28, 1997 and the results of its operations and its cash flows for the
period from June 30, 1996 to January 16, 1997 and the period from January 17,
1997 to June 28, 1997 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses and negative
cash flows from operations that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 2. The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.
Miami, Florida,
August 27, 1997.
F-2
<PAGE>
MAKO MARINE INTERNATIONAL, INC.
BALANCE SHEETS
AS OF JUNE 28, 1997 AND JUNE 29, 1996
<TABLE>
<CAPTION>
New Basis Old Basis
ASSETS 1997 1996
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 1,763,918 $ 530,123
Accounts receivable, less allowance for doubtful
accounts of $119,556 and $58,279, respectively 1,038,437 1,253,163
Inventories 3,752,181 2,277,995
Prepaids and other assets 415,691 178,902
------------ ------------
Total current assets 6,970,227 4,240,183
EXCESS OF COST OVER FAIR VALUE OF
NET ASSETS ACQUIRED 3,802,783 -
PROPERTY AND EQUIPMENT, net 4,270,155 3,064,115
OTHER ASSETS 534,596 139,027
------------ ------------
Total assets $ 15,577,761 $ 7,443,325
============ ============
</TABLE>
F-3
<PAGE>
MAKO MARINE INTERNATIONAL, INC.
BALANCE SHEETS
AS OF JUNE 28, 1997 AND JUNE 29, 1996
(Continued)
<TABLE>
<CAPTION>
New Basis Old Basis
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 2,311,259 $ 2,256,428
Accrued expenses 1,740,010 541,199
Accrued interest payable 33,695 183,736
Due to affiliate 45,987 -
Note payable - CreditAmerica, Inc. 300,906 385,906
Note payable - CreditAmerica Venture Capital, Inc., 300,000 -
current portion
Indemnities - current portion 88,647 85,178
Long-term debt - current portion 409,386 500,550
------------ ------------
Total current liabilities 5,229,890 3,952,997
NOTE PAYABLE - CreditAmerica Venture Capital, Inc., 600,000 900,000
net of current portion
INDEMNITIES, net of current portion 138,495 227,142
LONG-TERM DEBT, net of current portion 1,297,232 1,431,897
------------ ------------
Total liabilities 7,265,617 6,512,036
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY:
Preferred stock, 2,000,000 shares authorized; none issued - -
Common stock, $.01 par value, 15,000,000 shares
authorized; 9,055,000 and 2,655,000 shares issued 90,550 26,550
and outstanding, respectively
Additional paid-in capital 9,726,985 6,317,873
Accumulated deficit (1,505,391) (5,413,134)
------------ ------------
Total stockholder's equity 8,312,144 931,289
------------ ------------
Total liabilities and stockholders' equity $ 15,577,761 $ 7,443,325
============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-4
<PAGE>
MAKO MARINE INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM JUNE 30, 1996 TO JANUARY 16, 1997 AND
FOR THE PERIOD FROM JANUARY 17, 1997 TO JUNE 28, 1997 AND
FOR THE YEAR ENDED JUNE 29, 1996
<TABLE>
<CAPTION>
Old Basis New Basis Old Basis
June 30, 1996 January 17, Year Ended
to 1997 June 29, 1996
January 16, to June 28,
1997 1997
<S> <C> <C> <C>
NET SALES $ 9,767,501 $ 9,293,410 $ 19,141,970
COST OF SALES 9,121,285 8,623,935 17,817,667
------------- ------------- -------------
Gross profit 646,216 669,475 1,324,303
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,882,054 2,104,123 3,863,342
------------- ------------- -------------
Loss from operations (2,235,838) (1,434,648) (2,539,039)
------------- ------------- -------------
OTHER INCOME (EXPENSE):
Interest income - 51,791 68,495
Interest expense (205,427) (107,846) (312,175)
Other, net (91,165) (14,867) (173,056)
------------- ------------- -------------
Total other income (expense) (296,592) (70,922) (416,736)
------------- ------------- -------------
Net loss $ (2,532,430) $ (1,505,570) $ (2,955,775)
============= ============= =============
NET LOSS PER COMMON SHARE $(0.93) $(0.17) $(1.19)
====== ====== ======
WEIGHTED AVERAGE SHARES OF
2,724,049 9,055,000 2,484,662
========= ========= =========
COMMON STOCK OUTSTANDING
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-5
<PAGE>
MAKO MARINE INTERNATIONAL, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JULY 1, 1995 TO JUNE 28, 1997
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
<S> <C> <C> <C> <C> <C>
BALANCE, July 1, 1995 930,000 $9,300 $1,027,700 $(2,457,359) $(1,420,359)
Net proceeds from
initial public offering 1,725,000 17,250 5,290,173 - 5,307,423
Net loss, year ended
June 29, 1996 - - - (2,955,775) (2,955,775)
BALANCE, June 29, 1996 2,655,000 26,550 6,317,873 (5,413,134) 931,289
(old basis)
Net loss, period ended
January 16, 1997 - - - (2,532,430) (2,532,430)
--------- ------ --------- ----------- -----------
BALANCE, January 16, 1997
(old basis) 2,655,000 26,550 6,317,873 (7,945,564) (1,601,141)
Compensation cost -
Stock options granted - - 63,600 - 63,600
Effect of acquisition by
Tracker Marine, L.P. 6,400,000 64,000 3,345,512 7,945,743 11,355,255
Net loss, period ended
June 28, 1997 - - - (1,505,570) (1,505,570)
--------- ------- ---------- ----------- ----------
BALANCE, June 28, 1997 9,055,000 $90,550 $9,726,985 $(1,505,391) $8,312,144
(new basis) ========= ======= ========== =========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-6
<PAGE>
MAKO MARINE INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD JUNE 30, 1996 TO JANUARY 16, 1997 AND
FOR THE PERIOD JANUARY 17, 1997 TO JUNE 28, 1997 AND
FOR THE YEAR ENDED JUNE 29, 1996
<TABLE>
<CAPTION>
Old Basis New Basis Old Basis
June 30, 1996 to January 17, 1997 Year Ended
January 16, 1997 to June 28, 1997 June 29, 1996
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (2,532,430) $ (1,505,570) $(2,955,775)
Adjustments to reconcile net loss to net cash
used in operating activities-
Depreciation 382,613 413,278 562,359
Amortization of deferred loan cost - - 164,054
Amortization of excess of cost over
value of net assets acquired - 69,589 36,000
Provision for doubtful accounts 61,000 52,000 -
Compensation cost - stock options granted - 63,600 -
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 1,019,918 (772,198) (634,514)
Decrease (increase) in inventories 142,355 (748,237) (505,517)
Decrease (increase) in prepaids and
other assets (196,632) 62,434 262,676
Increase in accounts payable, accrued
expenses and accrued interest payable 1,043,702 179,167 592,798
------------- -------------- -----------
Net cash used in operating activities (79,474) (2,185,937) (2,477,919)
------------- -------------- ----------
INVESTING ACTIVITIES:
Purchases of property and equipment (125,809) (80,674) (645,117)
------------- -------------- --------
FINANCING ACTIVITIES:
Proceeds from borrowings - - 280,000
Principal payments on debt and indemnities (320,098) (160,200) (2,226,225)
Issuance of common stock - 4,140,000 5,307,423
Increase in due to affiliate - 45,987 -
Decrease in restricted cash - - 200,000
------------- -------------- -------
Net cash provided by
financing activities (320,098) 4,025,787 3,561,198
-------------- -------------- ---------
F-7
<PAGE>
Net increase (decrease) in cash
and cash equivalents (525,381) 1,759,176 438,162
CASH AND CASH EQUIVALENTS,
beginning of period 530,123 4,742 91,961
------------- -------------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 4,742 $ 1,763,918 $530,123
============= ============== ========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Interest paid $ 167,028 $ 296,286 $270,000
============= ============== ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-8
<PAGE>
MAKO MARINE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 28, 1997 AND JUNE 29, 1996
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
On August 2, 1994, Mako Marine International, Inc., a Florida corporation (the
"Company") acquired the boat manufacturing assets of Mako Marine, Inc. ("Old
Mako") and assumed and incurred certain liabilities and indemnities from
CreditAmerica Venture Capital, Inc. ("CAVC"), an affiliate of Old Mako, in a
transaction accounted for as a purchase.
On January 16, 1997, Tracker Marine, L.P., a Missouri limited partnership
("Tracker"), acquired 930,000 shares of the Company's $.01 par value common
stock (the "Mako Common Stock") from CAVC (the "CAVC Shares"), which shares then
constituted 35% of the outstanding Mako Common Stock.
On January 16, 1997, the Company sold to Tracker 6,400,000 newly issued shares
(the "Mako Shares") of Mako Common Stock for a purchase price consisting of cash
in the amount of $4,140,000 and assets relating to the manufacture of saltwater
boats (the "Tracker Transaction").
Mako Marine International, Inc. is engaged in the manufacture and sale of
offshore fishing and pleasure boats under the brand names "Mako," "Seacraft" and
"Silver King." Sales are concentrated on the eastern coast of the United States,
with a particular emphasis on Florida. The balance of the Company's sales are
made in the Gulf Coast, Great Lakes Regions, West Coast and foreign markets.
Basis of Presentation
The Company has chosen the Saturday closest to June 30 as its year-end.
Cash and Cash Equivalents
The Company considers all highly liquid investments with purchase maturities of
three months or less to be cash equivalents. Interest-bearing cash balances as
of June 28, 1997 and June 29, 1996 were $1,761,918 and $526,105, respectively.
Inventories
Inventories are stated at the lower of cost or market, with cost being
determined using the first-in, first-out ("FIFO") method.
Excess of Cost Over Fair Value of Net Assets Acquired
The excess of cost over fair value of net assets acquired ("goodwill") is being
amortized on a straight line basis over 30 years. Amortization expense was
$69,589 for the period from January 17, 1997 to June 28, 1997.
F-9
<PAGE>
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets to be Disposed Of". SFAS 121 establishes accounting
standards for recording the impairment of long-lived assets, certain
identifiable intangibles and goodwill. The Company adopted the provisions of
SFAS No. 121 in fiscal 1997. Accordingly, Mako management will evaluate the
recoverability of the carrying value of goodwill on a periodic basis. Management
will evaluate the results of operations and the cash flows from operations when
assessing the recoverability of the carrying value of goodwill. Accordingly,
when events or circumstances indicate that the recoverability of the goodwill
could be impaired, management will prepare estimates and projections of the cash
flows to be produced by operations. If the sum of the expected future
undiscounted cash flows from operations is less than the carrying value of the
goodwill, an impairment loss will be recognized in that period. The impairment
loss recognized will be the goodwill over the discounted anticipated future
operations cash flows. Adoption of SFAS No. 121 did not impact the Company's
results of operations or its financial position.
Property and Equipment, net
Property and equipment is stated on the cost basis. Depreciation is computed on
the straight-line method over the estimated useful lives of the respective
assets.
Revenue Recognition
Revenue from the sale of boats is recognized upon shipment.
Net Loss per Common Share
Loss per common share and common share equivalent is computed on the basis of
the weighted average number of common shares outstanding less preferred stock
dividends. As the Company is currently in a loss position, the effect of
convertible preferred stock and stock options are not considered in computing
loss per common share as the effect would be anti-dilutive.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes
pursuant SFAS No. 109, "Accounting for Income Taxes". Under this method,
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using enacted rates that will be in effect when the differences are expected to
reverse. (See Note 8).
Warranty Reserves
The Company furnishes warranties on its manufactured products for periods
ranging from one to twelve years and provides for warranty related expenses and
accruals as a percentage of net sales based on historical experience. Accrued
expenses in the accompanying balance sheets includes $500,000 and $240,000 of
accrued warranty expense at June 28, 1997 and June 29, 1996, respectively.
Advertising
Advertising expenses are charged to operations during the year in which they are
incurred. Advertising expenses for the period from June 30, 1996 to January 16,
1997 was $331,900, for the period from January 17, 1997 to June 28, 1997 was
$993,100 and for the year ended June 29, 1996 was $1,036,000.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
F-10
<PAGE>
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current
financial statement presentation.
Fair Value of Financial Instruments
SFAS No. 107, "Disclosure About Fair Value of Financial Instruments" requires
companies to disclose the fair value of financial instruments. Management
believes that the carrying values of its financial instruments approximates
their fair values and any differences which may exist between the carrying
values and fair values are not material.
Stock-Based Compensation
Beginning in fiscal 1997, the Company implemented the provisions of SFAS 123
"Accounting for Stock-Based Compensation" in accounting for stock-based
transactions with nonemployees and, accordingly, records compensation expense in
the statement of operations for such transactions. The Company continues to
apply the provisions of Accounting Principal Board ("APB") Opinion No. 25 for
transactions with employees, as permitted by SFAS 123.
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share" effective for fiscal years ending after December 15, 1997.
SFAS No. 128 simplifies the calculation of earnings per share to measure the
performance of an entity over a reporting period for both basic earnings per
share and diluted earnings per share. Due to the reported net losses, SFAS No.
128 would have no impact on the Company's reported loss per share for the years
ended June 28, 1997 and June 29, 1996.
2. GOING CONCERN AND MANAGEMENT'S PLANS
The Company's financial statements as of and for the period ended June 28, 1997
have been prepared on a going concern basis which contemplates the realization
of assets and the settlement of liabilities and commitments in the normal course
of business. The Company sustained net losses of $2,532,430 for the period from
June 30, 1996 to January 16, 1997, $1,505,570 for the period from January 17,
1997 to June 28, 1997 and $2,955,775 for the year ended June 29, 1996, and
negative cash flows from operations of $79,474 for the period from June 30, 1996
to January 16, 1997, $2,185,937 for the period from January 17, 1997 to June 28,
1997 and $2,477,919 for the year ended June 29, 1996. These matters raise
substantial doubt about the Company's ability to continue as a going concern.
Management recognizes the potential risk associated with continued losses and
continued negative cash flows from operations.
Although management has implemented certain actions designed to increase
operating cash flow (such as, for example, the achievement of reduced engine
costs from its principal vendor), the magnitude of the losses incurred during
fiscal years 1997 and 1996, the resulting operational cash flow deficiencies and
the expected continuation thereof raise substantial doubt as to the Company's
ability to generate sufficient cash from operations and fund its operational
cash requirements for fiscal 1998.
F-11
<PAGE>
It is expected that Mako will continue to generate negative cash flows from
operations throughout fiscal 1998, and that substantial infusions of working
capital will be required during fiscal 1998. In view of its current financial
condition, it is unlikely that the Company will be able to obtain such working
capital from traditional third party sources. The logical and perhaps only
source for such funding will be Tracker.
Tracker has indicated that it currently has no intention of providing such
funding to the Company so long as there remain outstanding shares of Mako Common
Stock held by persons or entities other than Tracker and warrants and options to
purchase shares of Mako Common Stock. Tracker has announced a merger transaction
with the Company pursuant to which Tracker would acquire the entire equity
interest in the Company not already owned by Tracker (the "Merger Transaction").
Upon completion of the Merger Transaction, the Company would become a wholly
owned subsidiary of Tracker.
If the proposed Merger Transaction is successfully consummated, management
believes that Tracker possess the means to implement improvements needed to
return the Company to profitability within a reasonable time-frame. If the
proposed Merger Transaction is not consummated, the Company may be unable to
continue as a going concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
3. STOCKHOLDERS' EQUITY
On January 16, 1997, Tracker acquired control of the Company through its
purchase of 930,000 shares of Mako Common Stock from CAVC for a net purchase
price of $1,310,000 in cash and the payment of certain obligations of the
Company amounting to $550,000. As a result of this purchase, Tracker became the
owner of 35% of the then outstanding shares of Mako. Tracker then acquired the
6,400,000 newly issued Mako Shares. As a result of the purchase of these shares,
Tracker acquired an additional 45.9% of the outstanding shares of the Company.
Upon acquisition of the newly issued Mako Shares, Tracker obtained ownership
control of 80.9% of the outstanding shares of the Company. The purchase price
for the Mako Shares was approximately $7,640,000, which consisted of the
contribution to the Company of cash in the amount of $4,140,000, the
contribution of assets relating to the manufacture of saltwater boats, and the
satisfaction of certain of the Company's payables in the amount of $550,000. The
total value ascribed to the assets was $2,194,000. Included in the assets
contributed by Tracker were its Punta Gorda, Florida, manufacturing facility and
the equipment and other physical property used therein for the manufacture of
saltwater fishing boats. Also included in the assets contributed to Mako were
Tracker's "SeaCraft" and "Silver King" brand names and Tracker's exclusive
rights over a five-year period to advertise off-shore boats in a catalog
published by an affiliate of Tracker. The Tracker Transaction was accounted for
as a purchase. The total purchase of $8,194,000 has been pushed down and
allocated to the assets and liabilities of the Company based upon the fair
values on the date of the Tracker Transaction. As a result of the Tracker
Transaction, a new basis of accounting has been established. The allocation of
the purchase price as of January 17, 1997 is as follows:
Current assets $ 7,980,539
Property, plant and equipment 5,100,781
Other assets 960
Goodwill 3,872,371
Current liabilities (4,871,812)
Noncurrent liabilities (2,328,850)
F-12
<PAGE>
All manufacturing activities have been consolidated in the Company's Miami,
Florida facility. Accordingly, the carrying value of the Punta Gorda, Florida
facility of $496,861 is included in other assets in the accompanying balance
sheet as of June 28, 1997 as such facilities are no longer used in operations
and are being held for sale.
Under the terms of the Agreement pursuant to which the Company sold the Mako
Shares to Tracker (the "Stock Purchase Agreement"), the Company is required to
issue to Tracker additional shares of Mako Common Stock if, at any time prior to
the expiration of the ninetieth day following August 23, 2000, the market price
of the Mako Common Stock reaches certain levels during a period of ten
consecutive trading days.
Also, the Stock Purchase Agreement provides for an option (the "Anti-Dilution
Option") on the part of Tracker to acquire additional shares of Mako Common
Stock at $1.50 per share, if and to the extent that options and warrants to
acquire shares of Mako Common Stock, which were outstanding on the closing date
of the sale of the Mako Shares to Tracker, are exercised in the future.
The following unaudited pro forma information presents a summary of operations
as if the Tracker Transaction had occurred on July 1, 1995:
For the Year Ended
June 28, 1997 June 29, 1996
------------- -------------
Net sales $20,059,778 $ 10,285,943
Net loss $(4,595,635) $(2,669,033)
Loss per share $(0.84) $(0.29)
The unaudited pro forma results have been prepared for comparative purposes only
and include certain adjustments, such as amortization of goodwill. They do not
purport to be indicative of the results of operations which actually would have
resulted had the Tracker Transaction occurred on July 1, 1995.
On August 23, 1995, the Company successfully completed its Initial Public
Offering ("IPO") for 1,725,000 units (consisting of one share of common stock
and one stock warrant) which generated net proceeds of $5,307,423, net of
expenses of $1,592,577.
4. INVENTORIES
As of June 28, 1997 and June 29, 1996 inventories by major classification are as
follows:
1997 1996
---- ----
Finished products $ 389,078 $ 607,986
Work-in-process 1,177,233 560,973
Raw materials and supplies 2,185,870 1,109,036
$ 3,752,181 $ 2,277,995
============= ============
F-13
<PAGE>
5. PROPERTY AND EQUIPMENT, net
<TABLE>
As of June 28, 1997 and June 29, 1996, property and equipment by major
classification is as follows:
<CAPTION>
Useful Life
in Years 1997 1996
-------- ---- ----
<S> <C> <C> <C>
Leasehold improvements 5 $ 19,509 $ -
Furniture and fixtures 5 290,828 264,606
Machinery and equipment 5 896,980 732,085
Molds 5-7 3,722,095 3,055,669
Vehicles and trailers 5 94,455 48,214
------------- -------------
5,023,867 4,100,574
Less- Accumulated depreciation 753,712 1,036,459
------------- -------------
$ 4,270,155 $ 3,064,115
============= =============
</TABLE>
6. DEBT
The Company's $900,000 note payable to CAVC bears interest at an annual rate of
9% and is payable in 24 equal monthly installments, commencing November 1997.
The obligation is collateralized by accounts receivable, inventory, property and
equipment and intangibles and is partially subordinate to the note payable to
CreditAmerica, Inc., note payable to bank and to supplier discussed below.
The note payable to CreditAmerica, Inc. (an entity controlled by an individual
who was an officer of the Company and a stockholder of CAVC) amounting to
$300,906 bears interest at an annual rate of 9% and is payable on demand.
Accrued interest is due on demand. The obligation is collateralized by accounts
receivable and inventories.
As of June 28, 1997 and June 29, 1996, long-term debt consists of the following:
1997 1996
---- ----
Note payable to bank bearing interest
at 9% $ 1,053,090 $1,315,744
Non-interest bearing note payable to
supplier, interest imputed at 9.5% 653,528 616,703
----------- ----------
1,706,618 1,932,447
Less- Current portion 409,386 500,550
----------- ----------
$ 1,297,232 $1,431,897
=========== ==========
The note payable to bank is payable in quarterly installments of $93,413
consisting of principal and interest with a balloon payment due in June 1999.
The note is collateralized by substantially all assets, and is partially
subordinated to the note payable to Credit America, Inc. and partially
subordinated to the note payable to CAVC.
The noninterest bearing note payable to supplier is payable from rebates on
purchases of marine engines from the supplier through 2008 or by a combination
of rebates and cash payments through 2008 in the event that certain minimum
engine purchase requirements are not met. The note is collateralized by the
marine engine inventory and patents and trademarks.
F-14
<PAGE>
As of June 28, 1997, maturities of long-term debt are as follows:
Year Ending
1998 $ 409,386
1999 455,726
2000 580,094
2001 130,706
2002 130,706
------------
$ 1,706,618
7. INDEMNITIES
In connection with the acquisition of substantially all of the business assets
of Old Mako by the Company and the Company's assumption of certain liabilities
as discussed in Note 1, the Company indemnified the former principal stockholder
of Old Mako against a Small Business Administration ("SBA") loan in the amount
of $387,488 and certain payroll tax liabilities limited to $342,759. The SBA
loan bears interest at an annual rate of 4% and is payable in monthly
installments of $8,010 including interest through November 1999. The payroll tax
liability was paid during the year ended June 29, 1996. The balance due on the
indemnity was $227,142 and $312,320 at June 28, 1997 and June 29, 1996,
respectively.
8. INCOME TAXES
As of June 28, 1997 and June 29, 1996, the tax effects of temporary differences
that give rise to deferred tax assets and liabilities are as follows:
1997 1996
---- ----
Allowance for doubtful accounts $ 45,000 $ 22,000
Inventory reserves 75,000 -
Accrued expenses 156,000 30,000
Prepaid expenses (156,000) -
------------- --------
Current deferred tax asset, net 120,000 52,000
------------- --------
Net operating loss carryforwards 3,585,000 2,155,000
Stock options 24,000 -
Warranty reserves 188,000 90,000
Depreciation (313,000) (272,000)
Goodwill (27,000) -
------------- --------
Noncurrent deferred tax asset, net 3,457,000 1,973,000
------------- ---------
Valuation allowance (3,577,000) (2,025,000)
------------- ----------
Net deferred taxes $ - $ -
============= ==========
F-15
<PAGE>
At June 28, 1997, the Company has net tax operating loss carryforwards of
approximately $9,530,000 to offset future taxable income. The net operating loss
carryforwards will expire as follows:
Fiscal Year Ending
2010 $ 2,500,000
2011 3,300,000
2012 3,730,000
Under Section 382 of the Internal Revenue Code, ownership changes caused by the
IPO and the Tracker Stock Purchase, limit the utilization of net operating loss
carryforwards originating prior to the Tracker Stock Purchase. The amount of net
operating loss carryforwards which may be utilized in any one year, is limited
to approximately $800,000 plus the carryforward of any unused net operating loss
limitations from prior years.
9. COMMITMENTS AND CONTINGENCIES
The Company leases its plant and office facilities from the former principal
stockholder of Old Mako under an operating lease, requiring monthly payments
aggregating $542,400 annually and taxes associated with the property. The lease,
which expires in July 2001, provides for two seven-year renewal options. Rental
expense under the operating lease aggregated $328,800 for the period from June
30, 1996 to January 16, 1997, $278,200 for the period from January 17, 1997 to
June 28, 1997 and $578,000, for the year ended June 29, 1996.
The Company sells its boats to independent dealers who typically finance the
purchases through "floor plan" financing arrangements with lenders. In
connection with the floor plan financing with certain dealers, the Company
guarantees directly to lenders that they will repurchase boats with unencumbered
titles which are in unused condition if the dealer defaults on its obligation to
repay the loan. As of June 28, 1997, the Company was contingently liable for
approximately $5,700,000 under the terms of these agreements. During the years
ended June 28, 1997 and June 29, 1996, returns were insignificant. The Company
pays certain floor plan fees as part of this arrangement. Floor plan fees
totaled $306,000 for the period from June 30, 1996 to January 16, 1997, $65,000
for the period from January 17 to June 28, 1997 and $246,000 for the year ended
June 29, 1996.
The Company has been named as a defendant in several lawsuits involving the
operations of Old Mako. They are as follows: (i) On or about September 14, 1994,
an action was commenced in St. Lucie County, Florida seeking recovery of
$209,541 for legal services performed on behalf of Old Mako, plus costs and
prejudgment interest. The amended complaint initially served on the Company
seeks the successor liability of the Company for the debt and an avoidance of
the transfer of assets from Old Mako to the Company. A second amended complaint
filed on or about October 30, 1996 and a third amended complaint filed on or
about April 17, 1997 restate essentially the same claims against the Company.
The litigation is in the discovery stage. (ii) On or about December 8, 1994, an
action was commenced in Dade County, Florida seeking recovery of the sum of
$166,603, plus interest and costs. The Complaint alleged that the Company
wrongfully and intentionally exercised dominion and control, and diverted to its
own use, the raw materials sold to Old Mako and subject to plaintiff's security
interest. The Company filed a motion to dismiss the complaint, and the complaint
was dismissed. An amended complaint was filed and the Company has filed a motion
to dismiss the amended complaint. The amended complaint alleges essentially the
same claims against the Company as the initial complaint. The Court has not yet
ruled on the motion to dismiss which has been pending since July 1995.
Litigation is in the discovery stage. (iii) On or about August 2, 1995, an
amended impleader complaint was filed in Dade County, Florida, seeking an
aggregated recovery of foreign judgments "in excess" of $400,000, attorney fees
and costs ("First Suit"). At the same time an independent action was also filed
in Dade County, Florida, with a virtually identical complaint ("Second Suit").
It is expected that these lawsuits will be consolidated or the Second Suit
F-16
<PAGE>
dismissed. The six count complaints allege that the manner in which the Company
acquired the assets of Old Mako resulted in a de facto merger or in a fraudulent
transfer by Old Mako. The plaintiffs alternatively seek to void the transfer of
the assets of Old Mako to the Company or the successor liability of the Company
for the plaintiffs' foreign judgments against Old Mako. The Company has filed a
motion for summary judgment in the First Suit asserting that no de facto merger
occurred and that the assets were rightfully transferred. The Court entered
summary judgment in favor of the Company with respect to the de facto merger
liability claim, and deferred ruling upon the fraudulent transfer claims until a
future hearing. Litigation is in the discovery stage. No significant activity
has taken place since September 1996. (iv) In June 1996, the Company was named
as a defendant in a suit alleging that the Company breached a sales
representation agreement between the plaintiffs and Old Mako which was expressly
or impliedly assumed by the Company. The complaint seeks relief of $501,800. The
Company filed a motion for summary judgment in April 1997 which was denied by
the Court in July 1997. Litigation is in the discovery stage. The Company has
denied liability in all of the aforementioned actions and believes that they are
defensible. CAVC has agreed to indemnify the Company for any losses and expenses
in excess of $150,000 arising out of claims against the Company for liabilities
of Old Mako that were not assumed in August 1994, except legal fees and expenses
incurred in the lawsuits described in items (i) and (ii) above. CAVC
acknowledges that the lawsuits described in (i) , (ii) and (iii) above are
within the scope of the indemnity and the Company has no reason to believe the
CAVC will not fulfill its obligations under such indemnity. While there can be
no assurance as to the ultimate outcome of these actions, the Company believes
that such actions will not have a material adverse effect on the Company's
financial position or operations.
In July 1996, an action was commenced in Palm Beach County, Florida against the
Company seeking an unspecified amount in damages. The Plaintiff alleges that the
Company breached the 1996 model year dealer agreement by appointing another
dealer within its territory, seeks declaratory judgment that the Florida
Deceptive and Unfair Trade Practices Act was violated by the appointment of a
new dealer in its territory, that the appointment of a new dealer in its
territory interfered with its business relationship with its customers, and that
the new dealer and Mako conspired to tortiuously interfere with its business
relationship with its customers and to unfairly compete. A first amended
complaint filed in September 1996 restates essentially the same allegations.
Litigation is in the discovery stage.
In August 1997, a purported class action lawsuit was commenced in the United
States District Court, Southern District of Florida against the Company and
other defendants seeking an injunction to prevent the Merger Transaction.
Alternatively, the plaintiff seeks to rescind the transaction if consummated, or
an accounting and damages due to the Merger Transaction. The Plaintiff class
generally alleges that the defendants have violated fiduciary obligations owed
to the plaintiff class in pursuing the Merger Transaction. The Company and
certain other defendants in this lawsuit have filed a Motion to Dismiss for,
among other things, the failure to state a cause of action
On May 27, 1997, the Company entered into an employment agreement with its
President. The agreement expires three years from the date of the agreement.
Pursuant to the employment agreement, the President is entitled to receive a
salary totaling $175,000 annually. In addition, the President is entitled to
receive an annual performance bonus of up to 60% of his base salary annually.
Pursuant to this employment agreement, the Company granted its President a five
year option (the "Additional Option") to acquire up to 35,000 shares of Mako
Common Stock at an option price of $2.125 per share (being equal to the value of
the Mako Common Stock at the close of business on the day preceding the grant).
F-17
<PAGE>
10. WARRANTS AND STOCK OPTION PLANS
Warrants and Options Issued to Nonemployees
In connection with the Company's IPO, 1,725,000 redeemable common stock purchase
warrants were issued to the public. Each warrant entitles the holder to purchase
one share of common stock for $4.00 per share during the four-year period
commencing August 23, 1996. Additionally, 1,375,000 redeemable common stock
purchase warrants were issued to certain persons upon exchange of warrants
received in connection with prior financing. These warrants are exercisable at
$4.00 per share commencing on August 23, 1996. With the IPO underwriter's prior
consent, the Company may redeem the foregoing warrants at a price of $.01 per
warrant, at any time once they become exercisable upon not less than 30 days
prior written notice if the last sale price of the Common Stock has been at
least 175% of the exercise price of the warrants on 20 of the 30 consecutive
trading days ending on the third day prior to the date on which the notice is
given.
In connection with the IPO, the Company sold to its underwriter for a nominal
consideration a unit purchase option, consisting of the right to purchase
150,000 of the IPO units. The unit purchase option is exercisable at a per unit
price of $5.76 for a period of four years commencing August 23, 1996.
On November 10, 1995, 5,000 warrants were granted to consultants exercisable at
$4.00 per share commencing on November 10, 1996 for a period of five years.
In connection with the acquisition of the Company, warrants to purchase 70,000
shares of the Company's common stock were issued to a bank. The warrants are
exercisable at prices ranging from $.43 to $.71 per share over the period
commencing August 31, 1997 and ending six months after the Company has satisfied
all requirements of the $1,500,000 note payable to the bank.
In connection with the Tracker Transaction, the Company issued the Anti-Dilution
option to Tracker. In connection with the hiring of its President, the Company
granted the Additional Option.
In fiscal 1997, the Company recorded compensation expense of $63,600 related to
41,500 stock options granted to nonemployees of the Company.
Fixed Stock Option Plans
Pursuant to the Company's 1995 Stock Option Plan, a total of 225,000 shares of
common stock have been reserved for issuance at prices to be determined by the
Stock Option Committee at the date of issuance.
F-18
<PAGE>
The following is a summary of activity under the 1995 Stock Option Plan:
Number of Weighted Average
Shares Price Per Share
------ ---------------
Outstanding at July 1, 1995 40,000 $ 3.06
Granted 121,000 3.68
Exercised - -
Canceled (9,600) 4.00
---------
Outstanding at June 29, 1996 151,400 3.50
Granted -
Exercised -
Canceled (6,000)
Outstanding at January 16, 1997 146,400
Granted 35,000 2.10
Exercised - -
Canceled - 4.00
---------
Outstanding at June 28, 1997 180,400 3.21
=========
Options exercisable at June 28, 1997 136,400 3.31
=========
Shares of common stock available for
future grants at June 28, 1997 44,600
=========
The following table summarizes information about fixed stock options outstanding
at June 28, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Number Number
Outstanding Remaining Weighted Exercisable Weighted
as of Contractual Average as of Average
Exercise Prices June 28, 1997 Life (Years) Exercise Price June 28, 1997 Exercise Price
- --------------- ------------- ------------ -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
1.00 - 2.50 75,000 3.82 $2.01 54,667 $ 2.16
4.00 - 4.25 105,400 3.53 4.06 81,733 4.08
</TABLE>
The Company applies APB Opinion 25 and related interpretations in accounting for
its plans. Accordingly, no compensation cost has been recognized for its fixed
stock option plans. Had compensation cost for the Company's stock been based on
fair value at the grant dates for awards under those plans consistent with FASB
Statement 123, the Company's net loss and net loss per share for the years ended
June 28, 1997 and June 29, 1996, on a pro forma basis, would have been as
follows:
F-19
<PAGE>
1997 1996
---- ----
Net loss As reported $4,038,001 $ 2,955,775
Proforma 4,081,927 3,056,803
Loss per share As reported $0.73 $1.19
Proforma $0.74 $1.23
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions: expected volatility 44%, risk-free interest rates ranging from
5.34% to 6.63%, expected dividends of $0 and expected lives of 5 years.
F-20
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MAKO MARINE INTERNATIONAL, INC.
(Registrant)
By: /s/ Kenneth Burroughs
Kenneth Burroughs
Chief Executive Officer, Chairman of the Board
Date: October 13, 1997
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints KENNETH BURROUGHS as his attorney-in-fact, with power
of substitution for him in any and all capacities, to sign any amendments to
this report on Form 10-KSB and to file the same, with exhibits thereto and other
documents in connection therewith, with Securities and Exchange Commission,
hereby ratifying and confirming all that said attorney-in-fact, or his
substitute, may do or cause to be done by virtue hereof.
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Kenneth Burroughs
Kenneth Burroughs
Chief Executive Officer, Chairman
of the Board (Signing as Principal
Executive Officer and Director)
Date: October 13, 1997
By: /s/ Stephen W. Smith
Stephen W. Smith
Chief Financial Officer (signing as
Principal Financial Officer and
Principal Accounting Officer
Date: October 13, 1997
By:
Joseph Messina, Director
Date:
By: /s/ Joe C. Greene
Joe C. Greene, Director
Date: October 13, 1997
By: /s/ Bruce S. Foerster
Bruce S. Foerster, Director
Date: October 13, 1997
By: /s/ Larry Mueller
Larry Mueller, Director
Date: October 13, 1997
<PAGE>
By: /s/ Susie Henry
Susie Henry, Director
Date: October 13, 1997
By:
Doug Baena, Director
Date:
<PAGE>
INDEX TO EXHIBITS
Except as otherwise noted, each exhibit listed herein is incorporated by
reference to the exhibit of the same number filed by the Company with its Form
SB-2 Registration Statement, Commission File Number 33-94168, on June 30, 1995
and as amended on August 15, 1995 and August 21, 1995.
Exhibit
No. Description
1.3 Form of Financial Consulting Agreement between the Company and the
Underwriter
1.4 Underwriter's Purchase Option.
2.1 Purchase Agreement dated February 25, 1994 between Barnett Bank of
South Florida, N.A. and CAVC.
2.2 Agreement dated as of August 2, 1994 between CAVC and the Company.
2.3 Non-Competition Agreement dated February 29, 1994 between CAVC and
Robert Schwebke.
2.4 Stock Purchase Agreement dated December 4, 1996 between the Company
and Tracker, filed as Exhibit 2.1 to the Company's Current Report on
Form 8-K dated December 4, 1996 and filed on December 13, 1996.
2.5 Stock Purchase Agreement dated December 4, 1996 between Tracker and
CAVC filed as Exhibit 2.2 to the Company's Current Report on Form
8-K dated December 4, 1996 and filed on December 13, 1996.
2.6 Plan of Merger dated August 8, 1997 between the Company and TRACKAQ
3.1 Articles of Incorporation of the Company, as amended.
3.2 By-Laws of the Company.
3.3 Amendment to By-Laws of the Company.
4.1 Specimen stock certificate of the Company's Common Stock.
4.2 Form of Warrant and Warrant Agreement.
4.3 Form of Warrant included as part of Underwriter's Purchase Option.
4.4 Warrants issued in connection with Bridge Financing.
4.5 Warrant dated August 2, 1994 of the Company issued to Barnett Bank
of South Florida, N.A.
4.6 Forms of Secured Promissory Note, Security Agreement (Inventory and
Accounts), Trademark Collateral Security Agreement, and Subscription
Agreement, each dated April 18, 1995, issued in connection with the
Bridge Financing.
4.7 Note and Security Agreement dated August 2, 1994 between the Company
and Barnett Bank of South Florida, N.A.
4.8 Loan Agreement dated August 2, 1994 between the Company and CAVC, as
amended by letter dated November 21, 1994.
4.9 Loan Agreement dated August 2, 1994 between the Company and
CreditAmerica.
4.10 Letter dated April 18, 1995 to the Company from CreditAmerica and
CAVC with respect to the repayment of insider indebtedness.
4.11 Basic Agreement dated November 21, 1994 by and between Brunswick
and the Company
4.12 Secured Note dated November 21, 1994 from the Company to Brunswick
in the original principal amount of $825,000, together with
Security Agreement dated November 21, 1994 between the Company and
Brunswick and Intercreditor Agreement dated November 21, 1994
between Barnett Bank of South Florida, N.A. and Brunswick.
4.13 Salt Water Joint Marketing Agreement dated November 21, 1994 between
Mercury Marine, a division of Brunswick and the Company, as
supplemented and amended on November 21, 1994, together with
addendum to supplement and amendment dated November 22, 1994.
4.14 Letter Agreement dated August 8, 1996 between the Company and
Barnett Bank.
4.15** Second Supplement and Amendment to Saltwater Joint Marketing
Agreement and Additional Agreement dated as of January 16, 1997
between Brunswick Corporation and the Company.
10.1 Employment Agreement dated as of January 1, 1995 between the Company
and Douglas W. Baena.
10.2 Employment Agreement dated as of January 1, 1995 between the Company
and Joseph J. Messina.
10.3 Employment Agreement dated as of March 1, 1995 between the Company
and Lawrence Tierney.
<PAGE>
10.4 Employment Agreement dated as of May 9, 1995 between the Company and
Edward Kunuty.
10.5 Letter dated June 21, 1995 from the Company to Jeffrey Bleustein.
10.6 Agreement dated July 26, 1994 between the Company and Vincam Human
Resources, Inc.
10.7 Floor Plan Repurchase Agreement dated December 14, 1994 between the
Company and Bombardier Capital Corp.
10.8 Manufacturers Financing Agreement dated July 28, 1994 between the
Company and TransAmerica Commercial Financial Corp.
10.9 Inventory Repurchase Agreement dated August 1, 1994 between the
Company and Nations Credit Commercial Corporation, Inc.
10.10 Shareholders' Agreement dated February 23, 1994 among Douglas W.
Baena, Harry Bresky, Buy America, Inc., Wilmont Holdings Corp.,
Joseph O'Sullivan, Robert Sponheimer and Brett Schwebke and CAVC as
amended on August 15, 1994 and October 14, 1994.
10.11 Warrant to purchase shares of Common Stock of CAVC.
10.16 Agreement dated April 18, 1995 by and among Robert C. Schwebke,
Douglas Baena, H. Harry Bresky, the Company and CAVC.
10.17 Agreement dated April 18, 1995 between CAVC and the Company with
respect to certain loans to and indemnifications of the Company.
10.18 Lock-up letter dated April 17, 1995 from Barnett Bank of South
Florida, N.A. to the Company.
10.19 Agreement by and among the Company, CAVC and the Underwriter dated
April 18, 1995 pursuant to which certain agreements may not be
amended without the prior consent of the Underwriter.
10.20 Form of Independent Dealer Agreement.
10.21 Amendment to Baena and Messina Employment Agreements.
10.22 Lock-up agreements executed in connection with Initial Public
Offering.
10.23 The Company's 1995 Stock Option Plan.
10.24 Amended Triple Net Lease dated April 18, 1995 between Robert C.
Schwebke and the Company.
10.25 Florida Mortgage and Security Agreement dated January 23, 1979 by
and between Robert C. Schwebke and Judith A. Schwebke and The
Prudential Insurance Company of America.
10.26 Mortgage and Security Agreement dated July 24, 1986 between Robert
C. Schwebke and Barnett Bank of South Florida, N.A.
10.27 Mortgage and Security Agreement dated July 24, 1986 between Robert
C. Schwebke and Barnett Bank of South Florida, N.A.
10.28 Mortgage Spreader and First Modification to Note and Mortgage dated
February 25, 1994 between Robert C. Schwebke and Barnett Bank of
South Florida, N.A.
10.29 Form of Agreement for Sales Representation.
10.32 Promissory note dated as of June 1, 1995 from the Company to CAVC.
10.33 Promissory note dated as of June 30, 1995 from the Company to
CreditAmerica.
10.34 Letter regarding indemnification dated December 4, 1996, filed as
Exhibit 2.3 to the Company's Current Report on Form 8-K dated
December 4, 1996 and filed on December 13, 1997.
10.35** Amendment dated January 16, 1997 to Amended Triple Net Lease between
Robert C. Schwebke and the Company.
10.36** Second Amendment dated January 16, 1997 to Employment Agreement
between the Company and Douglas W. Baena.
10.37 Letter Agreement between Tracker and the Company, and Tracker and
CAVC, dated January 16, 1997, filed as Exhibit 2.4 to the Company's
Current Report on Form 8-K dated January 16, 1997 and filed on
January 30, 1997.
10.38 Escrow Agreement dated January 16, 1997 among SunTrust Bank, Miami,
N.A., as escrow agent, the Company, CAVC and Tracker, filed as
Exhibit 2.5 to the Company's Current Report on Form 8-K dated
January 16, 1997 and filed on January 30, 1997.
10.39 Amendment dated January 16, 1997 to Douglas W. Baena Employment
Agreement, filed as Exhibit 2.6 to the Company's Current Report on
Form 8-K dated January 16, 1997 and filed on January 30, 1997.
<PAGE>
10.40 Employment Agreement dated July 1, 1996 between the Company and Hugh
Landon Russ, Jr., filed as Exhibit 2.7 to the Company's Current
Report on Form 8-K dated January 16, 1997 and filed on January 30,
1997.
10.41 Amendment dated January 16, 1997 to Hugh Landon Russ, Jr. Employment
Agreement, filed as Exhibit 2.8 to the Company's Current Report on
Form 8-K dated January 16, 1997 and filed on January 30, 1997.
10.42 Amendment dated January 16, 1997 to Lawrence Tierney Employment
Agreement, filed as Exhibit 2.9 to the Company's Current Report on
Form 8-K dated January 16, 1997 and filed on January 30, 1997.
10.43** Employment Agreement dated May 14, 1997 between the Company and
Richard Reyenger.
16.1 Letter from BDO Seidman regarding the Company's change of
independent accountants, filed as Exhibit 2.10 to the Company's
Current Report on Form 8-K dated January 16, 1997 and filed on
January 30, 1997.
24.1 Power of Attorney (included on the signature page of the Company's
Annual Report on Form 10-KSB).
27.1** Financial Data Schedule.
99.1** Class Action Complaint filed against the Company, its directors,
Tracker and TRACKAQ on August 12, 1997 in United States District
Court, Southern District of Florida.
** Filed herewith.
EXHIBIT 4.15
SECOND SUPPLEMENT AND AMENDMENT
TO
SALTWATER JOINT MARKETING AGREEMENT
AND ADDITIONAL AGREEMENTS
This Second Supplement and Amendment to Saltwater Joint Marketing
Agreement (this "Second Supplement") dated as of January 16, 1997 is entered
into by and between Brunswick Corporation, a Delaware corporation ("Brunswick"),
and Mako Marine International, Inc., a Florida corporation (the "Company").
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is acknowledged, the parties agree as follows:
1. General. Brunswick and the Company have entered into that certain
Saltwater Joint Marketing Agreement dated as of November 21, 1994 (as
supplemented and amended to date, the "Saltwater Agreement"). Subsequent to the
date of the Saltwater Agreement, the Company has become an 80% owned subsidiary
of Tracker Marine, L.P. Tracker Marine, L.P. is also a customer of Brunswick and
a company in which Brunswick owns an interest. This Supplement further
supplements, amends and modifies the Saltwater Agreement and certain other
agreements between the parties, in each case to the extent set forth herein, but
is not part of any program offered thereby, and sets forth additional agreements
between Brunswick and the Company. The parties agree that this Supplement does
not constitute an amendment to the terms of the Secured Note dated November 21,
1994, in the original principal amount of $825,000 (the "Note"), except for the
maturity date thereof as set forth in Section 2 and the matters addressed at
Section 10. "Outboard" shall have the same meaning as set forth in the Saltwater
Agreement.
2. Maturity of the Note. The maturity of the Note (as defined in the
Note) is hereby extended to April 14, 2008.
3. Pricing. From and after the date hereof, Brunswick's base price of
outboard motors to the Company shall be the discount off published dealer price
set forth on Exhibit 1 hereto. The Company acknowledges that in no event shall
the effect of this Second Supplement provide the Company with pricing less
favorable than that in effect prior to the date hereof. The foregoing pricing
shall apply notwithstanding any provision of the Saltwater Agreement to the
contrary, including, without limitation, Sections 2.3 and 4.1 thereof. Such
pricing shall terminate and be of no further force or effect from and after the
date that Tracker Marine, L.P. shall cease to be a majority shareholder of the
Company. From and after such date, the pricing applicable without giving effect
to this Second Supplement shall control.
<PAGE>
4. Term. The Term of the Saltwater Agreement shall continue until the
earlier of (a) April 14, 2008 or (b) the date that the Saltwater Agreement is
terminated pursuant to Section 5 thereof. The foregoing term shall apply
notwithstanding the termination dates set forth in (i) Section 1 of the
Saltwater Agreement or (ii) Section 1 of the November 29, 1994 Supplement and
Amendment to Saltwater Joint Marketing Agreement and Additional Agreements (the
"First Supplement"). Upon termination (other than termination referred to in
clause (b) above made at the election of Brunswick), the Company shall enter
into a new saltwater joint marketing agreement with Brunswick, provided that the
Company is still a majority-owned subsidiary of Tracker Marine, L.P. and
provided further, that Tracker Marine, L.P. is continuing to purchase outboard
engines from Brunswick at such time. Such new saltwater joint marketing
agreement shall have substantially the same pricing terms as Tracker Marine,
L.P, has for the purchase of outboard motors from Brunswick.
5. Purchasing Outboard Engines. Brunswick Outboards shall be installed
on all boats sold by the Company, except as permitted below. Notwithstanding the
foregoing and anything to the contrary set forth in the Saltwater Agreement
(including, without limitation, Section 3.1 thereof) or the First Supplement
(including, without limitation, Section 2 thereof), the Company is hereby
permitted to purchase and sell, on an annual basis, from third-party
manufacturers of engines, such engines for installation on up to the Applicable
Percentage of its saltwater boats. The "Applicable Percentage" shall be 35%
until July 1, 2001, 25% for model years 2002 through and including model year
2006 (if the Saltwater Agreement is still in effect), and 15% for model year
2007 and after (if the Saltwater Agreement is still in effect). The Company will
use all commercially reasonable efforts, however, to promote Brunswick's engines
to its dealers and to encourage its dealers to purchase Brunswick's engines.
Within 30 days after the end of each fiscal quarter, the Company shall deliver
to Brunswick a certificate signed by an executive officer setting forth the
number of engines manufactured by third party manufacturers purchased and sold
by the Company pursuant hereto during such quarter and the percentage that such
third-party engines represent of all engines sold by the Company during such
quarter.
Notwithstanding anything to the contrary set forth in the Saltwater
Agreement (including, without limitation, Section 2.2 thereof) or the First
Supplement (including, without limitation, Section 3 thereof), the Company shall
not be obligated to purchase, pay for and install Quicksilver controls, remote
controls or cables on any saltwater boat sold with an engine of a third-party
manufacturer pursuant to the exception set forth above.
Section 3.2 of the Saltwater Agreement is hereby deleted and of no
further force or effect.
The second sentence of the second paragraph of Section 2 of the First
Supplement is deleted and the following is inserted in its place:
2
<PAGE>
"If the Company purchases all or substantially all of the assets or
capital stock of another boat manufacturing company, or if the Company
manufactures and sells boats under a name other than Mako (such as "Sea Craft"
and "Silver King"), then outboard engines purchased by the Company from
Brunswick to be used in connection with the newly acquired boat manufacturing
company's boat lines or such boat lines manufactured and sold under another name
shall be counted as Qualifying Engines for purposes of this Agreement, including
for purposes of Market Share calculation and Loan reduction."
Section 5 of the First Supplement is hereby deleted and of no further
force or effect.
6. Assignability. Sections 7.2 and 5(d) of the Saltwater Agreement (as
amended by the First Supplement) are hereby deleted and of no further force or
effect.
7. Dealer Appointment. The Company shall have the independent power and
authority to appoint "package only" Brunswick dealers (i.e., sale of packages
consisting of boats manufactured by the Company and Brunswick motors, parts and
service with no right to purchase loose Brunswick motors from Brunswick) on the
terms and conditions of the Company's standard dealer agreements except in those
states where such appointment may be prohibited by law; provided that Brunswick
shall be entitled to stipulate whether any particular dealer is a Mercury or
Mariner dealer. The Company's power to appoint "package only" Brunswick dealers
shall be irrevocable during the term hereof. Brunswick hereby agrees to enter
into its standard parts and service agreement with "package only" Brunswick
dealers appointed pursuant to the terms of this Agreement. The Company hereby
appoints, and Brunswick hereby consents to the appointment of, all existing
Company dealers as "package only" dealers of Brunswick products; provided that
Brunswick retains the right to stipulate whether any such dealer is a Mercury
dealer or a Mariner dealer. Dealers appointed by the Company ("package only" or
"full line") shall be entitled to receive from Brunswick Special Dealer Program
benefits for the purchase and sale of the Outboards as though sold by Brunswick
as a part of a Brunswick branded boat/motor package. Brunswick's Mercury Marine
Division will make its dealer support services available to all "full-line, or
"package only" dealers appointed by the Company who qualify under the
Mercury/Mariner criteria for participation in the Mercury Marine Dealer Support
Services Program. Dealers appointed by the Company shall be entitled to the same
co-operative advertising allowances for advertising as other Brunswick dealers
under similar circumstances. The power and authority granted to the Company
under this Section 7 shall be non- assignable and shall terminate immediately
upon Tracker Marine, L.P. no longer being a majority shareholder of the Company.
3
<PAGE>
8. Forecasts. On the fifth day of each month commencing July, 1997, the
Company shall submit (i) a three-month forecast (each a "Short-Term Forecast")
setting forth the Company's projected requirements for Outboards for the three
months commencing with the month immediately following the month in which such
forecast is submitted and (ii) an eight-month forecast (each a "Long-Term
Forecast") for the eight months commencing with the fourth month following the
month in which such forecast is submitted. The first month of each Short-Term
Forecast shall be treated for all purposes hereof as a firm order and may vary
by not more than 10% from the amount of Outboards forecasted to be purchased by
the Company in such month in the immediately preceding Short-Term Forecast. The
forecast for the second month of each Short-Term Forecast is a forecast only and
may vary by not more than 15% from the amount of Outboards forecasted to be
purchased by the Company during such month in the immediately preceding Short-
Term Forecast. The forecast for the third month of any Short-Term Forecast is a
forecast only and the obligation of Brunswick to supply Outboards to meet any
firm order shall not exceed 160% of the number of Outboards first forecasted to
be purchased for such month (as modified by the two immediately preceding
sentences) in the Long-Term Closing Date Forecast or the initial Long-Term
Forecast with respect to the month in question.
Brunswick shall not be obligated to supply any Outboards ordered
pursuant to any "firm order" under this Section 8 if the amount of Outboards
ordered exceeds the amount of Outboards permitted to be included in the
Short-Term Forecast containing such firm order (the excess of the amount ordered
over the amount permitted to be included in a Short-Term Forecast being referred
to as the "Excess order"). However, Brunswick agrees to use its reasonable
efforts to supply the Excess Order Outboards to the Company. In times of short
supply of Outboards, Brunswick shall not discriminate against the Company in
attempting to fill orders for Outboards. However, Brunswick shall not be
obligated to take any action that would unfairly affect the supply of Outboards
to its distributor or dealer organization. Brunswick agrees to promptly notify
the Company, in writing, of any anticipated failure, refusal or inability to
sell the Outboards to the Company immediately upon receipt of information which
reasonably leads Brunswick to conclude that such failure, refusal or inability
is imminent. Following the occurrence of any material change in the status of
any interruption of performance, Brunswick shall promptly, but in no event later
than 3 business days following such occurrence, notify the Company in writing of
such material change. In addition, Brunswick shall periodically inform the
Company on a timely basis of the current status of the interruption and as to
the anticipated duration of the interruption.
4
<PAGE>
9. Freight; Payment Terms. Notwithstanding anything in the Saltwater
Agreement to the contrary, outboards will be shipped F.O.B. Company plants in
full truck loads. Any shipment made to more than one Company plant shall be
deemed to have been a full truck load shipment so long as (i) the aggregate
shipment amounts to a full truck load and (ii) all plants taking delivery are in
the State of [Florida]. The Company shall pay for Outboards within 60 days after
the date each such Outboard is shipped. The Company shall pay for all products
(other than Outboards) purchased from Brunswick in accordance with Brunswick's
standard payment terms.
10. No minimums. Brunswick waives the minimum purchase requirements in
(a) the last paragraph of Section 4 of the First Supplement and (b) the fourth
paragraph of the Note.
11. Basic Agreement. Sections 1.6 and 1.7 of that certain Basic
Agreement dated November 21, 1994 between Brunswick and the Company are hereby
deleted and of no further force or effect.
12. Renewals. Section 7 of the First Supplement is hereby deleted and
of no further force or effect.
13. Notices. Copies of all notices sent to the Company shall also be
sent to:
Tracker Marine, L.P.
1915-C South Campbell
Springfield, MO 65807
Attention: Ken Burroughs
Telecopy Number: (417) 887-1807
and
Greene & Curtis, L,L.P,
1340 East Woodhurst
Springfield, MO 65804
Attention: Joe C. Greene
Telecopy Number: (417) 883-4317
14. Effective Date. The agreements and amendments set forth in this
Second Supplement are effective as of the date of this Second Supplement.
15. Continuing Effect. To the extent that the terms of this Supplement
are inconsistent with the terms of the Saltwater Agreement and the First
Supplement, the terms of this Supplement shall control; provided that the
Saltwater Agreement shall otherwise continue in full force and effect. The
Saltwater Agreement, as amended hereby, and the other Agreements executed in
5
<PAGE>
connection therewith, continue in full force and effect. The Company reaffirms
its obligations under the Note.
BRUNSWICK CORPORATION MAKO MARINE INTERNATIONAL, INC.
By: /s/ J. Roger Patterson By: /s/ Kenneth Burroughs
Name: J. Roger Patterson Name: Kenneth Burroughs
Title: Senior Vice President; Title: President
General Manager of the OBU
Mercury Marine
6
<PAGE>
Exhibit 1
The Company will receive a discount on engines purchased hereunder
equal to the greater of (1) a 19% discount off the published dealer net price on
outboard motors shipped to the Company and an 18% discount off the published
dealer net price on outboard motors shipped to dealers, and (2) the best
available percentage discount off of Base Dealer Price (as defined from time to
time in applicable purchase documentation) as is in effect from time to time for
purchases of outboard motors from Brunswick by Tracker Marine, L.P. (whether
directly or through affiliates), provided that this clause (2) shall apply only
with respect to the period that Tracker Marine, L.P. remains the majority
shareholder of the Company.
EXHIBIT 10.35
AMENDMENT OF LEASE
THIS AMENDMENT OF LEASE ("Amendment") is made this 16th day of
January, 1997 by and between Robert C. Schwebke, an individual and Mako Marine
International, Inc., a Florida corporation, as Landlord and Tenant,
respectively, under Amended Triple Net Lease dated April 18, 1995 (the "Lease")
for the purpose of amending the Lease as provided herein. A legal description of
the Property leased by Landlord to Tenant under the Lease is attached hereto as
Exhibit A.
Terms not otherwise defined herein shall have the same meaning as
ascribed to them under the Lease.
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged by Landlord and Tenant, it is agreed by the parties
hereto that effective upon the acquisition by Tracker Marine, L.P. of 6.4
million shares of the common stock of Tenant from Tenant (expected to occur on
or about January 17, 1997) (the "Acquisition"), the Lease is hereby amended as
follows:
1. Early Termination Option. Notwithstanding Section 2 or any other
provision under the Lease, Tenant may, upon written notice to Landlord ("Early
Termination Notice") given in accordance with Section 40 of the Lease on or
before July 17, 1998, together with the payment of a lease termination fee in
the amount of $330,000 (the "Lease Termination Fee"), terminate the Lease
effective as of the close of business on the day immediately prior to the second
anniversary of this Amendment, and upon the giving of such Early Termination
Notice accompanied by the payment of the Lease Termination Fee, the Lease shall
automatically, and without further action on the part of Landlord or Tenant,
terminate on such date. If the Notice and Lease Termination Fee is not given and
paid on or before July 17, 1998, the option of Tenant set forth in this Section
1 shall automatically terminate.
2. Purchase Option. (a) From and after the date of this Amendment and
though the close of business on the day immediately preceding the first
anniversary of the date of this Amendment (the "Term"), Tenant shall have the
right to purchase the entire interest of Landlord in the Property, at a purchase
price of Five Million Dollars ($5,000,000) net to Landlord and on the other
terms and conditions set for below (the "Option").
(b) Tenant shall exercise the Option by delivering written
notice thereof (the "Notice") to Landlord at any time during the Term of the
Option in accordance with Section 40 of the Lease. If Tenant exercises the
Option, the closing of the purchase and sale of the Property will occur at a
time and place specified in the Notice; provided, however, that such closing
shall occur within 30 days of the giving of the Notice by Tenant and shall be
within Dade County, Florida.
<PAGE>
(c) At closing, Landlord shall convey to Tenant by special
warranty deed fee simple title to the Property, free and clear of all mortgages,
liens and encumbrances of any kind, except for (i) liens for taxes not yet due
and payable, and (ii) such easements, imperfections or irregularities which are
minor in nature and will not, either individually or collectively, adversely
affect the value of the Property or the use thereof (such permitted encumbrances
specified in the foregoing clause (i) and (ii) being collectively called the
"Permitted Encumbrances"). Moreover, Landlord shall execute and deliver all
other customary closing documents reasonably requested by Tenant or the title
company.
(d) At closing, Tenant shall pay the purchase price to
Landlord by cashier's check, certified check or other readily available funds.
Tenant shall also pay (i) all unpaid rent or other charges due and owing under
the Lease, and (ii) all expenses and costs incurred in connection with the
exercise of the Option, including, without limitation, title insurance premiums,
transfer or stamp taxes, closing fees and recording fees. Landlord shall furnish
to Tenant, at Tenant's expense, an ALTA Owner's Policy, dated as of the closing
date, from a title company licensed to do business in Florida, with standard
non-survey exceptions deleted showing Tenant as having good and marketable fee
simple title in the Property, subject only to the Permitted Encumbrances, and,
at the request of Tenant given at least 10 business days prior to closing,
provide, at Tenant's expense, a survey of the Property as required to delete all
standard survey exceptions from such Owner's Policy.
(e) Landlord shall not, without the prior written consent of
Tenant, cause or permit any lien or encumbrance (other than current liens and
encumbrances) to be created upon or attach to the Property or increase the
amount of indebtedness secured by current mortgages against the Property until
in either case the Option shall have expired without being exercised. Attached
as Exhibit B hereto is a list of currently outstanding mortgages, liens and
other encumbrances against the Property and, where applicable the currently
outstanding indebtedness secured thereby.
3. Notice of Acquisition. Tenant shall give Landlord prompt written
notice (in accordance with Section 40 of the Lease) of the completion of the
Acquisition, specifying the date thereof, which date shall constitute the
commencement of this Amendment. If the Acquisition does not occur on or before
February 28, 1997, then this Amendment shall not go into effect and shall
automatically terminate.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed the day and year first above written.
"LANDLORD"
/s/ Robert C. Schwebke
WITNESS ROBERT C. SCHWEBKE
"TENANT"
MAKO MARINE INTERNATIONAL,
INC., a Florida corporation
Attest:
By:/s/ Douglas W. Baena
Print Name: Douglas W. Baena
/s/ Hugh L. Russ, Jr. Title: President and Chief
Name: Hugh L. Russ, Jr. Executive Officer
Title: Vice President/Secretary
3
<PAGE>
Exhibit A
Legal Description
Tracts A & B, RANSBURG PARK, according to the Plat thereof, as recorded in Plat
Book 92, at Page 30, of the Public Records of Dade County, Florida.
and
All of Lot 5 and 6, of Block 3 and all of Lot 12, Block 2 of NORTH DADE
COMMERCIAL PARK, according to the Plat thereof, as recorded in Plat Book 126,
Page 29 of the Public Records of Dade County, Florida.
<PAGE>
Exhibit B
SCHEDULE OF MORTGAGE PAYMENTS DUE BY LANDLORD
Exhibit 1. Barnett Bank Amortization Schedule*
Exhibit 2. The Prudential Amortization Schedule
*Notwithstanding that the amortization schedule is attached as Exhibit 1 lists
amounts required to fully amortize the subject loan through July 1, 2006, Lessee
acknowledges that the maturity date of the subject loan is June 30, 2000, as set
forth in that certain Mortgage Spreader and First Modification to Note and
Mortgage between Landlord and Barnett Bank of South Florida, N.A., of even date
herewith.
EXHIBIT 10.36
October 13, 1997
Mr. Douglas W. Baena
19901 East Country Club Drive
Building Two, Apartment 104
Aventura, Florida 33180
Dear Sir:
Reference is made to an Employment Agreement ("Agreement") dated as of
January 1, 1995, as amended as of June 28, 1995, by and between you ("Employee")
and the undersigned ("Corporation").
This is to confirm our understanding and agreement as follows:
1. The Agreement is hereby amended in the following respects:
a. The Corporation shall have the right at any time during the
term of the Agreement to terminate the Agreement at its sole discretion and for
any reason whatsoever immediately upon the giving of 30 days' written notice of
such termination and specifying the effective time thereof; provided, however,
that if the Corporation shall not have terminated Employee prior to April 30,
1997 pursuant to this paragraph, Employee shall have the right at any time
during the term of the Agreement to terminate the Agreement at his sole
discretion upon the giving of 30 days written notice of such termination and
specifying the effective time thereof. Upon either of such terminations, the
Corporation shall pay to Employee a severance payment (the "Severance Payment")
of $75,000 payable in 12 monthly installments of $6,250 each, commencing on the
first day of the calendar month immediately following any such termination
(subject to all required withholding).
b. Paragraph 1 of the Agreement is deleted and in lieu thereof
Employee agrees to serve in such executive capacity as may be assigned to him
from time to time by the Board of Directors of the Corporation.
c. Paragraphs 4(ii), 6(b) and 9 of the Agreement are hereby
deleted in their entirety.
<PAGE>
Mr. Douglas W. Baena
October 13, 1997
Page 2
d. Notwithstanding anything contained in the fourth full
paragraph of Section 13(c) of the Agreement to the contrary, if the Agreement is
terminated by either the Corporation or Employee pursuant to paragraph 1(a)
hereof, and regardless of the payment of severance thereunder, from and after
such termination, the fourth full paragraph of Section 13(c) relating to "Non-
Competition" shall no longer apply to Employee; provided, however, that if
Employee engages in any activity that would have been violative of such portion
of Section 13(c) ("Competitive Activity"), then all remaining obligations of the
Corporation with respect to Severance Payment installments to be paid from and
after such Competitive Activity shall thereupon cease, and all rights of
Employee to the remainder of such Severance Payment shall be forfeited.
2. Except as provided in paragraph 1(d) in the event of any conflict
between the provisions of the Agreement and this letter, the provisions of this
letter shall prevail. Except as provided herein, the Agreement shall continue in
full force and effect without change or modification.
Very truly yours,
MAKO MARINE INTERNATIONAL, INC.
By:/s/ Hugh L. Russ, Jr.,
Vice President/Secretary
AGREED:
/s/ Douglas W. Baena
EXHIBIT 10.43
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is dated this
14th day of May, 1997, by and between MAKO MARINE INTERNATIONAL, INC., a Florida
Corporation of Miami, Florida ("Mako") and RICK REYENGER, an individual of
Nashville, Tennessee ("Executive"),
WITNESSETH:
1. Employment. On the terms and conditions of this Agreement, Mako
employs the Executive and the Executive accepts employment.
2. Term. The term of this Agreement shall begin on or about May 27,
1997 (the "Commencement Date"), and, except as herein specifically provided,
shall continue for a three (3) year term until May 26, 2000. The term of this
Agreement shall automatically extend from year to year thereafter unless either
party shall give written notice of termination more than ninety (90) days before
the end of the term then in force. Notwithstanding the foregoing, this is an
employment-at-will and Mako may terminate the term of employment under this
Agreement at any time, without cause or advance notice, subject to the
obligation of Mako to pay Executive the liquidated severance amounts under
Section 8 in the event of Termination Without Cause (as herein defined).
3. Position/Duties. The Executive is engaged as President of Mako, to
supervise and direct all of the operations of Mako. The services of the
Executive may be extended or curtailed by Mako from time to time. The Executive
shall report directly to the Chairman of Mako.
4. Extent of Services. The Executive shall devote his entire working
time, attention and energies to the business of Mako and shall not during the
term of this Agreement be engaged in any other business activity whether or not
such business activity is pursued for profit. Executive acknowledges that he
shall be required to travel in order to fully perform his duties under this
Agreement and to promote Mako's business and agrees to make himself available to
appear at such places and events as Mako may designate. However, the Executive
may invest his assets in such form or manner as will not require his services in
the operation of the affairs of the companies in which such investments are
made. The Executive may participate in trade group and non-profit organization
meetings and activities so long as such participation does not materially
interfere with the discharge of his duties.
<PAGE>
5. Working Facilities. The Executive shall be furnished such office
facilities and services at the offices and plant of Mako as are suitable to his
position and appropriate for the performance of his duties.
6. Base Salary. For all services rendered by the Executive, the Company
shall pay to the Executive a base salary (the "Base Salary") of One Hundred
Seventy-five Thousand Dollars ($175,000.00) a year, payable in equal twice
monthly installments in accordance with the ordinary payroll payment schedule of
Mako. Base Salary shall be subject to all withholding and other applicable
taxes. Throughout the term of this Agreement, the Base Salary shall be reviewed
annually but shall not be reduced below the One Hundred Seventy-five Thousand
Dollar ($175,000.00) initial annual amount.
7. Performance Bonus. In addition to other compensation to Executive
under this Agreement, Executive shall be eligible to receive a performance bonus
(the "Performance Bonus") each year based upon accomplishment or relative
accomplishment of certain annual financial and performance goals communicated by
Company to Executive during the first quarter of each year. Although relative
accomplishment of the goals by Executive shall be determined by use of the
subjective judgment of the Board of Directors of the Company, it is intended
that (i) a targeted bonus of Thirty per cent (30%) of Base Salary will
constitute the Performance Bonus if the Executive achieves all of the goals
established, and (ii) a targeted bonus of up to an additional Thirty per cent
(30%) of Base Salary if the Executive materially exceeds all of the goals
established. It is agreed that relative achievement of the goals, and the annual
attainment of the Performance Bonus, shall be in the sole discretion of the
Board of Directors of the Company. The Performance Bonus, if any, shall be
payable in the first fiscal quarter of each year for the preceding fiscal year
and is subject to all applicable withholdings and deductions. In the event of
Resignation (as defined) or Termination for Cause (as defined) during a calendar
year, no Performance Bonus shall be payable for that or a later calendar year.
In the event of Termination Without Cause (as defined) during the calendar year,
the Performance Bonus will be payable on the terms of Section 8. Section 10
provides for Performance Bonus calculation and payment in the case of Material
Disability (as defined in Section 10) or death.
2
<PAGE>
8. Severance Amounts. In the event of Termination Without Cause at any
time during the term, Executive shall be entitled only to continue to receive as
liquidated severance amounts (i) his Base Salary for a period of twelve (12)
months following the date of such Termination Without Cause, payable in equal
twice monthly installments, and (ii) an amount equal to Thirty per cent (30%) of
the Base Salary payable over the same period. The severance payments shall
terminate upon Executive securing gainful engagement or employment during the
time that severance payments are payable. No such severance amounts are due in
respect of Resignation by Executive or Termination for Cause. During the twelve
(12) month period during which the severance amounts are paid, Executive shall
keep Mako informed, in writing, of all engagements or employments. Executive
agrees to use his best efforts to secure engagement or employment. 9.
Definitions. The following definitions are agreed to: A. "Termination for Cause"
means the termination of employment of Executive by Mako by reason of either (i)
illegal conduct by Executive, (ii) failure of Executive to abide by the written
policies and procedures of Mako after having been afforded written notice of
such failure and Executive having failed to cure the failure within five (5)
calendar days, and (iii) failure of the Executive to conform to the conduct
requirements of Section 12. B. "Termination Without Cause" means the termination
of employment of Executive by Mako other than by reason of either (i)
Resignation, (ii) Termination for Cause, (iii) Material Disability (as defined
in Section 10) or (iv) death. C. "Resignation" means the resignation of
Executive of this employment, either in writing or by action. 10. Effect of
Material Disability and Death. (a) In the event that the Executive suffers
Material Disability (as herein defined), the Executive shall (i) be entitled to
receive such employee benefits set forth in Section 13 for six (6) months from
the effective date of the Material Disability, (ii) be entitled to receive the
Base Salary as of the effective date of the Material Disability for a period of
six (6) months, and (iii) receive the pro-rated portion of the Performance Bonus
3
<PAGE>
for the year during which the Material Disability occurs. The term "Material
Disability" means a physical or mental disability of the Executive which causes
the Executive to be unable to perform and discharge his full-time duties for ten
(10) consecutive working days during any three (3) consecutive calendar months
during the continuation of this Agreement. The effective date of a Material
Disability is the last day of the last period described in the preceding
sentence. (b) In the event of death, the estate of the Executive shall be
entitled to receive payment as though Executive had become Materially Disabled
on the date of death. 11. Agreement Not to Compete. For a period of eighteen
(18) months following any termination of employment by Executive hereunder for
whatever reason, the Executive agrees not to engage in, directly or indirectly
or own, manager, consult with, operate, be employed by, participate in or be
connected in any manner with the ownership, management, operation or control of
any business similar to the type of business conducted by Mako Marine
International, Inc., or its successors and assigns (the "Beneficiaries") at the
time of the termination of employment. This covenant not to compete shall
geographically apply to the United States and any other country in the world in
which any of the Beneficiaries conducts material business. It is agreed between
the parties that this Agreement is reasonably confined as to term and geography,
but in the event a court should hold otherwise, then it is the intention of the
parties that the reasonable term and geography be defined by the court. In the
event of Executive's actual or threatened breach of the provisions of this
paragraph, the Executive acknowledges that Mako will suffer irreparable harm and
shall be entitled to an injunction restraining the Executive therefrom and that
Mako shall not be obligated to pay to the Executive any sums of money described
in this Agreement in the event of the breach by the Executive of this agreement
not to compete. Nothing shall be construed as prohibiting Mako from pursuing any
other available remedies for such breach or threatened breach, including the
recovery of damages from the Executive. Executive shall notify Mako in writing
of all employments and engagements during the eighteen (18) month
non-competition period. The terms of this Section shall survive all stated terms
4
<PAGE>
of this Agreement and shall not be affected by termination of or resignation by
Executive.
12. Conduct. Executive agrees to conduct himself with due regard to
public conventions and morals and agrees that he will not do or commit any act
or thing that would tend to degrade or bring Executive or Mako into public
hatred, contempt, scorn or ridicule or that would tend to shock, insult or
offend the public, or ridicule public morals or decency.
13. Other Employee Benefits. Executive shall be eligible for and shall
receive all health and accident insurance benefits available to other employees
of Mako and shall be eligible to participate in the thrift plan and any and all
other programs made available to executives of Mako. Executive shall be entitled
to employee discounts for Mako merchandise and services.
14. Other Benefits. In addition to all other payments to Executive
hereunder, Company agrees to provide the following benefits during the term:
(a) To provide to Executive a relocation allowance of Forty-
three Thousand One Hundred Dollars ($43,100.00), payable within thirty
(30) days of permanent establishment of a residence in Miami, Florida.
(b) To reimburse Executive for his reasonable household moving
expenses to Miami, Florida, upon presentation of receipts, plus
reimbursement of reasonable household goods storage expenses incurred
for a period not to exceed one hundred eighty (180) days from date.
(c) To provide and grant to the Executive, as of the
Commencement Date, the right and option (the "Option") to purchase up
to Thirty-five Thousand (35,000) shares of the common capital stock of
Mako (the "Option Stock") for a price equal to the closing price of the
common capital stock of Mako on the Commencement Date (the "Per Share
Base Price"). The Option, which shall be in the form of Exhibit A
hereto, shall be exercisable at any time within the sixty (60) months
immediately following the Commencement Date (the "Exercise Period").
Notwithstanding the foregoing, if at any time during the Exercise
5
<PAGE>
Period the obligation of Mako to file periodic reports ceases under the
Securities Exchange Act of 1934, then, in that event: (i) the Option
and the right of the Executive to purchase shares of the Option Stock
thereunder shall thereupon terminate; and (ii) the Executive shall have
the right and option, at any time during the Exercise Period, to compel
Mako to repurchase the Option at a price equal to the product of
multiplying: (x) the difference between the Per Share Base Price and
Four Dollars ($4.00) by (y) the number of shares covered by the Option.
In the event of Termination For Cause, the Option shall be canceled and
Executive shall have no rights thereto.
(d) To pay to Execute a one-time signing bonus of Seventy-
five Thousand Dollars ($75,000.00) payable Twenty-five Thousand Dollars
($25,000.00) on the Commencement Date, Twenty-five Thousand Dollars
($25,000.00) ninety (90) days after the Commencement Date and
Twenty-five Thousand Dollars ($25,000.00) one hundred eighty (180) days
after the Commencement Date.
(e) To include Executive in the Tracker Marine, L.P. 401(k)
savings plan, if legally permitted. If not permitted, Mako agrees to
include Executive in the existing Mako 401(k) plan.
(f) To pay the premiums on a term life insurance policy on the
life of Executive in the insured amount of Three Hundred Thousand
Dollars ($300,000.00). This benefit is contingent on Executive's life
being, at all times during the term, insurable at preferred, non-smoker
rates.
15. Vacation. The Executive shall be entitled each calendar year to a
vacation of three (3) weeks, during which time his compensation shall be paid in
full. Each such vacation shall be taken in such periods as are determined by the
Chairman of Mako.
16. Expenses. Within the guidelines of written Mako policy, the
Executive may incur reasonable expenses for promoting Mako's business, including
expenses for entertainment, travel and similar items. Mako shall reimburse
Executive for all such expenses upon the Executive's periodic presentation of
6
<PAGE>
itemized account and vouchers of such expenditures in such form as is required
by the regulations of the Internal Revenue Service.
17. Maintenance of Trade Secrets and Confidential Information.
Executive recognizes that as a result of his employment by Mako, he has in the
past or may in the future develop, obtain or learn about trade secrets or
confidential information which is the property of Mako, and Executive agrees to
use his best efforts and utmost diligence to guard and protect said trade
secrets and confidential information, and Executive agrees that he will not
during or after the period of his employment by Mako use for himself or others
or divulge to others any of said trade secrets or confidential information which
he may develop, obtain or learn about as a result of his employment unless
authorized to do so by Mako in writing. Executive further agrees that if his
employment by Mako is terminated for any reason, he will not take with him but
will leave with Mako all records and papers and all matter of whatever kind
which bears Mako's secret or confidential information.
For purposes of this Agreement, the terms "trade secrets" and
"confidential information" may include processes, methods, techniques, systems,
summaries, programs, patterns, models, devices, compilations, list of customers,
price or discount lists, trademark drawings, copyright written materials, patent
information or any other information of whatever kind which gives to Mako an
opportunity to obtain an advantage over their competitors who do not know or use
it.
18. Attorneys' Fees. In the event of litigation between Mako and the
Executive concerning this Agreement, the non-prevailing party shall be obligated
to pay the attorneys' fees and court costs of the prevailing party.
19. Notices. Any notice required or desired to be given under this
Agreement shall be deemed given if given in writing by certified mail to the
residence of the Executive or to the principal place of business, in case of
Mako.
20. Waiver of Breach. The waiver by Mako of a breach of any provision
of this Agreement by the Executive shall not operate or be construed as a waiver
of any subsequent breach by the Executive. No waiver shall be valid unless in
writing and signed by an authorized officer of the Mako.
7
<PAGE>
21. Assignment. The Executive acknowledges that the services to be
rendered by him are unique and personal. Accordingly, the Executive may not
assign any of his rights or delegate any of his duties under this Agreement.
Subject to the foregoing, the rights and duties of the parties under this
Agreement shall inure to the benefit of and shall be binding upon them and their
heirs, successors and assigns.
22. Entire Agreement. Executive acknowledges and agrees that there are
no agreements, warranties, representations, promises or any suggestions thereof
that are not set forth in this Agreement and that this Agreement (together with
any other agreements between Mako and Executive concurrently executed herewith)
embodies the entire agreement between Mako and the Executive and can be amended
only by a subsequent agreement in writing signed by Mako and Executive.
23. Law Governing. This Agreement shall be governed by the laws of the
State of Missouri applicable to contracts entered into and performed entirely
within such state.
IN WITNESS WHEREOF, the parties have hereunto set their hands the day
and date first above written. MAKO MARINE INTERNATIONAL, INC.
By /s/ Joe Greene
Its Secretary; General Counsel
"Mako"
/s/ Rick Reyenger
Rick Reyenger
"Executive"
8
<PAGE>
STOCK OPTION AGREEMENT
(Nonassignable) 35,000 Shares Grant Date:__________, 1997
To Purchase Common Shares of
MAKO MARINE INTERNATIONAL, INC. (the "Corporation")
THIS CERTIFIES THAT Rick Reyenger (hereinafter called the "Optionee")
has been granted the option to purchase all or any part of fully paid and
nonassessable shares of common stock in the aggregate number of shares set out
above (hereinafter called the "Optioned Shares") of the Corporation, a Florida
corporation, upon and subject to the following terms and conditions.
The purchase price (hereinafter called the "Option Price") for the
Optioned Shares shall be $___________ per share.
Unless sooner terminated, this option, and all rights to purchase
Option Shares hereunder, shall expire ______________, 2002 (hereinafter called
the "Expiration Date").
This option, and all rights hereunder, shall be nonassignable and
nontransferable, except by will or the laws of descent and distribution in the
event of the death of the Optionee, as hereinafter set forth. Any attempted
transfer, assignment, pledge, hypothecation or other disposition of this option
shall be null and void without effect.
This option may be exercised from time to time only by delivery to the
Corporation at its main office (Attention: Secretary) of a notice in writing
duly signed by the Optionee stating the number of shares with respect to which
this option is then being exercised, and the time of delivery of such shares to
the Optionee, 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,
accompanied by: (i) payment in full in cash or by certified or bank cashier's
check payable to the order of the Corporation, of the aggregate Option Price for
the Optioned Shares purchased pursuant to the exercise of this option; or (ii)
at the discretion of the Corporation, by delivering at fair market value shares
of the Corporation's common stock that is already owned by the Optionee.
Notwithstanding the foregoing, this option may not be exercised at any time when
this option, or the granting or exercise hereof, violates any law or
governmental order or regulation.
Not less than five thousand (5,000) Optioned Shares may be purchased at
any one time unless the number purchased is the total number purchasable at that
time hereunder.
If at any time before the Expiration Date the Optionee dies (a
"Terminating Event"), then this option shall terminate, provided only that any
portion of this option that was exercisable as of the date of the Terminating
Event may be exercised by Optionee's executor or other legally authorized
representative at any time within six (6) months after Optionee's death.
This option is subject to the terms of a certain Executive Employment
Agreement (the "Contract") between Optionee and the Corporation. This Option
shall terminate in the event of either (i) Termination for Cause, as defined in
the Contract, (ii) violation of Section 11 of the Contract, or (iii) violation
of Section 17 of the Contract.
To the extent that this option shall not have been exercised in full
prior to its Expiration Date or earlier termination hereof, this Option shall
terminate and become void and of no further effect.
The Corporation may postpone the issuance and delivery of Optioned
Shares until: (a) all applicable laws and regulations have been complied with
(including, but not limited to, the effective registration and/or qualification
EXHIBIT A
Page 1
<PAGE>
of such Optioned Shares, and the admission to listing thereof on any stock
exchange); and (b) all other legal matters in connection with the issuance and
delivery of such Optioned Shares have been approved by the counsel of the
Corporation.
The Optionee shall make such representations and furnish such
information to the Corporation as may be appropriate to permit the Corporation
to issue any Optioned Shares in compliance with the provisions of the Securities
Act of 1933, as amended, or any other applicable law.
This option shall not confer upon the Optionee any right to remain in
the employ of the Corporation, or any subsidiary of the Corporation, and shall
not confer upon the Optionee any rights in the Optioned Shares prior to the
purchase thereof pursuant to an exercise of this option.
This Agreement shall be binding upon, and inure to the benefit of, any
successor or successors of the Corporation.
WITNESS the seal of the Corporation and the signatures of its duly
authorized officers.
MAKO MARINE INTERNATIONAL, INC.
By_______________________________
Its______________________________
ATTEST:
_________________________________
Joe C. Greene, Secretary
NOT VALID UNLESS MANUALLY
ATTESTED BY CORPORATE SECRETARY
RECEIVED AND AGREED TO BY:
____________________________________
Rick Reyenger, Optionee Date________________, 1997
EXHIBIT A
Page 2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the statement
of financial condition as of and for the years ended June 28, 1997 and June 29,
1996 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> JUN-29-1996 JUN-28-1997
<PERIOD-START> JUL-02-1995 JUN-30-1996
<PERIOD-END> JUN-29-1996 JUN-28-1997
<CASH> 530,123 1,763,918
<SECURITIES> 0 0
<RECEIVABLES> 1,311,442 1,157,993
<ALLOWANCES> 58,279 119,556
<INVENTORY> 2,277,995 3,752,181
<CURRENT-ASSETS> 4,240,183 6,970,227
<PP&E> 4,100,574 5,023,867
<DEPRECIATION> 1,036,459 753,712
<TOTAL-ASSETS> 7,443,325 15,577,761
<CURRENT-LIABILITIES> 3,952,997 5,229,890
<BONDS> 1,659,039 1,435,727
0 0
0 0
<COMMON> 26,550 90,550
<OTHER-SE> 904,739 8,221,594
<TOTAL-LIABILITY-AND-EQUITY> 7,443,325 15,577,761
<SALES> 19,141,970 19,060,911
<TOTAL-REVENUES> 19,210,465 19,112,702
<CGS> 17,817,667 17,745,220
<TOTAL-COSTS> 17,817,667 17,745,220
<OTHER-EXPENSES> 4,000,399 4,979,209
<LOSS-PROVISION> 36,000 113,000
<INTEREST-EXPENSE> 312,174 313,273
<INCOME-PRETAX> (2,955,775) (4,038,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,955,775) (4,038,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,955,775) (4,038,000)
<EPS-PRIMARY> (1.19) (.73)
<EPS-DILUTED> (1.19) (.73)
</TABLE>
EXHIBIT 99.1
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
- -----------------------------------------------------x
RICHARD BOGEN, :
:
Plaintiff, :
: Civil Action No.
- against - :
:
KENNETH BURROUGHS, DOUGLAS W. : CLASS ACTION
BAENA, JOSEPH J. MESSINA, BRUCE : COMPLAINT
FOERSTER, JOE C. GREENE, SUSIE :
HENRY, LARRY MUELLER, MAKO :
MARINE INTERNATIONAL, INC., :
TRACKER MARINE, L.P., and :
TRACKAQ, INC., :
:
Defendants. :
- -----------------------------------------------------x
Plaintiff, individually and on behalf of all persons similarly
situated, by his attorneys, alleges the following upon information and belief,
except for those allegations which pertain to plaintiff, which allegations are
based upon personal knowledge, after due investigation by his counsel. The
investigation included a review and analysis of public statements and corporate
documents of defendants, including filings with the United States Securities and
Exchange Commission (the "SEC"), analyst reports, and other review and analysis
of materials concerning the defendants named herein and the allegations set
forth below, including newspaper articles and articles in financial
publications:
NATURE OF THE ACTION
1. This action arises out of an unlawful scheme and plan to enable
Trackaq, Inc. ("Trackaq") to acquire the remaining approximately 19% ownership
<PAGE>
of Mako Marine International, Inc. ("Mako" or the "Company") which Trackaq does
not already own for grossly inadequate consideration and in breach of
defendants' fiduciary duties. Plaintiff alleges that he and the other public
stockholders of Mako common stock are entitled to enjoin the proposed
transaction, or alternatively, to recover damages in the event the transaction
is consummated.
JURISDICTION AND VENUE
2. This action arises under the common law of the State of Florida.
This Court has jurisdiction over this action pursuant to 28 U.S.C. ss. 1332
(diversity of citizenship). With regard to the requirements of 28 U.S.C. ss.
1332, plaintiff avers that he is a citizen of the State of New Jersey and that
each of the defendants are citizens of states other than the State of New
Jersey, and that the matter in controversy exceeds $75,000, exclusive of
interest and costs.
3. Venue is proper in this District because many of the acts complained
of, including the development and the carrying out of the proposed transaction,
occurred within this District. In addition, several of the defendants transact
business or reside in this District and Mako maintains its principal offices in
this District.
THE PARTIES
4. Plaintiff Richard Bogen is, and at all relevant times was, the owner
of Mako common stock.
5. Defendant Mako is a corporation organized and existing under the
2
<PAGE>
laws of the State of Florida with its principal executive offices located at
4355 NW 128th Street, Miami, Florida 33054. Mako designs, manufactures and sells
offshore boats for sport fishermen and recreational use. The Company markets 24
models ranging in length from 17 to 29 feet. Mako sells its boats through
independent dealers along the eastern coast of the United States, the Gulf
Coast, the Great Lakes region and in foreign markets.
6. Defendant Trackaq is a corporation organized and existing under the
laws of the State of Florida. Trackaq is a wholly-owned subsidiary of Tracker
Marine, L.P. ("Tracker Marine"). According to Mako's Schedule 13D/A-2 filed with
the SEC on August 7, 1997, Trackaq owns of record and beneficially 7,330,000
shares of the common stock of Mako, representing approximately 81% of the issued
and outstanding shares of the common stock of Mako.
7. Defendant Tracker Marine is a limited partnership organized under
the laws of the State of Missouri with its principal executive offices located
at 2500 East Kearney, Springfield, MO 56803. Tracker Marine's sole general
partner is JLM Management Company ("JLM"), a privately-held Missouri
corporation. John L. Morris ("Morris") is the sole director of JLM and, through
a revocable trust, the indirect beneficial owner of all of the outstanding
capital stock of JLM. On January 16, 1997, Tracker Marine acquired control of
Mako by means of Tracker Marine's purchase of 930,000 shares of common stock
from CreditAmerica Venture Capital, Inc. ("CAVC"), immediately followed by
Tracker's purchase from Mako of 6,400,000 newly issued shares of common stock
("Mako Shares"). With its acquisition of the CAVC shares, along with the 6.4
million newly issued Mako shares, Tracker Marine acquired a total of 7,300,000
3
<PAGE>
shares of common stock, representing approximately 81% of the currently
outstanding shares of Mako common stock.
8. Defendant Kenneth Burroughs ("Burroughs"), a resident of Missouri,
is the Chairman of the Board and Chief Executive Officer of the Company.
Burroughs was designated to the Board by Tracker Marine, pursuant to the Stock
Purchase Agreement dated December 4, 1996, by and between Tracker Marine and
Mako, and appointed by the Mako Board effective upon the consummation of the
transaction on January 16, 1997.
9. Defendant Susie Henry ("Henry"), a resident of Missouri, is a
director of the Company. Henry was designated to the Board by Tracker Marine,
pursuant to the Stock Purchase Agreement dated December 4, 1996, by and between
Tracker Marine and Mako, and appointed by the Mako Board effective upon the
consummation of the transaction on January 16, 1997. Henry is the sister of
Morris.
10. Defendant Larry Mueller ("Mueller"), a resident of Missouri, is a
director of the Company. Mueller was designated to the Board by Tracker Marine,
pursuant to the Stock Purchase Agreement dated December 4, 1996, by and between
Tracker Marine and Mako, and appointed by the Mako Board effective upon the
consummation of the transaction on January 16, 1997. Mueller is the
brother-in-law of Morris.
11. Defendant Joe C. Greene ("Greene"), a resident of Missouri, is a
director of the Company. Greene was designated to the Board by Tracker Marine,
pursuant to the Stock Purchase Agreement dated December 4, 1996, by and between
4
<PAGE>
Tracker Marine and Mako, and appointed by the Mako Board effective upon the
consummation of the transaction on January 16, 1997.
12. Defendant Douglas W. Baena ("Baena"), a resident of Florida, is a
director of the Company. Baena is the former Chairman of the Board, Chief
Executive Officer and President of the Company.
13. Defendant Joseph J. Messina ("Messina"), a resident of New York, is
a director of the Company.
14. Defendants Baena and Messina, in February 1994, formed Credit
America Venture Capital, Inc. ("CAVC"). CAVC was the principal shareholder of
Mako until the consummation of the transaction with Tracker Marine. To enable
Tracker Marine to acquire the approximately 81 percent interest in Mako, CAVC,
through Baena and Messina, sold 930,000 shares of Mako common stock to Tracker
Marine, which represented at the time approximately 35% of Mako's common stock,
at a net price of $1.40 per share.
15. Defendant Bruce Foerster ("Foerster"), a resident of Florida, is a
director of the Company.
16. The above-named individual defendants (collectively the "Individual
Defendants") as officers and/or directors of the Company, and/or as significant
shareholders of the Company owe fiduciary duties of good faith, loyalty, fair
dealing, due care, and candor to plaintiff and the other members of the Class
(as defined below).
5
<PAGE>
CLASS ACTION ALLEGATIONS
17. Plaintiff brings this action as a class action pursuant to rules
23(a) and 23(b)(3) of the Federal Rules of Civil Procedure (Fed. R. Civ. P.") on
behalf of himself and all other stockholders of the Company as of August 12,
1997 (the "Class"), and their successors in interest, who are or will be
threatened with injury arising from defendants' actions. Excluded from the Class
are the defendants herein, members of their immediate families, and any
subsidiary, firm, trust, corporation, or other entity related to or affiliated
with any of the defendants.
18. This action is properly maintainable as a class action for the
following reasons:
(a) the Class is so numerous that joinder of all members is
impracticable. While the exact number of Class members is unknown to plaintiff
at this time and can only be ascertained through appropriate discovery, there
are more than 9 million shares of Mako common stock outstanding, held by
hundreds of shareholders of record. The holders of these shares are believed to
be geographically dispersed throughout the United States. Mako common stock is
listed and actively traded on the NASDAQ/National Market System Bulletin Board;
(b) there are questions of law and fact which are common to members of
the Class and which predominate over any questions affecting only individual
members. The common questions include, inter alia, the following:
6
<PAGE>
(i) whether defendants have engaged and are continuing to
engage in a plan and scheme to benefit Trackaq at the expense of the
members of the Class; (ii) whether the Individual Defendants, as
directors and/or officers of the Company and/or as significant
shareholders of the Company, have breached their fiduciary duties owed
to plaintiff and the other members of the Class, including their duties
of entire fairness, loyalty, due care, and candor; (iii) whether
defendants have disclosed all material facts in connection with the
challenged transaction; and (iv) whether plaintiff and the other
members of the Class would be irreparably damaged were defendants not
enjoined from the conduct described herein;
(c) the claims of plaintiff are typical of the claims of the other
members of the Class and plaintiff has no interest that is adverse or
antagonistic to the interests of the Class;
(d) the plaintiff is committed to prosecuting this action and has
retained counsel competent and experienced in litigation of this nature.
Plaintiff is an adequate representative of the Class and will fairly and
adequately protect the interests of the Class; and
(e) a class action is superior to other available methods for the fair
and efficient adjudication of this controversy since a multiplicity of actions
could result in an unwarranted burden on the court system and could create the
possibility of inconsistent judgments. Moreover, a class action will allow
redress for many persons whose claims would otherwise be too small to litigate
individually. There will be no difficulty in the management of this action as a
class action.
7
<PAGE>
SUBSTANTIVE ALLEGATIONS
19. On August 8, 1997, Tracker Marine announced that Trackaq adopted a
Plan of Merger pursuant to which Trackaq will merge into Mako. Under the Plan of
Merger, the public shareholders of Mako will receive $1.25 in cash for each
share of Mako common stock they own, and holders of public warrants will receive
$0.125 in cash for each warrant they own (the "Transaction"). Upon consummation
of the proposed merger, Mako will become a wholly-owned subsidiary of Tracker
Marine. JLM, the sole general partner of Tracker Marine, has approved the merger
of Trackaq with and into Mako.
20. The purpose of the Transaction is to enable Trackaq to acquire one
hundred percent (100%) equity ownership of Mako and its valuable assets for its
own benefit at the expense of Mako's public stockholders, who will be deprived
of their equity investment and the benefits thereof including, among other
things, the expected growth in the Company's profitability.
21. The Transaction is the product of unfair dealing, and the price of
$1.25 cash per share is unconscionable and unfair and so grossly inadequate as
to constitute a gross breach of trust committed by defendants against the public
stockholders because, among other things:
(a) the announcement of the proposed Transaction was made when the
Company was poised for significant future growth and earnings. On August 4,
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1997, the Company announced its preliminary operating results for the three and
twelve month periods ended June 28, 1997. The Company expects revenue of
approximately $6.3 million with a net loss of approximately $425,000 or $0.26
per share for the fourth quarter of fiscal 1996. This compares to revenue of
$6.1 million and a net loss of $706,000 or $0.26 per share for the fourth
quarter of fiscal 1996. Further, revenues for the Company's fiscal year ended
June 28, 1997 is expected to be approximately $20.1 million with a net loss of
approximately $3.85 million or $0.69 per share. This compares to revenue of
$19.9 million and a net loss of $3 million or $1.19 per share for fiscal 1996.
(b) because Trackaq has an overwhelming controlling interest in the
Company's common stock, no third party will likely bid for Mako. Thus,
defendants will be able to proceed with the Transaction without an auction or
other type of market check to maximize value for Mako's public shareholders; and
(c) defendants timed the announcement of the Transaction to place an
artificial lid or cap on the market price for Mako's stock to enable Trackaq to
acquire the minority stock at the lowest possible price. The price of $1.25 per
share represents no premium over the market price on the day prior to the
announcement of the Transaction ($1.25 per share). It is also below the price
that the stock reached within the last six months ($3.25 per share), and year
($4.125 per share).
22. By reason of their positions with Mako and the controlling
ownership of the Company, the defendants have a fiduciary relationship with the
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plaintiff and the members of the Class and owe to them the highest obligations
of good faith and fair dealing. Further, by reason of defendants' positions with
Mako and Trackaq's controlling ownership of the Company, defendants are in
possession of non-public information concerning the financial condition and
prospects of Mako, and especially the true value and expected increased future
value of Mako and its assets, which have not been disclosed to Mako's public
stockholders.
23. The defendants are intent on paying the lowest price, whereas the
defendants also have the duty to maximize shareholder value. The defendant
fiduciaries have clear and material conflicts of interest.
24. Any attempt to obtain a fair price for the minority shareholders of
Mako will be prevented by Trackaq and/or its representatives. Trackaq and its
representatives control the Mako Board in that defendants Burroughs, Henry,
Greene, and Mueller (who comprise of four of the seven Mako directors) were
designated to the Mako Board by Tracker Marine.
25. The proposed Transaction is wrongful, unfair and harmful to Mako's
minority public stockholders, and represents an effort by defendants to
aggrandize their own financial position and/or interests at the expense of and
to the detriment of Class members. The Transaction is an attempt to deny
plaintiff and the other members of the Class their right to share
proportionately in the true value of Mako's valuable assets, while usurping the
same for the benefit of Trackaq on unfair and inadequate terms.
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26. Defendants, in failing to disclose the material non-public
information in their possession as to the value of Mako's assets, the full
extent of the future earnings potential of Mako and its expected increase in
profitability, have breached and are breaching their fiduciary duties to the
members of the Class.
27. Moreover, the Transaction is procedurally unfair in that it has not
been disclosed whether the Transaction was reviewed and approved by a
disinterested third party.
28. As a result of defendants' unlawful actions, plaintiff and the
other members of the Class will be damaged in that they will not receive their
fair portion of the value of Mako's assets and business in the Transaction and
will be prevented from obtaining the real value of their equity ownership of the
Company.
29. Unless the proposed Transaction is enjoined by the Court,
defendants will continue to breach their fiduciary duties owed to the plaintiff
and the members of the Class, will not engage in arm's-length negotiations on
the Transaction terms, and will consummate and close the proposed Transaction
complained of and succeed in their plan described above, all to the irreparable
harm of the plaintiff and the other members of the Class.
30. Plaintiff and the other members of the Class have no adequate
remedy at law.
WHEREFORE, plaintiff, on behalf of himself and the other members of the
Class, demands judgment as follows:
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(a) declaring this action to be a proper class action maintainable
pursuant to Rule 23(b)(3) of the Fed. R. Civ. P. and certifying plaintiff as the
representative of the Class;
(b) ordering defendants to carry out their fiduciary duties to
plaintiff and the other members of the Class, including those duties of care,
loyalty, candor and fair dealing;
(c) granting preliminary and permanent injunctive relief against the
consummation of the Transaction as described herein;
(d) appointing a disinterested third party to review the terms of the
Transaction and explore alternatives;
(e) in the event the Transaction is consummated, rescinding the
Transaction effected by defendants and/or awarding rescissory damages to the
Class;
(f) ordering defendants, jointly and severally, to account to plaintiff
and other members of the Class for all damages suffered and to be suffered by
them as the result of the acts and transactions alleged herein;
(g) awarding plaintiff the costs and disbursements of the action
including allowances for plaintiff's reasonable attorneys' and experts' fees;
and (h) granting such other and further relief as the Court may deem just and
proper.
Dated: August 12, 1997
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GOODKIND LABATON RUDOFF
& SUCHAROW LLP
By:
Emily C. Komlossy, Esq.
Suite 2100
200 South Biscayne Blvd.
Miami, FL 33131
(305) 579-1260
(305) 579-1229 (fax)
Attorneys for Plaintiff
OF COUNSEL:
WOLF POPPER LLP
845 Third Avenue
New York, N.Y. 10022
(212) 759-4600
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