Upon completion of this offering, we will have 4,000,000 shares of
common stock issued and outstanding. Of these shares, the 1,000,000 shares sold
in this offering will be freely tradable in the public market without
restriction under the Securities Act, except shares purchased by an "affiliate"
(as defined in the Securities Act) of Aarica. The remaining 2,800,000 shares,
will be "restricted shares" within the meaning of the Securities Act. Restricted
shares cannot be publicly sold unless registered under the Securities Act or
sold in accordance with an applicable exemption from registration, such as that
provided by Rule 144 under the Securities Act.
In general, under Rule 144, as currently in effect, a person (or
persons whose shares are aggregated) is entitled to sell restricted shares if at
least one year has passed since the later of the date such shares were acquired
from Aarica or any affiliate of Aarica. Rule 144 provides, however that within
any three-month period such person may only sell up to the greater of 1% of the
then outstanding shares of common stock (approximately 40,000 shares following
the completion of this offering) or the average weekly trading volume in our
shares during the four calendar weeks immediately preceding the date on which
the notice of the sale is filed with the Commission. Sales pursuant to Rule 144
also are subject to certain other requirements relating to manner of sale,
notice of sale and availability of current public information. Anyone who is not
an affiliate for a period of at least 90 days is entitled to sell restricted
shares under Rule 144 without regard to the limitations if at least two years
have passed since the date such shares were acquired from us or any affiliate.
Any affiliate is subject to such volume limitations regardless of how long the
shares have been owned or how they were acquired.
After this offering, Mr. Kolozs will own 2,250,000 shares of the common
stock (2,175,000 if his allotted shares are sold in the over-allotment option).
Mr. Kolozs and the other officers and directors will enter into an agreement
with the underwriters agreeing not to sell or otherwise dispose of any shares
for one year after the date of this prospectus without the prior written consent
of the underwriters. The 200,000 shares acquired in a private offering in June
1999 Became eligible for sale under Rule 144 in June 2000. The 150,000 shares
acquired by CCEC in June 2000, will be eligible for sale under Rule 144 in June
2001. These shares, together with any of the 200,000 shares received by CCEC in
June 1999 not sold in the over-allotment will be subject to a six-month lock-up.
We cannot predict the effect, if any, that an offer or sale of these
shares would have on the market price. Nevertheless, sales of significant
amounts of restricted shares in the public markets could adversely affect the
fair market price of the shares, as well as impair our ability to raise capital
through the issuance of additional equity shares.
Plan of distribution
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives, Institutional Equity
Corporation., has severally agreed to purchase from us and we have agreed to
sell to the underwriters, the respective number of units set forth opposite
their respective names at the initial public offering price, less the
underwriting discounts set forth on the cover page of this prospectus:
Underwriters Number of Units
Institutional Equity Corporation
Total 1,000,000
The underwriting agreement provides that the obligations of the
underwriters to pay for and accept delivery of the shares of common stock and
our warrants are subject to approval of certain legal matters by counsel to the
underwriter and to certain other events. The underwriters are obligated to
purchase all shares of common stock and warrants we are offering (other than
those covered by the over-allotment option described below), if any such shares
are purchased.
We have been advised by the representatives of the underwriters that
the underwriters propose initially to offer the units to the public at the
offering price set forth on the cover page of this prospectus and through
members of the NASD. The representatives have also advised us that the
underwriters may allow a concession, not in excess of $___ per unit, and in
their discretion, to certain domestic dealers who are members of the NASD and
which domestic dealers agree to sell our securities in conformity with the NASD
Conduct Rules. The initial public offering price and concessions will not be
changed by the representatives until after the offering has been completed.
At the closing of the sale of our securities that we are offering, we
will sell to the underwriters, the underwriter's warrants, for nominal
consideration, entitling the underwriters to purchase an aggregate of 100,000
units containing 100,000 shares of common stock and 100,000 warrants. The
underwriters' warrants shall be non-exercisable and non-transferable, other than
a transfer to affiliates of the underwriters or members of the selling group for
a period of twelve months following the effective date. The underwriters'
warrants and the underlying securities shall contain anti-dilution provisions
and are redeemable. The underwriters' warrants will be exercisable for a period
of four years commencing one year following the effective date and, if the
underwriters' warrants are not exercised during such period, they shall, by
their own terms, automatically expire.
The exercise price of each underwriters' warrants shall be:
o $____ per unit and
o $____ per share of common stock underlying the warrant,
which are 120% of the public offering price of our units and 150% of public
offering price of the shares of common stock underlying our warrants.
In addition, we have granted to the underwriters a single demand
registration right and unlimited piggy back registration rights with respect to
our common stock and our warrants underlying the underwriter's warrants for a
period commencing at the beginning of the second year and concluding at the end
of the fifth year following the effective date.
The warrants will not be redeemable for a period of twelve months
following the effective date, at which time the warrants may be redeemed by us
for $0.05 per warrant on not less than thirty days prior written notice, subject
to exercise by the underwriters, if the closing bid price for our common stock
has been at least $___ per share for thirty consecutive trading days. If we
exercise our right to redeem warrants, the warrants may still be exercised by
the underwriters until the close of business on the day immediately before the
date fixed for redemption. If any warrant called for redemption is not exercised
by such time, it will not be exercisable, and the underwriters will be entitled
only to the redemption price.
We may not redeem the warrants at any time that a current registration
statement under the Securities Act covering the shares of common stock issuable
upon exercise of our warrants is not in effect. The issuance of such shares to
the underwriters must be registered, qualified or exempt under the laws of the
state in which the underwriters reside. If required, we will file a new
registration statement with the Securities and Exchange Commission with respect
to the securities underlying the warrants prior to the exercise of such warrants
and will deliver a prospectus with respect to such securities to the underwriter
as required by Section 10(a)(3) of the Securities Act.
Under Rule 2710(a)(7)(A) of the NASD Conduct Rules, the warrants
acquired by the underwriters will be restricted from sale, transfer, assignment
or hypothecation for a period of one year from the effective date of this
offering, except to officers or partners (not directors) of the underwriters and
members of the selling group and their officers or partners.
In addition to the above, we have granted to the underwriters an option
exercisable for 45 days from the effective date, to purchase up to an additional
150,000 units containing 150,000 shares of common stock and 150,000 warrants at
the initial public offering price, less the underwriting discount set forth on
the cover page of this prospectus. The underwriters, or the underwriters
individually at their option, may exercise this option solely to cover
over-allotments in the sale of our securities being offered by this prospectus.
Prior to this offering, there has been no public market for our
securities and there can be no assurances that an active public market for our
securities will be developed or, if developed, sustained after this offering.
The initial public offering price of our units and the exercise price and terms
of our warrants have been arbitrarily determined by negotiations between us and
the underwriters and may bear no relationship to our current earnings, book
value, net worth or other established valuation criteria. The factors considered
in determining the initial public offering prices included:
o an evaluation by our management and the underwriters of the history of and prospects for the industry in
which we compete,
o an assessment of management,
o our prospects,
o our capital structure, and
o certain other factors deemed relevant.
The initial public offering prices do not necessarily bear any
relationship to our assets, book value, earnings or other established criterion
of value. Such prices are subject to change as a result of market conditions and
other factors, and no assurance can be given that a public market for the shares
of class A common stock and/or warrants will develop after the close of the
public offering, or if a public market in fact develops, that such public market
will be sustained, or that our units, shares of common stock and/or warrants can
be resold at any time at the initial public offering prices or any other prices.
We have agreed to pay our underwriters an underwriting discount as a
commission equal to ten percent of the gross proceeds of this offering,
including the gross proceeds from the sale of the over-allotment option, if
exercised. We have also agreed to reimburse the underwriters on a
non-accountable basis for their expenses in the amount of two percent of the
gross proceeds of this offering, including proceeds from any securities
purchased under the over-allotment option. The underwriters' expenses in excess
of the non-accountable expense allowance will be paid by the underwriters. To
the extent that the expenses of the underwriters are less than the amount of the
non-accountable expense allowance received, such excess shall be deemed to be
additional compensation to the underwriters.
If the underwriters, at their election at any time one year after the
date of this prospectus, solicits the exercise of the warrants, Aarica will be
obligated, subject to certain conditions, to pay the underwriters a warrant
solicitation fee equal to 5% of the aggregate proceeds received by Aarica as a
result of the solicitation. No warrant solicitation fees will be paid within one
year after the date of this prospectus. No solicitation fee will be paid if the
market price of the common stock is lower than the then exercise price of the
warrants. No solicitation fee will be paid if the warrants being exercised are
held in a discretionary account at the time of their exercise, except where
prior specific approval for exercise is received from the customer exercising
the warrants and no solicitation fee will be paid unless the customer exercising
thee warrants states in writing that the exercise was solicited and designates
in writing the underwriters or other broker-dealer to receive compensation in
connection with the exercise.
We have agreed to indemnify the underwriters against any costs or
liabilities incurred by the underwriters by reasons of misstatements or
omissions to state material facts in connection with statements made in the
registration statement or the prospectus. The underwriters have, in turn agreed
to indemnify us against any liabilities by reason of misstatements or omissions
to state material facts in connection with the statements made in the
prospectus, based on information relating to the underwriters and furnished in
writing by the underwriters. To the extent that this indemnification may purport
to provide exculpation from possible liabilities arising from the federal
securities laws, in the opinion of the Securities and Exchange Commission, such
indemnification is contrary to public policy and therefore unenforceable.
Shares of common stock held by our existing shareholders immediately
prior to the effective date and any other securities issued for a period of
twelve months from the effective date (other than those offered in this
prospectus, including the underlying securities, the underwriters' warrants and
the underlying the securities), are subject to a one year lock-up period, with
the exception of 200,000 shares of common stock issued in connection with bridge
financing in the amount of $500,000, and any of CCEC's shares acquired in July
1999 which are not sold in the over-allotment option, which are subject to a six
month lock-up period. CCEC's 150,000 shares acquired in June 2000, as
consideration of cancellation of approximately $300,000 of debt will be subject
o a six month lock-up from the effective dated of this prospectus and become
eligible for sale under Rule 144 in June 2001. The lock-up periods begin on the
later of the date of issuance or the effective date, and are subject to early
termination at the sole discretion of the underwriters. An appropriate legend
referring to these restrictions will be marked on the face of the certificates
representing all such securities. Moreover, for a period of twelve months from
the effective date, we will not sell or otherwise dispose of any securities
without the prior written consent of the underwriters.
The underwriters shall have the right to designate a member of the
board of directors, or at the underwriters' option, to designate one individual
to attend the meetings of our board of directors for a period of five years
after the effective date. If Robert A. Shuey, III, a principal of Institutional
Equity Corporation, is designated as a member of the board of directors, he will
receive an annual retainer of $5,000 and $1,000 per meeting attended, $1,000 for
chairing a committee of the board of directors, and $500 for each committee
meeting attended.
The foregoing is a summary of the principal terms of the agreement
described above and does not purport to be complete. Reference is made to the
underwriting agreement which is filed as an exhibit to the registration
statement.
Certain persons participating in this offering may engage in
transactions that stabilize, maintain or otherwise affect the price of our
common stock and warrants, including stabilizing transactions in accordance with
Rule 104 of Regulation M. Under Regulation M persons may bid for or purchase of
common stock for the purpose of stabilizing its market price.
In connection with this offering, certain underwriters may engage in passive
market making transactions in the units on the _______exchange in accordance
with Rule 103 of Regulation M.
Listing application
We intend to apply for listing of the units, common stock and warrants on the
______ Exchange under the trading symbols ____ ,____ ,and ____, respectively.
LEGAL MATTERS
Legal matters in connection with our class A common stock and our
warrants being offered in this prospectus will be passed upon for us by Maurice
J. Bates, L.L.C., Dallas, Texas. Certain legal matters will be passed upon for
the underwriters by the law firm of Wolin, Ridley & Miller, LLP, Dallas, Texas.
EXPERTS
The audited financial statements included in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports
Report of Independent Public Accountants
To the Shareholders of
Aarica Holdings, Inc. and Subsidiaries,
We have audited the accompanying consolidated balance sheets of AARICA HoldingS,
inc. (a United States corporation) AND SUBSIDIARIES (see Note 1) as of December
31, 1999 and 1998, and the related consolidated statements of operations,
shareholders' deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
As discussed in Note 1 to the accompanying financial statements, the Company was
reorganized during 1998. As a result, Aarica Holdings, Inc. was incorporated on
November 2, 1998 to become the holding company of all of the companies of the
group. Since the reorganization involved a combination of companies with common
stockholders, it was accounted for in a manner similar to a pooling-of-interests
by retroactively reflecting the reorganization in the accompanying financial
statements as if it had occurred as of the beginning of the earliest period
presented.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aarica Holdings, Inc. and
Subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States.
July 15, 2000
Aarica Holdings, Inc. and Subsidiaries
Consolidated balance sheets as of December 31, 1999 and 1998
(Stated in U.S. dollars)
Assets
1999 1998
---------------- --------------
Current assets:
Cash and cash equivalents-
Available 214,654 254,409
Restricted 262,544 -
----------------------------------------
477,198 254,409
Accounts receivable-
Trade 1,598,320 903,026
Other 146,222 104,729
----------------------------------------
1,744,542 1,007,755
Inventories 1,544,696 1,706,650
Prepaid expenses 27,658 20,908
----------------------------------------
Total current assets 3,794,094 2,989,722
Machinery and equipment 830,079 1,014,717
Other assets 8,882 7,252
----------------------------------------
Total assets $ 4,633,055 $ 4,011,691
=========== ===========
The accompanying notes are an integral part of these
consolidated balance sheets.
Aarica Holdings, Inc. and Subsidiaries
Consolidated balance sheets as of December 31, 1999 and 1998
(Stated in U.S. dollars)
Liabilities and shareholders' deficit
1999 1998
---------------- --------------
Current liabilities:
Suppliers $ 1,352,280 $
927,240
Accrued taxes 1,355,392 853,687
Notes payable to related parties 1,852,111 953,489
Other accounts payable and accrued liabilities 1,319,356 740,725
----------------------------------------
Total current liabilities 5,879,139 3,475,141
Long-term debt - 4,335,213
Shareholders' deficit:
Common stock, $.01 par value; 20,000,000 authorized shares; 2,800,000 and
2,600,000 shares outstanding at December 31, 1999 and1998,
respectively 28,000 26,000
Preferred stock, $.01 par value; 3,000,000
authorized shares - -
Additional paid-in capital 418,010 -
----------------------------------------
446,010 26,000
Accumulated losses (1,692,094) (3,824,663)
----------------------------------------
Total shareholders' deficit (1,246,084) (3,798,663)
----------------------------------------
Total liabilities and shareholders' $ 4,633,055 $ 4,011,691
deficit
=========== ===========
The accompanying notes are an integral part of these
consolidated balance sheets.
Aarica Holdings, Inc. and Subsidiaries
Consolidated statements of operations
For the years ended December 31, 1999 and 1998
(Stated in U.S. dollars)
1999 1998
---------------- -------------
Net sales $ 5,433,254 $ 5,742,454
Cost of sales 5,146,857 4,661,644
---------------------------------------
Gross profit 286,397 1,080,810
Operating expenses:
Selling, general and administrative 1,540,461 1,397,621
----------------------------------------
Operating loss (1,254,064) (316,811)
Other income (expenses):
Interest, net (233,842) (409,158)
Translation loss (157,102) (136,343)
Other, net (221,996) 665
---------------------------------------
(612,940) (544,836)
---------------------------------------
Loss before asset tax (1,867,004) (861,647)
Provision for asset tax 51,829 69,609
---------------------------------------
Loss before extraordinary item (1,918,833) (931,256)
Extraordinary item - Bank and creditor settlements 4,051,402 1,326,117
---------------------------------------
Net income $ 2,132,569 $ 394,861
=========== ===========
Weighted average shares 2,703,836 2,600,000
=========== ===========
Basic and diluted earnings per share:
Loss before extraordinary item $ (0.71) $ (0.36)
Extraordinary item 1.50 0.51
---------------------------------------
Net income $ 0.79 $ 0.15
=========== ===========
The accompanying notes are an integral part of these
consolidated statements.
Aarica Holdings, Inc. and Subsidiaries
Consolidated statements of shareholders' deficit
For the years ended December 31, 1999 and 1998
(Stated in U.S. dollars)
Capital Stock Additional Total
--------------- --------------
Paid-in Accumulated Shareholders'
Shares Amount Capital Losses
------ ------ ------- ----------------
Deficit
Balance as of December 31, 1997 2,600,000 $ 26,000 $ - $ (4,219,524) $ (4,193,524)
Net income - - 394,861 394,861 -
---------------------------------- ------------------- ----------------------------
Balance as of December 31, 1998 2,600,000 26,000 - (3,824,663) (3,798,663)
Issuance of common shares 200,000 2,000 418,010 - 420,010
Net income - - - 2,132,569 2,132,569
Balance as of December 31, 1999 ---------------- ------------------- ---------------- -------------------
2,800,000 $ 28,000 $ 418,010 $ (1,692,094) $ (1,246,084)
========= ============ ============ ========== =========
The accompanying notes are an integral part of these
consolidated statements.
Aarica Holdings, Inc. and Subsidiaries
Consolidated statements of cash flows
For the years ended December 31, 1999 and 1998
(Stated in U.S. dollars)
1999 1998
---------------- -------------
Cash flows from operating activities:
Net income $ 2,132,569 $ 394,861
Adjustments to reconcile net income to net cash provided by (used in)
operating activities-
Depreciation and amortization 215,922 195,411
Decrease (increase) in-
Trade receivables (660,047) 75,896
Other accounts receivable (37,567) 161,481
Prepaid expenses (8,502) 18,204
Inventories 161,954 (24,612)
Increase (decrease) in-
Suppliers 390,041 33,157
Accrued taxes 469,027 270,721
Notes payable to related parties 860,726 (728,459)
Other accounts payable and accrued liabilities 552,653 (88,679)
-----------------------------------------
Net cash provided by operating activities 4,076,776 307,981
Cash flows from investing activities:
Additions to machinery and equipment (31,284) (259,708)
Other assets (1,363) 27,285
-----------------------------------------
Net cash used in investing activities (32,647) (232,423)
Cash flows from financing activities:
Proceeds from long-term debt (3,722,727) 377,149
Loan payments (750,000) -
Increase in capital stock 420,010 -
-----------------------------------------
Net cash (used in) provided by financing activities (4,052,717) 377,149
-----------------------------------------
Effect of exchange rate changes on cash 231,377 (600,736)
Net increase (decrease) in cash and cash equivalents 222,789 (148,029)
Cash and cash equivalents at beginning of year 254,409 402,438
-----------------------------------------
Cash and cash equivalents at end of year $ 477,198 $ 254,409
=========== ===========
Supplemental cash flow disclosures:
Income taxes paid $ 40,904 $ 36,197
=========== ===========
Interest paid $ 19,542 $ -
=========== ===========
The accompanying notes are an integral part of these
consolidated statements.
Aarica Holdings, Inc. and Subsidiaries
Notes to consolidated financial statements as of December 31, 1999 and 1998
(Stated in U.S. dollars)
Aarica Holdings, Inc. and Subsidiaries
Notes to consolidated financial statements as of December 31, 1999 and 1998
(Stated in U.S. dollars)
1 Description of business and summary of significant accounting policies:
Description of business-
The Company through its subsidiaries designs, manufactures and sells athletic
footwear and sportswear principally in Mexico. The primary customers are large,
international footwear distributors as well as distributors and retailers in
Mexico. The Company has a manufacturing facility in Fresnillo, Zacatecas, Mexico
and a distribution facility and administrative office in Mexico City.
The Company has received a letter of intent from Institutional Equity
Corporation of Dallas, Texas for a proposed firm commitment underwriting to
raise approximately $10 million from the issuance of units consisting of common
stock and warrants to purchase common stock in an initial public offering. The
Company anticipates filing a registration statement with the Securities and
Exchange Commission on Form SB-2 in August 2000 in anticipation of a late 2000
offering.
Use of estimates-
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make certain
estimates and use certain assumptions that affect the reported amounts of assets
and liabilities and the required disclosure of contingent assets and liabilities
in the financial statements. Actual results could differ from those estimates.
Basis of presentation-
The accompanying consolidated financial statements include the financial
statements of Aarica Holdings, Inc. and its wholly-owned subsidiary, Aarica
Holdings Mexico, S.A. de C.V., which in turn has the following subsidiaries:
% Ownership
- Aarica Sport, S.A. de C.V. 99.9
- Taimex Industries, S.A. de C.V. 100.0
- Aarica Sport Products Manufacturing, S.A. de C.V. 80.0
- West Coast Sports, S.A. de C.V. 99.9
The Company was reorganized during 1998. As a result, Aarica Holdings Mexico,
S.A. de C.V. was incorporated in December 1998 to become the holding company of
all of the Mexican companies of the group. Additionally, Aarica Holdings, Inc
was incorporated in November 1998 as the owner of the Mexican holding company.
Since the reorganization involved a combination of companies with common
stockholders, it was accounted for in a manner similar to a pooling-of-interests
by retroactively reflecting the reorganization in the accompanying financial
statements as if it had occurred as of the earliest period presented.
All significant intercompany transactions and balances have been eliminated in
the accompanying consolidated financial statements. The minority interest was
not recorded, since the effect was negative as of December 31, 1999 and 1998.
Consolidation of foreign subsidiaries-
Aarica Holdings, Inc., a holding company without any substantive operations, is
incorporated in the United States and records its transactions in U.S. dollars.
However, all of its subsidiaries are Mexican corporations that record all of
their transactions and operations in Mexican pesos.
The functional currency of the Mexican operations is considered to be the U.S.
dollar. Accordingly, all Mexican peso amounts are translated into U.S. dollars
using the "remeasurement " approach prescribed by Statement of Financial
Accounting Standards ("SFAS") No. 52, as follows:
(a) Quoted year-end rates of exchange are used to remeasure monetary assets and liabilities.
(b) All nonmonetary assets and shareholders' deficit accounts are remeasured
at the rates of exchange in effect at the time the items were originally
recorded.
(c) Revenues and expenses are remeasured at the average rates of exchange in
effect during the year, except for cost of sales, depreciation and
amortization, which are translated at the rates of exchange in effect when
the respective assets were manufactured or acquired.
(d) The translation gain or loss arising from the remeasurement is included in
the determination of net income or loss of the period.
Adjustments to conform with accounting principles generally accepted in the
United States-
Certain accounting policies applied by the Mexican subsidiaries in their
accounts (and in their financial statements prepared for use in Mexico) conform
with accounting principles generally accepted in Mexico, but do not conform with
accounting principles generally accepted in the United States. The accompanying
consolidated financial statements have been prepared for use in the United
States and, as explained below, reflect certain adjustments required to conform
them with the accounting principles generally accepted in that country. Those
adjustments are as follows:
- The Mexican subsidiaries prepare their local financial statements
recognizing the effects of inflation as required by accounting principles
generally accepted in Mexico. These effects are not reflected in the
accompanying consolidated financial statements since this accounting
practice does not conform with accounting principles generally accepted in
the United States.
- In accordance with accounting principles generally accepted in Mexico, the
Mexican subsidiaries record by means of the liability method the future
effects of income taxes and employee profit sharing related to the
cumulative temporary differences between accounting and taxable income,
which arise from specific items whose turnaround period can be determined
and that are not expected to be replaced by items of a similar nature and
amount. Since there are no significant nonrecurring temporary differences,
the Mexican subsidiaries have not recorded any deferred or prepaid income
taxes or employee profit sharing effects in their local currency financial
statements. In accordance with accounting principles generally accepted in
the United States, the Mexican subsidiaries recognize by means of the
liability method the deferred and/or prepaid effects resulting from all
temporary differences.
The Mexican subsidiaries amortize preoperating expenses over a five-year term
for local financial statement purposes. However, such deferral does not
conform with accounting principles generally accepted in the United
States, and accordingly in the accompanying consolidated financial
statements such expenses were charged against income when incurred.
Cash equivalents-
Cash equivalents are primarily bank deposits valued at market (cost plus accrued
interest). In addition, cash equivalents at December 31, 1999 include a
restricted trust fund to guarantee letters of credit issued by the Company in
the amount of $262,544.
Inventories-
All inventories are stated at average cost, which does not exceed market.
Machinery and equipment-
Machinery and equipment are stated at cost. When machinery and equipment are
retired or otherwise disposed of, the cost is removed from the books,
accumulated depreciation is charged with an amount equivalent to the
depreciation previously provided on the retired asset, and the difference is
charged or credited to income.
Depreciation of machinery and equipment is calculated using the straight-line
method over the following estimated useful lives:
Years
Machinery and equipment 10
Molds 3
Furniture and fixtures 10
Transportation equipment 4
Computer equipment 3
Impairment of long-lived assets-
SFAS No. 121, "Accounting for the Impairment of Long-lived Assets and Long-lived
Assets to be Disposed of", requires that long-lived assets, such as machinery
and equipment, and certain identifiable intangibles be reviewed for impairment
whenever events or changes in circumstances indicate the carrying amount of an
asset may not be recoverable. The amount of impairment, if any, is measured
based on projected future cash flows (using a discount rate reflecting the
Company's average cost of funds) compared to the carrying value of those assets.
Employee severance benefits-
In accordance with Mexican Labor Law, the Mexican subsidiaries are liable for
separation payments, which consist of the payment of three months plus 20 days
of salary for each year of service to employees terminating under certain
circumstances. These payments are charged to the results of the period in which
they are made, since they have no vesting provisions.
Also under Mexican Labor Law, the Mexican subsidiaries are also liable for
seniority premium payments of 12 days of salary (up to a maximum of twice the
minimum wage) for each year of service to employees who:
- Retire or are terminated, once they have reached 15 or more years of
service with the Company.
- Are terminated under certain circumstances, regardless of the years of service
to the Company.
This seniority premium benefit qualifies as a defined benefit plan under SFAS
No. 87. However, since the average seniority of the Company's employees is very
low due to the high turnover of its employees, the potential seniority premium
liability is not considered significant and thus has not been recorded.
Income taxes-
Deferred income taxes are provided by the liability method for all temporary
differences between the amounts of assets and liabilities for financial and tax
reporting purposes, computed in accordance with SFAS No. 109, "Accounting for
Income Taxes".
Under SFAS No. 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amount of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. A valuation
allowance is established for any deferred tax asset for which it is more likely
than not that the related benefits will not be realized.
Financial instruments-
The Company's financial instruments include cash equivalents, accounts
receivable, accounts payable and notes payable. Due to the short-term nature of
these items, the fair value of these instruments approximates their recorded
value. Additionally, the Company does not have material financial instruments
with off-balance sheet risk.
Revenue recognition-
Sales and related cost of sales are recorded when goods are delivered by us to
the customers.
Advertising costs-
Advertising costs (approximately $47,000 and $32,000 in 1999 and 1998,
respectively) are expensed as incurred.
Recently issued accounting pronouncements-
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities". This
statement establishes the accounting and reporting standards for all derivative
financial instruments, including those embedded in other contracts, and for
hedging activities. The statement, to be applied prospectively, will be
effective for the Company's quarter ending March 31, 2001. The Company does not
presently have any derivative financial instruments; however, there can be no
assurance that the Company will not utilize in derivative financial instruments
in the future.
Inventories:
1999 1998
---------------- -------------
Raw materials $ 913,179 $ 773,720
Work in progress 128,442 431,185
Finished goods 256,451 246,373
---------------- --------------
1,298,072 1,451,278
Merchandise in transit 246,624 255,372
----------------- -----------------
$ 1,544,696 $ 1,706,650
=========== ===========
As of December 31, 1999, irrevocable letters of credit in the amount of $276,490
were issued related to purchase commitments of inventories with foreign
suppliers.
The Company manufactures its products at its facility in the State of Zacatecas,
Mexico. The government of Zacatecas arranged for the facility to be built on
behalf of the Company, and the Company executed a lease agreement that provided
for an annual rental cost of approximately $100,000. From the inception of the
lease through June 1999, the Company has been able to successfully negotiate a
waiver of the rental payments. The Company is seeking a formal waiver of the
rent subsequent to June 1999. In the event the Company is required to begin
paying rent, the annual rental will be approximately $100,000, plus value-added
tax, with annual Mexican inflation increases under a lease agreement which
expires in April 2001 that includes for a one-year extension option. The Company
has accrued $57,500 at December 31, 1999 with respect to this matter.
The Company's commercial and distribution offices are located in Mexico City.
The current lease expires on September 30, 2005, with an annual rental of
approximately $96,000 plus value-added tax, with annual Mexican inflation
increases. The Company paid approximately $75,947 and $75,973 in 1999 and 1998,
respectively, for the rent of the facility in Mexico City. The Company's United
States office is based in Maitland, Florida, and its annual rental is $8,000.
4 Long-term debt:
On January 14, 2000, Aarica Sport, S.A. de C.V. and Taimex Industries, S.A.
de C.V. completed the restructuring of their long-term debt of $4,506,096 with
Banco Bilbao Vizcaya Mexico, S.A. (BBV). As a result of this restructuring,
$3,756,096 of principal and interest was forgiven and is presented in the
statement of operations as an extraordinary gain. The residual amount of
$750,000 was paid in January 2000 with borrowings from Schmidt International,
LLC . Because the negotiation of this agreement was completed in December 1999,
this transaction was recorded as of December 31, 1999. An additional settlement
of $295,306 with creditors was also
recorded as an extraordinary gain.
A prior debt settlement with BBV resulted in an extraordinary gain of $935,329
in 1998. The Company also had settlements with other creditors that generated
additional extraordinary gains of $390,788 in 1998.
The Company had interest expense with related parties of $68,081 and $50,231 in
1999 and 1998, respectively.
As part of its debt restructuring, the Company signed a note payable to Schmidt
International, LLC (Schmidt) for $1,478,820 and another to Continental Capital &
Equity Corporation (CCEC) for $280,012. The notes payable to Schmidt and CCEC
bear annual interest rates of Prime + 5% and 10%, respectively. The Schmidt note
is secured by 2,400,000 shares of the Company owned by Carol Kolozs, majority
shareholder, President and Director of the Company.
In June 2000 the Company obtained an additional loan from Schmidt Int. in the
amount of $600,000 to provide working capital and funds for a portion of the
costs of the planned initial public offering (IPO). The loan is due October 31,
2000, bears interest at the rate of prime plus 5% per annum (14.50% as of June
30, 2000), and requires interest payments only until maturity date. Management
believes the Company will be able to successfully negotiate an extension of the
maturity date if the IPO is not consummated by October 31,2000.
On June 29, 2000 CCEC exchanged its outstanding principal and interest from its
revolving credit line to the Company in the approximate balance of $300,000 for
150,000 shares of common stock from the personal holdings of Carol Kolozs,
majority shareholder, President and Director of the Company. The conversion of
the note agreement established certain restrictions and obligations for the
Company, of which the most important are:
- The Company is limited in the quantity of shares (and the respective share
prices) that can be issued (other than the IPO) without the consent of
CCEC.
- A purchase option for up to 250,000 new shares of the Company's common
stock at a price of $2.00 per share was issued to CCEC for services
provided through June 2000. Also, in the event the IPO has not been
consummated on or before February 28, 2001, the option exercise price of
the 250,000 shares will be $0.05 per share.
6 Income tax system:
Income and asset tax regulations-
The Mexican subsidiaries are subject to income and asset taxes. Income taxes are
computed taking into consideration the taxable and deductible effects of
inflation, such as depreciation calculated on restated asset values and the
deduction of purchases in place of cost of sales, which permit the deduction of
current costs, and taxable income is increased or reduced by the effects of
inflation on certain monetary assets and liabilities through the inflationary
component. Beginning in 1999, the income tax rate increased from 34% to 35%,
with the obligation to pay this tax each year at a rate of 30% (transitorily 32%
in 1999) and the remainder upon distribution of earnings.
The asset tax is computed at an annual rate at 1.8% of the average of the
majority of restated assets less certain liabilities, and the tax is paid only
to the extent that it exceeds the income taxes of the period. Any required
payment of asset taxes is refundable against the excess of income taxes over
asset taxes for the preceding three, and following ten years.
The provisions for income taxes and employee profit sharing have been determined
on the basis of the taxable income of each individual company and not on a
consolidated basis.
The results of operations of the U.S. holding company have not been significant
to date, and that company has not yet generated any taxable income in the U.S.
Mexican employee profit sharing-
The Mexican subsidiaries are subject to statutory employee profit sharing, which
is calculated based on taxable income, after certain adjustments, primarily to
exclude the effects of restated depreciation and the tax gain or loss from
monetary position. The amount for 1999 was approximately $4,500 (included in
operating expenses) and for 1998 there was no employee profit sharing.
Analysis of provisions and balances-
The tax effect of temporary differences that generated deferred tax liabilities
(assets) under SFAS No. 109 as of December 31, 1999 and 1998 are as follows:
Deferred income taxes-
The components of the net deferred income taxes liability as of December 31 are
as follows:
Due to the uncertainty of the realization of the net deferred income tax assets,
the Company has provided a 100% valuation allowance for the related potential
future tax savings.
As of December 31, 1999, the Company cancelled deferred employee profit sharing
in amount of $131,378 that will not materialize, since the Company transferred
its employees to the new companies. As a result, the new companies do not have
any deferred charge to record (see Note 12).
In addition, the provisions for income taxes computed by applying the local
statutory rate to income taxes as reconciled to the actual provisions are as
follows for the years ended December 31:
As of December 31, 1999 the Mexican subsidiaries had the following tax loss
carryforwards, which will be indexed for inflation through the date used to
offset future taxable income, as follows (translated from Mexican pesos to U.S.
dollars at the December 31, 1999 exchange rate):
On July 22, 1999, the Company increased its capital stock in the amount of
$2,000 through the issuance of 200,000 shares of common stock for cash.
Additional paid-in capital of $418,010 resulted from this transaction.
8 Common and preferred stock:
The Company is authorized to issue 20,000,000 shares of common stock at a par
value of $.01 per share. In addition, the Company is authorized to issue
3,000,000 shares of preferred stock, none of which was issued as of December 31,
1999. The features of the preferred stock may vary, among other things, as to
the rate of dividend, conversion privilege and liquidation rights, based upon
the resolution of the Board of Directors at the time of issuance.
9 Earnings per common share:
Earnings (loss) per common share are computed by dividing the related amounts by
the weighted average number of common stock equivalent shares outstanding.
10 Royalties:
The Company has entered into two licensing agreements requiring royalty payments
ranging from 4% to 5% of specified product sales. Royalties are charged to
expense under the licensing agreements and totaled $105,000 and $25,000 in 1999
and 1998, respectively. Pursuant to these agreements, the future minimum
guaranteed royalty payments are approximately $185,000 in 2000 and $222,000 in
2001.
11 Concentrations of credit risk:
Financial instruments that potentially expose the Company to credit risk consist
principally of cash and cash equivalents and trade receivables. Cash and cash
equivalents are placed with high quality financial institutions, and the Company
limits the amount of credit exposure with any one financial institution.
One customer accounted for approximately 46% of the Company's net sales in 1998.
No sales to any single customer accounted for more than 10% of net sales in
1999.
12 Subsequent events:
In 2000 two new companies were incorporated, Aarica Services, S.A. de C.V.
and North American Shoe Company, S.A. de C.V. (NASCO). All employees of the
Company were transferred into these new companies.
13 Contingencies:
On November 16, 1999 the "maquiladora" program of Taimex, S.A. de C.V.
(subsidiary company) was cancelled by the Commerce and Industrial Ministry
(SECOFI). This program permitted Taimex not to pay import taxes if inventories
were to be exported within two years. As a result of renegotiations, NASCO
became eligible for this program on April 14, 2000, so the Company will be able
to continue with this benefit. However, SECOFI could claim the import taxes for
the Taimex inventories that have to be exported after November 16, 1999, and
consequently there is a contingency of the amount of $315,658 as of the issue
date of these consolidated financial statements.
The Company has not paid various taxes on which surcharges and restatements of
approximately $187,460 have been computed. The surcharges and restatements have
not been recorded since the Company's attorney believes that such amounts can be
eliminated through negotiations favorable to the Company. In addition, the
Company has approached the tax authorities and arranged for installment payments
of some of the delinquent taxes, but the majority has not yet been officially
arranged with those authorities.
Aarica Holdings, Inc. and Subsidiaries
Unaudited consolidated balance sheet as of March 31, 2000
(Stated in U.S. dollars)
Assets
Current assets:
Cash and cash equivalents-
Available $ 386,571
Restricted 463,887
---------------------
850,458
Accounts receivable-
Trade 1,142,615
Other 264,923
---------------------
1,407,538
Inventories 1,630,665
Prepaid expenses 21,937
---------------------
Total current assets 3,910,598
Machinery and equipment 780,663
Other assets 101,444
---------------------
Total assets $ 4,792,705
===========
The accompanying notes are an integral part of this
consolidated balance sheet.
Aarica Holdings, Inc. and Subsidiaries
Unaudited consolidated balance sheet as of March 31, 2000
(Stated in U.S. dollars)
Liabilities and shareholders' deficit
Current liabilities:
Suppliers $ 1,278,345
Accrued taxes 1,530,928
Notes payable to related parties 2,314,112
Other accounts payable and accrued liabilities 1,245,333
---------------------
Total current liabilities 6,368,718
Shareholders' deficit:
Common stock, $.01 par value; 20,000,000 authorized 28,000
shares; 2,800,000 shares outstanding
Preferred stock, $.01 par value; 3,000,000
authorized shares -
Additional paid-in capital 418,010
---------------------
446,010
Accumulated losses (2,022,023)
---------------------
Total shareholders' deficit (1,576,013)
---------------------
Total liabilities and shareholders' $ 4,792,705
deficit
===========
The accompanying notes are an integral part of this
consolidated balance sheet.
Aarica Holdings, Inc. and Subsidiaries
Unaudited consolidated statements of operations
For the three months ended March 31, 2000 and 1999
(Stated in U.S. dollars)
2000 1999
---------------- -------------
Net sales $ 1,205,042 $ 1,023,239
Cost of sales 1,016,082 970,936
---------------------------------------
Gross profit 188,960 52,303
Operating expenses:
Selling, general and administrative 402,361 415,909
----------------------------------------
Operating loss (213,401) (363,606)
Other income (expenses):
Interest, net (119,972) (210,868)
Translation (loss) gain (2,896) 183,547
Other, net 6,798 (54,105)
---------------------------------------
(116,070) (81,426)
---------------------------------------
Loss before asset tax (329,471) (445,032)
Provision for asset tax 458 1,864
---------------------------------------
Net loss $ $
(329,929) (446,896)
=========== ===========
Weighted average shares outstanding 2,800,000 2,600,000
=========== ===========
Basic and diluted earnings per share:
Net loss $ (0.11) $ (0.17)
=========== ===========
The accompanying notes are an integral part of this
consolidated balance sheet.
Aarica Holdings, Inc. and Subsidiaries
Unaudited consolidated statements of cash flows
For the three months ended March 31, 2000 and 1999
(Stated in U.S. dollars)
2000 1999
---------------- -------------
Cash flows from operating activities:
Net loss $ (329,929) $ (446,896)
Adjustments to reconcile net income to net cash provided by (used in)
operating activities-
Depreciation and amortization 74,523 108,069
Decrease (increase) in-
Trade receivables 496,596 (74,519)
Prepaid expenses 6,716 (40,768)
Other accounts receivable (110,369) (182,913)
Inventories (86,733) 52,462
Increase (decrease) in-
Suppliers (114,172) 35,695
Taxes payable 130,688 259,514
Related parties 396,696 342,099
Other accounts payable and accrued liabilities (113,246) (279,953)
-----------------------------------------
Net cash provided by (used in) operating activities 350,770 (227,210)
Cash flows from investing activities:
Additions to machinery and equipment (25,107) (12,905)
Additions to other assets (92,301) (1,002)
-----------------------------------------
Net cash used in investing activities (117,408) (13,907)
Cash flows from financing activities:
Proceeds from long-term debt - 486,075
-----------------------------------------
Net cash provided by financing activities - 486,075
-----------------------------------------
Effect of exchange rate changes on cash (256,558)
139,898
Net increase in cash and cash equivalents 373,260 (11,600)
Cash and cash equivalents at beginning of period 477,198 254,409
-----------------------------------------
Cash and cash equivalents at end of period $ 850,458 $ 242,809
=========== ===========
Supplemental cash flow disclosures:
Income taxes paid $ 10,523
$
-
=========== ===========
Interest paid
$ $
- -
=========== ===========
The accompanying notes are an integral part of this
consolidated balance sheet.
Aarica Holdings, Inc. and Subsidiaries
Notes to unaudited consolidated financial statements as of March 31, 2000
(Stated in U.S. dollars)
1 Basis of presentation of interim financial statements:
The information in this report reflects all adjustments, which are, in the
opinion of management, necessary for a fair presentation of the results for the
interim periods included herein. All adjustments other than those described in
this report are, in the opinion of management, of a normal and recurring nature.
These consolidated financial statements include the accounts of Aarica Holdings,
Inc. and its subsidiaries listed in Notes 1 and 13 to the consolidated financial
statements for the years ended December 31, 1999 and 1998.
The results are not necessarily indicative of the results to be expected for the
full fiscal year. The financial statements should be read in conjunction with
the financial statement disclosures contained in the Company's annual financial
statements for the years ended December 31, 1999 and 1998.
2 Cash and cash equivalents:
Restricted cash equivalents include a trust fund to guarantee letters of credit
issued by the Company in the amount of $463,887.
3 Inventories:
Inventories were comprised of the following as of March 31, 2000:
Raw materials $ 641,715
Work in progress 99,686
Finished goods 857,120
--- -----
1,598,521
Merchandise in transit 32,144
--------
$ 1,630,665
===========
As of March 31, 2000, irrevocable letters of credit in the amount of $493,599
were issued related to purchase commitments of inventories from foreign
suppliers.
4 Contingencies:
See Note 13 to the consolidated financial statements as of December 31, 1999 and
1998 for a discussion of contingencies and other related items. There have been
no significant changes in the status of those contingencies.
Aarica Holdings, Inc.
1,000,000 Units
Each Unit
consisting of 1,000,000 shares of Common Stock
and
1,000,000 redeemable common stock purchase warrants
PROSPECTUS
Institutional Equity Corporation
1-877-467-7891
V
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Pursuant to Section 2.02-1 of the Texas Business Corporation Act, a
corporation may indemnify an individual made a party to a proceeding because the
individual is or was a director against liability incurred in his official
capacity with the corporation including expenses and attorneys fees.
Article VI of the Articles of Incorporation provides as follows:
"The Corporation shall indemnify any director or officer, or former
director or officer of the Corporation, or any person who may have served at its
request as a director or officer of another corporation of which this
Corporation owns shares of capital stock or of which it is a creditor to the
fullest extent permitted by the Texas Business Corporation act and as provided
in the By-laws of the Corporation."
Article VII of the by-laws provides as follows:
"Section 1. Indemnification.
The corporation shall indemnify its present or former directors and
officers, employees, agents and other persons to the fullest extent permissible
by, and in accordance with, the procedures contained in Article 2.02 of the
Texas Business Corporation Act. Such indemnification shall not be deemed to be
exclusive of any other rights to which a director, officer, agent or other
person may be entitled, consistent with law, under any provision of the articles
of Incorporation or By-laws of the corporation, any general or specific action
of the board of directors, the terms of any contract, or as may be permitted or
required by law."
"Section 2. Insurance and Other Arrangements
"Pursuant to Section R of Article 2.02-1of the Texas Business
Corporation Act, the corporation may purchase and maintain insurance or another
arrangement on behalf of any person who is or was a director, officer, employee,
or agent or the corporation or who is or was serving at the request of the
corporation a a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise, against any liability asserted against him or
her and incurred by him or her in such capacity or arising out of his or her
status as such person, whether or not the corporation would have the power to
indemnify him or her against that liability under article 2.02-1 of the Texas
Business Corporation Act."
Item 25. Other Expenses of Issuance and Distribution
Estimated expenses in connection with the public offering by the Company of
the securities offered hereunder are as
follows:
Securities and Exchange Commission Filing Fee $ 7,725
NASD Filing Fee* 3,426
Nasdaq Application and Listing Fee 9,000
Accounting Fees and Expenses* 100,000
Legal Fees and Expenses 100,000
Printing* 50,000
Fees of Transfer Agent and Registrar* 3,500
Underwriters' Non-Accountable Expense Allowance 200,000
Miscellaneous* 26,349
---- ------
Total* 500,000
== =======
----------------
* Estimated.
Item 26. Recent Sales of Unregistered Securities
In November 1998, the registrant issued 2,600,000 shares of its common
stock to Carol Kolozs, its Chief Executive Officer and founder, in exchange for
all of his interest in Aarica Holdings Mexico, S. A. de C. V., a newly organized
Mexican holding company which had acquired from him substantially all of the
stock of four Mexican subsidiaries. Mr. Kolozs was founder of the registrant and
relied upon the exemption from registration provided by section 4 (2) of the
Securities Act of 1933, as amended (the "Securities Act") for transactions not
involving a public offering. No underwriter was involved in the transaction and
the certificate for Mr. Kolozs' shares was stamped with a restrictive legend and
a stop transfer order was placed on the transfer records of the company. Mr.
Kolozs transferred 200,000 of his shares in July 1999 to CCEC for services
rendered to the company through that date. CCEC agreed to take the shares for
investment and not with a view to distribution. The certificate is stamped with
a restrictive legend and a stop transfer order was placed on the transfer
records of the company. In June 2000, the company granted CCEC options to
purchase 250,000 shares at $2.00 per share for services rendered to the company
from August 1999 through June 30, 2000. The options were taken for investment
and not with a view to distribution.
In June 1999, the registrant sold 200,000 of its common stock to 17
persons in a private offering pursuant to Rule 506 of Regulation D under the
Securities Act. The shares were sold in units consisting of 10,000 shares at
$25,000 per unit. Each investor represented to the registrant and the selling
agent that he/she was an accredited investor as defined in Regulation D. The
units were sold though Kashner Davidson Securities Corporation, a member firm of
the National association of Securities Dealers, Inc. The registrant received
gross proceeds of $500,000 and paid Kashner Davidson commissions of 10% on the
securities sold by Kashner Davidson and granted warrants to Kashner Davidson to
purchase 105,000 shares of the registrant's common stock at $2.50 per share,
exercisable for five years. The securities were sold without registration in
reliance upon the exemption from registration provided by Regulation D. The
certificates issued bear a restrictive legend prohibiting transfer in the
absence of an effective registration statement or an opinion of counsel that
registration is not required. Each investor was screened by the issuer and the
selling agent prior to accepting his/her subscription and provided support for
the representation that he/she was an accredited investor.
In June 2000, Mr. Kolozs transferred 150,000 shares of common stock
from his personal holdings to CCEC in consideration for CCEC's cancellation of
an outstanding note in the amount of $300,000 owed by the company. CCEC. CCEC
agreed to take the shares for investment and not with a view to distribution.
The certificate is stamped with a restrictive legend and a stop transfer order
was placed on the transfer records of the company. No underwriter was involved
in the transaction. The parties relied upon the exemption contained in section
4(1) of the Securities Act for transactions by any person other than an issuer,
underwriter or dealer.
Item 27. Exhibits
Exhibit No Item
Exhibit 1.1 Form of Underwriting Agreement.(1)
Exhibit 1.2 Form of Underwriters' Warrant Agreement.(1)
Exhibit 3.1 Articles of Incorporation of the Registrant. (1)
Exhibit 3.2 Bylaws of the Registrant (1)
Exhibit 5.1 Opinion of Maurice J. Bates L.L.C.(2)
Exhibit 10.1 Stock Compensation Plan (1)
Exhibit 10.2 Warrant Agreement with American Stock Transfer & Trust Company. (1)
Exhibit 10.3 (i) Loan Agreement with Robert E. Schmidt, Jr. (1)
(ii) First Amendment to Loan Agreement (1) (iii) Second
Amendment to Loan Agreement (1) (iv) Third Amendment to
Loan Agreement (1) (v) Amended and Restated Pledge
Agreement (1) (vi) Amended and Restated Guaranty
Agreement (1) (vii) Assignment of Loan (1) (viii) Amended
and Restated Security Agreement (1)
(ix) Amended and Restated Guaranty Agreement, Carol Kolozs. (1)
(x) Amended and Restated Guaranty Agreement, Aarica Holdings, Inc. (1)
(xi) Amended and Restated Guaranty Agreement, Aarica Sport, S.A. de C.V. (1)
(xii) Amended and Restated Guaranty Agreement, Taimex Industries, S.A. de C.V. (1)
(xiii) Note Extension (1)
Exhibit 10.4 Warrant Agreement with Kashner Davidson Securities Corporation (1)
Exhibit 10.5 Lease on Nasco building. (1)
Exhibit 10.6 Sublease on Mexico City offices. (1)
Exhibit 10.7 License agreement with L.A. Gear. (1)
Exhibit 10.8 License agreement with Lotto. (1)
Exhibit 10.9 Sample purchase order for K-Swiss. (1)
Exhibit 10.10 Sample purchase order for Wilson Sporting Goods Co. DE Mexico, SA. DE CV (1)
Exhibit 10.11 Copy of Nasco union contract. (1)
Exhibit 10.12 Sample employee contract. (1)
Exhibit 21 Subsidiaries of the Registrant. (1)
Exhibit 23.1 Consent of Arthur Andersen, L L. P., Certified Public Accountants.(1)
Exhibit 23.2 Consent of Maurice J. Bates, L.L.C. to be contained in his opinion filed as Exhibit 5.1 to
this registration statement.(2)
Exhibit 27 Financial Data Schedule (1)
--------------
(1) Filed herewith
(2) To be filed by amendment
Item 28. Undertakings
The undersigned registrant hereby undertakes as follows:
To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
(2) To file, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(a) Include any Prospectus required by Section 10(a)(3) of the Securities Act;
(b) Reflect in the Prospectus any facts or events which, individually or
together, represent a fundamental change in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would exceed that which
was registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected on the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective
registration statement; and
(c) Include any additional or changed material information on the plan of
distribution.
(3) For determining liability under the securities act, treat each
post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at
that time to be the initial bona fide offering.
(4) For determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities
offered in the registration statement, and that offering of
the securities at that time as the initial bona fide offering
of those securities.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or
persons controlling the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised
that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy, as
expressed in the Act and is, therefore, unenforceable.
(6) In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the shares of the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the
final adjudication of such issue.
(7) For the purposes of determining any liability under the
Securities Act, treat the information omitted from the form of
prospectus filed as part of a registration statement in
reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to
be part of this Registration Statement as of the time it was
declared effective.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorizes this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Orlando, State of Florida on August 14, 2000.
Aarica Holdings, Inc.
By: /s/ Carol Kolozs
----------------
Carol Kolozs, President,
Principal Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints Carol Kolozs and John J. Stitz,
and each for them, his true and lawful attorney-in-fact and agent, with full
power of substitution and re-substitution, for him and in his name, place and
stead, in any and all capacities (until revoked in writing), to sign any and all
further amendments to this Registration Statement (including post-effective
amendments), and to file same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
such attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person thereby ratifying and confirming all that said
attorneys-in-fact and agents, and each of them, or their substitutes may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s Carol Kolozs President, Director August 14, 2000
-------------------
Carol Kolozs (Principal Executive Officer)
/s/ John J. Stitz Chief Financial Officer, Secretary, August 14, 2000
-----------------
John J, Stitz Treasurer (Principal Financial
Officer)
/s/ James R. Schnorf Director August 14, 2000
--------------------
James R. Schnorf
_____________________ Director August , 2000
Patrick L. M. Williams
/s/ Robert E. Schmidt, Jr. Director August 14, 2000
-------------------------
Robert E. Schmidt, Jr.
2000 STOCK COMPENSATION PLAN
of
AARICA HOLDINGS, INC.
(a Texas corporation)
(3)
TABLE OF CONTENTS
2000 STOCK COMPENSATION PLAN
of
AARICA HOLDINGS, INC.
SECTION SUBJECT PAGE
1. Purpose of Plan ...........................................................................1
2. Stock Subject to the Plan....................................................................1
3. Administration of the Plan...................................................................1
(a) General ...........................................................................1
(b) Changes in Law Applicable...........................................................2
4. Types of Awards Under the Plan...............................................................2
5. Persons to Whom Options Shall Be Granted.....................................................2
(a) Nonqualified Options................................................................2
(b) Incentive Options...................................................................2
6. Factors to Be Considered in Granting Options.................................................3
7. Time of Granting Option......................................................................3
8. Terms and Conditions of Options..............................................................3
(a) Number of Shares....................................................................3
(b) Type of Option......................................................................3
(c) Option Period.......................................................................3
(1) General....................................................................3
(2) Termination of Employment..................................................3
(3) Cessation of Service as Director
or Advisor.................................................................4
(4) Disability.................................................................4
(5) Death......................................................................4
(6) Acceleration and Exercise Upon Change
of Control.................................................................4
(d) Option Prices.......................................................................5
(1) Nonqualified Options.......................................................5
(2) Incentive Options..........................................................5
(3) Determination of Fair Market Value.........................................5
(e) Exercise of Options.................................................................6
(f) Non-transferability of Options......................................................6
(g) Limitations on 10% Shareholders.....................................................6
(h) Limits on Vesting of Incentive Options..............................................6
(i) Compliance with Securities Laws.....................................................6
(j) Additional Provisions...............................................................7
9. Medium and Time of Payment...................................................................7
10. Alternate Stock Appreciation Rights..........................................................8
(a) Award of Alternate Stock Rights.....................................................8
(b) Alternate Stock Rights Agreement....................................................8
(c) Exercise ...........................................................................8
(d) Amount of Payment...................................................................8
(e) Form of Payment.....................................................................8
(f) Termination of SAR .................................................................8
(g) Effect of Exercise of SAR...........................................................9
(h) Effect of Exercise of Related Option................................................9
(i) Non-transferability of SAR..........................................................9
11. Rights as a Shareholder......................................................................9
12. Optionee's Agreement to Serve................................................................10
13. Adjustments on Changes in Capitalization.....................................................10
(a) Changes in Capitalization...........................................................10
(b) Reorganization, Dissolution or Liquidation..........................................10
(c) Change in Par Value.................................................................10
(d) Notice of Adjustments...............................................................10
(e) Effect Upon Holder of Option........................................................11
(f) Right of Company to Make Adjustments................................................11
14. Investment Purpose...........................................................................11
15. No Obligation to Exercise Option or SAR......................................................12
16. Modification, Extension, and Renewal of Options..............................................12
17. Effective Date of the Plan...................................................................12
18. Termination of the Plan......................................................................12
19. Amendment of the Plan........................................................................12
20. Withholding ...........................................................................12
21. Indemnification of Committee.................................................................12
22. Application of Funds.........................................................................13
23. Governing Law ...........................................................................13
2000 STOCK COMPENSATION PLAN - Page 12
2000 STOCK COMPENSATION PLAN
OF
AARICA HOLDINGS, INC.
1. Purpose of Plan. This 2000 Stock Compensation Plan ("Plan") is
intended to encourage ownership of the common stock of AARICA HOLDINGS, INC.
("Company") by certain officers, directors, employees and advisors of the
Company or any Subsidiary or Subsidiaries of the Company (as hereinafter
defined) in order to provide additional incentive for such persons to promote
the success and the business of the Company or its Subsidiaries and to encourage
them to remain in the employ of the Company or its Subsidiaries by providing
such persons an opportunity to benefit from any appreciation of the common stock
of the Company through the issuance of stock options and related stock
appreciation rights to such persons in accordance with the terms of the Plan. It
is further intended that options granted pursuant to this Plan shall constitute
either incentive stock options ("Incentive Options") within the meaning of
Section 422 (formerly Section 422A) of the Internal Revenue Code of 1986, as
amended ("Code"), or options which do not constitute Incentive Options
("Nonqualified Options") as determined by the Committee (as hereinafter defined)
at the time of issuance of such options. Incentive Options, Nonqualified Options
and Reload Options (as defined in Section 11 hereof) are herein sometimes
referred to collectively as "Options". As used herein, the term Subsidiary or
Subsidiaries shall mean any corporation (other than the employer corporation) in
an unbroken chain of corporations beginning with the employer corporation if, at
the time of granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
2. Stock Subject to the Plan. Subject to adjustment as provided in
Section 14 hereof, there will be reserved for the use upon the exercise of
Options to be granted from time to time under the Plan, an aggregate of three
hundred fifty thousand (350,000) shares of the common stock, $.01 par value, of
the Company ("Common Stock"), which shares in whole or in part shall be
authorized, but unissued, shares of the Common Stock or issued shares of Common
Stock which shall have been reacquired by the Company as determined from time to
time by the Board of Directors of the Company ("Board of Directors"). To
determine the number of shares of Common Stock available at any time for the
granting of Options under the Plan, there shall be deducted from the total
number of reserved shares of Common Stock, the number of shares of Common Stock
in respect of which Options have been granted pursuant to the Plan which remain
outstanding or which have been exercised. If and to the extent that any Option
to purchase reserved shares shall not be exercised by the optionee for any
reason or if such Option to purchase shall terminate as provided herein, such
shares which have not been so purchased hereunder shall again become available
for the purposes of the Plan unless the Plan shall have been terminated, but
such unpurchased shares shall not be deemed to increase the aggregate number of
shares specified above to be reserved for purposes of the Plan (subject to
adjustment as provided in Section 14 hereof).
3. Administration of the Plan.
(a) General. The Plan shall be administered by a Compensation
Committee ("Committee") appointed by the Board of Directors, which
Committee shall consist of not less than two (2) members of the Board
of Directors, except that if at any time there shall be less than two
(2) directors who are qualified to serve on the Committee, then the
Plan shall be administered by the full Board of Directors. All
references in this Plan to the Committee shall be deemed to refer
instead to the full Board of Directors at any time there is not a
committee of two (2) members qualified to act hereunder. The Board of
Directors may from time to time appoint members of the Committee in
substitution for or in addition to members previously appointed and may
fill vacancies, however caused, in the Committee. If the Board of
Directors does not designate a Chairman of the Committee, the Committee
shall select one of its members as its Chairman. The Committee shall
hold its meetings at such times and places as it shall deem advisable.
A majority of its members shall constitute a quorum. Any action of the
Committee shall be taken by a majority vote of its members at a meeting
at which a quorum is present. Notwithstanding the preceding, any action
of the Committee may be taken without a meeting by a written consent
signed by all of the members, and any action so taken shall be deemed
fully as effective as if it had been taken by a vote of the members
present in person at the meeting duly called and held. The Committee
may appoint a Secretary, shall keep minutes of its meetings, and shall
make such rules and regulations for the conduct of its business as it
shall deem advisable.
The Committee shall have the sole authority and power, subject
to the express provisions and limitations of the Plan, to construe the
Plan and option agreements granted hereunder, and to adopt, prescribe,
amend, and rescind rules and regulations relating to the Plan, and to
make all determinations necessary or advisable for administering the
Plan, including, but not limited to, (i) who shall be granted Options
under the Plan, (ii) the term of each Option, (iii) the number of
shares covered by such Option, (iv) whether the Option shall constitute
an Incentive Option or a Nonqualified Option or a Reload Option, (v)
the exercise price for the purchase of the shares of the Common Stock
covered by the Option, (vi) the period during which the Option may be
exercised, (vii) whether the right to purchase the number of shares
covered by the Option shall be fully vested on issuance of the Option
so that such shares may be purchased in full at one time or whether the
right to purchase such shares shall become vested over a period of time
so that such shares may only be purchased in installments, and (viii)
the time or times at which Options shall be granted. The Committee's
determinations under the Plan, including the above enumerated
determinations, need not be uniform and may be made by it selectively
among the persons who receive, or are eligible to receive, Options
under the Plan, whether or not such persons are similarly situated.
The interpretation by the Committee of any provision of the
Plan or of any option agreement entered into hereunder with respect to
any Incentive Option shall be in accordance with Section 422 of the
Code and the regulations issued thereunder, as such section or
regulations may be amended from time to time, in order that the rights
granted hereunder and under said option agreements shall constitute
"Incentive Stock Options" within the meaning of such section. The
interpretation and construction by the Committee of any provision of
the Plan or of any Option granted hereunder shall be final and
conclusive, unless otherwise determined by the Board of Directors. No
member of the Board of Directors or the Committee shall be liable for
any action or determination made in good faith with respect to the Plan
or any Option granted under it. Upon issuing an Option under the Plan,
the Committee shall report to the Board of Directors the name of the
person granted the Option, whether the Option is an Incentive Option or
a Nonqualified Option, the number of shares of Common Stock covered by
the Option, and the terms and conditions of such Option.
(b) Changes in Law Applicable. If the laws relating to
Incentive Options or Nonqualified Options are changed, altered or
amended during the term of the Plan, the Board of Directors shall have
full authority and power to alter or amend the Plan with respect to
Incentive Options or Nonqualified Options, respectively, to conform to
such changes in the law without the necessity of obtaining further
shareholder approval, unless the changes require such approval.
4. Types of Awards Under the Plan. Awards under the Plan may be in the form
of either Options, --------------------------------- alternate stock
appreciation rights (as described in Section 10 hereof), or a combination
thereof.
5. Persons to Whom Options Shall be Granted.
(a) Nonqualified Options. Nonqualified Options shall be
granted only to officers, directors of the Company or a Subsidiary [as
hereinafter defined], employees and advisors of the Company or a Subsidiary who,
in the judgment of the Committee, are responsible for or contribute to the
management or success of the Company or a Subsidiary and who, at the time of the
granting of the Nonqualified Options, are either officers, directors, employees
or advisors of the Company or a Subsidiary.
(b) Incentive Options. Incentive Options shall be granted only
to employees of the Company or a Subsidiary who, in the judgment of the
Committee, are responsible for or contribute to the management or success of the
Company or a Subsidiary and who, at the time of the granting of the Incentive
Option are either an employee of the Company or a Subsidiary. Subject to the
provisions of Section 8(g) hereof, no individual shall be granted an Incentive
Option who, immediately before such Incentive Option was granted, would own more
than ten percent (10%) of the total combined voting power or value of all
classes of stock of the Company ("10% Shareholder").
6. Factors to Be Considered in Granting Options. In making any
determination as to persons to whom Options shall be granted and as to the
number of shares to be covered by such Options, the Committee shall take into
account the duties and responsibilities of the respective officers, directors,
employees, or advisors, their current and potential contributions to the success
of the Company or a Subsidiary, and such other factors as the Committee shall
deem relevant in connection with accomplishing the purpose of the Plan.
7. Time of Granting Options. Neither anything contained in the Plan or
in any resolution adopted or to be adopted by the Board of Directors or the
Shareholders of the Company or a Subsidiary nor any action taken by the
Committee shall constitute the granting of any Option. The granting of an Option
shall be effected only when a written Option Agreement acceptable in form and
substance to the Committee, subject to the terms and conditions hereof including
those set forth in Section 8 hereof, shall have been duly executed and delivered
by or on behalf of the Company and the person to whom such Option shall be
granted. No person shall have any rights under the Plan until such time, if any,
as a written Option Agreement shall have been duly executed and delivered as set
forth in this Section 7.
8. Terms and Conditions of Options. All Options granted pursuant to
this Plan must be granted within ten (10) years from the date the Plan is
adopted by the Board of Directors of the Company. Each Option Agreement
governing an Option granted hereunder shall be subject to at least the following
terms and conditions, and shall contain such other terms and conditions, not
inconsistent therewith, that the Committee shall deem appropriate:
(a) Number of Shares. Each Option shall state the number of shares of
Common Stock which ----------------
it represents.
(b) Type of Option. Each Option shall state whether it is intended to be an
Incentive -------------- Option or a Nonqualified Option.
(c) Option Period.
(1) General. Each Option shall state the date upon
which it is granted. Each Option shall be exercisable in whole
or in part during such period as is provided under the terms
of the Option subject to any vesting period set forth in the
Option, but in no event shall an Option be exercisable either
in whole or in part after the expiration of ten (10) years
from the date of grant; provided, however, if an Incentive
Option is granted to a 10% Shareholder, such Incentive Option
shall not be exercisable more than five (5) years from the
date of grant thereof.
(2) Termination of Employment. Except as otherwise
provided in case of Disability (as hereinafter defined), death
or Change of Control (as hereinafter defined), no Option shall
be exercisable after an optionee who is an employee of the
Company or a Subsidiary ceases to be employed by the Company
or a Subsidiary as an employee; provided, however, that the
Committee shall have the right in its sole discretion, but not
the obligation, to extend the exercise period for not more
than three (3) months following the date of termination of
such optionee's employment; provided further, however, that no
Option shall be exercisable after the expiration of ten (10)
years from the date it is granted and provided further, no
Incentive Option granted to a 10% Shareholder shall be
exercisable after the expiration of five (5) years from the
date it is granted.
(3) Cessation of Service as Director or Advisor. In
the event an optionee who was a director or advisor of the
Company or a Subsidiary ceases to be a director or advisor of
the Company or a Subsidiary for any reason, other than
Disability or death, prior to the full exercise of the Option,
such optionee may exercise his Option at any time within three
years after such optionee's status as a director or advisor of
the Company or a Subsidiary is so terminated to the extent he
was entitled to exercise such Option at the date such
optionee's status as a director or advisor of the Company or a
Subsidiary terminated; provided, however, that no Option shall
be exercisable after the expiration of ten (10) years from the
date it is granted.
(4) Disability. If an optionee's employment is
terminated by reason of the permanent and total Disability of
such optionee or if an optionee who is a director or advisor
of the Company or a Subsidiary ceases to serve as a director
or advisor by reason of the permanent and total Disability of
such optionee, the Committee shall have the right in its sole
discretion, but not the obligation, to extend the exercise
period for not more than five (5) years following the date of
termination of the optionee's employment or the date such
optionee ceases to be a director or advisor of the Company or
a Subsidiary, as the case may be, subject to the condition
that no Option shall be exercisable after the expiration of
ten (10) years from the date it is granted and subject to the
further condition that no Incentive Option granted to a 10%
Shareholder shall be exercisable after the expiration of five
(5) years from the date it is granted. For purposes of this
Plan, the term "Disability" shall mean the inability of the
optionee to fulfill such optionee's obligations to the Company
or a Subsidiary by reason of any physical or mental impairment
which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less
than twelve (12) months as determined by a physician
acceptable to the Committee in its sole discretion.
(5) Death. If an optionee dies while in the employ of
the Company or a Subsidiary, or while serving as a director or
advisor of the Company or a Subsidiary, and shall not have
fully exercised Options granted pursuant to the Plan, such
Options may be exercised in whole or in part at any time
within five years year after the optionee's death, by the
executors or administrators of the optionee's estate or by any
person or persons who shall have acquired the Options directly
from the optionee by bequest or inheritance, but only to the
extent that the optionee was entitled to exercise such Option
at the date of such optionee's death, subject to the condition
that no Option shall be exercisable after the expiration of
ten (10) years from the date it is granted and subject to the
further condition that no Incentive Option granted to a 10%
Shareholder shall be exercisable after the expiration of five
(5) years from the date it is granted.
(6) Acceleration and Exercise Upon Change of Control.
Notwithstanding the preceding provisions of this Section 8(c),
if any Option granted under the Plan provides for either (a)
an incremental vesting period whereby such Option may only be
exercised in installments as such incremental vesting period
is satisfied or (b) a delayed vesting period whereby such
Option may only be exercised after the lapse of a specified
period of time, such as after the expiration of one (1) year,
such vesting period shall be accelerated upon the occurrence
of a Change of Control (as hereinafter defined) of the
Company, or a threatened Change of Control of the Company as
determined by the Committee, so that such Option shall
thereupon become exercisable immediately in part or its
entirety by the holder thereof, as such holder shall elect.
For the purposes of this Plan, a "Change of Control" shall be
deemed to have occurred if:
(i) Any "person", including a "group" as
determined in accordance with Section 13(d)(3) of the
Securities Exchange Act of 1934 ("Exchange Act") and
the Rules and Regulations promulgated thereunder, is
or becomes, through one or a series of related
transactions or through one or more intermediaries,
the beneficial owner, directly or indirectly, of
securities of the Company representing 25% or more of
the combined voting power of the Company's then
outstanding securities, other than a person who is
such a beneficial owner on the effective date of the
Plan and any affiliate of such person;
(ii) As a result of, or in connection with,
any tender offer or exchange offer, merger or other
business combination, sale of assets or contested
election, or any combination of the foregoing
transactions ("Transaction"), the persons who were
Directors of the Company before the Transaction shall
cease to constitute a majority of the Board of
Directors of the Company or any successor to the
Company;
(iii) Following the effective date of the Plan,
the Company is merged or consolidated with another
corporation and as a result of such merger or
consolidation less than 40% of the outstanding voting
securities of the surviving or resulting corporation
shall then be owned in the aggregate by the former
stockholders of the Company, other than (x) any party
to such merger or consolidation, or (y) any
affiliates of any such party;
(iv) A tender offer or exchange offer is
made and consummated for the ownership of securities
of the Company representing 25% or more of the
combined voting power of the Company's then
outstanding voting securities; or
(v) The Company transfers more than 50% of
its assets, or the last of a series of transfers
result in the transfer of more than 50% of the assets
of the Company, to another corporation that is not a
wholly-owned corporation of the Company. For purposes
of this subsection 8(c)(6)(v), the determination of
what constitutes more than 50% of the assets of the
Company shall be determined based on the sum of the
values attributed to (i) the Company's real property
as determined by an independent appraisal thereof,
and (ii) the net book value of all other assets of
the Company, each taken as of the date of the
Transaction involved.
In addition, upon a Change of Control, any Options
previously granted under the Plan to the extent not already
exercised may be exercised in whole or in part either
immediately or at any time during the term of the Option as
such holder shall elect.
(d) Option Prices.
(1) Nonqualified Options. The purchase price or
prices of the shares of the Common Stock which shall be
offered to any person under the Plan and covered by a
Nonqualified Option shall be the price determined by the
Committee at the time of granting of the Nonqualified Option,
which price may be less than, equal to or higher than one
hundred percent (100%) of the fair market value of the Common
Stock at the time of granting the Nonqualified Option.
(2) Incentive Options. The purchase price or prices
of the shares of the Common Stock which shall be offered to
any person under the Plan and covered by an Incentive Option
shall be one hundred percent (100%) of the fair market value
of the Common Stock at the time of granting the Incentive
Option or such higher purchase price as may be determined by
the Committee at the time of granting the Incentive Option;
provided, however, if an Incentive Option is granted to a 10%
Shareholder, the purchase price of the shares of the Common
Stock of the Company covered by such Incentive Option may not
be less than one hundred ten percent (110%) of the fair market
value of such shares on the day the Incentive Option is
granted.
(3) Determination of Fair Market Value. During such
time as the Common Stock of the Company is not listed upon an
established stock exchange, the fair market value per share
shall be deemed to be the closing sales price of the Common
Stock on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") on the day the Option is
granted, as reported by NASDAQ, if the Common Stock is so
quoted, and if not so quoted, the mean between dealer "bid"
and "ask," prices of the Common Stock in the New York
over-the-counter market on the day the Option is granted, as
reported by the National Association of Securities Dealers,
Inc. If the Common Stock is listed upon an established stock
exchange or exchanges, such fair market value shall be deemed
to be the highest closing price of the Common Stock on such
stock exchange or exchanges on the day the Option is granted
or, if no sale of the Common Stock of the Company shall have
been made on established stock exchange on such day, on the
next preceding day on which there was a sale of such stock. If
there is no market price for the Common Stock, then the Board
of Directors and the Committee may, after taking all relevant
facts into consideration, determine the fair market value of
the Common Stock.
(e) Exercise of Options. To the extent that a holder
of an Option has a current right to exercise, the Option may
be exercised from time to time by written notice to the
Company at its principal place of business. Such notice shall
state the election to exercise the Option, the number of whole
shares in respect of which it is being exercised, shall be
signed by the person or persons so exercising the Option, and
shall contain any investment representation required by
Section 8(i) hereof. Such notice shall be accompanied by
payment of the full purchase price of such shares and by the
Option Agreement evidencing the Option. In addition, if the
Option shall be exercised, pursuant to Section 8(c)(4) or
Section 8(c)(5) hereof, by any person or persons other than
the optionee, such notice shall also be accompanied by
appropriate proof of the right of such person or persons to
exercise the Option. The Company shall deliver a certificate
or certificates representing such shares as soon as
practicable after the aforesaid notice and payment of such
shares shall be received. The certificate or certificates for
the shares as to which the Option shall have been so exercised
shall be registered in the name of the person or persons so
exercising the Option. In the event the Option shall not be
exercised in full, the Secretary of the Company shall endorse
or cause to be endorsed on the Option the number of shares
which has been exercised thereunder and the number of shares
that remain exercisable under the Option and return such
Option Agreement to the holder thereof.
(f) Non-transferability of Options. An Option granted
pursuant to the Plan shall be exercisable only by the optionee
or the optionee's court appointed guardian as set forth in
Section 8(c)(4) hereof during the optionee's lifetime and
shall not be assignable or transferable by the optionee
otherwise than by Will or the laws of descent and
distribution. An Option granted pursuant to the Plan shall not
be assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise other than by Will or the laws
of descent and distribution) and shall not be subject to
execution, attachment, or similar process. Any attempted
transfer, assignment, pledge, hypothecation, or other
disposition of any Option or of any rights granted thereunder
contrary to the foregoing provisions of this Section 8(f), or
the levy of any attachment or similar process upon an Option
or such rights, shall be null and void.
(g) Limitations on 10% Shareholders. No Incentive
Option may be granted under the Plan to any 10% Shareholder
unless (i) such Incentive Option is granted at an option price
not less than one hundred ten percent (110%) of the fair
market value of the shares on the day the Incentive Option is
granted and (ii) such Incentive Option expires on a date not
later than five (5) years from the date the Incentive Option
is granted.
(h) Limits on Vesting of Incentive Options. An
individual may be granted one or more Incentive Options,
provided that the aggregate fair market value (as determined
at the time such Incentive Option is granted) of the stock
with respect to which Incentive Options are exercisable for
the first time by such individual during any calendar year
shall not exceed $100,000. To the extent the $100,000
limitation in the preceding sentence is exceeded, such option
shall be treated as an option which is not an Incentive
Option.
(i) Compliance with Securities Laws. The Plan and the
grant and exercise of the rights to purchase shares hereunder,
and the Company's obligations to sell and deliver shares upon
the exercise of rights to purchase shares, shall be subject to
all applicable federal and state laws, rules and regulations,
and to such approvals by any regulatory or governmental agency
as may, in the opinion of counsel for the Company, be
required, and shall also be subject to all applicable rules
and regulations of any stock exchange upon which the Common
Stock of the Company may then be listed. At the time of
exercise of any Option, the Company may require the optionee
to execute any documents or take any action which may be then
necessary to comply with the Securities Act of 1933, as
amended ("Securities Act"), and the rules and regulations
promulgated thereunder, or any other applicable federal or
state laws regulating the sale and issuance of securities, and
the Company may, if it deems necessary, include provisions in
the stock option agreements to assure such compliance. The
Company may, from time to time, change its requirements with
respect to enforcing compliance with federal and state
securities laws, including the request for and enforcement of
letters of investment intent, such requirements to be
determined by the Company in its judgment as necessary to
assure compliance with said laws. Such changes may be made
with respect to any particular Option or stock issued upon
exercise thereof. Without limiting the generality of the
foregoing, if the Common Stock issuable upon exercise of an
Option granted under the Plan is not registered under the
Securities Act, the Company at the time of exercise will
require that the registered owner execute and deliver an
investment representation agreement to the Company in form
acceptable to the Company and its counsel, and the Company
will place a legend on the certificate evidencing such Common
Stock restricting the transfer thereof, which legend shall be
substantially as follows:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAW BUT HAVE BEEN ACQUIRED FOR THE
PRIVATE INVESTMENT OF THE HOLDER HEREOF AND MAY NOT
BE OFFERED, SOLD OR TRANSFERRED UNTIL EITHER (i) A
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR
SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE
BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) THE
COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY AND ITS COUNSEL THAT
REGISTRATION UNDER SUCH SECURITIES ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN
CONNECTION WITH SUCH PROPOSED OFFER, SALE OR
TRANSFER.
(j) Additional Provisions. The Option Agreements
authorized under the Plan shall contain such other provisions
as the Committee shall deem advisable, including, without
limitation, restrictions upon the exercise of the Option. Any
such Option Agreement with respect to an Incentive Option
shall contain such limitations and restrictions upon the
exercise of the Incentive Option as shall be necessary in
order that the option will be an "Incentive Stock Option" as
defined in Section 422 of the Code.
9. Medium and Time of Payment. The purchase price of the shares of the
Common Stock as to which the Option shall be exercised shall be paid in full
either (i) in cash at the time of exercise of the Option, (ii) by tendering to
the Company shares of the Company's Common Stock having a fair market value (as
of the date of receipt of such shares by the Company) equal to the purchase
price for the number of shares of Common Stock purchased, or (iii) partly in
cash and partly in shares of the Company's Common Stock valued at fair market
value as of the date of receipt of such shares by the Company. Cash payment for
the shares of the Common Stock purchased upon exercise of the Option shall be in
the form of either a cashier's check, certified check or money order. Personal
checks may be submitted, but will not be considered as payment for the shares of
the Common Stock purchased and no certificate for such shares will be issued
until the personal check clears in normal banking channels. If a personal check
is not paid upon presentment by the Company, then the attempted exercise of the
Option will be null and void. In the event the optionee tenders shares of the
Company's Common Stock in full or partial payment for the shares being purchased
pursuant to the Option, the shares of Common Stock so tendered shall be
accompanied by fully executed stock powers endorsed in favor of the Company with
the signature on such stock power being guaranteed. If an optionee tenders
shares, such optionee assumes sole and full responsibility for the tax
consequences, if any, to such optionee arising therefrom, including the possible
application of Code Section 424(c), or its successor Code section, which negates
any nonrecognition of income rule with respect to such transferred shares, if
such transferred shares have not been held for the minimum statutory holding
period to receive preferential tax treatment.
10. Alternate Stock Appreciation Rights.
(a) Award of Alternate Stock Rights. Concurrently with or
subsequent to the award of any Option to purchase one or more shares of
Common Stock, the Committee may in its sole discretion, subject to the
provisions of the Plan and such other terms and conditions as the
Committee may prescribe, award to the optionee with respect to each
share of Common Stock covered by an Option ("Related Option"), a
related alternate stock appreciation right ("SAR"), permitting the
optionee to be paid the appreciation on the Related Option in lieu of
exercising the Related Option. A SAR granted with respect to an
Incentive Option must be granted together with the Related Option. A
SAR granted with respect to a Nonqualified Option may be granted
together with or subsequent to the grant of such Related Option.
(b) Alternate Stock Rights Agreement. Each SAR shall be on
such terms and conditions not inconsistent with this Plan as the
Committee may determine and shall be evidenced by a written agreement
executed by the Company and the optionee receiving the Related Option.
(c) Exercise. An SAR may be exercised only if and to the
extent that its Related Option is eligible to be exercised on the date
of exercise of the SAR. To the extent that a holder of a SAR has a
current right to exercise, the SAR may be exercised from time to time
by written notice to the Company at its principal place of business.
Such notice shall state the election to exercise the SAR, the number of
shares in respect of which it is being exercised, shall be signed by
the person so exercising the SAR and shall be accompanied by the
agreement evidencing the SAR and the Related Option. In the event the
SAR shall not be exercised in full, the Secretary of the Company shall
endorse or cause to be endorsed on the SAR and the Related Option the
number of shares which have been exercised thereunder and the number of
shares that remain exercisable under the SAR and the Related Option and
return such SAR and Related Option to the holder thereof.
(d) Amount of Payment. The amount of payment to which an
optionee shall be entitled upon the exercise of each SAR shall be equal
to 100% of the amount, if any, by which the fair market value of a
share of Common Stock on the exercise date exceeds the fair market
value of a share of Common Stock on the date the Option related to said
SAR was granted or became effective, as the case may be; provided,
however, the Company may, in its sole discretion, withhold from such
cash payment any amount necessary to satisfy the Company's obligation
for withholding taxes with respect to such payment. For this purpose,
the fair market value of a share of Common Stock shall be determined as
set forth in Section 8(d) hereof.
(e) Form of Payment. The amount payable by the Company to an
optionee upon exercise of a SAR may be paid in shares of Common Stock,
cash or a combination thereof. The number of shares of Common Stock to
be paid to an optionee upon such optionee's exercise of SAR shall be
determined by dividing the amount of payment determined pursuant to
Section 10(d) hereof by the fair market value of a share of Common
Stock on the exercise date of such SAR. For purposes of this Plan, the
exercise date of a SAR shall be the date the Company receives written
notification from the optionee of the exercise of the SAR in accordance
with the provisions of Section 10(c) hereof. As soon as practicable
after exercise, the Company shall either deliver to the optionee the
amount of cash due such optionee or a certificate or certificates for
such shares of Common Stock. All such shares shall be issued with the
rights and restrictions specified herein.
(f) Termination of SAR. Except as otherwise provided in case
of Disability (as defined in Section 8(c)(4) hereof) or death, no SAR
shall be exercisable after an optionee ceases to be an employee,
director or advisor of the Company or Subsidiary; provided, however,
that the Committee shall have the right in its sole discretion, but not
the obligation, to extend the exercise period for not more than three
(3) months following the date such optionee ceases to be an employee or
five (5) years if the optionee ceases to be a director or advisor of
the Company or a Subsidiary; provided further, that the Committee may
not extend the period during which an optionee may exercise a SAR for a
period greater than the period during which an optionee may exercise
the Related Option. If an optionee's position as an employee, director
or advisor of the Company is terminated due to the Disability or death
of such optionee, the Committee shall have the right, in its sole
discretion, but not the obligation, to extend the exercise period
applicable to the SAR for a period not to exceed the period in which
the optionee may exercise the Option related to said SAR as set forth
in Sections 8(c)(4) and 8(c)(5) hereof, respectively.
(g) Effect of Exercise of SAR. The exercise of any SAR shall
cancel and terminate the right to purchase an equal number of shares
covered by the Related Option.
(h) Effect of Exercise of Related Option. Upon the exercise or
termination of any Related Option, the SAR with respect to such Related
Option shall terminate to the extent of the number of shares of Common
Stock as to which the Related Option was exercised or terminated.
(i) Non-transferability of SAR. A SAR granted pursuant to this
Plan shall be exercisable only by the optionee or the optionee's court
appointed guardian as set forth in Section 8(c)(4) hereof during the
optionee's lifetime and, subject to the provisions of Section 10(f)
hereof, shall not be assignable or transferable by the optionee. A SAR
granted pursuant to the Plan shall not be assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and
shall not be subject to execution, attachment, or similar process. Any
attempted transfer, assignment, pledge, hypothecation, or other
disposition of any SAR or of any rights granted thereunder contrary to
the foregoing provisions of this Section 10(i), or the levy of any
attachment or similar process upon a SAR or such rights, shall be null
and void.
11. Rights as a Shareholder. The holder of an Option or a SAR shall
have no rights as a shareholder with respect to the shares covered by the Option
or SAR until the due exercise of the Option, Related Option, or SAR and the date
of issuance of one or more stock certificates to such holder for such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except as
provided in Section 14 hereof.
12. Optionee's Agreement to Serve. If requested by the Company, each
employee receiving an Option shall, as one of the terms of the Option Agreement
agree that such employee will remain in the employ of the Company or Subsidiary
for a period of at least one (1) year from the date on which the Option shall be
granted to such employee; and that such employee will, during such employment,
devote such employee's entire time, energy, and skill to the service of the
Company or a Subsidiary as may be required by the management thereof, subject to
vacations, sick leaves, and military absences. Such employment, subject to the
provisions of any written contract between the Company or a Subsidiary and such
employee, shall be at the pleasure of the Board of Directors of the Company or a
Subsidiary, and at such compensation as the Company or a Subsidiary shall
reasonably determine. Any termination of such employee's employment during the
period which the employee has agreed pursuant to the foregoing provisions of
this Section 13 to remain in employment that is either for cause or voluntary on
the part of the employee shall be deemed a violation by the employee of such
employee's agreement. In the event of such violation, any Option or Options held
by such employee, to the extent not theretofore exercised, shall forthwith
terminate, unless otherwise determined by the Committee. Notwithstanding the
preceding, neither the action of the Company in establishing the Plan nor any
action taken by the Company, a Subsidiary or the Committee under the provisions
hereof shall be construed as granting the optionee the right to be retained in
the employ of the Company or a Subsidiary, or to limit or restrict the right of
the Company or a Subsidiary, as applicable, to terminate the employment of any
employee of the Company or a Subsidiary, with or without cause.
13. Adjustments on Changes in Capitalization.
(a) Changes in Capitalization. Subject to any required action
by the Shareholders of the Company, the number of shares of Common
Stock covered by the Plan, the number of shares of Common Stock covered
by each outstanding Option, and the exercise price per share thereof
specified in each such Option, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
of the Company resulting from a subdivision or consolidation of shares
or the payment of a stock dividend (but only on the Common Stock) or
any other increase or decrease in the number of such shares effected
without receipt of consideration by the Company after the date the
Option is granted, so that upon exercise of the Option, the optionee
shall receive the same number of shares the optionee would have
received had the optionee been the holder of all shares subject to such
optionee's outstanding Option immediately before the effective date of
such change in the number of issued shares of the Common Stock of the
Company.
(b) Reorganization, Dissolution or Liquidation. Subject to any
required action by the Shareholders of the Company, if the Company
shall be the surviving corporation in any merger or consolidation, each
outstanding Option shall pertain to and apply to the securities to
which a holder of the number of shares of Common Stock subject to the
Option would have been entitled. A dissolution or liquidation of the
Company or a merger or consolidation in which the Company is not the
surviving corporation, shall cause each outstanding Option to terminate
as of a date to be fixed by the Committee (which date shall be as of or
prior to the effective date of any such dissolution or liquidation or
merger or consolidation); provided, that not less than thirty (30) days
written notice of the date so fixed as such termination date shall be
given to each optionee, and each optionee shall, in such event, have
the right, during the said period of thirty (30) days preceding such
termination date, to exercise such optionee's Option in whole or in
part in the manner herein set forth.
(c) Change in Par Value. In the event of a change in the
Common Stock of the Company as presently constituted, which change is
limited to a change of all of its authorized shares with par value into
the same number of shares with a different par value or without par
value, the shares resulting from any change shall be deemed to be the
Common Stock within the meaning of the Plan.
(d) Notice of Adjustments. To the extent that the adjustments
set forth in the foregoing paragraphs of this Section 14 relate to
stock or securities of the Company, such adjustments, if any, shall be
made by the Committee, whose determination in that respect shall be
final, binding and conclusive, provided that each Incentive Option
granted pursuant to this Plan shall not be adjusted in a manner that
causes the Incentive Option to fail to continue to qualify as an
"Incentive Stock Option" within the meaning of Section 422 of the Code.
The Company shall give timely notice of any adjustments made to each
holder of an Option under this Plan and such adjustments shall be
effective and binding on the optionee.
(e) Effect Upon Holder of Option. Except as hereinbefore
expressly provided in this Section 14, the holder of an Option shall
have no rights by reason of any subdivision or consolidation of shares
of stock of any class or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class by
reason of any dissolution, liquidation, merger, reorganization, or
consolidation, or spin-off of assets or stock of another corporation,
and any issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall not
affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Common Stock subject to the
Option. Without limiting the generality of the foregoing, no adjustment
shall be made with respect to the number or price of shares subject to
any Option granted hereunder upon the occurrence of any of the
following events:
(1) The grant or exercise of any other options which
may be granted or exercised under any qualified or
nonqualified stock option plan or under any other employee
benefit plan of the Company whether or not such options were
outstanding on the date of grant of the Option or thereafter
granted;
(2) The sale of any shares of Common Stock in the
Company's initial or any subsequent public offering,
including, without limitation, shares sold upon the exercise
of any overallotment option granted to the underwriter in
connection with such offering;
(3) The issuance, sale or exercise of any warrants to
purchase shares of Common Stock whether or not such warrants
were outstanding on the date of grant of the Option or
thereafter issued;
(4) The issuance or sale of rights, promissory notes
or other securities convertible into shares of Common Stock in
accordance with the terms of such securities ("Convertible
Securities") whether or not such Convertible Securities were
outstanding on the date of grant of the Option or were
thereafter issued or sold;
(5) The issuance or sale of Common Stock upon
conversion or exchange of any Convertible Securities, whether
or not any adjustment in the purchase price was made or
required to be made upon the issuance or sale of such
Convertible Securities and whether or not such Convertible
Securities were outstanding on the date of grant of the Option
or were thereafter issued or sold; or
(6) Upon any amendment to or change in the terms of
any rights or warrants to subscribe for or purchase, or
options for the purchase of, Common Stock or Convertible
Securities or in the terms of any Convertible Securities,
including, but not limited to, any extension of any expiration
date of any such right, warrant or option, any change in any
exercise or purchase price provided for in any such right,
warrant or option, any extension of any date through which any
Convertible Securities are convertible into or exchangeable
for Common Stock or any change in the rate at which any
Convertible Securities are convertible into or exchangeable
for Common Stock.
(f) Right of Company to Make Adjustments. The grant of an
Option pursuant to the Plan shall not affect in any way the right or
power of the Company to make adjustments, reclassification,
reorganizations, or changes of its capital or business structure or to
merge or to consolidate or to dissolve, liquidate or sell, or transfer
all or any part of its business or assets.
14. Investment Purpose. Each Option under the Plan shall be granted on
the condition that the purchase of the shares of stock thereunder shall be for
investment purposes, and not with a view to resale or distribution; provided,
however, that in the event the shares of stock subject to such Option are
registered under the Securities Act or in the event a resale of such shares of
stock without such registration would otherwise be permissible, such condition
shall be inoperative if in the opinion of counsel for the Company such condition
is not required under the Securities Act or any other applicable law,
regulation, or rule of any governmental agency.
15. No Obligation to Exercise Option or SAR. The granting of an Option or
SAR shall impose no ------------------------------------------- obligation upon
the optionee to exercise such Option or SAR.
16. Modification, Extension, and Renewal of Options. Subject to the
terms and conditions and within the limitations of the Plan, the Committee and
the Board of Directors may modify, extend or renew outstanding Options granted
under the Plan, or accept the surrender of outstanding Options (to the extent
not theretofore exercised). Neither the Committee nor the Board of Directors
shall, however, modify any outstanding Options so as to specify a lower price or
accept the surrender of outstanding Options and authorize the granting of new
Options in substitution therefor specifying a lower price. Notwithstanding the
foregoing, however, no modification of an Option shall, without the consent of
the optionee, alter or impair any rights or obligations under any Option
theretofore granted under the Plan.
17. Effective Date of the Plan. The Plan shall become effective on the date
of execution hereof, --------------------------- which date is the date the
Board of Directors and Shareholders approved and adopted the Plan ("Effective
Date").
18. Termination of the Plan. This Plan shall terminate as of the
expiration of ten (10) years from the Effective Date. Options may be granted
under this Plan at any time and from time to time prior to its termination. Any
Option outstanding under the Plan at the time of its termination shall remain in
effect until the Option shall have been exercised or shall have expired.
19. Amendment of the Plan. The Plan may be terminated at any time by
the Board of Directors of the Company. The Board of Directors may at any time
and from time to time without obtaining the approval of the Shareholders of the
Company or a Subsidiary, modify or amend the Plan (including such form of Option
Agreement as hereinabove mentioned) in such respects as it shall deem advisable
in order that the Incentive Options granted under the Plan shall be "Incentive
Stock Options" as defined in Section 422 of the Code or to conform to any change
in the law, or in any other respect which shall not change: (a) the maximum
number of shares for which Options may be granted under the Plan, except as
provided in Section 14 hereof; or (b) the option prices other than to change the
manner of determining the fair market value of the Common Stock for the purpose
of Section 8(d) hereof to conform with any then applicable provisions of the
Code or regulations thereunder; or (c) the periods during which Options may be
granted or exercised; or (d) the provisions relating to the determination of
persons to whom Options shall be granted and the number of shares to be covered
by such Options; or (e) the provisions relating to adjustments to be made upon
changes in capitalization. The termination or any modification or amendment of
the Plan shall not, without the consent of the person to whom any Option shall
theretofore have been granted, affect that person's rights under an Option
theretofore granted to such person. With the consent of the person to whom such
Option was granted, an outstanding Option may be modified or amended by the
Committee in such manner as it may deem appropriate and consistent with the
requirements of this Plan applicable to the grant of a new Option on the date of
modification or amendment.
20. Withholding. Whenever an optionee shall recognize compensation
income as a result of the exercise of any Option or SAR granted under the Plan,
the optionee shall remit in cash to the Company or Subsidiary the minimum amount
of federal income and employment tax withholding which the Company or Subsidiary
is required to remit to the Internal Revenue Service in accordance with the then
current provisions of the Code. The full amount of such withholding shall be
paid by the optionee simultaneously with the award or exercise of an Option or
SAR, as applicable.
21. Indemnification of Committee. In addition to such other rights of
indemnification as they may have as Directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees actually and necessarily incurred
in connection with the defense of any action, suit or proceedings, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any Option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such
Committee member is liable for negligence or misconduct in the performance of
his duties; provided that within sixty (60) days after institution of any such
action, suit or proceeding a Committee member shall in writing offer the Company
the opportunity, at its own expense, to pursue and defend the same.
22. Application of Funds. The proceeds received by the Company from the
sale of Common Stock --------------------- pursuant to Options granted hereunder
will be used for general corporate purposes.
23. Governing Law. This Plan shall be governed and construed in accordance
with the laws of the -------------- state of incorporation of the Company.
EXECUTED this 12th day of April, 2000..
AARICA HOLDINGS, INC.
By: /s/ Carol Kolozs______________
Carol Kolozs, Chief Executive Officer
ATTEST:
/s/ James R.Schnorf______
James R. .Schnorf, Secretary
Warrant Agreement
Aarica
WARRANT AGREEMENT
Between
AARICA HOLDINGS, INC.
And
AMERICAN STOCK TRANSFER & TRUST CO.
As Warrant Agent
for Public Offering of 1,000,000 Units, Each Consisting of One Share of
Common Stock and One Redeemable Common Stock Purchase Warrant
Dated as of September _____, 2000
THIS WARRANT AGREEMENT, dated as of September _____, 2000, between Aarica
Holdings, Inc., a Texas corporation (the "Company"), and American Stock Transfer
& Trust Co., New York, New York, as warrant agent (the "Warrant Agent");
WHEREAS, the Company proposes to issue 1,000,000 Redeemable Common
Stock Purchase Warrants (the "Warrants"), entitling the holders thereof to
purchase one share of Common Stock, at $.01 par value (the "Common Stock") for
each Warrant, in connection with the proposed issuance by the Company of
1,000,000 Units, each Unit consisting of one share of Common Stock and one
Warrant, and the Company also proposes to issue up to 150,000 Warrants
underlying, in part, the Underwriters' over-allotment option and up to 100,000
Warrants underlying, in part, a warrant to purchase Units to be granted to the
Representative of the Underwriters; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to act in connection with the
registration, transfer, exchange and exercise of Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
1. Appointment of Warrant Agent. The Company hereby appoints the Warrant
Agent to act as agent for the Company in accordance with the instructions
hereinafter in this Agreement set forth, and the Warrant Agent hereby accepts
such appointment.
2. Form of Warrant. The text of the Warrant and of the form of election
to purchase shares to be printed on the reverse thereof shall be substantially
as set forth in Exhibit A attached hereto. The Warrant Price to purchase one
share of Common Stock shall be as provided and defined in Section 8. The
Warrants shall be executed on behalf of the Company by the manual or facsimile
signature of the present or any future Chairman of the Board or President or
Vice President of the Company, under its corporate seal, affixed or in
facsimile, attested by the manual or facsimile signature of the present or any
future Secretary or Assistant Secretary of the Company. Warrants shall be dated
as of the date of issuance thereof by the Warrant Agent either upon initial
issuance or upon transfer or exchange.
Warrant Agreement
Aarica
3. Countersignature and Registration. The Warrant Agent shall maintain
books for the transfer and registration of the Warrants. The Warrants shall be
countersigned by the Warrant Agent (or by any successor to the Warrant Agent
then acting as warrant agent under this Agreement) and shall not be valid for
any purpose unless so countersigned. Warrants may be so countersigned, however,
by the Warrant Agent (or by its successor as warrant agent) and be delivered by
the Warrant Agent, notwithstanding that the persons whose manual or facsimile
signatures appear thereon as proper officers of the Company shall have ceased to
be such officers at the time of such countersignature or delivery.
4. Transfers and Exchanges. The Warrant Agent shall transfer, from time
to time after the sale of the Units, any outstanding Warrants upon the books to
be maintained by the Warrant Agent for that purpose, upon surrender thereof for
transfer properly endorsed or accompanied by appropriate instructions for
transfer. Upon any such transfer, a new Warrant shall be issued to the
transferee, and the surrendered Warrant shall be cancelled by the Warrant Agent.
Warrants so cancelled shall be delivered by the Warrant Agent to the Company
from time to time. The Warrants may be exchanged at the option of the holder
thereof, when surrendered at the office of the Warrant Agent, for another
Warrant, or other Warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of shares of
Common Stock. The Warrant Agent is hereby irrevocably authorized to countersign
in accordance with Section 3 of this Agreement the new Warrants required
pursuant to the provisions of this section, and the Company, whenever required
by the Warrant Agent, will supply the Warrant Agent with Warrants duly executed
on behalf of the Company for such purpose.
5. Exercise of Warrants. Subject to the provisions of this Agreement,
each registered holder of Warrants shall have the right, which may be exercised
as expressed in such Warrants, to purchase from the Company (and the Company
shall issue and sell to such registered holder of warrants) the number of fully
paid and nonassessable shares of Common Stock specified in such Warrants, upon
surrender of such Warrants to the Company at the office of the Warrant Agent,
with the form of election to purchase on the reverse thereof duly filled in and
signed, and upon payment to the Warrant Agent for the account of the Company of
the Warrant Price for the number of shares of common stock in respect of which
such Warrants are then exercised. Payment of such Warrant Price may be made in
cash, or by certified or official bank check, payable in United States dollars,
to the order of the Warrant Agent. No adjustment shall be made for any dividends
on any shares of Common Stock issuable upon exercise of a Warrant. Upon such
surrender of Warrants, and payment of the Warrant Price as aforesaid, the
Company shall issue and cause to be delivered with all reasonable dispatch to or
upon the written order of the registered holder of such Warrants and in such
name or names as such registered holder may designate, a certificate or
certificates for the number of full shares of Common Stock so purchased upon the
exercise of such Warrants. Such certificate or certificates shall be deemed to
have been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such shares as of the date of the
surrender of such Warrants and payment of the Warrant Price as aforesaid;
provided, however, that if, at the date of surrender of such Warrants and
payment of the Warrant Price, the transfer books for the Common Stock or other
class of stock purchasable upon the exercise of such Warrants shall be closed,
the certificates for the shares in respect of which such Warrants are then
exercised shall be issuable as of the date on which such books shall next be
opened and until such date the Company shall be under no duty to deliver any
certificate for such shares; provided further, however, that the transfer books
aforesaid, unless otherwise required by law, shall not be closed at any one time
for a period longer than 20 days. The rights of purchase represented by the
Warrants shall be exercisable, at the election of the registered holders
thereof, either as an entirety or from time to time for part only of the shares
specified therein, and in the event that any Warrant is exercised in respect of
less than all of the shares specified therein, a new Warrant or Warrants will be
issued for the remaining number of shares specified in the Warrant so
surrendered, and the Warrant Agent is hereby irrevocably authorized to
countersign and to deliver the required new Warrants pursuant to the provisions
of this Section and of Section 3 of this Agreement and the Company, whenever
required by the Warrant Agent, will supply the Warrant Agent with Warrants duly
executed on behalf of the Company for such purpose.
6. Mutilated or Missing Warrants. In case any of the Warrants shall be
mutilated, lost, stolen or destroyed, the Company will issue and the Warrant
Agent will countersign and deliver in exchange and substitution for and upon
cancellation of the mutilated warrant, or in lieu of and substitution for the
Warrant lost, stolen or destroyed, a new Warrant of like tenor and representing
an equivalent right or interest; but only upon receipt of evidence satisfactory
to the Company and the Warrant Agent of such loss, theft or destruction of such
Warrant and indemnity, if requested, also satisfactory to them. Applicants for
such substitute Warrants shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company or the Warrant
Agent may prescribe.
7. Reservation and Registration of Common Stock.
A. There have been reserved, and the Company shall at all times keep
reserved, out of the authorized and unissued shares of Common Stock, a number of
shares sufficient to provide for the exercise of the rights of purchase
represented by the Warrants, and the Transfer Agent for the Common Stock and
every subsequent Transfer Agent for any shares of the Company's capital stock
issuable upon the exercise of any of the rights of purchase aforesaid are hereby
irrevocably authorized and directed at all times to reserve such number of
authorized and unissued shares as shall be requisite for such purpose. The
Company will keep a copy of this Agreement on file with the Transfer Agent for
the Common Stock and with every subsequent Transfer Agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Warrant Agent is hereby irrevocably authorized
to requisition from time to time such Transfer Agent for stock certificates
required to honor outstanding Warrants. The Company will supply such Transfer
Agents with duly executed stock certificates for such purpose and will itself
provide or otherwise make available any cash which may be issuable as provided
in Section 9 of this Agreement. All Warrants surrendered in the exercise of the
rights thereby evidenced shall be cancelled by the Warrant Agent and shall
thereafter be delivered to the Company, and such cancelled Warrants shall
constitute sufficient evidence of the number of shares of stock which have been
issued upon the exercise of such Warrants.
B. The Company represents that it has registered under the Securities
Act of 1933, as amended, the shares of Common Stock issuable upon exercise of
the Warrants and will use its best efforts to maintain the effectiveness of such
registration by post-effective amendment during the entire period in which the
Warrants are exercisable, and that it will use its best efforts to qualify such
Common Stock for sale under the securities laws of such states of the United
States as may be necessary to permit the exercise of the Warrants in the states
in which the Units are initially qualified and to maintain such qualifications
during the entire period in which the Warrants are exercisable.
8. Warrant Price; Adjustments.
A. The exercise price (the "Exercise Price") at which Common Stock
shall be purchasable upon exercise of the Warrants at any time after the Common
Stock and Warrants become separately tradable and until 5:00 p.m., New York, New
York time, on ____________, 2005, shall be $_______ per share of Common Stock
or, if adjusted as provided in this Section, shall be such price as so adjusted.
B. The Warrant Price shall be subject to adjustment from time to time as
follows:
(1) Except as hereinafter provided, in case the
Company shall at any time or from time to time after the date
hereof issue any additional shares of Common Stock for a
consideration per share less than the Warrant Price in effect
immediately prior to the issuance of such additional shares,
or without consideration, then, upon each such issuance, the
Warrant Price in effect immediately prior to the issuance of
such additional shares shall forthwith be reduced to a price
(calculated to the nearest full cent) determined by dividing:
(a) An amount equal to (i) the total number
of shares of Common Stock outstanding immediately
prior to such issuance multiplied by the Warrant
Price in effect immediately prior to such issuance,
plus (ii) the consideration, if any, received by the
Company upon such issuance, by
(b) The total number of shares of Common
Stock outstanding immediately after the issuance of
such additional shares.
(2) The Company shall not be required to make any
such adjustment of the Warrant Price in accordance with the
foregoing if the amount of such adjustment shall be less than
$0.05 (adjustment will be made when cumulative adjustment
equals or exceeds $0.05) but in such case the Company shall
maintain a cumulative record of the Warrant Price as it would
have been in the absence of this provision (the "Constructive
Warrant Price"), and for the purpose of computing a new
Warrant Price after the next subsequent issuance of additional
shares (but not for the purpose of determining whether an
adjustment thereof is required under the terms of this
paragraph) the constructive Warrant Price shall be deemed to
be the Warrant Price in effect immediately prior to such
issuance.
(3) For the purpose of this Section 8 the following provisions shall also
be applicable:
(a) In the case of the issuance of
additional shares of Common Stock for cash, the
consideration received by the Company therefor shall
be deemed to be the net cash proceeds received by the
Company for such shares before deducting any
commissions or other expenses paid or incurred by the
Company for any underwriting of, or otherwise in
connection with, the issuance of such shares.
(b) In case of the issuance (otherwise than
upon conversion or exchange of shares of Common
stock) of additional shares of Common Stock for a
consideration other than cash or a consideration a
part of which shall be other than cash, the amount of
the consideration other than cash received by the
Company for such shares shall be deemed to be the
value of such consideration as determined in good
faith by the Board of Directors of the Company, as of
the date of the adoption of the resolution of said
Board, providing for the issuance of such shares for
consideration other than cash or for consideration a
part of which shall be other than cash, such fair
value to include goodwill and other intangibles to
the extent determined in good faith by the Board.
(c) In case of the issuance by the Company
after the date hereof of any security (other than the
Warrants) that is convertible into shares of Common
Stock or of any warrants, rights or options to
purchase shares of Common stock (except the options
and warrants referred to in subsection H of this
Section 8), (i) the Company shall be deemed (as
provided in subparagraph (e) below) to have issued
the maximum number of shares of Common Stock
deliverable upon the exercise of such conversion
privileges or warrants, rights or options, and (ii)
the consideration therefor shall be deemed to be the
consideration received by the Company for such
convertible securities or for such warrants, rights
or options, as the case may be, before deducting
therefrom any expenses or commissions incurred or
paid by the Company for any underwriting of, or
otherwise in connection with, the issuance of such
convertible security or warrants, rights or options,
plus (A) the minimum consideration or adjustment
payment to be received by the Company in connection
with such conversion, or (B) the minimum price at
which shares of Common Stock are to be delivered upon
exercise of such warrants, rights or options or, if
no minimum price is specified and such shares are to
be delivered at an option price related to the market
value of the subject shares, an option price bearing
the same relation to the market value of the subject
shares at the time such warrants, rights or options
were granted; provided that as to such options such
further adjustment as shall be necessary on the basis
of the actual option price at the time of exercise
shall be made at such time if the actual option price
is less than the aforesaid assumed option price. No
further adjustment of the Warrant Price shall be made
as a result of the actual issuance of the shares of
Common Stock referred to in this subparagraph (c). on
the expiration of such warrants, rights or options,
or the termination of such right to convert, the
Warrant Price shall be readjusted to such Warrant
Price as would have pertained had the adjustments
made upon the issuance of such warrants, rights,
options or convertible securities been made upon the
basis of the delivery of only the number of shares of
Common Stock actually delivered upon the exercise of
such warrants, rights or options or upon the
conversion of such securities.
(d) For the purposes hereof, any additional
shares of Common Stock issued as a stock dividend
shall be deemed to have been issued for no
consideration.
(e) The number of shares of Common Stock at
any time outstanding shall include the aggregate
number of shares deliverable in respect of the
convertible securities, rights and options referred
to in subparagraph (c) of this paragraph; provided
that with respect to shares referred to in clause (i)
of subparagraph (c), to the extent that such
warrants, options, rights or conversion privileges
are not exercised, such shares shall be deemed to be
outstanding only until the expiration dates of the
warrants, rights, options or conversion privileges or
the prior cancellation thereof.
C. In case the Company shall at any time subdivide its outstanding
shares of Common stock into a greater number of shares, the Warrant Price in
effect immediately prior to such subdivision shall be proportionately reduced
and, in case the outstanding shares of the Common Stock of the Company shall be
combined into a smaller number of shares, the Warrant Price in effect
immediately prior to such combination shall be proportionately increased.
D. Upon each adjustment of the Warrant Price pursuant to the provisions
of this Section 8, the number of shares issuable upon the exercise of each
Warrant shall be adjusted by multiplying the Warrant Price in effect prior to
the adjustment by the number of shares of Common Stock covered by the warrant
and dividing the product so obtained by the adjusted Warrant Price.
E. Except upon consolidation or reclassification of the shares of
Common Stock of the Company as provided for in subsection C hereof and except
for readjustment of the Warrant Price upon expiration of warrants, rights or
options as provided for in subparagraph (c) of paragraph 3 of subsection B
hereof, the Warrant Price in effect at any time may not be adjusted upward or
increased in any manner whatsoever.
F. Irrespective of any adjustment or change in the Warrant Price or the
number of shares of Common Stock actually purchasable under the several
Warrants, the Warrants theretofore and thereafter issued may continue to express
the Warrant Price per share and the number of shares purchasable thereunder as
the Warrant Price per share and the number of shares purchasable were expressed
in the Warrants when initially issued.
G. If any capital reorganization or reclassification of the capital
stock of the Company (other than a distribution of stock in accordance with
Section 10.B) or consolidation or merger of the Company with another corporation
or the sale of all or substantially all of its assets to another corporation
shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, or merger or sale, lawful and adequate
provision shall be made whereby the holder of each Warrant then outstanding
shall thereafter have the right to purchase and receive upon the basis and upon
the terms and conditions specified herein and in the Warrants and in lieu of the
shares of the Common Stock immediately theretofore purchasable and receivable
upon the exercise of the rights represented by each such Warrant, such shares of
stock, securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares of such Common Stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented by each such Warrant had
such reorganization, reclassification, consolidation, merger or sale not taken
place, and in any such case appropriate provisions shall be made with respect to
the rights and interest of the holder of each Warrant then outstanding to the
end that the provisions thereof (including without limitation provisions for
adjustment of the Warrant Price and of the number of shares purchasable upon the
exercise of each Warrant then outstanding) shall thereafter be applicable as
nearly as may be in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise of each Warrant.
H. No adjustment of the Warrant Price shall be made in connection with
the issuance or sale of shares of Common Stock issuable pursuant to currently
outstanding options and warrants granted to officers, directors, employees,
advisory directors, or affiliates of the Company.
I. Whenever the Warrant Price is adjusted as herein provided, the
Company shall (a) forthwith file with the Warrant Agent a certificate signed by
the Chairman of the Board or the President or a Vice President of the Company
and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Company, showing in detail the facts requiring such adjustment
and the Warrant Price and the number of shares of Common Stock purchasable upon
exercise of the Warrants after such adjustment and (b) cause a notice stating
that such adjustment has been effected and stating the adjusted Warrant Price
and the number of shares of Common Stock purchasable upon exercise of the
Warrants to be published at least once a week for two consecutive weeks in a
newspaper of general circulation in Dallas, Texas and in New York, New York. The
Company, at its option, may cause a copy of such notice to be sent by first
class mail, postage prepaid, to each registered holder of Warrants at his
address appearing on the Warrant register. The Warrant Agent shall have no duty
with respect to any such certificate filed with it except to keep the same on
file and available for inspection by holders of Warrants during reasonable
business hours. The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of a Warrant to determine whether any facts exist
which may require any adjustment of the Warrant Price, or with respect to the
nature or extent of any adjustment of the Warrant Price when made, or with
respect to the method employed in making such adjustment.
J. The Company may retain a firm of independent certified public
accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) selected by the Board of
Directors of the Company or the Executive Committee of said Board and approved
by the Warrant Agent, to make any computation required under this Section 8, and
a certificate signed by such firm shall be conclusive evidence of the
correctness of any computation made under this Section 8.
K. In case at any time conditions shall arise by reason of action taken
by the Company which, in the opinion of the Board of Directors of the Company,
are not adequately covered by the other provisions of this Agreement and which
might materially and adversely affect the rights of the holders of the Warrants,
or in case at any time any such conditions are expected to arise by reason of
any action contemplated by the Company, the Board of Directors of the Company
shall appoint a firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial statements
of the Company), who shall give their opinion as to the adjustment, if any (not
inconsistent with the standards established in this Section 8), of the Warrant
Price and the number of shares of Common Stock purchasable pursuant hereto
(including, if necessary, any adjustment as to the property which may be
purchasable in lieu thereof upon exercise of the Warrants) which is, or would
be, required to preserve without dilution the rights of the holders of the
Warrants. The Board of Directors of the Company shall make the adjustment
recommended forthwith upon the receipt of such opinion or the taking of any such
action contemplated, as the case may be; provided, however, that no adjustment
of the Warrant Price shall be made which in the opinion of the accountant or
firm of accountants giving the aforesaid opinion would result in an increase of
the Warrant Price to more than the Warrant Price then in effect except as
otherwise provided in subsection E of this Section 8.
9. No Fractional Interests. The Company shall not be required to issue
fractions of shares of Common Stock on the exercise of Warrants. If any fraction
of a share of Common Stock would, except for the provisions of this section, be
issuable on the exercise of any warrant (or specified portions thereof), the
Company shall purchase such fraction for an amount in cash equal to the current
value of such fraction (a) computed, if the Common Stock shall be listed or
admitted to unlisted trading privileges on any national or regional securities
exchange, on the basis of the last reported sale price of the Common Stock on
such exchange on the last business day prior to the date of exercise upon which
such a sale shall have been effected (or, if the Common Stock shall be listed or
admitted to unlisted trading privileges on more than one such exchange, on the
basis of such price on the exchange designated from time to time for such
purpose by the Board of Directors of the Company) or (b) computed, if the Common
Stock shall not be listed or admitted to unlisted trading privileges, on the
basis of the average of the high and low bid prices of the Common Stock in the
Nasdaq Stock Market, on the last business day prior to the date of exercise.
10. Notice to Warrant Holders.
A. Nothing contained in this Agreement or in any of the Warrants shall
be construed as conferring upon the holders thereof the right to vote or to
consent or to receive notice as stockholders in respect of the meetings of
stockholders for the election of directors of the Company or any other matters,
or any rights whatsoever as stockholders of the Company; provided, however, that
in the event that a meeting of stockholders shall be called to consider and take
action on a proposal for the voluntary dissolution of the Company, other than in
connection with a consolidation, merger or sale of all, or substantially all, of
its property, assets, business and goodwill as an entirety, then and in that
event the Company shall cause a notice thereof to be published at least once a
week for two consecutive weeks in a newspaper of general circulation in Dallas,
Texas and New York, New York, such publication to be completed at least 20 days
prior to the date fixed as a record date or the date of closing the transfer
books for the determination of the stock holders entitled to vote at such
meeting. The Company shall also cause a copy of such notice to be sent by first
class mail, postage prepaid, at least 20 days prior to said date fixed as a
record date or said date of closing the transfer books, to each registered
holder of Warrants at his address appearing on the Warrant register; but failure
to mail or receive such notice or any defect therein or in the mailing thereof
shall not affect the validity of any action taken in connection with such
voluntary dissolution. If such notice shall have been so given and if such a
voluntary dissolution shall be authorized at such meeting or any adjournment
thereof, then for and after the date on which such voluntary dissolution shall
have been duly authorized by the stockholders, the purchase rights represented
by the Warrants and other rights with respect thereto shall cease and terminate.
B. If the Company shall make any distribution on, or to holders of, its
Common Stock (or other property which may be purchasable in lieu thereof upon
the exercise of Warrants) of any property (other than a cash dividend), the
Company shall cause a notice of its intention to make such distribution to be
published at least once a week for two consecutive weeks in a newspaper of
general circulation in Dallas, Texas and New York, New York, such publication to
be completed at least 20 days prior to the date fixed as a record date or the
date of closing the transfer books for the determination of the stockholders
entitled to receive such distribution. The Company shall also cause a copy of
such notice to be sent by first class mail, postage prepaid, at least 20 days
prior to said date fixed as a record date or said date of closing the transfer
books, to each registered holder of Warrants at his address appearing on the
Warrant register; but failure to mail or to receive such notice or any defect
therein or in the mailing thereof shall not affect the validity of any action
taken in connection with such distribution.
11. Disposition of Proceeds on Exercise of Warrants.
A. The Warrant Agent shall account promptly to the Company with respect
to Warrants exercised and concurrently pay to the Company all monies received by
the Warrant Agent for the purchase of shares of the Company's stock through the
exercise of such Warrants.
B. The Warrant Agent shall keep copies of this Agreement available for
inspection by holders of Warrants during normal business hours at its principal
office.
12. Redemption of Warrants.
A. At any time on or after the Warrants and the shares of Common Stock
are separately traded, the Company may, at its option, redeem some or all of the
outstanding Warrants at $0.05 per Warrant, upon thirty (30) days' prior written
notice, if the closing sale price of the Common Stock on the American Stock
Exchange or any other national securities exchange, or the closing bid quotation
on the Nasdaq Stock Market, has equaled or exceeded $_______ for ten (10)
consecutive trading days preceding the date notice of redemption is given (the
"Redemption Price"). In order to redeem the Warrants, the Company must have on
file with the Securities and Exchange Commission a current registration
statement pertaining to the Common Stock underlying the Warrants.
B. The election of the Company to redeem some or all of the Warrants shall
be evidenced by a resolution of the Board of Directors of the Company.
C. Warrants may be exercised at any time on or before the date fixed for
redemption (the "Redemption Date").
D. Notice of redemption shall be given by first class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each holder of Warrants, at his address appearing in the Warrant
register.
All notices of redemption shall state:
(1) The Redemption Date;
(2) That on the Redemption Date the Redemption Price will become due and
payable upon each Warrant;
(3) The place where such Warrants are to be surrendered for redemption and
payment of the Redemption Price; and
(4) The current Warrant Price of the Warrants, the
place or places where such Warrants may be surrendered for
exercise, and the time at which the right to exercise the
Warrants will terminate in accordance with this Agreement.
E. Notice of redemption of Warrants at the election of the Company shall be
given by the Company or, at the Company's request, by the Warrant Agent in the
name and at the expense of the Company.
F. Prior to any Redemption Date, the Company shall deposit with the
Warrant Agent an amount of money sufficient to pay the Redemption Price of all
the Warrants which are to be redeemed on that date. If any Warrant is exercised
pursuant to Section 5, any money so deposited with the Warrant Agent for the
redemption of such Warrant shall be paid to the Company.
G. Notice of redemption having been given as aforesaid, the Warrants so
to be redeemed shall, on the Redemption Date, become redeemable at the
Redemption Price therein specified and on such date (unless the Company shall
default in the payment of the Redemption Price), such Warrants shall cease to be
exercisable and thereafter represent only the right to receive the Redemption
Price. Upon surrender of such Warrants for redemption in accordance with said
notice, such Warrants shall be redeemed by the Company for the Redemption Price.
13. Merger or Consolidation or Change of Name of Warrant Agent. Any
corporation into which the Warrant Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Warrant Agent shall be a party, or any corporation succeeding to the
corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor warrant agent under
the provisions of Section 15 of this Agreement. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement and at such time any of the Warrants shall have been countersigned but
not delivered, any such successor to the Warrant Agent may adopt the
countersignature of the Warrant Agent and deliver such warrants so
countersigned; and in case at the time any of the Warrants shall not have been
countersigned, any successor to the Warrant Agent may countersign such Warrants
either in the name of the predecessor Warrant Agent or in the name of the
successor warrant agent; and in all such cases such Warrants shall have the full
force provided in the Warrant and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrants shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignature under its prior name
and deliver warrants so countersigned; and in case at that time any of the
Warrants shall not have been countersigned, the Warrant Agent may countersign
such Warrants whether in its prior name or in its changed name; and in all such
cases such Warrants shall have the full force provided in the Warrants and in
this Agreement.
14. Duties of Warrant Agent. The Warrant Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Warrants, by their acceptance
thereof, shall be bound:
A. The statements contained herein and in the Warrants shall be taken
as statements of the Company, and the Warrant Agent assumes no responsibility
for the correctness of any of the same except such as describe the Warrant Agent
or action taken or to be taken by it. The Warrant Agent assumes no
responsibility with respect to the distribution of the Warrants except as herein
otherwise provided.
B. The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Warrants to be complied with by the Company.
C. The Warrant Agent may execute and exercise any of the rights or powers
hereby vested in it to perform any duty hereunder either itself or by or through
its attorneys, agents or employees.
D. The Warrant Agent may consult at any time with counsel satisfactory
to it (who may be counsel for the Company) and the Warrant Agent shall incur no
liability or responsibility to the Company or to any holder of any Warrant in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in accordance with the opinion or the advice of such counsel, provided the
Warrant Agent shall have exercised reasonable care in the selection and
continued employment of such counsel.
E. The Warrant Agent shall incur no liability or responsibility to the
Company or to any holder of any Warrant for any action taken in reliance on any
notice, resolution, waiver, consent, order, certificate, or other paper,
document or instrument believed by it to be genuine and to have been signed,
sent or presented by the proper party or parties.
F. The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other appropriate charges incurred by the Warrant Agent
in the execution of this Agreement and to indemnify the Warrant Agent and save
it harmless against any and all liabilities, including judgments, costs and
reasonable counsel fees, for anything done or omitted by the Warrant Agent in
the execution of this Agreement except as a result of the Warrant Agent's
negligence or bad faith.
G. The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to involve
expense unless the Company or one or more registered holders of Warrants shall
furnish the Warrant Agent with reasonable security and indemnity for any cost
and expense which may be incurred, but this provision shall not affect the power
of the Warrant Agent to take such action as the Warrant Agent may consider
proper, whether with or without any such security or indemnity. All rights of
action under this Agreement or under any of the Warrants may be enforced by the
Warrant Agent without the possession of any of the Warrants or the production
thereof at any trial or other proceeding relative thereto, and any such action,
suit or proceeding instituted by the Warrant Agent shall be brought in its name
as Warrant Agent, and any recovery of judgment shall be for the ratable benefit
of the registered holders of the Warrants, as their respective rights or
interests may appear.
H. The Warrant Agent and any stockholder, director, officer or employee
of the Warrant Agent may buy, sell or deal in any of the Warrants or other
securities of the Company or become peculiarly interested in any transaction in
which the Company may be interested, or contract with or lend money to or
otherwise act as fully and freely as though it were not Warrant Agent under this
Agreement. Nothing herein shall preclude the Warrant Agent from acting in any
other capacity for the Company or for any other legal entity.
I. The Warrant Agent shall act hereunder solely as agent and not in a
ministerial capacity, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not be liable for anything which it
may do or refrain from doing in connection with this Agreement except for its
own negligence or bad faith.
15. Change of Warrant Agent. The Warrant Agent may resign and be
discharged from its duties under this Agreement by giving to the Company notice
in writing, and to the holders of the Warrants notice by publication, of such
resignation, specifying a date when such resignation shall take effect, which
notice shall be published at least once a week for two consecutive weeks in a
newspaper of general circulation in Dallas, Texas and New York, New York, prior
to the date so specified. The Warrant Agent may be removed by like notice to the
Warrant Agent from the Company and by like publication. If the Warrant Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Warrant Agent. If the Company shall
fail to make such appointment within a period of 30 days after such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Warrant Agent or by the registered holder of a
Warrant (who shall, with such notice, submit his warrant for inspection by the
Company), then the registered holder of a Warrant may apply to any court of
competent jurisdiction for the appointment of a successor to the Warrant Agent.
Any successor warrant agent, whether appointed by the Company or by
such a court, shall be a bank or trust company having its principal office, and
having capital and surplus as shown by its last published report to its
stockholders, of at least $1,000,000. After appointment, the successor warrant
agent shall be vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Warrant Agent without further act or deed;
but the former Warrant Agent shall deliver and transfer to the successor warrant
agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Failure to
file or publish any notice provided for in this section, however, or any defect
therein, shall not affect the legality or validity of the resignation or removal
of the Warrant Agent or the appointment of the successor warrant agent, as the
case may be.
16. Identify of Transfer Agent. Forthwith upon the appointment of any
Transfer Agent for the Common Stock or of any subsequent Transfer Agent for
shares of the Common Stock or other shares of the Company's capital stock
issuable upon the exercise of the rights of purchase represented by the
Warrants, the Company will file with the Warrant Agent a statement setting forth
the name and address of such Transfer Agent.
17. Notices. Any notice pursuant to this Agreement to be given or made
by the Warrant Agent or the registered holder of any Warrant to or on the
Company shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing by the Company
with the Warrant Agent) as follows:
Aarica Holdings, Inc.
195 Wekiva Springs Road, Suite 322
Longwood, Florida 32779
Any notice pursuant to this Agreement to be given or made by the
Company or the registered holder of any Warrant to or on the Warrant Agent shall
be sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing by the warrant Agent with
the Company) as follows:
American Stock Transfer & Trust Co.
40 Wall Street
New York, New York 10005
18. Supplements and Amendments. The Company and the Warrant Agent may
from time to supplement or amend this Agreement without the approval of any
holders of Warrants (i) in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision herein; (ii) to extend the expiration date of the
Warrants or lower the Warrant Price; or (iii) to make any other provisions in
regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not be
inconsistent with the provisions of the Warrants and which shall not adversely
affect the interests of the holders of Warrants.
19. Successors. All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
20. Merger or Consolidation of the Company. The Company shall not
effect any consolidation or merger with, or sale of substantially all its
property to, any other corporation unless the corporation resulting from such
merger (if not the Company) or consolidation or the corporation purchasing such
property shall expressly assume, by supplemental agreement satisfactory in form
to the Warrant Agent and executed and delivered to the Warrant Agent, the due
and punctual performance and observance of each and every covenant and condition
of this Agreement to be performed and observed by the Company, such agreement by
the Warrant Agent not to be unreasonably withheld.
21. Florida Contract. This Agreement and each Warrant issued hereunder
shall be deemed to be a contract made under the laws of the State of Florida and
for all purposes shall be construed in accordance with the laws of said state.
22. Benefits of This Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Warrant Agent and the registered holders of the Warrants any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Warrant Agent and the registered
holders of the Warrants.
23. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes by deemed to
be an original, and all such counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date hereof.
AARICA HOLDINGS, INC.
By:-------------------
Carol Kolozs, President
AMERICAN STOCK TRANSFER & TRUST CO.
By: ---- ----------------------------
No. ____
EXHIBIT A
FORM OF
AARICA HOLDINGS, INC.
REDEEMABLE COMMON STOCK PURCHASE WARRANT
TO PURCHASE ONE SHARE OF COMMON STOCK
EXERCISABLE ON OR BEFORE 5:00 P. M.,
NEW YORK, NEW YORK TIME, September _____, 2005
This Warrant Certifies that _____________________________________, or
registered assigns, is the holder of _______________ Warrants expiring _______,
2005, to purchase shares of Common Stock, $.01 par value per share (the "Common
Stock"), of Aarica Holdings, Inc., a Texas corporation (the "Company"). Each
Warrant entitles the holder to purchase from the Company at any time after the
Shares and Warrants become separately tradable and until 5:00 p.m. New York, New
York time, on _________, 2005,(the "Expiration Date"), ___________ fully-paid
and non-assessable shares of Common Stock at the exercise price (the "Exercise
Price") of $_____ per share, upon surrender of this Warrant Certificate and
payment of the Exercise Price at the office or agency of the Warrant Agent in
New York, New York, but only subject to the conditions set forth herein and in
the Warrant Agreement. Payment of the Exercise Price may be made in cash or by
certified check payable to the order of the Company. As used herein, "Shares"
refers to the Common Stock offered by the Prospectus dated September___,2000,
and, where appropriate, to the other securities or property issuable upon
exercise of a Warrant as provided for in the Warrant Agreement upon the
happening of certain events set forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York, New York time,
on the Expiration Date. To the extent not exercised by such time, the Warrants
shall be cancelled and retired notwithstanding delivery of the related Warrant
Certificate. All Warrants evidenced hereby shall thereafter be void.
Reference is hereby made to the provisions of the Warrant Agreement
between Aarica Holdings, Inc., a Texas corporation (the "Company"), and American
Stock Transfer & Trust Co., New York, New York, as warrant agent (the "Warrant
Agent") and such further provisions shall for all purposes have the same effect
as though fully set forth herein.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent.
Dated: September ____, 2000.
AARICA HOLDINGS, INC.
By: ---------------------
Carol Kolozs, President
AMERICAN STOCK TRANSFER & TRUST CO.,
as Warrant Agent
By: ----------------------
FORM OF
ELECTION TO PURCHASE
Aarica Holdings, Inc.
c/o American Stock Transfer & Trust Co.
40 Wall Street
New York, New York 10005
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
shares of the stock provided for therein, and requests that certificates for
such shares shall be issued in the name of and be delivered to at and, if said
number of shares shall not be all of the shares purchasable thereunder, that a
new Warrant for the balance remaining of the shares purchasable under the within
Warrant be registered in the name of, and delivered to, the undersigned at the
address stated below.
Date:___________________
Name of Warrant Holder:______________________________
(Please Print)
Signature:___________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate)
For value received, does hereby well, assign and transfer unto the
within Warrant, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint attorney, to transfer said Warrant on
the books of the within-named Corporation, with full power of substitution in
the promises,
Date:___________________
Signature:___________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate)
1
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made this 8th day of March, 1999, by
and among AARICA HOLDINGS, INC., a Texas corporation, (hereinafter called the
"Borrower,"), CAROL KOLOZS (hereinafter called the "Guarantor") and ROBERT E.
SCHMIDT, JR. (hereinafter called the "Lender").
WITNESSETH:
ARTICLE I. THE LOAN
The Borrower has borrowed from Lender the sum of Two Hundred Forty
Thousand and No/100 Dollars ($240,000.00) with the obligations of Borrower to
Lender to be guaranteed by Guarantor ("Original Loan").
Further, the Borrower agrees to borrow from the Lender, and the Lender
agrees to lend to the Borrower the sum of Two Hundred Fifty Thousand and No/100
Dollars ($250,000.00) with the obligations of Borrower to Lender to be
guaranteed by Guarantor ("Second Loan"). (The Original Loan and Second Loan are
hereinafter collectively referred to as the "Loan"). The Second Loan is to be
distributed as follows:
(a) $50,000.00 in the form of a wire transfer or bank check;
(b) Letter of Credit in the amount of $150,000.00 for the benefit of Shing Tak; and
(c) Letter of Credit in the amount of $50,000.00 for the benefit of Taimark.
ARTICLE II. THE NOTE AND PLEDGE AGREEMENT
The obligation to repay the Loan shall be evidenced by the Borrower's
Promissory Note and Replacement Promissory Note, hereinafter collectively called
the "Note," both in substantially the form of Exhibit "A" hereto attached.
ARTICLE III. REPRESENTATIONS
The Borrower and Guarantor represent and warrant to the Lender as
follows:
Good Standing
3.01. The Borrower is a corporation duly organized and existing and in
good standing under the laws of the State of Texas. The Borrower has the
corporate power to own its property and to carry on its business as now being
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the transaction of its business makes such qualification
necessary in the judgment of the Borrower.
Corporate Authority
3.02. The Borrower has full power and authority to enter into this
Agreement, to borrow the funds, to execute and deliver the Note, and to incur
the obligations provided for in this Agreement, all of which have been duly
authorized by all proper and necessary corporate action. The consent and
approval of the Borrower's Board of Directors and its shareholders is shown by
their duly adopted resolution attached hereto and incorporated herein.
Binding Agreement
3.03. This Agreement constitutes, and the Note and Guaranty when issued
and delivered for value received will constitute, the legal, valid, and binding
obligation of the Borrower and Guarantor in accordance with its terms, subject
to bankruptcy and insolvency laws and any other laws of general application
affecting the rights and remedies of creditors.
Litigation
3.04. There are no proceedings pending or, so far as the officers of
the Borrower know, threatened before any court or administrative agency which,
in the opinion of the officers of the Borrower, will materially adversely affect
the financial condition or operations of the Borrower.
No Conflicting Agreements
3.05. There is no charter, regulation, or preference stock provision of
the Borrower and no provision of any existing mortgage, indenture, contract, or
agreement binding on the Borrower or affecting its property, which would
conflict with or in any way prevent the execution, delivery, or carrying out of
the terms of this Agreement and of the Note and Pledge Agreement.
Financial Condition
3.06. The Borrower and Guarantor agree that they will, at all times,
make their best good faith effort to keep in as good a financial condition
throughout the term of this Agreement as it is in on this date. The Borrower and
Guarantor represent and warrant that there has been no material adverse change
in the Borrower's financial condition since that set forth in the September 30,
1998 financial statements prepared by Arthur Anderson and previously delivered
to Lender. The Borrower and Guarantor further agree to immediately advise the
Lender of any material adverse change in either of their financial condition or
operations, or of any litigation, claim, or cause of action that may bring about
any material damage to the Borrower and/or Guarantor.
3.07. The stock of the Mexican entities have been transferred to the U. S.
holding company and are wholly owned subsidiaries of the U. S. holding company.
ARTICLE IV. CONDITIONS OF LENDING
The obligation of the Lender to make the loan is subject to the
following conditions precedent:
Compliance
4.01. The Lender shall have received a certificate dated the date of
the loan and signed by an executive officer of the Borrower to the effect that:
(1) the Borrower has complied, and is then in compliance, with all the terms and
covenants of this Agreement that are binding upon it; (2) there exists no event
of default as defined in Article IX and no event that, with the giving of notice
or the lapse of time, or both, would constitute such an event of default; and
(3) the representations and warranties contained in Article III are true with
the same effect as though such representations and warranties had been made at
the time of the loan.
Evidence of Corporate Action
4.02. The Lender shall have received copies of all corporate action
taken by the Borrower to authorize this Agreement, the Note and Security
Agreement and the borrowing hereunder, and such other documents as the Lender
may reasonably require.
ARTICLE V. CONVERSION OF ORIGINAL LOAN
Borrower is making a private offering of its stock. Lender shall
convert any unpaid principal and/or interest on the Original Loan to stock of
the Borrower at eighty percent (80%) of the offering price. Such conversion
shall occur at such time as Borrower has issued the minimum number of shares
required under such offering as set forth in the Confidential Private Placement
Memorandum of AARICA Holdings, Inc. as referenced on Exhibit B (the "Offering").
The Borrower and Guarantor agree that no material changes will be made to the
terms of the Offering without the written approval of the Lender.
ARTICLE VI. SUBORDINATION OF NOTES AND DEBENTURES
The principal amounts of any debenture, bonds or notes, promissory
notes, loans or other instruments of indebtedness issued or to be issued by the
Borrower to Guarantor, any shareholder, other than Lender, subsidiary, or
affiliated or related corporation shall at all times be subject and subordinate
to the Note described in Article II.
ARTICLE VII. AFFIRMATIVE COVENANTS
Until payment in full of the Note and performance of all other
obligations of the Borrower under this agreement, the Borrower will:
Taxes
7.01. Except as described in the Offering, pay and discharge all taxes,
assessments, and governmental charges upon it, its income, and its properties
prior to the date on which penalties are attached, unless and only to the extent
that the taxes are contested in good faith and by appropriate proceedings by the
Borrower; and accrue all such taxes quarterly.
Quarterly Financial Reports
7.02. Provide quarterly financial reports to the Lender on or before
the 45th day after the end of each calendar quarter during the time period in
which any indebtedness is outstanding. Financial reports shall include, but are
not limited to, profit and loss statements, balance sheets and cash flow
projections. Annually, Borrower and Guarantor shall provide Lender with
financial statements and reports prepared and approved by a certified public
accountant licensed to practice in the appropriate jurisdiction reasonably
acceptable to Lender, to be delivered within ninety (90) days of the close of
Borrower's fiscal year on Borrower and all subsidiaries.
Insurance
7.03. Maintain insurance with responsible insurance companies of such
of its properties, in such amounts and against such risks as is customarily
maintained by similar businesses operating in the same vicinity, and furnish
evidence and a detailed list thereof to the Lender, upon request. Lender shall
be named as an Additional Insured on all such policies of insurance.
ARTICLE VIII. NEGATIVE COVENANTS
Until payment in full of the Note and performance of all other
obligations of the Borrower under this agreement, the Borrower will not, except
with the prior express written consent of the Lender:
Loans
8.01. Make any material (i.e., other than typical payroll advances to
employees consistent with past practices) loans or advances to any person, firm,
or corporation, or permit any subsidiary so to do, except: repayment of the Note
to Lender.
Investments
8.02. Purchase or acquire the obligations or stock of, or any other
interest in, any person, firm, corporation, or other enterprise whatsoever, or
permit any subsidiary so to do, except: (1) direct obligations of the United
States of America; (2) obligations and stock of any corporation that hereby
becomes a subsidiary; (3) obligations and stock of any wholly-owned subsidiary;
or (4) obligations or stock of any other person, firm, or corporation not
exceeding, at cost, $1,000 in the aggregate at any one time outstanding.
Stock
8.03. Alter the capital structure of the corporation in any manner or
issue additional stock, whether to new or existing shareholders and whether
authorized or in treasury, without the prior written consent of Lender.
Salary
8.04. Borrower and Guarantor agree they shall not increase salaries of
executives, including but not limited to, management fees and compensation paid
to Guarantor or any related party, during the time period in which any
indebtedness under the loan remains outstanding. Borrower represents that the
existing compensation paid to Guarantor is $15,000.00 per month.
Changes in Business; Sale of Assets
8.05. Sell, assign, lease, transfer, or convey assets other than in the
usual and regular course of business; merge or consolidate with any other
corporation; enter into a joint venture or similar business arrangement with any
third party; modify the nature and type of business presently engaged in; do any
act that may jeopardize the Borrower from continuing to exist as an independent
business.
8.06. Borrower shall not undertake any action, or otherwise permit any
inaction, which will adversely effect, impair, terminate or jeopardize
Borrower's business licenses.
8.07 Other than in the ordinary course of business, Borrower shall not
incur any additional indebtedness without the express written consent of Lender,
except for shareholder loans, which indebtedness shall be subordinate to payment
of the indebtedness owed to Lender, and subordinate to Lender's security
interests in Borrower's issued and outstanding stock.
ARTICLE IX. EVENTS OF DEFAULT
9.01. The following shall be considered an "Event of Default":
(1) Default shall be made in the payment of any installment of
principal or of interest upon the Note for a period of ten (10) days after it
has become due and payable, whether at maturity, by notice of intention to
prepay, or otherwise; or
(2) Default shall be made in the due observance or performance of any
term, covenant, or provision of the Note and other loan documents, and such
default has continued unremedied for a period of ten (10) days; or
(3) Any representation or warranty made by the Borrower or any
statement or representation made in any certificate, report, or opinion
delivered pursuant to this agreement shall prove to have been incorrect in any
material respect when made; or
(4) The Borrower makes an assignment for the benefit of creditors,
files a petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions
or applies to any tribunal for any receiver or any trustee of the Borrower or
any substantial part of its property, commences any proceeding relating to the
arrangement or readjustment of debt, or for dissolution or liquidation under any
law or statue of any jurisdiction, whether now or hereafter in effect, or if
there is commenced against the Borrower any such proceeding that remains
undismissed for a period of sixty (60) days, or the Borrower by any act
indicates its consent, approval of, or acquiescence in any such proceeding or
the appointment of any receiver of or any trustee for the Borrower or any
substantial part of its property, or permits any receivership or trusteeship to
continue undischarged for a period of thirty (30) days; or
(5) Any final judgment against the Borrower or any attachment against
its property for any amount in excess of $50,000.00 remains unpaid, unstayed on
appeal, undischarged, unbonded, or undismissed for a period of sixty (60) days.
ARTICLE X. MANAGEMENT
The Borrower agrees to give the Lender prompt notice in the event that
CAROL KOLOZS shall cease, for any reason, to be an officer, director or manager
of the Borrower. In this event, then Lender may, after receipt of the notice,
request payment of the Note, and it shall immediately become due and payable.
ARTICLE XII. MISCELLANEOUS
Expenses
11.01. The Borrower agrees to pay for Borrower's counsel fees and all
expenses incurred in connection with the preparation of this Agreement, and loan
documents and the perfection of any security interests required by the Loan
Documents in an amount not to exceed $5,000.00.
No Waiver
11.02. The Lender shall not by any act of omission or commission be
deemed to waive any of its rights or remedies hereunder unless the waiver is in
writing and is signed by the Lender, and then only to the extent specifically
set forth therein; a waiver of one event shall not be construed as continuing or
as a bar to or waiver of the right or remedy on a subsequent event.
Interest Rate
11.03. The Borrower specifically agrees that, in the Event of a
Default, as defined in Article X, interest shall continue to accrue at the rate
set forth in the Note and the Lender shall be entitled to charge compound
interest and collect interest at the rate set forth in the Note, before as well
as after entry of any judgment, including judgment of foreclosure and sale,
until payment in full of the balance due is made.
Late Charge
11.04. In the event that any installment of principal and/or interest
is received by the Lender more than ten (10) days after the due date, a late
payment charge of five percent (5%) of the payment due will be added in addition
to interest at the rate provided herein. The Borrower agrees to pay the charge
and interest, and failure to do so after ten (10) days' notice shall constitute
an Event of Default under Article X of this Agreement. This charge shall be in
addition to all other rights and remedies available to the Lender at law, in
equity, or under this Agreement.
Time of the Essence
11.05. Time is of the essence in each and every term and condition of this
Agreement, the Note and the Security Agreement.
Florida Law To Apply
11.06. BORROWER AND GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE SUPREME COURT OF THE STATE OF FLORIDA, COUNTY OF ORANGE, AND
THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF FLORIDA IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS LOAN AGREEMENT OR ANY OF
THE DOCUMENTS EXECUTED IN CONNECTION HEREWITH, AND BORROWER AND GUARANTOR HEREBY
IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE
HEARD AND DETERMINED IN SUCH FLORIDA STATE OR FEDERAL COURT. BORROWER AND
GUARANTOR HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT EACH MAY EFFECTIVELY
DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING. BORROWER AND GUARANTOR ALSO IRREVOCABLY CONSENT TO THE SERVICE OF
ANY AND ALL PROCESS IN ANY SUCH ACTION OF PROCEEDING BY THE MAILING OF A COPY OF
SUCH PROCESS TO BORROWER AND GUARANTOR BY REGISTERED OR EXPRESS MAIL, RETURN
RECEIPT REQUESTED, AT EACH ADDRESS SPECIFIED HEREIN. SUCH SERVICE WILL BECOME
EFFECTIVE THREE (3) BUSINESS DAYS AFTER SUCH MAILING AND WILL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE ON BORROWER AND GUARANTOR IN SUCH ACTION OR
PROCEEDING. BORROWER AND GUARANTOR AGREE THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY MANNER PROVIDED BY LAW.
NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF LENDER TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF LENDER TO
BRING ANY ACTION OR PROCEEDING AGAINST BORROWER AND/OR GUARANTOR OR THEIR
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
EACH OF BORROWER, GUARANTOR AND LENDER, BY ITS ACCEPTANCE HEREOF,
HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT
EXECUTED IN CONNECTION HEREWITH OR IN CONNECTION WITH ANY DEFENSE, COUNTERCLAIM
OR CROSS CLAIM ASSERTED BY BORROWER AND/OR GUARANTOR IN ANY SUCH LITIGATION.
Notice
11.08. Addresses for notices shall be as follows:
If to Borrower: AARICA HOLDINGS, INC.
1080 Howell Branch Road
Winter Park, FL 32789
With a copy to: Gary Siegel, Esq.
6500 S. Highway 17-92
Fern Park, FL 32730
If to Lender: Robert E. Schmidt, Jr.
1123 Overcash Drive
Dunedin, FL 34698
With a copy to: James G. Willard, Esq.
Shutts & Bowen LLP
20 N. Orange Ave., Suite 1000
Orlando, FL 32801-4626
All notices shall be given by United States Postal Service, postage
prepaid, certified, return receipt requested, or by recognized national
overnight courier such as Federal Express and shall be deemed given when
received by the party to whom the notice is addressed.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above-written.
THIS FIRST AMENDMENT to Loan Agreement is made this _____ day of March,
1999, by and among AARICA HOLDINGS, INC., a Texas corporation (hereinafter
called "Borrower"), CAROL KOLOZS (hereinafter called "Guarantor"), and ROBERT E.
SCHMIDT, JR., (hereinafter called the "Lender").
WHEREAS, Borrower, Guarantor, and Lender entered into that certain Loan
Agreement dated March 8, 1999 (the "Agreement"), whereby Borrower acknowledged
borrowing $240,000.00 ("Original Loan"), and borrowed an additional $250,000.00
("Second Loan"); and Guarantor guaranteed payment of both the First and Second
Loan; and
WHEREAS, Lender has already advanced $50,000.00 in the form of a wire
transfer and $50,000.00 in the form of a Letter of Credit for the benefit of
Taimark, pursuant to the terms of the Second Loan; and
WHEREAS, Borrower and Guarantor have requested Lender change the manner
of the final distribution of the Second Loan and advance $150,000.00 in the form
of a wire transfer or bank check instead of a Letter of Credit for the benefit
of Shing Tak to which request Lender has agreed; and
WHEREAS, Borrower, Guarantor, and Lender desire to amend the Agreement
to reflect the change in the form of final distribution under the Second Loan.
NOW, THEREFORE, in consideration of the premises herein contained, Ten
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree that the
Agreement be amended as follows:
Paragraph (b) of Article I of the Agreement is deleted in its entirety
and the following substituted therefor:
"(b) $150,000.00 in the form of a wire transfer or bank check; and"
Except as modified by this Amendment, the Agreement shall remain
unchanged and in full force and effect, and the parties reaffirm and ratify
their respective obligations thereunder.
The recitals hereto, which the parties acknowledge are true and
correct, are hereby incorporated herein by reference. This Amendment may be
executed in one or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument. This Amendment shall be binding upon and inure to the benefit of the
parties
-2-
hereto and their respective permitted successors, grantees, heirs, and assigns.
This Amendment shall be construed and interpreted in accordance with, and
governed by, the laws of the State of Florida.
GUARANTOR: BORROWER:
AARICA HOLDINGS, INC., a Texas
corporation
------------------------------------
Carol Kolozs
By:______________________________
Its:______________________________
LENDER:
------------------------------------
Robert E. Schmidt, Jr.
ORL95 109952.1 - CJG
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO Loan Agreement is made this 26the day of March,
1999, by and among AARICA HOLDINGS, INC., a Texas corporation (hereinafter
called "Borrower"), and CAROL KOLOZS (hereinafter called "Guarantor"), and
ROBERT E. SCHMIDT, JR., (hereinafter called the "Lender").
WHEREAS Borrower, Guarantor and Lender entered in to that certain loan agreement
dated March 8, 1999 (the "Agreement") as amended March 23, 1999 and wish to
further amend the Agreement in the manner provided herein.
NOW, THEREFORE, in consideration of the premises herein contained, ten dollars
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree that the Agreement be further
amended as follows:
ARTICLE V is deleted in its entirety and the following substituted therefor:
"Borrower is making a private offering of its common stock pursuant to
a Confidential Private Placement Memorandum attached hereto as Exhibit B (the
"Memorandum"). Lender shall have the right, but not the obligation, to convert
any unpaid principal and/or interest on the Original Loan to common stock of the
Borrower at eighty percent (80%) of the offering price of Borrower's common
stock as set forth in the Memorandum. Lender shall not convert the principal and
interest on the Original Loan until the Borrower has finally closed its private
offering. Borrower and Guarantor agree that no material changes will be made to
the terms of the Offering without the written approval of Lender."
Except as modified by this Amendment, the Agreement and the First
Amendment thereto shall remain unchanged and in full force and effect, and the
parties reaffirm and ratify their respective obligations thereunder.
The recitals hereto, which the parties acknowledge are true and
correct, are hereby incorporated herein by reference. This Amendment may be
executed in one or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument. This Amendment shall be binding upon and inure to the benefit of the
parties hereto and their respective permitted successors, grantees, heirs, and
assigns. This amendment shall be construed and interpreted in accordance with,
and governed by, the laws of the State of Florida.
GUARANTOR: BORROWER:
a Texas Corporation
s/ Carol Kolozs
Carol Kolozs By: Carol Kolozs
Carol Kolozs, President
LENDER:
/s/ Robert E. Schmidt, Jr.
-------------------------
Robert E. Schmidt, Jr.
ORL95 111218.1 BAM
THIRD AMENDMENT TO LOAN AGREEMENT
THIS THIRD AMENDMENT to Loan Agreement is made as of the 14th day of
January, 2000, by and among AARICA HOLDINGS, INC., a Texas corporation
(hereinafter called "Borrower"), CAROL KOLOZS (hereinafter called "Guarantor"),
AARICA SPORT, S.A. de C.V. (hereinafter called "Aarica"), TAIMEX INDUSTRIES,
S.A. de C.V. (hereinafter called "Taimex"), SCHMIDT INTERNATIONAL, LLC, a
Florida limited liability company (hereinafter called "LLC"), and ROBERT E.
SCHMIDT, JR. or his Assigns, (hereinafter called the "Lender").
WHEREAS, Borrower, Guarantor, and Lender entered into that certain Loan
Agreement dated March 8, 1999 (the "Agreement"), whereby Borrower acknowledged
borrowing $240,000.00 through its subsidiary, Taimex ("Original Loan"), and
borrowed an additional $250,000.00, of which $137,500.00 has been repaid
("Second Loan"); and Guarantor guaranteed payment of both the First and Second
Loan; and
WHEREAS, Lender has advanced an additional $100,000.00 on October 6,
1999, $75,000.00 on October 22, 1999, $50,000.00 on December 9, 1999, $75,000.00
on December 14, 1999, and $50,000.00 on January 7, 2000; and
WHEREAS, Borrower has also been provided with letters of credit issued
or provided by Lender or Lender's bank ("Letters of Credit"); and
WHEREAS, Lender desires to assign all of his right, title and interest in
the Loan to LLC; and
WHEREAS, Borrower and/or Aaarica and Taimex desire to borrow from
Lender and Lender desires to lend at Lender's option through its wholly owned
entity, the LLC, to Borrower an additional $1,537,500.00; and
WHEREAS, Borrower, Guarantor, and Lender desire to amend the Agreement
to reflect the additional $1,537,500.00 bringing the total of the third loan to
$1,887,500.00 ("Third Loan"), to agree to the assignment of the loan from Lender
to LLC, and to provide that the security from Borrower, Guarantor, Aarica and
Taimex cover the Original Loan, Second Loan, Third Loan, and the Letters of
Credit.
NOW, THEREFORE, in consideration of the premises herein contained, Ten
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree that the
Agreement be amended as follows:
1. Borrower, Guarantor, Aarica and Taimex hereby agree that Lender may assign
all of his right, title, and interest in the Loan, including the Warrants
granted herein, to LLC.
2. All payments made under the Loan shall be forwarded to Lender at the
following address: c/o Boulder Venture, 330 E. Kilbourn Avenue, Suite 1454,
Milwaukee, WI 53202.
-7-
3. A new paragraph is added to Article I which reads as follows:
Further, the Borrower agrees to borrow from the Lender, and
the Lender agrees to lend to the Borrower, the aggregate sum
of One Million Eight Hundred Eighty-Seven Thousand Five
Hundred Dollars ($1,887,500.00) (the "Third Loan") distributed
as follows:
(1) $100,000.00 on October 6, 1999;
(2) $75,000.00 on October 22, 1999;
(3) $50,000.00 on December 9, 1999;
(4) $75,000.00 on December 14, 1999;
(5) $50,000.00 on January 7, 2000; and
(6) $750,000.00 on January 14, 2000 in the form of wire transfer or bank check
to be evidenced by a $750,000.00 promissory note of Aarica and Taimex (the
"Subsidiary Note").
(7) $787,500.00 to be distributed to Borrower from time to time as necessary for
the operations of Borrower, in such amounts and at such times as determined
solely by Lender.
4. Article II is deleted in its entirety and the following substituted
therefor:
The obligation to repay the Loan shall be evidenced by the
Borrower's Promissory Note, Replacement Promissory Note, Third
Promissory Note, and the Subsidiary Note, hereinafter
collectively called the "Note", all in substantially the form
of "Exhibit "A" hereto attached.
Further, the Loan shall be secured by Guarantor's Amended and
Restated Guaranty and Amended and Restated Stock Pledge
Agreement, as well as an Amended and Restated Guaranty from
each of Aarica and Taimex, a Guaranty of Borrower of the
Subsidiary Note and an Amended and Restated Security Agreement
granting Lender a security interest in the accounts receivable
and inventory of each.
5. The paragraph constituting Article V is to be labeled Section 5.01 and
is amended to read as follows:
Borrower anticipates making a public offering of its stock
(the "Offering"). Lender shall have the option to convert any
unpaid principal and/or interest on the Original Loan to stock
of the Borrower at eighty percent (80%) of the offering price.
In addition, Borrower grants Lender the option to redeem such
converted shares within twenty-four (24) months after the
conversion and Borrower shall be required to redeem such
converted shares at the conversion price payable in cash
within thirty (30) days of receipt of Lender's written notice
of his exercise of his option to redeem the converted shares.
The option to convert the Original Loan and the option to
redeem granted in this Section 5.01 shall not expire until
such time as the Loan is paid in full.
6. There is added to Article V a Section 5.02 which reads as follows:
Lender shall have the option to convert the original principal
amount of the Second Loan to stock of the Borrower at the
conversion rate of $2.00 per share, assuming Lender pays to
Borrower any amounts previously repaid to Lender on the Second
Loan. The option to convert the Second Loan granted hereby
must be exercised on or before August 31, 2000 ("Second
Option").
7. There is added to Article V a Section 5.03 which reads as follows:
Lender, Guarantor and Borrower shall enter into a Common Stock
Purchase Warrant granting Lender Warrants to purchase 200,000
common shares of Borrower at $.01 per share ("Warrant
Shares"). In the event Lender does not realize a return on the
Warrant Shares at the time of the Offering in an amount equal
to or greater than the original principal amount of the Third
Loan, then Lender shall be entitled to exercise Warrants to
purchase common stock of Borrower from Guarantor at $.01 per
share ("Guarantor Shares") until the aggregate return realized
by Lender on the Warrant Shares and Guarantor Shares equals or
exceeds $2,000,000.00 ("Third Option"). Lender has received a
form of Warrant which Lender has approved and will deliver to
Borrower.
8. There is added to Article V a Section 5.04 which reads as follows:
The parties agree that Lender's conversion rate in the Second
Option and purchase price in the Third Option were agreed to
based upon Borrower making an Offering of at least
$10,000,000.00 with an offering price of $10.00 per share
("Anticipated Offering"). In the event the Anticipated
Offering is not made by Borrower, then the conversion rate in
the Second Option and the per share purchase price in the
Third Option shall be adjusted proportionately to the actual
Offering made by Borrower.
9. Paragraph (1) and (2) of Section 9.01 are amended to read as follows:
(1) Default shall be made in the payment of any installment of
principal or of interest upon the Note for a period of five
(5) days after it has become due and payable, whether at
maturity, by notice of intention to repay, or otherwise; or
(2) Default shall be made in the due observance or performance
of any term, covenant, or provision of the Note and other loan
documents, and such default has continued unremedied for a
period of five (5) days; or
10. Section 11.01 is amended to read as follows:
The Borrower agrees to pay for all of Lender's reasonable
attorneys' fees and expenses incurred in connection with the
preparation of this Amendment, the amended loan documents, and
the perfection of the security interests required by the
amended loan documents, plus all fees (including attorneys'
fees) and costs, including prepayment penalties associated
with Lender obtaining a loan from Marine Bank and Savings.
11. Section 11.04 is amended to read as follows:
In the event that any installment of principal and/or interest
is received by the Lender more than five (5) days after the
due date, a late payment charge of five percent (5%) of the
payment due will be added in addition to interest at the rate
provided herein. The Borrower agrees to pay the charge and
interest, and failure to do so after five (5) days' notice
shall constitute an Event of Default under Article X of this
Agreement. This charge shall be in addition to all other
rights and remedies available to the Lender at law, in equity,
or under this Agreement.
12. Section 11.08 is amended to change the notice address of Borrower and
Lender and to add the following addresses for notices to Taimex and Aarica:
If to Aarica and Taimex: AARICA SPORT, S.A. de C.V.
TAIMEX INDUSTRIES, S.A. de C.V.
1080 Howell Branch Road
Winter Park, FL 32789
with a copy to: Jim Schnorf, Esq.
Continental Capital
195 Wekiva Springs Road, Suite 200
Longwood, FL 32779
If to Borrower: AARICA HOLDINGS, INC.
1080 Howell Branch Road
Winter Park, FL 32789
with a copy to: Jim Schnorf, Esq.
Continental Capital
195 Wekiva Springs Road, Suite 200
Longwood, FL 32779
If to Lender: Robert E. Schmidt, Jr.
4340 W. Hillsborough Ave., #212
Tampa, FL 33614
13. There is added to Article XII Sections 11.09, 11.10, and 11.11, 11.12
which read as follows:
11.09 Lender shall be appointed as a Director of Borrower
effective as of the date hereof and shall remain a Director of
Borrower until such time as the Loan is paid in full. The
number of directors of Borrower shall not be increased during
such time.
11.10 As additional consideration for the Loan, Lender shall
receive, at Lender's option, a ten percent (10%) ownership
interest in any and all future ventures, businesses,
enterprises, or entities in which Guarantor is to acquire at
least a fifty percent ownership interest, other than Borrower.
11.11 As soon as practicable after the date hereof, Borrower
shall purchase a life insurance policy on Guarantor in the
amount of not less than $3,000,000.00, naming Lender as the
sole Beneficiary. Such policy shall be maintained by Borrower
until the Loan is paid in full.
11.12 To the extent Lender or its counsel should, in their
reasonable opinion, at any time during the term of the Loan,
require any additional documents to be executed by the
Borrower, its affiliates, or the Guarantors to carry out the
provisions of this Agreement and the loan documents, including
without limitation, the Notes, the Guarantees, the Security
Agreement, and financing statements, the Borrowers and the
Guarantors shall immediately comply with said request and
execute such documents. In regard to said matters, the
Borrower, in accordance with this Agreement, shall pay any
reasonable additional attorneys' fees incurred by the Lender
in said matters. If the Borrower or Guarantors should fail to
execute any such documents, the Borrower and Guarantors do
hereby designate and appoint the Lender as their attorney in
fact to execute such documents on behalf of the Borrower and
Guarantors. The failure of the Borrower or Guarantors to
comply with the provisions of this section shall be and
constitute, at the Lender's option, a default under the Loan.
Except as modified by this Amendment, the Agreement shall remain
unchanged and in full force and effect, and the parties reaffirm and ratify
their respective obligations thereunder.
The recitals hereto, which the parties acknowledge are true and
correct, are hereby incorporated herein by reference. This Amendment may be
executed in one or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument. This Amendment shall be binding upon and inure to the benefit of the
parties hereto and their respective permitted successors, grantees, heirs, and
assigns. This Amendment shall be construed and interpreted in accordance with,
and governed by, the laws of the State of Florida.
GUARANTORS: BORROWER:
AARICA HOLDINGS, INC., a Texas
corporation
/s/ Carol Kolozs
Carol Kolozs
By: /s/ Carol Kolozs_____
----------------------
Carol Kolozs, President
AARICA SPORT, S.A. de C.V.
By: /s/ Carol Kolozs______
Carol Kolozs, President
TAIMEX INDUSTRIES, S.A. de C.V.
By: /s/ Carol Kolozs_____
Carol Kolozs, President
LENDER:
/s/ Robert E. Schmidt, Jr.
--------------------------
Robert E. Schmidt, Jr.
SCHMIDT INTERNATIONAL, LLC
By:/s/ Robert E. Schmidt, Jr._____
-----------------------------
Robert E. Schmidt, Jr., Member
AMENDED AND RESTATED
PLEDGE AGREEMENT
THIS AMENDED AND RESTATED STOCK PLEDGE AGREEMENT (this "Agreement") dated
as of January 14, 2000, by Carol Kolozs ("Pledgor") in favor of Robert E.
Schmidt, Jr. ("Secured Party").
RECITALS
The authorized capital stock of Aarica Holdings, Inc., a Texas
corporation (the "Company"), consists of 20,000,000 shares of common stock, par
value $.01 per share, and 3,000,000 shares of preferred stock, $.01 par value.
There are currently issued and outstanding 2,800,000 common shares, which
constitutes all of the issued and outstanding shares of the corporation and of
which 2,400,000 are owned by Pledgor ("Pledged Shares").
Secured Party has agreed to loan to the Company and its subsidiaries
the aggregate principal amount of $2,377,500.00 (the "Loans"), upon the
condition, among others, that Pledgor shall have executed and delivered to
Secured Party, (i) a Guaranty in favor of Secured Party (the "Guaranty"),
guaranteeing the payment to Secured Party by the Company of the Loans; and (ii)
this Agreement granting a security interest in the Pledged Shares to Secured
Party, all to secure the payment and performance by Pledgor of his obligations
under the Guaranty and this Agreement.
As additional consideration for Secured Party to enter into the Loans,
Company, Pledgor and Secured Party have entered into a Common Stock Purchase
Warrant granting Secured Party Warrants to purchase common stock of the Company
and granting contingent Warrants to purchase Pledged Shares ("Warrant").
Accordingly, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, and of other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Pledge. Pledgor hereby pledges and grants to Secured Party a security
interest in the Pledged Shares and all interest, securities, dividends, rights,
cash and other property at any time or from time to time received, receivable or
otherwise distributable to Pledgor in respect of, upon conversion, or exercise
of, or in exchange for, the Pledged Shares and the products and proceeds of the
Pledged Shares (as such terms are defined in Article 9 of the Uniform Commercial
Code as currently in effect in the State of Florida), to secure the prompt and
indefeasible payment and performance in full when due of all obligations
existing under the Guaranty and this Agreement, as the same may be extended,
renewed, refinanced, refunded, amended, modified, supplemented or restated from
time to time (the "Secured Obligations"). Except as hereinafter expressly
provided, possession of all such property received, receivable, exchangeable or
otherwise distributed or distributable with respect to the Pledged Shares or any
other shares of the Company's stock of evidence of indebtedness of any nature
which come into possession of Pledgor shall be immediately delivered directly to
Secured Party upon the receipt thereof by Pledgor.
-8-
The Pledged Shares and any items received and/or receivable in respect
thereof or in exchange therefor are hereinafter collectively referred to as the
"Collateral."
2. Delivery of the Pledged Shares. Pledgor shall deliver to Secured Party,
concurrently with the execution of this Pledge Agreement, the certificate(s)
representing the Pledged Shares accompanied by an appropriate instrument of
assignment duly executed in blank by Pledgor and such certificates shall be in
transferable form.
3. Representations and Warranties. Pledgor represents and warrants to Secured
Party that:
(1) Pledgor is the sole holder of record and the sole beneficial owner of the
Collateral, free and clear of any security interest, lien, option, adverse
claim, encumbrance, covenant or restriction of any kind (except restrictions
imposed by United States Federal and state securities laws on the offer and sale
thereof) thereon or affecting the title thereto, except for the security
interest created by this Agreement.
(2) All of the Pledged Shares have been duly authorized, validly issued and are
fully paid and non-assessable and consist of 85.7% of the outstanding stock of
the Company.
(3) Pledgor has full legal right, capacity, competency and authority to pledge
and create a security interest in, and to deliver and deposit the Collateral
with Secured Party as provided herein.
(4) None of the Pledged Shares delivered to Secured Party hereunder have been
issued or transferred in violation of the securities registration, securities
disclosure or similar laws of any jurisdiction ("Securities Laws") to which such
issuance or transfer may be subject.
(5) No consent, authorization, approval or other action by, and no notice to,
registration or filing with, any governmental authority or other person is
required either (i) for the pledge by Pledgor of the Collateral pursuant to this
Agreement or for the execution, delivery or performance of this Agreement and
the Guaranty by Pledgor or (ii) for the exercise by Secured Party of the voting
or other rights provided for in this Agreement or the remedies in respect of the
Collateral pursuant to this Agreement, except as may be required in connection
with such disposition by laws affecting the offering and sale of securities
generally.
(6) This Agreement and the Guaranty have been duly executed and delivered by
Pledgor and constitute legal, valid and binding obligations of Pledgor
enforceable in accordance with their respective terms, except as enforceability
may be limited by bankruptcy, insolvency and other similar laws affecting the
rights of creditors generally and general principles of equity, whether applied
by a court in an action of law or a proceeding in equity.
(7) The representations and warranties set forth in this Section 3 shall survive
the execution and delivery of this Agreement.
4. Covenants. Pledgor covenants and agrees that until the earlier to occur of
the indefeasible payment of the Secured Obligations and/or the termination of
Secured Party's security interest in the Collateral:
(1) Without the prior written consent of Secured Party, Pledgor will not sell,
assign, transfer, pledge or otherwise encumber or restrict any of its rights in
or to the Collateral or create or suffer to exist any security interest, option,
adverse claim, lien or other encumbrance on the Collateral (each, a "Lien"),
except for the Warrant and the security interest created hereby.
(2) Pledgor will, at his expense, promptly execute, acknowledge, and deliver all
such instruments and take all such action as Secured Party may, at any time and
from time to time, request in order to ensure to Secured Party the benefits of
the security interest in the Collateral intended to be created by this
Agreement, including the execution and filing of Uniform Commercial Code
financing and continuation statements, and will cooperate with Secured Party in
obtaining all necessary approvals and making all necessary filings under
applicable law to perfect the security interest created hereby.
(3) Pledgor has and will defend the title to the Collateral and the security
interest of Secured Party therein against the claim of any person and will
maintain and preserve such security interest until the termination of such
security interest.
5. Dividends and Voting. So long as no default or Event of Default (as defined
in Section 7(a)) shall have occurred, Pledgor shall be entitled to (i) vote the
Pledged Shares (and (ii) receive any and all cash dividends and distributions
made out of earned surplus with respect to the Pledged Shares which Pledgor is
otherwise entitled to receive, subject, however, to the possession rights of
Secured Party pursuant to Section 1 upon the occurrence of such a default or
Event of Default.
6. Term of Pledge; Redelivery of Pledged Shares.
(1) The Collateral shall remain pledged and in the possession of Secured Party
until Pledgor has indefeasibly satisfied in full all of the Secured Obligations
or an Event of Default under this Pledge Agreement has occurred and Secured
Party forecloses its security interest in the Collateral.
(2) Upon Pledgor's indefeasible payment in full of the Secured Obligations,
Secured Party shall deliver to Pledgor or any other person legally entitled
thereto all of the Collateral in Secured Party's possession, including all
certificates evidencing or representing any securities included in the
Collateral together with any assignments separate from such certificates
executed and delivered by Pledgor hereunder, and the pledge of the Collateral
shall thereupon terminate.
(1)
7. Default.
(1) Under the terms of this Agreement, the term "default" means default in the
payment or performance by Pledgor of his obligations under the Guaranty, this
Agreement, or any of the terms of any other documentation evidencing the Loans
("Loan Documents"), and the term "Event of Default" means:
(1) The Company fails to pay the principal of, interest accrued on, or any other
amount at any time owing under the Loan Documents, as and when the same become
due and payable; or
(2) The Company defaults in the due observance or performance of any of its
covenants contained in the Loan
Documents; or
(3) The Company shall (i) become insolvent, however evidenced, (ii) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
trustee or similar official of or for itself or of or for all or a substantial
part of its property, (iii) make an assignment for the benefit of its creditors,
(iv) commence a voluntary case under the Federal Bankruptcy Code, as now or
hereafter in effect (the "Code"), (v) file a petition seeking to take advantage
of any other bankruptcy, insolvency, moratorium, reorganization or other similar
law of any jurisdiction ("Other Laws"), (vi) acquiesce as to, or fail to
controvert in a timely or appropriate manner, an involuntary case filed against
the Company under the Code, or (vii) take any corporate action in furtherance of
any of the foregoing; or
(4) A proceeding or involuntary case shall be commenced, without the application
or consent of the Company, in any court of competent jurisdiction (i) under the
Code, (ii) seeking liquidation, reorganization, dissolution, winding up or
composition or readjustment of its debts under any Other Laws, or (iii) seeking
the appointment of a trustee, receiver or similar official for it or for all or
any substantial part of its assets; or
(5) A final judgment for the payment of money shall be rendered by a court of
competent jurisdiction against the Company and the Company shall not discharge
the same, or procure a stay of execution thereof within 30 days from the date of
entry thereof and within such 30 day period or such longer period during which
execution of such judgment shall have been stayed, appeal therefrom and cause
the execution thereof to be stayed during such appeal, and such judgment,
together with all other judgments against the Company and its subsidiaries,
shall exceed in the aggregate $50,000 in excess of any insurance as to the
subject matter of such judgments, as to which coverage has not been declined or
the underlying claim rejected by the applicable insurer; or
(6) The liquidation or dissolution of the Company or any vote in favor thereof
by the board of directors and shareholders of the Company; or (1)
(7) A proceeding is commenced and remains pending in excess of ninety (90) days
to foreclose a security interest in or lien on any asset of the Company as a
result of a default in the payment or performance of any indebtedness of the
Company in excess of $50,000 (other than the Loans); or
(8) An attachment or garnishment is levied against the assets of the Company
involving an amount in excess of $50,000 and the lien created by such levy is
not vacated, bonded or stayed within 10 days after such lien has attached to
such assets; or
(9) Except as presently exists, the Company defaults in the payment (regardless
of amount) when due of the principal of, interest on, or any other liability on
account of, any indebtedness of the Company (other than the Loans) having an
unpaid principal amount in excess of $50,000, or a default occurs in the
performance or observance by the Company of any covenant or condition (other
than for the payment of money) contained in any note (other than the Loans) or
agreement evidencing or pertaining to any such indebtedness, which causes the
maturity of such indebtedness to be accelerated or permits the holder or holders
of such indebtedness to declare the same to be due prior to the stated maturity
thereof; or
(10) Any representation, warranty or statement of fact made by the Company in
the Loan Documents or in any certificate or financial statement delivered by the
Company to the Secured Party at any time proves to be false or misleading in any
material respect when made or deemed made by the Company.
(2) Upon the occurrence of a default or an Event of Default, Secured Party may
exercise from time to time with respect to the Collateral all rights and
remedies available to a secured party after the default under Article 9 of the
Uniform Commercial Code as in effect at the time in the State of Florida on the
date hereof subject to the following:
(1) In exercising any remedies hereunder with respect to the Pledged Shares,
Secured Party may foreclose its security interest in the Pledged Shares (i) if
Secured Party shall have accelerated the maturity of the Loans upon or following
the occurrence of an Event of Default (other than an Event of Default specified
in Sections (a)(i) through (a)(iv) inclusive, or (a)(vi) above) or (2) upon and
during the occurrence of an Event of Default specified in Section (a)(iii),
(iv), or (vi) above, or (3) upon and following the 91st day following the
occurrence of a default or Event of Default, if and while all obligations of
Pledgor under the Guaranty and this Pledge Agreement have not been paid in full
in cash.
(2) Pledgor acknowledges that Secured Party may be subject to certain
restrictions imposed by the Securities Act of 1933, as amended, and applicable
state securities law (collectively, "Securities Laws") in disposing of the
Pledged Shares or other securities constituting part of the Collateral and
agrees (i) that such securities may be sold privately subject to the customary
restrictions on resale which are imposed by reason of applicable Securities Laws
in such private sales and with a resulting reduction in the sale price and (ii)
that the sale of such securities may be delayed for extended periods of time in
order to register the securities under the applicable Securities Laws for public
sale. Pledgor agrees to cooperate with Secured Party in any such sale and,
without limiting the generality of the foregoing, to provide Secured Party with
all information, documents and access to Pledgor's management as Secured Party
may reasonably request in connection with any such sale.
8. Application of Proceeds. Any cash held by Secured Party as Collateral and all
cash proceeds received by Secured Party in respect of any sale or other
disposition of all or any part of the Collateral shall be applied by Secured
Party as follows:
first, to Secured Party in an amount sufficient to pay in full the
expenses of Secured Party in connection with such sale or other disposition
including legal fees and expenses of Secured Party;
second, to Secured Party to satisfy in full all outstanding Secured Obligations,
and ------
finally, upon the indefeasible payment in full of all the Secured
Obligations, to Pledgor or its representatives or to whomsoever may be lawfully
entitled to receive the same, or as a court of competent jurisdiction may
direct.
9. No Waiver; Cumulative Remedies. Secured Party shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder, and no waiver of any of the provisions hereof or Pledgor's compliance
therewith shall be effective unless in writing, signed by Secured Party and then
only to the extent therein set forth. A waiver by Secured Party of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which Secured Party would otherwise have had on any future
occasion. The rights and remedies hereunder provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights and
remedies provided by law. None of the terms or provisions of this Agreement may
be altered, modified or amended, except by an instrument in writing, duly
executed by Secured Party.
10. Assignment. The Loan Documents, the Guaranty and this Agreement may be
assigned by Secured Party to one or more third parties without the prior written
consent of Pledgor.
11. Successors and Assigns. This Agreement inures to the benefit of Secured
Party and his respective legal representatives, heirs, distributees, successors
and assigns and binds Pledgor, and his respective legal representatives, heirs,
distributees, successors and assigns, and the words "Secured Party" and
"Pledgor" whenever occurring herein shall be deemed and construed to include
such respective successors and assigns.
12. Governing Law. This Agreement shall in all respects be interpreted and
governed by, and construed in accordance with the laws of the State of Florida.
13. Notices. All notices required to be given to any of the parties hereunder
shall be in writing and shall be deemed to have been sufficiently given for all
purposes when presented personally to such party, sent by telecopier (with
original timely mailed), or sent by registered or express mail, return receipt
requested, to such party at its address set forth below:
If to Pledgor, to:
Carol Kolozs
1080 Howell Branch Road
Winter Park, FL 32789
With a copy to:
Jim Schnorf, Esq.
Continental Capital
195 Wekiva Springs Rd., Suite 200
Longwood, FL 32779
If to Secured Party, to:
Robert E. Schmidt, Jr.
4340 W. Hillsborough Ave., #212
Tampa, FL 33614
With a copy to:
James G. Willard, Esquire
Shutts & Bowen LLP
20 N. Orange Ave., Ste. 1000
Orlando, FL 32801-4626
14. Entire Agreement. This Pledge Agreement embodies the entire agreement and
understanding between Secured Party and the Pledgor as to the subject matter
hereof and supersedes all prior agreements and understandings relating to the
subject matter hereof and thereof.
15. Counterparts. This Agreement may be executed in any number of counterparts
which shall, collectively and separately, constitute one agreement.
16. Documentary Stamp Tax. Pledgor shall be responsible for all Florida
documentary stamp taxes owed, if any, as a result of the stock transfers made
under the terms of this Agreement.
17. Consent To Jurisdiction, Waiver Of Jury Trial.
PLEDGOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE SUPREME
COURT OF THE STATE OF FLORIDA, COUNTY OF ORANGE, AND THE UNITED STATES DISTRICT
COURT FOR THE MIDDLE DISTRICT OF FLORIDA IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS PLEDGE AGREEMENT OR ANY OF THE DOCUMENTS EXECUTED IN
CONNECTION HEREWITH, AND PLEDGOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH FLORIDA
STATE OR FEDERAL COURT. PLEDGOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH ACTION OR PROCEEDING. PLEDGOR ALSO IRREVOCABLY CONSENTS TO
THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OF PROCEEDING BY THE
MAILING OF A COPY OF SUCH PROCESS TO PLEDGOR BY REGISTERED OR EXPRESS MAIL,
RETURN RECEIPT REQUESTED, AT HIS ADDRESS SPECIFIED HEREIN. SUCH SERVICE WILL
BECOME EFFECTIVE THREE (3) BUSINESS DAYS AFTER SUCH MAILING AND WILL BE DEEMED
IN EVERY RESPECT EFFECTIVE SERVICE ON PLEDGOR IN SUCH ACTION OR PROCEEDING.
PLEDGOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY MANNER PROVIDED BY LAW.
NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF SECURED PARTY TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF
SECURED PARTY TO BRING ANY ACTION OR PROCEEDING AGAINST PLEDGOR OR ITS PROPERTY
IN THE COURTS OF ANY OTHER JURISDICTION.
EACH OF PLEDGOR AND SECURED PARTY, BY ITS ACCEPTANCE HEREOF, HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT EXECUTED IN
CONNECTION HEREWITH OR IN CONNECTION WITH ANY DEFENSE, COUNTERCLAIM OR
CROSSCLAIM ASSERTED BY PLEDGOR IN ANY SUCH LITIGATION.
IN WITNESS WHEREOF, Pledgor has caused this Agreement to be duly
executed as of the day and year first written above.
PLEDGOR:
/s/ Carol Kolozs
Carol Kolozs
ORLDOCS 10006795.1 LMW
ASSIGNMENT OF LOAN
THIS ASSIGNMENT OF LOAN (this "Assignment") effective as of the 14th day of
January, 2000, by and among ROBERT E. SCHMIDT, JR. ("Assignor"), SCHMIDT
INTERNATIONAL, LLC, a Florida limited liability company ("Assignee"), AARICA
HOLDINGS, INC., a Texas corporation ("Borrower"), and CAROL KOLOZS, AARICA
SPORT, S.A. de C.V., AND TAIMEX INDUSTRIES, S.A. de C.V. (collectively the
"Guarantors").
WHEREAS, Borrower, Guarantors, and Assignor entered into that certain
Loan Agreement dated March 8, 1999, as amended, whereby Borrower and its
subsidiaries borrowed an aggregate of $2,377,500.00 from Assignor (the "Loan")
and Guarantors guaranteed the Loan; and
WHEREAS, Assignor desires to assign all of his rights, title, and
interest under the Loan, including all loan documents, promissory notes, and
security documents , and Assignee is willing to accept such assignment and
assume all obligations thereunder.
NOW, THEREFORE, in consideration of the premises herein contained, Ten
Dollars ($10.00), and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Recitals. The above recitals are hereby incorporated herein by
reference. --------
2. Assignment of Loan. Assignor hereby assigns all of his rights, title,
and interest under the Loan to ------------------ Assignee.
3. Acceptance of Assignment. Assignee hereby accepts the assignment of all
of Assignor's rights, title, ------------------------- and interest under the
Loan, relieves Assignor of all liability, and assumes all obligations
thereunder.
4. Consent. Borrower and Guarantors hereby consent to the Assignment of the
Loan from Assignor to ------- Assignee.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
the day and year first above written.
ASSIGNEE: ASSIGNOR:
SCHMIDT INTERNATIONAL, LLC
By: /s/ Robert E. Schmidt, Jr. ___ /s/ Robert E. Schmidt, Jr.
----------------------------------- --------------------------
Robert E. Schmidt, Member Robert E. Schmidt, Jr.
BORROWER: GUARANTOR:
AARICA HOLDINGS, INC.
By: /s/ Carol Kolozs _____ /s/ Carol Kolozs
---------------------------- ----------------
Carol Kolozs, President Carol Kolozs
GUARANTOR:
AARICA SPORT, S.A. de C.V. TAIMEX INDUSTRIES, S.A. de C.V.
By: /s/ Carol Kolozs By:_ /s/ Carol Kolozs
----------------- -----------------
Carol Kolozs, President Carol Kolozs, President
ORLDOCS 10007046.1 LMW
AMENDED AND RESTATED
GUARANTY AGREEMENT
THIS AMENDED AND RESTATED GUARANTY ("Guaranty") given this 14th day of
January, 2000, by Carol Kolozs ("Guarantor"), to Robert E. Schmidt, Jr., his
successors and assigns and any successor holder of the Notes ("Creditor").
WHEREAS, Aarica Holdings, Inc., a Texas corporation, and its subsidiaries
("Borrower") are indebted to Creditor in the aggregate principal amount of Two
Million Three Hundred Seventy-Seven Thousand Five Hundred Dollars
($2,377,500.00) ("Loan") which indebtedness is evidenced by Borrower's
Promissory Note dated March 8, 1999, in the principal amount of $250,000.00, of
which $137,500.00 has been repaid, Replacement Promissory Note dated March 8,
1999, in the principal amount of $240,000.00, Subsidiary Note of Aarica Sport,
S.A. de C.V. and Taimex Industries, S.A. de C.V. dated January 14, 2000, in the
principal amount of $750,000.00, and Third Promissory Note dated January 14,
2000, in the principal amount of $1,137,500.00 (collectively the "Notes"); and
WHEREAS, repayment of the indebtedness evidenced by the Notes is being
secured by an Amended and Restated Stock Pledge Agreement between Guarantor and
Creditor of even date herewith; and
WHEREAS, to induce Creditor to make the Loan and to grant such other
accommodations to Borrower, including Letters of Credit, as Creditor may deem
proper, and with full knowledge that the Loan, and any such other accommodations
would not be made unless payment of all amounts due under the Notes and the
performance and/or observance by Borrower of all of the terms, covenants,
conditions and agreements on its part to be observed or performed pursuant to
the Notes, the Amended and Restated Stock Pledge Agreement, and all other
security documents ("Security Documents") are guaranteed by Guarantor; and
WHEREAS, Guarantor is the sole shareholder of Borrower, and as a result
of Guarantor's ownership interest in Borrower, Guarantor will receive a direct
benefit from the Loan.
NOW THEREFORE, for and in consideration of the making of the Loan and
other good and valuable consideration, receipt of which is hereby acknowledged,
it is agreed as follows:
-8-
1. Guarantor does hereby unconditionally guaranty the due and punctual
payment to Creditor of the amount of the Indebtedness as herein defined.
"Indebtedness", for the purposes of this Guaranty, means the
primary obligations of Borrower for payment of the sums due under the
Notes, including but not limited to, all sums of principal, accrued interest,
collection costs, advances, attorneys' fees and costs, and all monies extended
by Creditor which are prescribed, allowed, evidenced or secured by the Notes and
all security documents; all Letters of Credit issued or to be issued by Creditor
to Borrower; and for payment of any and all liabilities, whether fixed or
contingent, whether now due or hereafter due and whether secured or unsecured,
of the Borrower to Creditor arising or accruing by virtue of the Security
Documents. The term "Indebtedness" shall include all renewals, modifications and
extensions thereof.
2. In addition to the guaranty provided in Paragraph 1, Guarantor does
hereby further unconditionally guarantee the amount of:
(1) Loss or damage caused by the removal or disposal of any portion of the
Collateral (as defined in the Amended and Restated Stock Pledge Agreement);
(2) Loss or damage suffered by Creditor as a result of or
attributable to any fraud or misrepresentations by Borrower
contained in the Notes, Security Documents, or any documents
entered into in connection with the acquisition, issuance or
financing of the Collateral;
(3) Loss or damage suffered by Creditor as a result of the
misapplication of: (i) any products or proceeds, as such terms
are defined in Article 9 of the Uniform Commercial Code as
adopted by the State of Florida, from the Collateral following
any notice of default to Borrower, (ii) any and all costs
(including, but not limited to attorneys' fees, whether suit
is instituted or not) incurred by Creditor in the enforcement
of the Notes or the Security Documents following a default by
Borrower.
For purposes of this Paragraph, "misapplication" means Borrower's
failure to apply funds to the payment of principal, interest and other
amounts due under the Notes.
3. The liability of Guarantor shall continue until this Guaranty is marked
"Canceled" by the Creditor and returned to the Guarantor upon the
payment in full of the entire Indebtedness.
4. The obligations of Guarantor hereunder are unconditional, irrespective
of the genuineness, validity, negotiability or enforceability of the
Notes or any of the Security Documents and are independent of the
obligations of the Borrower. Creditor may prosecute a separate action
or actions hereon against Guarantor, whether action is brought against
Borrower, any other guarantor or the Collateral and whether Borrower is
joined in any such action or actions.
5. Guarantor authorizes Creditor, without notice of demand, and without
affecting the liability of Guarantor hereunder, from time to time to:
(1) Waive compliance with, or any defaults under, or grant any other
indulgences with respect to, the Notes or any of the other Security Documents;
(2) Agree with Borrower to modify, amend or change any provision of the
Notes or any of the other Security Documents;
(3) Grant to Borrower extensions or renewals of the Notes or any other of
the Security Documents, and/or effect any release, compromise or settlement in
connection with the Notes or any of the Security Documents;
(4) Agree with Borrower to the substitution, exchange, release or other
disposition of all or any part of the Collateral encumbered by the Security
Documents;
(5) Make advances for the purpose of performing any term or
covenant contained in the Notes or any of the other Security
Documents with respect to which Borrower or the then owner of
the Collateral shall be in default;
(6) Assign or otherwise transfer the Notes or any of the other Security
Documents or this Guaranty or any interest therein or herein;
(7) Add additional guarantors and release or make settlement with any
person or entity comprising Guarantor; and
(8) Deal in all respects with Borrower as if this Guaranty were not in
effect.
6. Guarantor hereby expressly waives each and all of the following:
(1) Notice of acceptance of this Guaranty to Creditor;
(2) Notice of the amount of Indebtedness now existing or which hereafter
may exist under the Notes;
(3) Notice of demand for payment, notice of default or nonpayment,
presentment, protest and notice of protest, as to the Notes;
(4) All other notices to which Guarantor might otherwise be
entitled in connection with this Guaranty, the Notes or other
Security Documents;
(5) Any right to require Creditor, as a condition precedent to the
enforcement of this Guaranty, to exhaust any security for payment of said Notes
by foreclosure proceedings or otherwise, or to pursue any other rights or
remedies which Creditor has or hereafter may have against the Borrower or any
subsequent endorser of the Notes, whether such rights exist by statute or
otherwise, it being agreed by Guarantor that its guaranty hereunder is an
absolute guarantee of payment and not of collection, that the failure of
Creditor to exercise any rights or remedies it has or may have against Borrower
shall in no way impair the obligation of said guaranty and that the liability of
Guarantor hereunder is and shall be direct and unconditional; and;
(6) All defenses, offsets and counterclaims which Guarantor may at any time
have to any claim of Creditor against Borrower.
7. Guarantor further agrees to each and all of the following:
(1) No change of ownership or legal title to all or a part of the
Collateral, whether effected with or without consent of
Creditor, shall affect, change or discharge the obligations of
Guarantor except as provided for the release of the Collateral
in the Security Documents;
(2) This Guaranty shall not be discharged or affected by the
dissolution, liquidation, merger, termination, or any other
type of corporate reorganization or restructure of Guarantor
or Borrower; and
(3) In the event action is commenced to enforce this Guaranty,
Guarantor agrees to pay Creditor's costs of suit and its
reasonable attorneys' fees in a sum to be fixed by the Court.
8. All indebtedness of Borrower now or hereafter held by Guarantor is
hereby subordinated to the Indebtedness of Borrower to Creditor, and
such indebtedness of Borrower to Guarantor, if Creditor so requires,
shall be collected, enforced and received by Guarantor as Trustee for
Creditor, and shall be paid to Creditor on account of Indebtedness of
Borrower to Creditor but without reducing or affecting the liability of
Guarantor under the other provisions of this Guaranty (except to the
extent of the actual payment thereof to Creditor).
9. Creditor, without notice to or consent of Guarantor, may assign this
Guaranty in whole or in part and may disclose to any assignee any
information or other data or material in Creditor's possession relating
to Guarantor. This Guaranty shall inure to the benefit of and may be
relied upon and enforced by Creditor's successors and assigns and shall
be binding upon Guarantor and the legal representatives and assigns of
Guarantor, except that Guarantor may not assign its liabilities under
this Guaranty without the prior written consent of Creditor, which
consent Creditor, in its sole discretion may withhold.
10. Except for any notice required by law to be given in another manner,
all notices, waivers, demands, requests or other communications
required or permitted by this Guaranty (collectively, "Notices"), to be
effective, shall be in writing, properly addressed, and shall be given
(i) by personal delivery, (ii) by established overnight commercial
courier with delivery charges prepaid or duly charged, (iii) by
registered or certified mail, return receipt requested, first class
postage prepaid, or (iv) by facsimile transmission, as follows:
If to Creditor: Robert E. Schmidt, Jr.
--------------
4340 W. Hillsborough Ave., #212
Tampa, FL 33614
With a copy to: James G. Willard, Esquire
20 North Orange Avenue
Suite 1000
Orlando, FL 32801-4626
If to Guarantor: Carol Kolozs
1080 Howell Branch Rd.
Winter Park, FL 32789
With a copy to: Jim Schnorf, Esq..
Continental Capital
195 Wekiva Springs Rd., Suite 200
Longwood, FL 32779
or to any other address or addressee as any party entitled to receive
notice under this Agreement shall designate, from time to time, to
others in the manner provided in this Paragraph 10 for the service of
Notices.
Notices delivered by personal delivery shall be deemed to have been
given upon tender to a natural person at the address shown. Notices
delivered by overnight courier shall be deemed to have been given the
next business day after delivery to such overnight commercial courier.
Notices delivered by mail shall be deemed to have been given on the
second (2nd) day after deposit into the United State Postal System.
Notices delivered by facsimile shall be deemed to have been given upon
confirmation of transmission to the correct facsimile phone number of
the intended recipient. All copies of Notices sent to the parties
listed above as receiving copies are sent as an accommodation only and
the lack of any such notice shall not effect the validity or
effectiveness of the notice to Creditor or Guarantor.
11. If, at any time, payment of any of the Indebtedness or any part
thereof, is rescinded or otherwise must be restored or returned to
Creditor upon the insolvency, bankruptcy or reorganization of Borrower
or under any other circumstances whatsoever, this Guaranty shall
continue effective or shall (if previously deemed terminated) be
reinstated, as the case may be, as if such payment had not been made or
performance completed.
12. Guarantor shall be liable for payment to Creditor of post-petition
interest accruing under the Security Documents and all costs incurred
or expended by Creditor, including, but not limited to, attorneys' fees
even if Borrower's obligation to Creditor ceases to exist by operation
of law.
13. If any provision of this Guaranty is held to be invalid or
unenforceable in any respect, the validity of the remaining covenants,
agreements, terms or provisions contained herein in no way shall be
affected, prejudiced or disbursed thereby.
14. No provision of this Guaranty shall be modified, waived, altered,
terminated, or discharged except by a written instrument or instruments
executed by the party against which enforcement of said action is
asserted. Any alleged modification, waiver, alteration or amendment
which is not so documented shall not be effective as to any party.
15. If this Guaranty is signed by more than one person, firm or
corporation, then all obligations of any such person, firm or
corporation shall be joint and several.
16. As used herein, the singular number includes the plural, and the
masculine gender includes the feminine and neuter.
17. Until all the Indebtedness has been paid in full, Guarantor shall not
have any right of subrogation unless expressly granted in writing by Creditor.
18. Consent to Jurisdiction. GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE SUPREME COURT OF THE STATE OF FLORIDA, COUNTY OF ORANGE, AND
THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF FLORIDA IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY AGREEMENT OR
ANY OF THE DOCUMENTS EXECUTED IN CONNECTION HEREWITH, AND GUARANTOR HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN SUCH FLORIDA STATE OR FEDERAL COURT. GUARANTOR HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE
OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING.
GUARANTOR ALSO IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY
SUCH ACTION OF PROCEEDING BY THE MAILING OF A COPY OF SUCH PROCESS TO GUARANTOR
BY REGISTERED OR EXPRESS MAIL, RETURN RECEIPT REQUESTED, AT HIS ADDRESS
SPECIFIED HEREIN. SUCH SERVICE WILL BECOME EFFECTIVE THREE (3) BUSINESS DAYS
AFTER SUCH MAILING AND WILL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE ON
GUARANTOR IN SUCH ACTION OR PROCEEDING. GUARANTOR AGREES THAT A FINAL JUDGMENT
IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY MANNER PROVIDED BY LAW.
NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF CREDITOR TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT
OF CREDITOR TO BRING ANY ACTION OR PROCEEDING AGAINST GUARANTOR OR ITS
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
EACH OF GUARANTOR AND CREDITOR, BY ITS ACCEPTANCE HEREOF, HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT
OR ANY AGREEMENT EXECUTED IN CONNECTION HEREWITH OR IN CONNECTION WITH
ANY DEFENSE, COUNTERCLAIM OR CROSS CLAIM ASSERTED BY GUARANTOR IN ANY
SUCH LITIGATION.
19. Waiver of Jury Trial. THE UNDERSIGNED HEREBY KNOWINGLY AND VOLUNTARILY
WAIVES THE RIGHT TO TRIAL BY
JURY in any action or proceeding for the interpretation, declaration,
reformation, pursuit, assertion, enforcement or resolution of any claim or
defense that has been asserted or may ever be asserted or ascertainable by or
against it under this Guaranty, or under any law or theory governing any
relationship between the Borrower and the Guarantor. This waiver by jury trial
shall extend to all -------------------------- matters between the parties and
shall be unconditional and absolute in all respects. In the event that
--------------------------- any collateral matter is judicially determined to be
outside the scope of this waiver of jury trial, or if this waiver of jury trial
is determined to be unenforceable to any degree, then this waiver of jury trial
shall be automatically modified to encompass all such matters so that no matter
involving the Borrower and the Guarantor shall be susceptible to jury trial to
any degree or at any time. The Borrower and the Guarantor hereby expressly waive
all rights to pursue mediation or arbitration or diversion of any claims
asserted or assertable in connection with this Guaranty.
IN WITNESS WHEREOF, the Guarantor has signed this Guaranty this 14th
day of January, 2000.
Signed, sealed and delivered in the presence of:
GUARANTOR:
Carol Kolozs
STATE OF FLORIDA
COUNTY OF ORANGE
The foregoing instrument was acknowledged before me this 14th day of
January, 2000, by Carol Kolozs, who is personally known to me or who has
produced _________________________ as identification and who did (did not) take
an oath.
Signature
Printed Name
ORLDOCS 10006792.1 LMW
Consent
As independent public accountants, we hereby consent to the use in this
registration statement of our report dated May 11, 2000 included herein and to
all references to our Firm included in this registration statement.
Arthur Andersen, L.L.P.
Mexico City, D.F.
August 14, 2000
ARTICLE 5
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE REGISTRANT'S FINANCIAL STATEMENTS AS OF AND FOR THE YEAR
ENDED DECEMBER 31, 1999 AND AS OF AND FOR THE THREE MONTHS ENDED
JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
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