-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TKpDwGaen+vrphMe1JHAH0rPqV3NYAXqPh/Ai4jug/RQ8/vbqBaJfwVgxAy4W3ux OI6fwOTHVZ9X+NLOuqWFmg== 0000950150-97-001904.txt : 19971231 0000950150-97-001904.hdr.sgml : 19971231 ACCESSION NUMBER: 0000950150-97-001904 CONFORMED SUBMISSION TYPE: SB-2 PUBLIC DOCUMENT COUNT: 20 FILED AS OF DATE: 19971230 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CUIDAO HOLDING CORP CENTRAL INDEX KEY: 0001018765 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 650639616 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SB-2 SEC ACT: SEC FILE NUMBER: 333-43457 FILM NUMBER: 97746744 BUSINESS ADDRESS: STREET 1: 3201 W GRIFFIN STREET 2: STE 204 CITY: FT LAUDERDALE STATE: FL ZIP: 33312 BUSINESS PHONE: 9549641060 MAIL ADDRESS: STREET 1: 3201 W GRIFFIN STREET 2: STE 204 CITY: FT LAUDERDALE STATE: FL ZIP: 33312 SB-2 1 FORM SB-2 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1997 REGISTRATION NO. ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ CUIDAO HOLDING CORP. (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER) FLORIDA 5182 65-0639616 (STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.) OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
3201 WEST GRIFFIN ROAD SUITE 204 FT. LAUDERDALE, FLORIDA 33312-6900 (954) 964-1060 (ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES) ------------------------ MR. C. MICHAEL FISHER 3201 WEST GRIFFIN ROAD SUITE 204 FT. LAUDERDALE, FLORIDA 33312-6900 (954) 964-1060 (NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE) ------------------------ COPIES TO: JOHN W. MARTIN, ESQ. 5777 WEST CENTURY BLVD., SUITE 1540 LOS ANGELES, CALIFORNIA 90045 (310) 342-6800 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. ------------------------ CALCULATION OF REGISTRATION FEE ================================================================================================================= AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED(1) UNIT(1) PRICE(1) REGISTRATION FEE - ----------------------------------------------------------------------------------------------------------------- Units Consisting of One share of Common Stock and One Common Stock Purchase Warrant................. 260,000 $5.75 $1,495,000 $516 - ----------------------------------------------------------------------------------------------------------------- Common Stock Underlying Warrants....... 260,000 $5.75 $1,495,000 $516 - ----------------------------------------------------------------------------------------------------------------- TOTALS................................................................ $2,990,000 $1,032 =================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457 of Regulation C promulgated under the Securities Act of 1933. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ 2 CUIDAO HOLDING CORP. CROSS REFERENCE SHEET
ITEM NUMBER AND CAPTION PROSPECTUS HEADING ----------------------------------------- ----------------------------------------- 1. Front of Registration Statement and Outside Front Cover of Prospectus........ Forepart of Registration Statement and Prospectus Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus............................ Inside Front and Outside Back Cover Pages of Prospectus 3. Summary Information and Risk Factors..... Prospectus Summary and Risk Factors 4. Use of Proceeds.......................... Use of Proceeds 5. Determination of Offering Price.......... Risk Factors and Plan of Distribution 6. Dilution................................. Dilution 7. Selling Security Holders................. Not Applicable 8. Plan of Distribution..................... Plan of Distribution 9. Legal Proceedings........................ Not Applicable 10. Directors, Executive Officers, Promoters and Control Persons...................... Management and Principal Stockholders 11. Security Ownership of Certain Beneficial Owners and Management.................... Management and Principal Stockholders 12. Description of Securities to be Registered......................... Description of Securities 13. Interest of Named Experts and Counsel.... Legal Matters 14. Disclosure of Commission Position on Indemnification for Securities Act Liabilities.............................. Not Applicable 15. Organization Within Last Five Years...... Certain Relationships and Related Transactions 16. Description of Business.................. Business 17. Management's Discussion and Analysis or Plan of Operation........................ Plan of Operation 18. Description of Property.................. Business 19. Certain Relationships and Related Transactions............................. Certain Relationships and Related Transactions 20. Market for Common Equity and Related Stockholder Matters...................... Not Applicable 21. Executive Compensation................... Management 22. Financial Statements..................... Financial Statements 23. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure............................... Not Applicable
3 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION DATED DECEMBER 30, 1997 UP TO 260,000 UNITS CONSISTING OF 260,000 SHARES OF COMMON STOCK AND WARRANTS TO PURCHASE 260,000 SHARES OF COMMON STOCK CUIDAO HOLDING CORP. ------------------------ Each unit ("Unit") offered hereby consists of one share of Common Stock of Cuidao Holding Corp. (the "Common Stock") and one Common Stock Purchase Warrant (the "Warrant"). After completion of this offering, the shares of Common Stock (the "Shares") and the Warrants comprising the Units shall be immediately separately transferable. Each Warrant entitles the holder thereof to purchase one share of Common Stock at an exercise price of $8.00, subject to adjustment, at any time until the third anniversary of the date of this Prospectus. The Warrants may be redeemed by the Company at $.05 per Warrant, at any time prior to their expiration on not less than 30 days' written notice, if the closing bid price of the Common Stock equals or exceeds $10.00 per share for 30 consecutive trading days ending within 10 days of the notice of redemption. See "Description of Securities." The minimum offering by the Company will be 95,000 Units ($546,250) and the maximum offering will be 260,000 Units ($1,495,000). The Units are offered on a "best efforts, all or none" basis with respect to the minimum number of Units offered hereby, and on a "best efforts" basis with respect to sales of Units thereafter up to the maximum number of Units being offered. Pending the payment for not less than 95,000 Units, all proceeds of this offering will be deposited in an interest bearing escrow account at Bank, , California (the "Escrow Agent"). There has been no public market for any securities of the Company prior to this offering, and there can be no assurance that a public market will develop by reason of this offering. If such a market should develop, there is no assurance that it will be sustained, or that it will develop into a market greater than a limited market. See "Risk Factors." The initial public offering price for the Units has been determined solely by the Company, and does not necessarily bear any direct relationship to the Company's assets, operations, book or other established criteria of value. See "Risk Factors" and "Dilution." THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION FROM THE OFFERING PRICE. SEE "RISK FACTORS" AND "DILUTION." THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
====================================================================================================== UNDERWRITING PRICE TO DISCOUNTS PROCEEDS TO PUBLIC(1) AND COMMISSIONS(2) COMPANY(3) - ------------------------------------------------------------------------------------------------------ Per Share........................ $5.75 $.575 $5.175 - ------------------------------------------------------------------------------------------------------ Total Minimum.................... $546,250 $54,625 $491,625 - ------------------------------------------------------------------------------------------------------ Total Maximum.................... $1,495,000 $149,500 $1,345,500 ======================================================================================================
Footnotes on Next Page The offering of the Units hereunder will terminate not later than , 1998 (the "Termination Date"), provided that, in the sole discretion of the Company, the offering period may be extended for an additional period not to exceed 90 days. The Company has entered into an escrow agreement with Bank to hold any proceeds from this offering in an interest bearing escrow account subject to certain terms and conditions. If subscriptions for all of the Units offered hereby have not been received and accepted by the Company by the Termination Date, no Units will be sold, and all funds held in escrow will be returned promptly to investors along with any interest accrued thereon. See "Plan of Distribution." WEST AMERICA SECURITIES CORP. THE DATE OF THIS PROSPECTUS IS , 1998 4 Footnotes to Cover Page (1) Units are being offered for sale at $5.75 per Unit. Payment in full for the Units is due upon subscription. Unit purchase funds will initially be held in an interest bearing escrow account at . This offering will terminate on or before a date 90 days from the date of this Prospectus unless the maximum amount of Units offered hereby is sold prior to such date, or unless this offering is otherwise extended in the discretion of the Company for a period not to exceed 90 days. When subscriptions for the minimum amount of Units offered hereby have been received and accepted by the Company, such funds will be released from escrow to the Company, and investors whose subscriptions for Units have been accepted by the Company will be issued Common Stock and Warrant certificates evidencing the number of Units acquired, and the initial escrow will close. See "Unit Purchase Information" and "Plan of Distribution." (2) Does not include additional compensation to the Placement Agent in the form of (i) a nonaccountable expense allowance of $13,656 if the minimum number of Units offered hereby are sold, and $37,375 if the maximum number of Units offered hereby are sold, which amounts to 2.5% of the total proceeds to be realized from the sale of the Units and (ii) an option (the "Placement Agent Unit Purchase Option") to purchase up to 26,000 Units (the "Option Units") at a price of $7.00 per Option Unit. In addition, the Company has agreed to indemnify the Placement Agent against certain liabilities under the Securities Act of 1933, as amended (the "Securities Act"). See "Plan of Distribution." (3) Proceeds to the Company are calculated before the deduction of expenses in connection with this offering and payable by the Company, which are estimated to be $80,488 if the minimum number of Units offered hereby are sold, and $104,207 if the maximum number of Units offered hereby are sold, and include filing, legal, accounting, printing and other miscellaneous fees, and the nonaccountable expenses payable to the Placement Agent referred to in footnote 2 above. 2 5 The Company is not currently a reporting company under the Securities Exchange Act of 1934, as amended. Upon completion of the offering of the Units, the Company intends to deliver annual reports to the holders of its securities. The annual reports will contain financial information that has been examined and reported upon by an independent certified public accountant. Red Dragon is an applied for trademark of the Company. This Prospectus also includes product names other than the names of the Company's products, and also includes the names of companies other than the Company. UNIT PURCHASE INFORMATION Subscribers purchasing Units should make checks payable to " Bank as Escrow Agent for Cuidao Holding Corp." Subscribers must complete a Subscription Agreement in the form attached as Appendix A to this Prospectus. For convenience, an actual Subscription Agreement has been included with this Prospectus. Additional copies of the Subscription Agreement may be obtained by writing or calling or faxing the Placement Agent at its executive office; 4510 E. Thousand Oaks Boulevard, Suite 100, Westlake Village, California 91362, telephone (800) 935-9378 and facsimile (805) 777-1744. All checks and Subscription Agreements should be forwarded to the Placement Agent at its Westlake Village, California office. 3 6 PROSPECTUS SUMMARY This Prospectus contains forward-looking statements which involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors including those set forth under "Risk Factors" and elsewhere in this Prospectus. The following information is selective and qualified in its entirety by the detailed information (including financial information and notes thereto) appearing elsewhere in this Prospectus. This summary of certain provisions of the Prospectus is intended only for convenient reference and does not purport to be complete. The entire Prospectus should be read and carefully considered by prospective investors before making a decision to purchase Units. Except as set forth in the Company's financial statements or as otherwise indicated herein, all information in this Prospectus (i) reflects the 1-for-2.5 reverse stock split of the Company's Common Stock effected on July 28, 1997, (ii) reflects the conversion of all of the Company's outstanding shares of Preferred Stock into shares of Common Stock which will occur automatically upon the closing of this offering and (iii) assumes no exercise of the Warrants or the Placement Agent's Unit Purchase Option. THE COMPANY Cuidao Holding Corp., a Florida corporation, was incorporated on February 12, 1996. The Company is authorized to issue two classes of capital stock, which are Common Stock and Preferred Stock. The total authorized Common Stock of the Company is 100,000,000 shares, $.0001 par value. The total authorized Preferred Stock of the Company is 10,000,000 shares, $.0001 par value. The Company's principal executive offices are located at 3201 West Griffin Road, Suite 204, Ft. Lauderdale, Florida 33312-6900; and its telephone number is (954) 964-1060. The Company is a development stage corporation which imports, develops, manages and distributes a portfolio of international and regional brands of beer, wine and spirits. The Company was formed to participate in specific niche segments of the approximate $100 billion United States alcoholic beverage market by acting as a supplier of a variety of beers, wines and spirits. The Company's current portfolio of beers consist of the following line of beers produced in the People's Republic of China by Tsingtao Brewery No. 3, a brewery owned and operated by Tsingtao Brewery Co., Ltd. ("Tsingtao"): Red Dragon Draft, Red Dragon Light and Red Dragon Amber. The Company's present portfolio of wines consist of the following French originated brands: Les Vignerons De Buzet Wines, Armadis Wines, Les Chais Du Prevot Wines, La Grappe De Gurson Wines, and Godet Freres Champagnes. The Company's portfolio of spirits consist of the following French originated brands: La Belle Sandrine and Armagnac Marquis De Puysegur. See "Business of the Company." Through its Red Dragon beer brands, the Company intends to expand the United States market for Chinese beer imports. The Company believes that the United States market for Chinese beer imports is approximately $125,000,000 annually, although no assurance to this effect can be given. Currently, the only significant brand of Chinese beer being marketed and sold in the United States is a regular beer produced by Tsingtao, and sold under the brand name of "Tsingtao Beer". The Company's initial strategy for expanding the United States market for Chinese beer imports will relate to diversifying Tsingtao's beer product from a singular brand to a wider variety of beer products which will consist of light, draft and amber beer types, and which will be sold under the brand name of "Red Dragon". With its wine brands, the Company intends to exploit the United States domestic wine market. According to Beverage World Magazine, in 1995 Americans consumed approximately 470.8 million gallons of wine. The Company believes that wine imports consists of approximately 72.5 million gallons and account for approximately 16% of total United States wine consumption. The Company further believes that its portfolio of wines will provide the United States consumer with a "French quality" wine at a retail price of between $5.00 to $8.00 per 750 ml (milliliter) bottle. At such retail prices, the Company expects that its wines will have particular appeal to the mass merchandise market. Through its La Belle Sandrine spirit, the Company intends to compete in the growing market for prepared cocktail beverages. La Belle Sandrine is an all natural, citrus based, prepared cocktail. The prepared cocktail 4 7 market is a niche market which currently has approximately 30 different brand participants (such as Jose Cuervo Margaritas and Khalua Combos). Because of the composition of its La Belle Sandrine product, the Company believes that La Belle Sandrine will compete primarily with a prepared cocktail which sells under the brand name of "Alize". Statistical information available to the Company indicates that Alize has increased its United States sales from 20,000 cases in 1991 to 430,000 cases in 1996, resulting in total 1996 sales for the product of approximately $37,000,000. The Company's strategy is to become a leading importer, developer and manager of a portfolio of beer, wine and spirit brands which serve specific niche alcoholic beverage markets. Key elements of the Company's strategy include: - Making selective product acquisitions in the alcoholic beverage industry to expand its product portfolio. - Improving market position and capitalizing on growth trends within the industry. - Improving operating efficiencies through reduced product and organizational costs. - Capitalizing and improving on strong alliance and wholesaler relationships. - Developing brand identification for its portfolio of products. - Expanding distribution into new markets and increasing penetration of existing markets primarily through product line extensions, promotional activities and through the acquisition of producers and other importers and distributors of alcoholic beverage products. RISK FACTORS An investment in the Units offered hereby involves a high degree of risk. The Company is a development stage company which has not had substantial business operations to date. There can be no assurance that the Company will have substantial product sales or revenues or that it will be able to sell its products at a profit. Other risk factors include the seasonality of the Company's products, the Company's reliance on third-party producers and the Company's reliance on independent distributors and wholesalers for product sales. See "Risk Factors." THE OFFERING Securities Offered by the Company.................. 260,000 Units at a public offering price of $5.75 per Unit. Each Unit consists of one share of Common Stock and One Warrant. Each Warrant entitles the holder thereof to purchase one additional share of Common Stock at an exercise price of $8.00, subject to adjustment, at any time until the third anniversary of the date of this Prospectus. Common Stock Outstanding before Offering.......... 2,226,000 Shares(1). Common Stock Outstanding after Minimum offering..... 2,359,000 Shares(2). Common Stock Outstanding after Maximum Offering..... 2,524,000 Shares(2). Use of Proceeds............ To purchase alcoholic beverage products, to advertise and market, to provide financing for undetermined future acquisitions and for working capital and general corporate purposes. - --------------- (1) Does not include 38,000 shares of Common Stock issuable upon the automatic conversion of 38,000 shares of the Company's Series A Preferred Stock into shares of the Company's Common Stock. 5 8 Such Series A Preferred Stock will be automatically converted into shares of the Company's Common Stock upon the closing of the sale of the Units offered hereby. See "Description of Securities -- Preferred Stock." (2) All references throughout this Prospectus to the number of Shares to be outstanding following this offering include the issuance of 38,000 Shares as a result of the automatic conversion of 38,000 shares of Series A Preferred Stock into 38,000 shares of the Company's Common Stock, but exclude (i) the possible issuance of up to 260,000 additional Shares that may be purchased upon exercise of the Warrants offered hereby, (ii) up to 26,000 additional Shares that may be purchased upon exercise of the Placement Agent Unit Purchase Option and (iii) 1,000,000 shares of Common Stock reserved for issuance under the Company's Stock Option Plans. See "Capitalization," "Stock Option Plans" and Notes to Financial Statements. SUMMARY FINANCIAL AND OPERATING INFORMATION
FEBRUARY 12, 1996 (DATE OF TEN MONTHS DEVELOPMENT INCEPTION) TO ENDED STAGE ENDED DECEMBER 31, 1996 OCTOBER 31, 1997 OCTOBER 31, 1997(1) ----------------- ---------------- ------------------- STATEMENT OF OPERATIONS DATA Revenues.................................... $ 192 $ 149 $ 341 Net income (loss)........................... (21,523) (94,105) (115,538) Net income (loss) loss per share............ (.012) (.046) (.060) Shares used in calculation of net loss per Share(2).................................. 1,833,600 2,035,960 1,929,962
OCTOBER 31, 1997 ------------------------------------------------- AS ADJUSTED AS ADJUSTED ACTUAL MINIMUM MAXIMUM (UNAUDITED) (UNAUDITED)(3) (UNAUDITED)(4) ----------- -------------- -------------- BALANCE SHEET DATA Working capital (deficit).......................... $59,035 $473,696 $1,307,803 Total assets....................................... 96,236 510,104 1,345,004 Total Stockholders' equity (deficit)............... 95,443 509,311 1,344,211
- --------------- (1) Cumulative totals for development stage operations of the Company from February 12, 1996 (date of inception) to October 31, 1997. (2) See Note 2 of Notes to Financial Statements of the Company concerning net loss per share information, which Financial Statements are included elsewhere in this Prospectus. (3) As adjusted amounts give effect to the sale of 95,000 Units by the Company in this offering, the minimum number of Units offered hereby, and the use of the net proceeds of $413,868 therefrom as if this offering had occurred at the balance sheet date. See "Use of Proceeds" and "Capitalization." (4) As adjusted amounts give effect to the sale of 260,000 Units by the Company in this offering, the maximum number of Units offered hereby, and the use of the net proceeds of $1,248,768 therefrom as if this offering had occurred at the balance sheet date. See "Use of Proceeds" and "Capitalization." 6 9 RISK FACTORS An investment in the Units offered hereby involves a high degree of risk and is not an appropriate investment for persons who cannot afford the loss of their entire investment. Prospective investors should carefully consider the following risk factors, in addition to the other information contained in this Prospectus, before purchasing any of the Units. Except for the historical information contained herein, the discussion in this Prospectus contains certain forward-looking statements that involve risks and uncertainties, such as statements of the Company's plans, objectives, expectations and intentions. The cautionary statements made in this Prospectus should be read as being applicable to all related forward-looking statements wherever they appear in this Prospectus. The Company's actual results could differ materially from those discussed here. Factors that could cause or contribute to such differences include those discussed below, as well as those discussed elsewhere herein. Development Stage Company; No Revenues. The Company is a development stage company with no product sales and no operating revenues. The Company has incurred cumulative losses from its inception and as of December 31, 1996 and October 31, 1997, had an accumulated deficit of $(21,523) and $(115,538) respectively. The Company anticipates that losses will continue for the foreseeable future as the Company continues its development and initial product marketing activities. The likelihood of the success of the Company must be considered in light of the expenses, complications and delays frequently encountered in connection with the establishment and expansion of new businesses and the competitive environment in which the Company will operate. There can be no assurance that future revenues from sales of the Company's products will occur or be significant, or that the Company will be able to sell its products at a profit. Future revenues and profits, if any, will depend on various factors, including, but not limited to, initial and continued market acceptance of the Company's products, and the successful implementation of its planned marketing strategies. Failure to achieve a satisfactory level of sales could impair the Company's ability to obtain required additional funds. See "-- Capital Requirements" and "Plan of Operation." Uncertainty of Demand. Although the Company believes that a demand exists for its portfolio of alcoholic beverage products, the Company has not yet marketed its alcoholic beverage products to any significant extent. As such, the demand for the Company's products are not yet known. Although management of the Company has conducted what it believes is market research into the alcoholic beverage industry, absolutely no assurance can be given that sufficient demand for the Company's products exist such that the Company will be successful in its business endeavor. See "Plan of Operation." Substantial Competition; Better Financed Competitors. The Company encounters and is likely to continue encountering substantial competition from a number of competitors some of which posses greater resources than the Company. The principal competitive factors affecting the market for the Company's alcoholic beverage products include product quality and taste, packaging, brand recognition, price and distribution capabilities. There can be no assurance that the Company will be able to compete successfully against current and future competitors based on these and other factors. The Company competes with a variety of domestic and international suppliers of alcoholic beverage products, many of whom have substantially greater financial, distribution and marketing resources and have achieved a higher level of brand recognition than the Company. The Company anticipates increased competition in the specific niche areas of the alcoholic beverage industry that it intends to serve from major importers, distributors and suppliers of alcoholic beverages such as Brown-Forman Company, Barton Beers Ltd., Kobrand Corporation and Allied Domecq Spirits and Wines, each of whom has introduced and is marketing alcoholic beverages designed to serve specific niche areas of the alcoholic beverage industry. These large importers, distributors and suppliers dominate the overall importation and/or distribution of alcoholic beverages in the United States and the Company expects that certain of these companies, with their superior financial resources and established distribution networks, will seek further participation in niche areas of the alcoholic beverage industry through the increased acquisition of alcoholic beverage products to distribute, or the formation of distribution alliances with the producers of alcoholic beverage products which serve specific niche areas of the alcoholic beverage industry. Increased competition could result in price reductions, reduced profit margins and loss of market share, all of which would have a material adverse effect on the Company's business, financial condition and results of operations. See "Business -- Competition." 7 10 Potential Fluctuations in Quarterly Results; Seasonality. The Company's quarterly operating results may vary significantly depending on factors such as the timing of new product announcements by the Company or its competitors, the timing of significant advertising and promotion campaigns by the Company, changes in the sales mix between the Company's beer, wine and spirits products, the impact of an increasing average federal excise tax rate as sales volume increases, increased competition, seasonality of sales of the Company's products, general economic factors, trends in consumer preferences, regulatory developments, including changes in domestic import duties and excise and other tax rates, changes in average selling prices or market acceptance of the Company's alcoholic beverage products and variations in shipping and transportation costs. The Company expects to experience higher sales in the third and fourth quarters of a calendar year due to increased consumption of alcoholic beverages during seasonal holidays. Fluctuations in sales due to seasonality may become more pronounced as the growth rate of the Company's sales slow. Based upon all of the foregoing, the Company believes that quarterly sales and operating results are likely to vary significantly in the future and that period-to-period comparisons of its results of operations will not be meaningful and should not be relied upon as indications of future performance. Further, it is possible that in some future quarter the Company's revenue or operating results will be below the expectations of public market analysts and investors. In such event, if a public market for the Company's securities were to develop in the future, the price of such securities could be materially adversely affected. Product Concentration; Dependence on New Product Introductions. The Company currently offers a relatively limited number of beer, wine and spirits products and believes that the sale of such beer, wine and spirits products will account for a significant portion of the Company's sales for the foreseeable future. Therefore, the Company's future operating results, particularly in the near term, are significantly dependent upon the continued market acceptance of these beer, wine and spirits products. There can be no assurance that the Company's beer, wine and spirits products will achieve market acceptance. Initial sales for a new alcoholic beverage product may be caused by the interest of distributors and retailers to have the latest product on hand for potential future sale to consumers. As a result, initial stocking orders for, or sales of, a newly introduced alcoholic beverage product may not be indicative of market acceptance and long term consumer demand. A decline in the demand for any of the Company's beers, wines and spirits as a result of competition, changes in consumer tastes and preferences, government regulation or other factors would have a material adverse effect on the Company's business, operating results and financial condition. In addition, there can be no assurance that the Company will be successful in importing, developing, managing, introducing and marketing additional new alcoholic beverage products that will sustain sales growth in the future. See "Business." Reliance on Third-Party Producers. The Company does not produce any of the alcoholic beverage products that it presently markets and distributes. The Company's Red Dragon beer brands are produced in the People's Republic of China by Tsiangtao Brewery No. 3, a brewery owned and operated by Tsingtao. The Company's wine and spirits products are produced in France by SICA-Les Chais du Prevot, Armadis, Les Vignerons De Buzet, Cave du Vignoble Gursonnais and Godet Freres. The Company has entered into an exclusive Import and Distribution Agreement with each of these producers which gives the Company the exclusive right to market and distribute in the United States the alcoholic beverage products produced by each of the foregoing referenced producers (hereinafter collectively referred to as the "Producers"). The Company relies upon each of the Producers at all phases of production of the alcoholic beverage products which are imported, managed, marketed and distributed by the Company, including scheduling production to meet delivery requirements, packaging, performing quality control and assurance and performing regulatory compliance. The Company's relationship with each of its Producers is therefore critical to the Company's business, operating results and financial condition. The Company's dependence on the Producers entails a number of significant risks. The Company's business, results of operations and financial condition would be materially adversely affected if any one of the Producers were unable, for any reason, to meet the Company's delivery commitments or if a Producer were unable to continue to produce a product being marketed and distributed by the Company. In the event that a Producer were no longer able to supply the Company with a particular product, the Company would be 8 11 required to identify, qualify and obtain an appropriate substitute product from a different producer of alcoholic beverage products. This identification, qualification and acquisition of an alternative product could take up to one year or longer, and no assurance can be given that alternative products would be available to the Company or that the producers of such alternative products would be in a position to satisfy the Company's production requirements on a timely and cost-effective basis. Any inability by the Company to obtain a consistent and adequate supply of the alcoholic beverages produced by the Producers on a timely basis or any other circumstances that would require the Company to seek alternative sources of supply would materially adversely effect the Company's revenues and goodwill and would therefore have a material adverse effect on the Company's business, financial condition and results of operations. See "Business -- Products." Foreign Production. Currently, all of the alcoholic beverage products to be managed, marketed and distributed by the Company are produced outside of the United States, and include production in China. The foreign production of goods is subject to a number of risks, including transportation delays and interruptions, political and economic disruptions, the imposition of tariffs and import and export controls and changes in governmental policies. China currently enjoys most favored nation trading status with the United States. While the Company has not to date experienced any material adverse effects due to such risks, there can be no assurance that such events will not occur in the future with the result of possible increases in costs and delays of, or interferences with, product deliveries resulting in losses of revenues and goodwill. Foreign Currency and Foreign Exchange Regulation. As part of the Company's ordinary business operations, the Company will be required to purchase alcoholic beverage products from the Producers. The Company may be required to accomplish such purchases through the use of foreign currencies. As a result, fluctuations in exchange rates of the United States dollar against foreign currencies could adversely affect the Company's results of operations. The Company may attempt to limit its exposure to the risk of currency fluctuations by purchasing forward exchange contracts which could expose the Company to substantial risk of loss. In such a transaction, the Company would purchase a predetermined amount of foreign currency to ensure that the Company in the future will own a known amount of such currency to pay for goods at a predetermined cost. The Company believes that the use of such transactions will successfully allow the Company to better determine costs involved in its operations, and thus better manage currency fluctuations. There can be no assurance that the Company will in the future successfully manage its exposure to currency fluctuations or that such fluctuations will not have a material adverse effect on the Company. Dependence on Independent Distributors and Wholesalers; Customer Concentration. The Company expects to sell most of its alcoholic beverage products to unrelated distributors and wholesalers for resale to restaurants, bars and retail outlets. Accordingly, the Company is dependent upon these distributors and wholesalers to sell the Company's products and to assist the Company in promoting market acceptance of, and creating demand for, the Company's products. There can be no assurance that the Company's distributors will devote the resources necessary to provide effective sales and promotion support to the Company. The Company believes that it is likely that the vast majority of its sales in the future will be concentrated among ten or less distributors and wholesalers. The Company believes that its future growth and success will depend in large part upon a few significant distributors and wholesalers. If one or more of these significant distributors were to discontinue selling, or decrease the level of orders for the Company's products, the Company's business would be adversely affected in the areas serviced by such distributors and wholesalers until the Company retained replacements. There can be no assurance however that the Company would be able to replace a significant distributor in a timely manner or at all in the event it were to discontinue selling the Company's products. In addition, there is always a risk that the Company's distributors will give higher priority to the products of other beverage companies, including products directly competitive with the Company's products, thus reducing their efforts to sell the Company's products. The Company's distributors may not contractually commit to make future purchases and therefore could discontinue carrying the Company's products in favor of a competitor's product or other alcoholic beverages at any time or for any reason. If any of the Company's significant distributors were to experience financial difficulties, or otherwise become unable or unwilling to promote or sell the Company's products, the Company's results of operations would be adversely affected. In addition, in some states, the Company's relationship with its distributors may be affected by laws that restrict enforceability of some contract terms, especially those related to the 9 12 Company's right to terminate the services of its distributors. Accordingly, the Company's ability to change distributors in certain states may be adversely impacted by such laws. See "Business -- Sales, Marketing and Distribution." Development of New Products; Need to Manage Product Introductions. The alcoholic beverage industry is highly competitive and characterized by changing consumer preferences and continuous introduction of new products. The Company's goal is to expand its portfolio of alcoholic beverage products through the acquisition of new products serving niche segments of the industry, develop and manage such new products, and introduce such new products on a timely and regular basis to maintain distributor and retail interest and appeal to varying consumer preferences. The Company believes that its future growth will depend, in part, on its ability to anticipate changes in consumer preferences and acquire, manage, develop and introduce, in a timely manner, new alcoholic beverage products that adequately address such changes. There can be no assurance that the Company will be successful in acquiring, developing, introducing and marketing new products on a timely and regular basis. If the Company is unable to acquire and introduce new products or if the Company's new products are not successful, the Company's sales may be adversely affected as customers seek competitive products. In addition, the introduction or announcement of new alcoholic beverage products by the Company could result in reduction of sales of the Company's existing products, requiring the Company to manage carefully product introductions in order to minimize disruption in sales of existing products. There can be no assurance that the introduction of new product offerings by the Company will not cause distributors, retailers and consumers to reduce purchases or consumption of existing Company products. Such reduction of purchases or consumption could have a material adverse effect on the Company's business, operating results and financial condition. See "Business -- Products." Ability to Identify and Consummate Suitable Acquisitions; Integration of Acquisitions. The Company expects to devote a substantial amount of time and expense in attempting to acquire other importers and distributors of alcoholic beverage products as a means of expanding the Company's alcoholic beverage product lines and distribution channels and to create certain operating efficiencies. Identifying appropriate acquisitions and proposing, negotiating and consummating acquisitions can be a lengthy and costly process. Furthermore, the Company may compete for acquisition opportunities with companies that may have greater resources than the Company. There can be no assurance that suitable acquisition candidates are available or can be identified or that acquisitions can be consummated on terms favorable to the Company. Acquisitions require the Company to attract and retain component and experienced management personnel and require the implementation of management information systems and other operating systems. There can be no assurance that the Company will be able to successfully acquire and integrate other importers and distributors of alcoholic beverage products. Any failure or inability to efficiently acquire and integrate other importers and distributors may have a material adverse effect on the Company's results of operations or financial condition. Ability to Manage Growth. The Company is a development stage company which has not completely realized its business plan. The Company believes that as its business plan is more fully realized, the Company may experience a period of rapid growth that will result in new and increased responsibilities for management personnel and will place a significant strain upon the Company's management, operating and financial systems and resources. To accommodate any rapid growth and to compete effectively and manage future growth, if any, the Company will be required to implement and improve its operational, financial and management information systems, procedures and controls on a timely basis and to expand, train, motivate and manage its work force. There can be no assurance that the Company's personnel, systems, procedures and controls will be adequate to support the Company's existing and future operations. Any failure to implement and improve the Company's operational, financial and management systems or to expand, train, motivate or manage employees could have a material adverse effect on the Company's business, operating results and financial condition. See "Business -- Employees." Dependence on Consumer Acceptance; Strength of Economy. Although the Company believes it has the ability and experience to recognize potentially valuable products and to gauge trends in its business, the Company's revenues, nevertheless, will be substantially dependent on the success of its products, which depends, among other things, on rapidly changing consumer acceptance, which is difficult to predict and over which the Company will have little control. The Company's profitability and sales will depend on the strength 10 13 of the economy, which can dictate consumers' spending habits on such items as alcoholic beverage products. No prediction can be made about the stability of the economy. Any prolonged downturn in the economy, whether real or perceived, could adversely affect the Company. Capital Requirements. The Company anticipates that, if it fails to achieve significant revenues or profitable operations from its initial marketing efforts, or if the initiation of sales of its alcoholic beverage products is delayed beyond planned time periods, it will require additional funding to develop and market its initial products, to expand its management team and for further marketing and product development. There can be no assurance that additional capital from any source will be available when needed by the Company, or that such capital will be available on terms acceptable to the Company. If adequate funds are not available, the Company may be required to curtail significantly its business activities or cease operations entirely. See "Use of Proceeds." Government Regulation. Federal, state and local authorities extensively regulate the production and distribution of beer, wine and spirits. The Federal Bureau of Alcohol, Tobacco and Firearms (the "ATF") and various state alcohol authorities regulate matters such as licensing, trade and pricing practices, labelling, advertising and relations with wholesalers and distributors. In the last several years federal and state regulators have required warning labels to be placed on alcoholic beverages. It is uncertain what future regulations may be promulgated by these governmental agencies and the effect these regulations will have on the Company's business. In addition, Congress in 1991 substantially increased the amount of excise tax assessed upon alcoholic beverages and it is possible that additional increases in excise taxes could be promulgated in the future. Because the Company may be required to pay excise taxes as part of its ordinary business operations, any increase may cause a corresponding increase in the costs to the Company, thereby requiring the Company to raise prices or suffer reduced profit margins. It is unknown what the impact of future regulations will be, but it is possible that current or future governmental regulations of the type referenced above could materially adversely affect the Company's business. See "Business -- Government Regulation." Health Risks; Social Concerns. There has been substantial attention paid in recent years to the adverse social and health effects of alcohol consumption. Although some studies have indicated that moderate wine consumption may result in health benefits, other reports have sharply disputed these findings. Anti-alcohol groups have advocated more stringent labelling requirements and other governmental regulations generally unfavorable to the alcoholic beverage industry. More restrictive regulations, negative publicity regarding alcohol consumption or publication of studies which indicate a significant health risk from moderate consumption of alcohol could adversely affect the sale and consumption of alcoholic beverages and could have a material adverse effect on the Company's financial results. Arbitrary Determination of Offering Price. The offering price of the Units was arbitrarily determined by the Company. Among the factors considered by the Company in establishing the offering price of the Units was the proceeds to be raised by the Company, the percentage of ownership to be held by investors in this offering, the experience of the Company's management and the current market conditions in the over-the-counter securities market. Accordingly, there is no relationship whatsoever between the offering price and the assets, earnings or book value of the Company, or any other recognized criteria of value. Control by Existing Management and Stockholders. Following completion of this offering, the control of the Company will remain in the hands of its current directors, officers and stockholders. Accordingly, these persons will be able to elect a majority of the Board of Directors and to control the management of the Company. See "Management," "Principal Stockholders" and "Description of Securities." No Dividends on Common Stock Anticipated. The Company has not paid any dividends upon its Common Stock since its inception and, by reason of its present financial status and its contemplated financial requirements, does not contemplate or anticipate paying any dividends upon its Common Stock in the foreseeable future. Therefore, any potential purchaser of the Units whose decision to invest in the Units is based upon an expectation of dividend payments should refrain from purchasing the Units. See "Dividend Policy." 11 14 Dependence Upon Key Personnel. The Company's success is heavily dependent upon the continued active participation of its current executive officers, key employees and consultants. Loss of the services of one of these executives, employees or consultants could have a material adverse effect upon the development of the Company's business. The Company does not currently have "key-man" life insurance on any of its executive personnel and does not intend to do so in the foreseeable future. There can be no assurance that the Company will be able to recruit or retain other qualified personnel should it be necessary to do so. See "Management." Dependence Upon Consultants. The Company has established a team of consultants which include persons with expertise in business areas important to the Company's operations. Various members of the Company's team of consultants consult with the Company regarding sales, marketing and operations efforts at the Company, but are employed elsewhere on a full-time basis. As a result, they can only spend a limited amount of time on the Company's affairs. There can be no assurance that the Company will be able to continue to retain the consulting services of any of its consultants, the loss of which may be detrimental to the Company. There is no assurance that the Company will be able to continue to attract and retain qualified consultants necessary for the development of its business. The failure to recruit additional scientific and technical consultants in a timely manner, would be detrimental to the Company's research and development programs and to its business. See "Business -- Consultants." Shares Available for Resale. Sales of substantial numbers of shares of Common Stock in the public market following this offering could adversely affect the market price of the Common Stock prevailing from time to time. Upon completion of this offering, and assuming that the maximum number of shares offered hereby have been sold, the Company will have 2,524,000 shares of Common Stock outstanding. All shares of Common Stock outstanding (including the 260,000 Shares sold in this offering) will be freely transferable without restriction of further registration under the Securities Act, unless they are held by "affiliates" of the Company within the meaning of Rule 144 promulgated under the Securities Act as currently in effect. However, notwithstanding that all of the Company's outstanding Common Stock may be sold by existing stockholders pursuant to Rule 144, certain of the Company's stockholders have entered into an agreement with the Company and the Placement Agent (the "Lock-Up Agreement") pursuant to which such stockholders have agreed not to sell, pledge, hypothecate, assign, grant any option for the sale of, or otherwise transfer or dispose of, whether or not for consideration, directly or indirectly, 441,200 shares of Common Stock without the approval of the Placement Agent or without the occurrence of certain events which are more particularly described in the Lock-Up Agreement. Further, certain of the Company's stockholders have entered into an agreement with the Company (the "Promotional Share Lock-In Agreement") pursuant to which such stockholders have agreed not to sell, pledge, hypothecate, assign or otherwise transfer or dispose of 1,750,000 shares of Common Stock without the occurrence of certain events, which are more particularly described in the Promotional Share Lock-In Agreement, and without the approval of the administrators of certain state securities laws. The Company is unable to estimate when or the number of foregoing shares that may be sold by existing stockholders because such sales will depend upon the market price for the Common Stock, the personal circumstances of the seller and other factors. The future sales of Common Stock or the availability of such shares of Common Stock for sale may have an adverse effect on the market price of the Common Stock prevailing from time to time. If such future sales did adversely affect the market price of the Common Stock, the Company's ability to raise additional funds through an equity offering at such time could be adversely affected. See "-- Absence of Public Market; Possible Volatility of Stock Price," "Principal Stockholders" and "Shares Eligible for Future Sale." Dependence on Trademarks and Proprietary Rights; No Assurance of Enforceability. The Company's success will depend in part on its ability to obtain and preserve its trademarks and to operate without infringing the proprietary rights of third parties. There can be no assurance that any applications related to the Company's trademarks will provide the Company with a competitive advantage or will afford protection against competitors with products similar to those offered by the Company, or that competitors of the Company will not circumvent, or challenge the validity of, the Company's trademarks. In addition, in the event that another party infringes the Company's trademarks, the enforcement of such rights is at the option of 12 15 the Company and can be a lengthy and costly process, with no guarantee of success. Finally, although to date no claims have been brought against the Company alleging that its trademarks infringe intellectual property rights of others, there can be no assurance that such claims will not be brought against the Company in the future, or that any such claims will not be successful. If such a claim were successful, the Company's business could be materially adversely affected. In addition to any potential monetary liability for damages, the Company could be required to obtain a license in order to continue to provide products under its trademarks or could be enjoined from utilizing its trademarks if such a license were not made available on acceptable terms. If the Company becomes involved in such litigation, it may require significant Company resources, which may materially adversely affect the Company. See "Business -- Trademarks." Dilution. Present stockholders of the Company acquired their shares of Common Stock at an average cost of approximately $0.09 per share, an amount substantially less than the $5.75 per Unit to be paid by public investors. The Company's net tangible book value as of October 31, 1997, without giving effect to any outstanding warrants or options of the Company, was $95,443 or $0.04 per share and will increase to approximately $509,311, or $0.22 per share if the minimum number of Units offered hereby is sold, and $1,344,211, or $0.53 per share, if the maximum number of Units offered hereby is sold. The result will be an immediate and substantial dilution of the net tangible book value of the shares of Common Stock acquired by the public investor of $5.53 (96%) per share if the minimum number of Units offered hereby is sold, and $5.22 (91%) per Unit if the maximum number of Units offered hereby is sold. Public investors therefore will bear most of the risk of loss, while control of the Company will remain in the hands of the present management and stockholders. See "Dilution" and "Certain Relationships and Related Transactions -- Prior Issuances of the Company's Securities." Escrow of Investors' Funds Pending Sale of Minimum Number of Shares Offered. Under the terms of this offering, the Company is offering the Units on a "95,000 Units or none, best efforts" basis. If the minimum number of Units is sold, the remaining 165,000 Units will be offered on a "best efforts" basis until all of the Units are sold or the offering period ends, whichever occurs first, unless the offering is terminated earlier by the Company. Therefore, no commitment exists by anyone to purchase all or any part of the Units offered hereby. Consequently, there is no assurance that all of the Units offered hereby will be sold, and subscribers' funds may be escrowed for so long as 90 days (or a period of 180 days if the offering period is extended by the Company) and then returned promptly with interest thereon, in the event all of the Units offered hereby are not sold within the 90 day offering period. Investors, therefore will not have the use of any funds paid for the purchase of the Units during the offering period. In the event the Company is unable to sell all of the Units offered hereby within the offering period, the offering will be withdrawn. See "Plan of Distribution." Directors' and Officers' Indemnification. The Company's Articles of Incorporation and Bylaws require the Company to indemnify and hold harmless its directors and officers from and against and in respect of certain losses, damages, deficiencies, expenses or costs which may be incurred or suffered by such directors and officers as a result of their serving in such capacities with the Company. See "Certain Provisions of Florida Law and of the Company's Articles of Incorporation and Bylaws." Placement Agent Unit Purchase Option To Be Outstanding. Upon completion of the offering, the Company expects to have outstanding a Placement Agent Unit Purchase Option to purchase an aggregate of 26,000 Units. For the life of the Placement Agent Unit Purchase Option, the holder thereof is given, at no cost and without assuming the risk of ownership of the Common Stock, the opportunity to profit from an increase in the market price of the Common Stock of the Company. The existence of such Placement Agent Unit Purchase Option might adversely affect the ability of the Company to raise equity capital on favorable terms, and such Placement Agent Unit Purchase Option is likely to be exercised at a time when the Company could obtain additional equity capital on more favorable terms. See "Plan of Distribution." Potential Adverse Effect of Redemption of Warrants. Commencing on the date of this Prospectus, the Warrants may be redeemed by the Company at a redemption price of $.05 per Warrant upon not less than 30 days' prior written notice if, with respect to the Warrants, the closing bid price of the Common Stock shall have averaged $10.00 per share or above for 30 consecutive trading days ending within 10 days of the notice. Redemption of the Warrants could force the holders (i) to exercise the Warrants and pay the exercise price 13 16 therefor at a time when it may be disadvantageous for the holders to do so, (ii) to sell the Warrants at the then current market price when they might otherwise wish to hold the Warrants or (iii) to accept the nominal redemption price which, at the time the Warrants are called for redemption, is likely to be substantially less than the market value of the Warrants. See "Description of Securities -- Warrants." Current Prospectus and State Registration to Exercise Warrants. The holders of the Warrants will be able to exercise the Warrants only if (i) a current prospectus under the Securities Act relating to the shares of Common Stock underlying the Warrants is then in effect and (ii) such shares of Common Stock are qualified for sale or exempt from qualification under the applicable securities laws of the states in which the various holders of Warrants reside. Although the Company has undertaken and intends to use its best efforts to maintain a current prospectus covering the securities underlying the Warrants following completion of the offering to the extent required by federal securities laws, there can be no assurance that the Company will be able to do so. The value of the Warrants may be greatly reduced if a prospectus covering the securities issuable upon the exercise of the Warrants is not kept current or if the shares of Common Stock are not qualified, or exempt from qualification, in the state in which the holders of Warrants reside. Persons holding Warrants who reside in jurisdictions in which such shares of Common Stock are not qualified and in which there is no exemption will be unable to exercise their Warrants and would either have to sell their Warrants in the open market or allow them to expire unexercised. If and when the Warrants become redeemable by the terms thereof, the Company may exercise its redemption right even if it is unable to qualify the underlying shares of Common Stock for sale under all applicable state securities laws. See "Description of Securities -- Warrants." Absence of Public Market; Possible Volatility of Price of Common Stock. Prior to this offering, there has been no public market for any of the shares of the Company's Common Stock, and there can be no assurance that a trading market will develop, or if developed, that it will be developed into something greater than a limited market. The trading price of the shares of Common Stock could be subject to wide fluctuations in response to such factors as, among others, variations in the Company's anticipated or actual results of operations and market conditions in the industries in which the Company operates. Risks of Low-Priced Stocks; Possible Effect of "Penny Stock" Rules on Liquidity of the Common Stock and Warrants. The Common Stock and Warrants may become subject to certain rules and regulations promulgated by the Securities and Exchange Commission ("Commission") pursuant to the Securities Enforcement Remedies and Penny Stock Reform Act of 1990 (the "Penny Stock Rules") which impose strict sales practice requirements on broker-dealers which sell such securities to persons other than established customers and certain "accredited investors." For transactions covered by the Penny Stock Rules, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent for the transaction prior to sale. Consequently, such rule may affect the ability of broker-dealers to sell the Common Stock and may affect the ability of purchasers in this offering to sell any of the Common Stock and Warrants acquired hereby in the secondary market. The Penny Stock Rules generally define a "penny stock" to be any security not listed on an exchange or not authorized for quotation on the Nasdaq Stock Market and has a market price (as therein defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. For any transactions by broker-dealers involving a penny stock (unless exempt), the rules require delivery, prior to a transaction in a penny stock, of a risk disclosure document relating to the market for the penny stocks. Disclosure is also required to be made about compensation payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stocks. The foregoing penny stock restrictions will not apply to the Company's securities if such securities are listed on an exchange or quoted on the Nasdaq Stock Market and have certain price and volume information provided on a current and continuing basis or if the Company meets certain minimum net tangible asset or average revenue criteria. There can be no assurance that the Company's securities will qualify for exemption from the Penny Stock Rules. In any event, even if the Company's securities were exempt from the Penny Stock Rules, they would remain subject to Section 15(b)(6) of the Securities Exchange Act of 1934, as 14 17 amended (the "Exchange Act"), which gives the Commission the authority to prohibit any person that is engaged in unlawful conduct while participating in a distribution of a penny stock from associating with a broker-dealer or participating in a distribution of a penny stock, if the Commission finds that such a restriction would be in the public interest. If the Company's securities were subject to the rules on penny stocks, the market liquidity for the Company's securities could be severely adversely affected. Discretion of Management and the Board of Directors in Use of Proceeds. Although the Company intends to apply the net proceeds of this offering in the manner described under "Use of Proceeds," the Company's management and the Board of Directors have broad discretion within such proposed uses as to the precise allocation of the net proceeds, the timing of expenditures and all other aspects of the use thereof. The Company reserves the right to reallocate the net proceeds of this offering among the various categories set forth under "Use of Proceeds" as it, in its sole discretion, deems necessary or advisable based upon prevailing business conditions and circumstances. See "Use of Proceeds." Lack of a Majority of Independent Directors. Upon completion of the offering of the Units, the Company's board of directors will have only one independent director. As such, upon completion of the offering of the Units, the majority of the Company's directors will be either officers of the Company, persons related to the officers of the Company, or persons who provide consulting or advisory services to the Company in exchange for remuneration. See "Management." Experience of Management. Potential purchasers of the Units should be aware that management of the Company does not have any experience operating a company which has as its primary business, the importation and distribution of alcoholic beverage products. Accordingly, management is required to retain knowledgeable and experienced employees and consultants in the operations of the Company's business. There can be no assurance that the Company will be able to retain its current employees and/or consultants, or that it will be able to recruit knowledgeable and experienced employees and consultants in the future should it be necessary to do so. 15 18 THE COMPANY The Company is a development stage corporation which was formed to participate in specific niche segments of the approximate $100 billion United States alcoholic beverage market by acting as an importer and wholesale supplier of a variety of beers, wines and spirits. Through its Red Dragon beer brands, the Company intends to expand the United States market for Chinese beer imports. The Company believes that the United States market for Chinese beer imports is approximately $125,000,000 annually, although absolutely no assurance to this effect can be given. Currently, the only significant brand of Chinese beer being marketed and sold in the United States is a regular beer produced by Tsingtao, and sold under the brand name of "Tsingtao Beer". The Company intends to utilize its portfolio of wines to exploit the large United States domestic wine market. According to Beverage World Magazine, in 1995, Americans consumed approximately 470.8 million gallons of wine. The Company believes that wine imports consists of approximately 72.5 million gallons and account for approximately 16% of total United States wine consumption. With its La Belle Sandrine brand, the Company intends to compete in the growing market for prepared cocktail beverages. La Belle Sandrine is an all natural, citrus based, prepared cocktail containing the spirit armagnac. Currently, this niche market has approximately 30 different brands (such as Jose Cuervo Margaritas and Khalua Combos). Because of the composition of La Belle Sandrine, the Company believes that La Belle Sandrine will compete primarily with a prepared cocktail which sells under the brand name of "Alize". Statistical information available to the Company indicates that Alize has increased its sales from 20,000 cases in 1991 to 430,000 cases in 1996, resulting in total 1996 sales of approximately $37,000,000. The Company's strategy is to become a leading importer, developer, manager and distributor of a portfolio of brands of beer, wine and spirits which serve specific niche alcoholic beverage markets. Key elements of the Company's strategy include: Continuous Development of Value-Added and Branded Business. The Company intends to develop and build its business as a value-added and branded business through careful selection of distribution channels, continued development of niche products with volume potential and aggressive marketing programs. The Company expects to devote significant financial resources to innovative selling, advertising and promotional activities designed to build brand awareness and a high level of consumer loyalty for its products. The Company plans to focus its selling, advertising and promotional activities on peak selling periods for its beer, wine and spirit products. Through participation in trade shows and other alcoholic beverage industry events, the Company will seek to educate distributors, retailers and consumers about the Company's products. Development and Expansion of Distribution Network. The Company's strategy is to expand market share in key markets of the United States by developing initially a regional distribution network, and thereafter a national distribution network, to increase retail account distribution. The Company believes that as it is able to extend its product line, it will be able to leverage its distribution network by increasing the number of products that the Company is able to move through its distribution network, thereby allowing the Company to realize certain operating efficiencies and product cost reductions. The Company expects to invest significant resources to educate distributors and retailers about promoting and selling the Company's products. The Company further expects to choose distributors in each market that will devote significant attention and resources to the promotion and sale of the Company's products. Focus on Product Development and Diversity. The Company intends to continue to expand its product line with additional beer, wine and spirit products designed to appeal to varying consumer preferences. The Company has a "volume-niche" strategy where development efforts are focused on niche products which have sufficient volume to provide distribution efficiency. The Company intends to pursue this strategy through strategic alliances and/or acquisitions of producers and other importers and distributors of alcoholic beverage products. The Company was incorporated in Florida on February 12, 1996. On June 29, 1996 the Company formed Cuidao (USA) Import Co., Inc., a Florida corporation. On March 31, 1997, the Company acquired R&R 16 19 (Bordeaux) Imports, Inc., a Florida corporation. Both Cuidao (USA) Import Co., Inc. and R&R (Bordeaux) Imports, Inc., are wholly-owned subsidiaries of the Company. Unless the context requires otherwise, all references to the Company include Cuidao (USA) Import Co., Inc. and R&R (Bordeaux) Imports, Inc. The Company's principal executive offices are located at 3201 West Griffin Road, Suite 204, Ft. Lauderdale, Florida 33312-6900 and its telephone number is (954) 964-1060. USE OF PROCEEDS The net proceeds to the Company from the sale of Units (after deducting Placement Agent commissions and offering expenses) are estimated to be approximately $413,868 if the minimum number of 95,000 Units is sold and $1,248,768 if the maximum number of 260,000 Units is sold. The following table sets forth the estimated application by the Company of the net proceeds to be derived from the sale of Units offered hereby.
MINIMUM OFFERING MAXIMUM OFFERING AMOUNT, 95,000 PERCENTAGE OF AMOUNT, 260,000 PERCENTAGE OF USE OF PROCEEDS UNITS NET PROCEEDS UNITS NET PROCEEDS - ------------------------------------ ---------------- ------------- ---------------- ------------- To purchase products(1)............. $290,000 70% $ 874,000 70% To advertise and market(2).......... 83,000 20% 250,000 20% To provide general working capital(3)........................ 40,868 10% 124,768 10% -------- --- ---------- --- Total Net Proceeds............. $413,868 100% $1,248,768 100% ======== === ========== ===
- --------------- (1) Represents funds to be used to make payments to the producers of alcoholic beverage products which the Company expects to import and distribute, and includes letter of credit funding and the payment of expenses related thereto. See "Business" and "Certain Relationships and Related Transactions -- Certain Material Contracts." (2) Represents funds required to implement the Company's sales and marketing programs. This will include the retention of independent advertising and marketing firms, attendance at trade shows, and the preparation of promotional materials. See "Business -- Sales, Marketing and Distribution." (3) Represents funds which will support the basic operations of the Company, including but not limited to funds for office rent, utilities and miscellaneous expenses. Pending the expenditure of the proceeds of this offering, the Company may make temporary investments in insured certificates of deposit, insured short-term interest-bearing deposits, United States Government obligations or insured money market certificates. DIVIDEND POLICY The Company has never paid or declared any cash dividends on its Common Stock and does not intend to pay dividends on its Common Stock in the foreseeable future. The Company presently expects to retain its earnings to finance the development and expansion of its business. The payment by the Company of dividends, if any, on its Common Stock in the future is subject to the discretion of the Board of Directors and will depend on the Company's earnings, financial condition, capital requirements and other relevant factors. See "Description of Securities." DILUTION As of October 31, 1997, there were 2,226,000 shares of Common Stock outstanding having a net tangible book value of $95,443 or approximately $0.04 per share. Net tangible book value per share is the net tangible assets of the Company (total assets less total liabilities and intangible assets) divided by the number of shares of Common Stock outstanding. Upon completion of this offering, there will be 2,359,000 shares of the Company's Common Stock outstanding having a net tangible book value of approximately $509,311 or approximately $0.22 per share if the minimum number of Units is sold; and 2,524,000 shares of the Company's Common Stock outstanding having a net tangible book value of approximately $1,344,211 or approximately $0.53 per share if the maximum number of Units is sold. The net tangible book value of each 17 20 share will have increased by approximately $0.18 per share to present stockholders, and decreased by approximately $5.53 per share (a dilution of 96%) to public investors if the minimum number of Units is sold, and the net tangible book value of each share will have increased by approximately $0.49 per share to the present stockholders and decreased by approximately $5.22 per share (a dilution of 91%) to public investors if the maximum number of Units is sold. Dilution represents the difference between the aggregate offering price of the Units herein and the pro forma net tangible book value per share of Common Stock of the Company immediately after the completion of the offering of the Units. Dilution of the value of the Units purchased by investors in this offering will also be due, in part, to the lower book value of the shares of Common Stock presently outstanding, and in part, to expenses incurred in connection with the offering of the Units. The following table illustrates this dilution: ASSUMING MINIMUM NUMBER OF UNITS SOLD Public offering price per share(1)................................. $5.75 Net tangible book value per share before offering................ $0.04 Increase per share attributable to payment by investors in this offering...................................................... $0.18 ----- Pro forma net tangible book value per share, after offering........ $0.22 ----- Dilution per share to new investors................................ $5.53 =====
- --------------- (1) Before deduction of underwriting commissions and expenses payable by the Company. This figure does not assign any value to the Warrants included in the Units. ASSUMING MAXIMUM NUMBER OF UNITS SOLD Public offering price per share(1)................................... $5.75 Net tangible book value per share before offering.................. $0.04 Increase per share attributable to payment by investors in this offering........................................................ $0.49 ----- Net tangible book value per share after offering................... $0.53 ----- Dilution per share to new investors.................................. $5.22 =====
- --------------- (1) Before deduction of underwriting commissions and expenses payable by the Company. This figure does not assign any value to the Warrants included in the Units. The following tables set forth the percentage of equity to be purchased by public investors in this offering compared to the percentage of equity to be owned by the present stockholders, and the comparative amounts paid for the shares of Common Stock by public investors as compared to the total cash consideration paid by the present stockholders of the Company. ASSUMING THE MINIMUM NUMBER OF UNITS SOLD
TOTAL SHARES OF PURCHASED CONSIDERATION -------------------- ------------------ AVERAGE PRICE NUMBER PERCENT AMOUNT PERCENT PAID PER SHARE(1) ---------- ------- -------- ------- ----------------- Existing Stockholders................ 2,264,000 96% $210,754 29% $0.09 New Investors........................ 95,000 4% $546,250 71% $5.75 --------- --- -------- --- TOTAL...................... 2,359,000 100% $757,004 100% ========= === ======== ===
- --------------- (1) Based on the average value per share paid by existing stockholders to the Company and a public offering price of $5.75 per share of Common Stock paid by new investors. 18 21 ASSUMING THE MAXIMUM NUMBER OF UNITS SOLD
SHARES PURCHASED TOTAL CONSIDERATION --------------------- ---------------------- AVERAGE PRICE NUMBER PERCENT AMOUNT PERCENT PAID PER SHARE(1) --------- ------- ---------- ------- ----------------- Existing Stockholders.......... 2,264,000 90% $ 210,754 12% $0.09 New Investors.................. 260,000 10% $1,495,000 88% $5.75 --------- --- ---------- --- TOTAL................ 2,524,000 100% $1,705,754 100% ========= === ========== ===
- --------------- (1) Based on the average value per share paid by existing stockholders to the Company and a public offering price of $5.75 per share of Common Stock paid by new investors. The Company has reserved an aggregate of 1,000,000 shares of its Common Stock for its officers, directors, employees and consultants to purchase pursuant to its Stock Option Plans. As of the date of this Prospectus, the Company has not issued any options pursuant to the terms of its Stock Option Plans. The above paragraph does not give effect to the possible issuance of up to 1,000,000 additional shares of the Company's Common Stock upon exercise of any options which have been, or may yet be, granted under the Stock Option Plans. The issuance of shares of the Company's Common Stock upon the exercise of options which may be granted under the Stock Option Plans would result in further dilution in the interests of stockholders if at the time of exercise, the Company's net tangible book value per share is greater than the exercise price of any such options. See "Stock Option Plans." 19 22 CAPITALIZATION The following tables set forth at October 31, 1997 (i) the actual capitalization of the Company and (ii) the capitalization as adjusted to reflect the sale of the minimum and the maximum number of Units offered hereby (based upon an initial public offering price of $5.75 per Unit and the application of the net proceeds therefrom). The table should be read in conjunction with the Financial Statements and Notes thereto included elsewhere in this Prospectus. ASSUMES MINIMUM NUMBER OF UNITS SOLD
OCTOBER 31, 1997 ------------------------------ ACTUAL (1) AS ADJUSTED (2) ---------- --------------- (UNAUDITED) Stockholders' equity (deficit): Common Stock, $.0001 par value, 100,000,000 shares authorized; 2,226,000 shares outstanding; 2,359,000 outstanding as adjusted pro forma (2)..................................... $ 223 $ 236 Additional paid-in-capital.................................... 58,484 624,613 Preferred Stock, $.0001 par value, 10,000,000 shares authorized; Series A Preferred Stock outstanding........... 4 0 Additional paid-in-capital or Series A Preferred Stock........ 152,270 0 Accumulated deficit in development stage........................ (115,538) (115,538) ------- ------- Total stockholders' equity................................. 95,443 509,311 ------- ------- Total capitalization.................................. $ 95,443 $ 509,311 ======= =======
- --------------- (1) Derived from the Financial Statements of the Company included elsewhere in this Prospectus. (2) As adjusted to reflect the sale of the minimum number of Units offered hereby and the application of the net proceeds set forth in "Use of Proceeds." ASSUMES MAXIMUM NUMBER OF UNITS SOLD
OCTOBER 31, 1997 ---------------------------- ACTUAL(1) AS ADJUSTED(2) --------- -------------- (UNAUDITED) Stockholders' equity (deficit): Common Stock, $.0001 par value, 100,000,000 shares authorized; 2,226,000 shares outstanding; 2,524,000 outstanding as adjusted pro forma(2)........................................ $ 223 $ 252 Additional paid-in-capital...................................... 58,484 1,459,497 Preferred Stock, $.0001 par value, 10,000,000 shares authorized; Series A Preferred Stock outstanding......................... 4 0 Additional paid-in-capital or Series A Preferred Stock.......... 152,270 0 Accumulated deficit in development stage.......................... (115,538) (115,538) --------- ---------- Total stockholders' equity................................... 95,443 1,344,211 --------- ---------- Total capitalization.................................... $ 95,443 $1,344,211 ========= ==========
- --------------- (1) Derived from the Financial Statements of the Company included elsewhere in this Prospectus. (2) As adjusted to reflect the sale of the maximum number of Units offered hereby and the application of the net proceeds set forth in "Use of Proceeds." 20 23 SELECTED FINANCIAL DATA The statement of operations and balance sheet information set forth below as of December 31, 1996 and for the year ended December 31, 1996, are derived from, and are qualified by reference to, the financial statements of the Company which have been audited by Baum & Company, P.A., independent certified public accountants. The financial statements as of December 31, 1996, and the report thereon, are included elsewhere in this Prospectus. The selected data for the ten months ended October 31, 1997 are derived from the unaudited financial statements of the Company, and in the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of such data have been included. The information below should be read in conjunction with the consolidated Financial Statements and Notes thereto included in this Prospectus. The Company's historical operating results are not necessarily indicative of the results of any future period.
FEBRUARY 12, 1996 (DATE OF INCEPTION) TO TEN MONTHS ENDED DECEMBER 31, 1996 OCTOBER 31, 1997 ---------------------- ---------------- STATEMENTS OF OPERATIONS DATA: Revenues................................................. $ 192 $ 149 Operating expenses....................................... (21,715) (94,164) Operating income (loss).................................. (21,523) (94,015) Weighted average number of shares of common stock and common stock equivalents outstanding.................. 1,833,600 2,035,960 BALANCE SHEET DATA: Working capital (deficit)................................ $ 10,506 $ 59,035 Total assets............................................. 38,344 96,236 Stockholders' equity (deficit)........................... 37,157 95,443
21 24 PLAN OF OPERATION During the 12 month period beginning immediately after completion of the sale of the minimum number of Units offered hereby, the Company intends to carry out three principal objectives: (1) aggressively manage and market its current portfolio of beer, wines and spirits in specific niche markets of the overall alcoholic beverage industry; (2) expand its management and administrative personnel to support its alcoholic beverage product lines; and (3) expand its product line and distribution channels through strategic alliances and/or through the acquisition of other importers and distributors of alcoholic beverage products or through the acquisition of producers of alcoholic beverage products. MARKETING OF PRODUCTS With its Red Dragon beer brands, the Company intends to expand the Chinese beer segment of the overall Asian beer import market. Presently, the Asian beer import market has approximately five major brands which include Tsingtao, Sapporo and Kirin. The Company's plans are to become a leading supplier of Chinese brand beer in the North American market by expanding the product line of Tsingtao, which is the predominant Chinese beer product sold in North America. The Company's marketing strategy for its line of Chinese beer will be to first introduce its Red Dragon product line to Asian-theme restaurants (primarily Chinese restaurants), stressing the fact that the Company's line of Chinese beer products will provide the restauranteur with a product that he or she currently does not have, which is a diversified (light, amber, draft) Chinese beer line. Thereafter, the Company will seek to introduce its Red Dragon beer products to Asian-related specialty markets. Eventually, the Company plans to introduce its Red Dragon beer brands to retailers who specialize in marketing and selling imported beers. These vendors will primarily consist of ale houses and specialty liquor stores that sell a variety of imported beers. To market its Red Dragon beer products, the Company has developed, and will institute, a variety of advertising and marketing programs designed to create consumer awareness for its beer products and to establish brand identification. The Company plans to conduct on-premise promotions, which will include the use of posters and wall and daily scheduling calendars which prominently display the Company's Red Dragon beer products at the site of retail sale of the Company's beer products. Where legal, the Company will conduct product tasting seminars with restaurant staff and consumers. In addition, the Company intends to utilize a variety of restaurant table top "tent" displays featuring its beer products and its monthly promotions. As the Company's Red Dragon products are gradually introduced into the mainstream retail market, the Company will integrate a giveaway merchandise program with T-Shirts and baseball caps featuring the Company's Red Dragon trademarked logo. The Company's merchandise program will be specifically designed to develop brand identification. The Company anticipates that approximately $20,000 of the net proceeds raised from the minimum offering of Units hereunder, and $50,000 of the net proceeds raised from the maximum offering of Units hereby will be allocated for the initial marketing of its Red Dragon beer products. With its wine products, the Company's objective will be to successfully introduce a profitable line of imported wines into the $12.1 billion retail wine market. The Company's marketing and sales strategy with respect to its wine products will be to provide the off-premise merchandise market with quality products at a reasonable cost to the retailer and the consumer. In the marketing of its wine products, the Company will focus on the consumer fascination with imported wines and their image. The Company's wine marketing approach will combine the positive image of French wines with an appealing retail price (the Company's wine product line is anticipated to retail in the $5.00-$10.00 range per 750 ml bottle) so as to communicate to the consumer that the Company's wine products have an attractive price to quality value. Management believes that retailers and consumers of wine products make their purchasing decisions based on an identifiable and favorable price to quality value quotient. 22 25 The Company will distribute its wine products through agents that deal directly with high volume off-premise accounts. Although the Company believes that the high volume off-premise account market does not engage in heavy advertising as a form of marketing (this market relies on providing distributors and retailers value and an opportunity to realize reasonable profit margins as its primary form of marketing strategy), it is the Company's plan to participate in at least three major restaurant/hotel trade shows during the first 12 months after completion of the sale of the minimum number of Units offered hereby, and it is the Company's plan to design incentive programs for distributor personnel which will have as its main focus the placement of products with off-premise accounts. Since the Company believes that its primary marketing strategy for its wine products will be providing distributors and retailers with value and an opportunity to realize reasonable profit margins, the Company does not expect to use any of the net proceeds raised from the offering of the Units toward the marketing of its wine products. The Company's premier spirits product, La Belle Sandrine, will initially be introduced in warm climate areas, and thereafter in seasonal climate areas as appropriate. The Company's marketing strategy for its La Belle Sandrine product will be to drive growth for this product using advertising that focuses on the unique tropical related properties of the product (the combination of passion fruit juice and armagnac). The Company's marketing strategy for its La Belle Sandrine product will initially concentrate on on-premise promotions, followed by a variety of off-premise programs. The Company intends to utilize on-premise visuals which show the various ways in which La Belle Sandrine can be mixed and used. The Company's off-premise promotions will include the producing and packaging with products sold, a cook book featuring a variety of seafood and poultry items prepared with La Belle Sandrine as a sauce. The Company anticipates that approximately $63,000 of the net proceeds raised from the minimum offering of Units hereunder, and $200,000 of the net proceeds raised from the maximum offering of Units hereby will be allocated for the marketing of La Belle Sandrine. EXPANSION OF MANAGEMENT AND ADMINISTRATIVE PERSONNEL The Company currently has five employees and three consultants. Assuming that product acceptance, sales and revenue growth justify such, the Company anticipates employing an additional four persons by the end of the first quarter of 1999. It is further anticipated that one of these persons will be an executive officer of the Company responsible for certain aspects of sales and marketing and three persons will be in corporate administration. As a result of the foregoing, it is expected that annual employee compensation will increase during the 12 month period commencing immediately after the completion of the sale of the minimum number of Units offered hereby from approximately $52,000 to approximately $265,000. EXPANSION OF PRODUCT LINES AND DISTRIBUTION CHANNELS The Company plans to expand the number of alcoholic beverage products under its management, as well as increase the number of distribution channels for its products. At the foundation of the Company's plans for expansion of its product lines and distribution channels is the acquisition of other importers and/or distributors of alcoholic beverage products. In its acquisition planning, the Company will look to acquire other importers and/or distributors of alcoholic beverage products who own, or have exclusive rights to, niche alcoholic beverage products which can be sold to volume purchasers and which have the potential to be branded. In addition to adding entirely new product lines, acquisitions are expected to be beneficial in adding new customers and distribution channels, and improving operating efficiencies of the Company through shared resources and regional facilities and the creation of critical mass in product offerings. The Company believes that the importation and/or distribution of alcoholic beverage products in the United States is a highly fragmented industry populated by numerous single product, or niche product, 23 26 importers and distributors. As a result, the Company believes that opportunities exist for the Company to expand its product offerings and distribution channels, and to increase its operating efficiencies through the acquisition of other importers and/or distributors of alcoholic beverage products. The Company has no present commitments or agreements and is not currently involved in any negotiations with respect to any acquisitions. The Company has not specifically determined the amount it will be required to expend on any future acquisition or the timing of the expenditure. The amount actually expended, if any, is at the discretion of the Company and may depend upon a number of factors including future revenue growth and the amount of cash generated by the Company's operations. 24 27 BUSINESS OVERVIEW The Company is a development stage corporation which was formed to participate in specific niche segments of the approximate $100 billion United States alcoholic beverage market by acting as a supplier of a variety of beers, wines and spirits. Through its Red Dragon beer brands, the Company intends to expand the United States market for Chinese beer imports. The Company believes that the United States market for Chinese beer imports is approximately $125,000,000 annually. Currently, the only significant brand of Chinese beer being marketed and sold in the United States is a regular beer produced by Tsingtao, and sold under the brand name of "Tsingtao Beer". The Company intends to utilize its portfolio of wines to exploit the large United States domestic wine market. According to Beverage World Magazine, in 1995, Americans consumed approximately 470.8 million gallons of wine. The Company believes that wine imports consists of approximately 72.5 million gallons and account for approximately 16% of total United States wine consumption. With its La Belle Sandrine brand, the Company intends to compete in the growing market for prepared cocktail beverages. La Belle Sandrine is an all natural, citrus based, prepared cocktail containing the spirit armagnac. Currently, this niche market has approximately 30 different brands (such as Jose Cuervo Margaritas and Khalua Combos). Because of the composition of La Belle Sandrine, the Company believes that La Belle Sandrine will compete primarily with a prepared cocktail which sells under the brand name of "Alize". Statistical information available to the Company indicates that Alize has increased its sales from 20,000 cases in 1991 to 430,000 cases in 1996, resulting in total 1996 sales of approximately $37,000,000. The Company's strategy is to become a leading importer, developer, manager and distributor of a portfolio of brands of beer, wines and spirits which serve specific niche alcoholic beverage markets. Key elements of the Company's strategy include: making selective product acquisitions in the alcoholic beverage industry to expand its product portfolio; improving market position and capitalizing on growth trends within the industry; improving operating efficiencies through reduced product and organizational costs; capitalizing and improving on strong alliance and wholesaler relationships; developing brand identification for its portfolio of products; expanding distribution into new markets and increasing penetration of existing markets primarily through product line extensions, promotional activities and through the acquisition of producers and other importers and distributors of alcoholic beverage products. The Company was incorporated in Florida on February 12, 1996. On June 29, 1996 the Company formed Cuidao (USA) Import Co., Inc., a Florida corporation. On March 31, 1997, the Company acquired R&R (Bordeaux) Imports, Inc., a Florida corporation. Both Cuidao (USA) Import Co., Inc. and R&R (Bordeaux) Imports, Inc., are wholly-owned subsidiaries of the Company. Unless the context requires otherwise, all references to the Company include Cuidao (USA) Import Co., Inc. and R&R (Bordeaux) Imports, Inc. INDUSTRY BACKGROUND Beer Industry Beer has the largest share of the United States alcoholic beverage market with a total of 5.8 billion gallons of beer being sold in the United States in 1995. Beer owns 87.9% of the consumed alcohol industry in the United States. Demographic information shows that 61% of beer drinkers are men, with the 25 to 34 and 45 to 55 age brackets being the most likely to drink beer. Beer continues to attract consumer attention through the introduction of new styles and types, such as ice beer and specialty brew. According to the Adams-Jacobson Handbook (1996 edition), imported beer in 1996 continued a three year growth pattern with a 7.4% increase in sales over the previous year, and resulting in a 6% share of the United States beer market. As Americans continue to beer surf and experiment, import sales have increased. Importers are continuing to look for new ways to expand their core business, and are implementing new strategies such as product line extensions. 25 28 The leading import sales in cases, comparing 1995 to 1996 are as follows (in millions):
1995 1996 ----- ----- Heineken............................................. 34 38 Corona Extra......................................... 21 28.4 Molson Ice........................................... 11 10 Total Imported Beer.................................. 155.2 172.2
Asian produced beers fared relatively well in 1996 as traffic at Asian theme restaurants (the prime sites for Asian beer sales) improved. Asahi, Kirin and Sapporo, all Japanese brands, and Tsingtao, the predominant Chinese brand, continue to lead in the Asian beer market. The Company estimates that the United States market for Chinese beer is in excess of 4,000,000 cases annually. The primary venue for Chinese beer sales in the United States is the Chinese restaurant. According to the 1992 Census of Retail Trade, there are over 22,000 Chinese restaurants in the United States, with major cities having the largest share of them. The only Chinese beer sold in all 50 states of the United States is Tsingtao Beer. Tsingtao Beer sells in excess of 1,000,000 cases per annum. Tsingtao Beer is almost exclusively marketed and sold in Chinese restaurants. Unlike the Japanese brewers who have found tremendous success selling a varied product line, Tsingtao has traditionally chosen to sell only one brand. In response to this lack of product diversification, many of Tsingtao's Chinese restaurant buyers have been forced to carry other brands of Asian and European beers to satisfy their customer's demands for product diversity. The Company believes that Tsingtao's historical decision not to extend its beer product line has severely limited the sales potential of Tsingtao in the United States. Wine Industry The United States wine industry consists of the domestic and foreign (most notably French and Italian) production of three basic wine groups. These groups are table wines (wines consumed with a meal), dessert wines (usually sweet wines consumed after a meal) and sparkling wines (champagnes). Table wines account for more than 80% of the total United States wine market. Table wines which retail for more than $3.00 per 750 ml (milliliter) bottle are generally referred to as "premium wines". There are three segments within the premium wine market. These segments are the "popular premium" wines which retail between $3.00 and $7.00 per 750 ml bottle, "super premium" wines which retail between $7.00 and $14.00 per 750 ml bottle and "ultra premium" wines which retail over $14.00 per 750 ml bottle. Champagnes are the most famous wines in the world. Born in the province of Champagne, in northeastern France, it is the only one of the world's hundred of sparkling wines that rightly bears the name Champagne. In 1996, shipments of champagne from France set a record of 95 million bottles. The United States alone imported over 13 million bottles of champagne from France in 1996. The United States was the third largest importer of champagne in the world in 1996, trailing only the United Kingdom and Germany. Since 1993, the overall United States wine market has enjoyed four consecutive growth years posting a 2.3% growth between 1995 and 1996. In 1995, wine imports climbed to 72.5 million gallons and accounted for 15.7% of total wine sales. Import wines share of the United States wine market varies widely among different states, with shares generally higher in the East and lower in the West. In 1996, imports accounted for 23.8% of wine sales in New York and 19.4% of wine sales in Florida, but only 9.2% of wine sales in California. The 1996 figures surged by 5.7 million cases, up 19% from 1995, mainly because of huge gains by European wines and products from Chile, Brazil, Argentina and Australia. European table wines sported relatively high growth in 1996 with Italy at 15% of the import market, France at 18% of the import market and Spain at 15% of the import market leading the way. 26 29 The Company believes that Americans now consume more table wine for a number of reasons including favorable news about the health benefits of red wine, favorable new United States dietary guidelines, new packaging and a strong economy. Spirits Industry Spirits are essentially all alcoholic beverages other than beer or wine. Spirits are created through the process of distilling, which reduces water content and greatly increases the alcohol strength of an alcoholic beverage. Where beers on average have an alcohol content ranging from 2% to 8% and wines have an alcohol content ranging from 8% to 14%, distilled spirits are usually in the range of 35% alcohol content, although individual products may be higher or lower. Buoyed by a strong economy, sales of distilled spirits reversed a 15-year record of decline, with volume rising 0.3 percent in 1996 to 135 million nine-liter cases, according to Impact Databank. One category of spirits is the prepared cocktail. Prepared cocktails as a whole were up in 1996 by more than 11% as compared to 1995, and were led by Heublein's TGI Friday's line. The TGI Friday's brand had a strong year in 1996, with a 68% sales gain over 1995 to reach more than 1.1 million 9-liter cases sold. The brand has had an annual compound growth rate of more than 100% since 1992. Alize, the cognac and passion fruit prepared cocktail distributed by Kobrand Corporation, had 1996 sales of 430,000 9-liter cases, more than tripling its sales since 1994. PRODUCTS Beer Products The Company's beer products currently consist of three crafted brews from the Tsingtao Brewery No. 3 in the People's Republic of China. These three products are Red Dragon Draft, Red Dragon Light and Red Dragon Amber. The Tsingtao Brewery No. 3 is located at the foot of the Tin Zhu Mountains in Shangdong Province. In producing its beer products, the brewery utilizes a unique patented process which is designed to eliminate all impurities from the water used in the brewing process, thus creating a beer which tastes pure, and is clear. The brewing process utilized by the Tsingtao Brewery No. 3 has earned the brewery a number of national quality awards in China such as the Medal of Most Popular with Consumers, the Medal of Beer Trusted by Consumers (issued in the First Light Industry Fair), the title of Qingdao High Quality Product, and the title of National Ten Best Stars. The quality awards earned by the brewery are presented in Beijing to less than two percent of the more than 800 breweries operating in the People's Republic of China. Tsingtao , the owner and operator of Tsingtao Brewery No. 3 is China's most famous beer producer. Its regular beer product, "Tsingtao Beer", is the number one Chinese Beer imported in the United States and ranks among the top 25 imported beers (out of over 600 brands) in the United States. Tsingtao Beer is also the number one branded consumer product exported from China. Since 1986, Tsingtao Beer has sold approximately 1,000,000 cases annually in the United States. Tsingtao Beer is served in more than 90% of all Chinese restaurants in the United States. It is the only Chinese beer available in all fifty states of the United States. Tsingtao Beer was awarded a gold medal for its superior taste and quality by a panel of highly acclaimed chefs belonging to Chefs in America, a prestigious culinary association. With its newly crafted Red Dragon brands, the Company intends to further expand the growing market for Asian beer imports, and specifically, the market for Chinese beer imports. Wine Products The Company is a supplier of a diverse line of popular premium and super premium varietal wines produced in the Bordeaux region of France. The Company's wines are procured from five different French wine producers. These producers are Les Vignerons De Buzet, Armadis, SICA-Les Chais Du Prevot, Cave Vignoble Gursonnais and Godet Freres. 27 30 Les Vignerons De Buzet ("Buzet") is the second largest exporter of "co-op" wines in France, shipping over 3,000,000 bottles worldwide and selling an additional 3,500,000 bottles to restaurants within France. Buzet offers a diverse line of premium table wines under three different labels. These labels are Renaissance, Excellance and Instant Nature, with each label providing premium red, white and rose flavors. The Buzet Red Renaissance is made from Merlot, with the addition of Cabernet Sauvignon, and has a distinctive character. The Buzet White Renaissanceis made principally from Semillion, Sauvignon and Muscatel, and has a floral, fruity aroma. The Buzet Rose Renaissance is made from a harmonious blend of Merlot and Cabernet and is supple and fruity. The Company expects that its Buzet Renaissance and Excellance lines will be sold to consumers at prices between $5.50 and $8.00 per 750 ml bottle. Buzet Instant Nature lines will consist of Red Instant Nature and White Instant Nature. The Instant Nature lines are unique in that their labels have various wildlife scenes depicting what foods these wines are best to be consumed with. Armadis provides the Company with a variety of labels which will be marketed and sold to the United States consumer. The relatively low priced popular premium labels of Bordeaux Rouge, Bordeaux Blanc Dry and Bordeaux Blanc Sweet are expected to retail in the $6.00 per 750 ml bottle range. The super premium premier line of Premieres Cotes de Bergerac in Blanc Molleux, Monbazellas, Sauternes and Medoc will retail from $9.00 to $15.00 per 750 ml bottle. Also falling into this range will be the Armadis Montagne St. Emilion and Graves Rouge. SICA-Les Ches Du Prevot provides the Company with the popular premium wines of Entre Duex Mers, Bordeaux Blanc, Bordeaux Rouge and Bordeaux Superieur. Entre Duex Mers is a dry wine containing 70% Semillion, 20% Sauvignon and 10% Muscatel. The Sauvignon and the Muscatel bring floral aromas to the wine and the Semillion gives it a fruity taste. The Bordeaux Blanc is 100% Sauvignon with a prevailing floral aroma and a fruity (orange family) taste. The Bordeaux Rouge is 50% Merlot, 40% Cabernet Franc and 10% Cabernet Sauvignon, and has a harmony and fineness which enable it to be tasted in its youth. The Bordeaux Superieur is 30% Merlot, 30% Sauvignon and 40% Cabernet Franc, and has a dark purple color, intense aromas and a fruity taste. All of the SICA-Les Ches Du Prevot wines are expected to retail to the consumer at $5.00 to $7.00 per 750 ml bottle. Cave du Vignoble Gursonnais provides the Company with a line of popular premium wines under the Bergerac, Cotes de Bergerac and Moelleux labels. Some of the wines within these lines are the Bergerac Blush, which is a wine which comes from Cabernet grapes soaked during a short period, the Cotes de Bergerac Dry White, which comes from a blend of Muscatel and Semillion, the Cotes de Bergerac Mellow White, which has a very intense flavor and which is reminiscent of the passion fruit, and Cotes de Bergerac Mellow Prestige, which is a combination of Semillion, Sauvignon and Muscatel. The Company expects that all of the Cave de Vignoble Gursonnais wines will retail to the consumer at a price range of between $5.00 to $8.00 per 750 ml bottle. Godet Freres provides the Company with an elite champagne. The Company will offer three types of Godet Freres champagne. A Brut, which is usually the best choice for an aperitif because it contains almost no sugar, a Rose, which is produced in only small amounts, and a Cuvee, which is a four year old champagne. Both the Brut and Rose are aged for two years before being made available for commercial sale. The Company will offer its Cuvee in both a standard 750 ml bottle and a magnum 1.5 liter bottle. The Company expects its Godet Freres champagnes to retail in the $20.00 to $30.00 per 750 ml bottle range. As a general rule, champagne can never be expected to be inexpensive because by the time a bottle of champagne leaves a wine cellar, it has been handled at least 150 times. For example, champagne bottles are typically stored on a rack on a 45 degree angle, and are turned daily to force any sediment into the neck of the bottle up near the bottle's cork. 28 31 Spirits Products In addition to wines, Armadis also provides the Company with a product called La Belle Sandrine. La Belle Sandrine is a unique aperitif which is a blend of the exotic flavor of passion fruit and armagnac. Although it is ideal as a before dinner drink, it can also be appreciated at any time of day or night, and can be served chilled, over ice, or added to other cocktails. SALES, MARKETING AND DISTRIBUTION The Company expects to sell its products to independent beverage distributors and wholesalers for resale to retailers who sell alcoholic beverages to the consumer. Independent wholesale distributors (all of whom may carry other beverage products that compete with the Company's products) will be formally appointed by the Company in a variety of ways throughout the states in which the Company does business. The Company anticipates that in most cases, there will be variations in appointment procedures which are directly attributable to state alcoholic beverage laws mandating territorial appointment (some exclusive and some non-exclusive), restricting in various ways the Company's ability to terminate or not renew the services of wholesale distributors and providing varying periods and methods of resolving contractual disputes. Generally, these state laws vary from a requirement that good cause be shown for the action taken to a requirement that compensation be paid to the terminated distributor for the fair market value of the lost business. The Company believes that its specific distribution and sales strategy will necessarily vary among its beer, wine and spirits products. Preliminarily, the diverse strategies for each such product will be as follows: Beer Distribution. The Company's beer products are expected to be initially distributed primarily to Asian-themed (initially Chinese) restaurants, bars and taverns, and later to brew pubs, warehouse clubs and specialty liquor stores that sell a variety of imported beers. The Company's beer products will be delivered to these retail outlets through a network of approximately 20 local and regional distributors. The Company plans to initially introduce its Red Dragon beer products to distributors who serve eight primary states which have the majority of Chinese theme restaurants and retailers, and who currently sell Tsingtao Beer. The Company expects that these markets will account for the greatest percentage of its Red Dragon beer distribution in the near future. Wine Distribution. The Company's wine products are expected to be distributed in restaurants, bars and taverns, warehouse clubs, liquor stores and supermarkets. The Company plans for its wine products to be delivered initially to these retail outlets through a network of approximately 10 local and regional distributors, or will be provided to retailers (such as wholesale clubs) through direct shipment to warehouse facilities. In the event of direct shipments to warehouse facilities, local distributors will be paid a stocking fee and be responsible for insuring that all excise taxes are paid where required by revenue authorities. Initially, the Company will contract with regional distributors in the least competitive markets on the East Coast. Distribution will begin in the region of Delaware and gradually move south to Florida. As the Company is able to demonstrate the viability of its wine products, it expects to be able to expand its distribution network west into those regions of the United States where California produced wines are also distributed. With respect to its champagnes, the Company will focus on contracting with wine distributors who concentrate on the restaurant trade. The Company realizes that champagne is mostly a seasonal beverage, and will look for most of its champagne sales to be in the third and fourth quarters of the year. The Company expects its champagne products to perform well in specialty wine shops and large liquor stores that offer a large variety of wines and champagnes to consumers at prices ranging from inexpensive to higher price quality products. Spirits. The Company's spirits products will be purchased by consumers at restaurants, bars and taverns, as well as in bottles at liquor stores, warehouse clubs and supermarkets (where permitted by law). The Company believes that its spirits products will initially be delivered to these retail outlets through a network of approximately 12 regional distributors. 29 32 The Company plans to initially introduce its flagship spirits product, La Belle Sandrine, to distributors who serve states which have relatively warm climates and which are less likely to be affected by seasonal climate changes. Once the viability of the product is proven, the Company will seek to effectuate an alliance with a large national distributor of spirits products in order to secure nationwide distribution of La Belle Sandrine. In each of its targeted markets, the Company will select its distributors based on a number of factors including: (i) market strength measured in terms of financial resources and number and size of accounts served, (ii) commitment to expend resources to educate consumers and retailers about the quality and tastes of the Company's beer, wine and spirits products, (iii) reputation for customer service, including the ability to frequently service retail accounts and to merchandise the Company's products aggressively and (iv) commitment to community involvement. The Company expects to pursue promotional strategies that are designed to create strong brand awareness built on quality products, service to distributors and product imaging. The Company believes that grass root promotion, word-of-mouth reputation and an identifiable and favorable price to quality value quotient are the principal elements influencing consumer product selection. As a result, the Company anticipates devoting considerable effort, through tastings and distributor visits, to educating distributors and consumers as to the distinctive qualities of its products. The Company will participate in localized promotions designed to enhance the reputation of the Company and its products. The Company's sales and marketing staff will focus principally on distributor training and assistance, local promotions, and programs for on- premises consumer and retailer education. To build brand recognition in its target markets, the Company anticipates sponsoring or participating in cultural and community events, music and other entertainment performances, craft and imported beer festivals and cuisine events, and sporting events. The Company believes that an important function of its sales and marketing staff will be to elevate distributor and retailer awareness of the distinctive qualities of the Company's beer, wine and spirits products. This will be accomplished primarily through direct contact with restaurants, pubs, taverns and grocery chains, and by supplying distributors with distinctive point-of-sale materials, including neon signs, posters, table tents, coasters, calendars, glassware and promotional flyers. The Company's sales staff will meet frequently with distributor sales representatives to jointly visit retail accounts to educate retailers about the quality of the Company's products. This, in turn, allows retailers to assist in educating consumers. The Company will use distinctive graphics in its packaging and marketing materials designed to set the Company's products apart and promote strong brand recognition. To differentiate its beer products, the Company plans to sell and distribute a line of T-Shirts, sweatshirts, jackets, hats and similar products emblazoned with the Company's Red Dragon logo and graphics. The Company will also utilize direct mail, distributing a full color merchandise catalogue to the Company's distributors and retailers. COMPETITION The Company competes in niche segments of the United States alcoholic beverage industry. The Company believes that presently its beer products compete with imported Asian beers, its wine products compete with domestic and imported wines that generally sell in the range of $5.00 to $8.00 per 750 ml bottle, and its spirits products compete with other prepared cocktails. The principal competitive factors affecting the market for the Company's products include product quality and taste, packaging, price, brand recognition and distribution capabilities. The Company believes that its products will compete favorably overall with respect to these factors. There can be no assurance however that the Company will be able to compete successfully against current and future competitors based on these and other factors. The Company competes with a variety of importers and suppliers of alcoholic beverage products, many of whom have significantly greater financial, administrative, distribution and marketing resources and a higher level of brand recognition than the Company. With respect to its Red Dragon beer products, the Company anticipates competition from Sapporo USA, Inc. and Kirin Brewery of America, major importers and 30 33 distributors of alcoholic beverage products, and the importers and distributors of such Asian beer brands as Sapporo Draft and Kirin Lager and Kirin Light. With respect to its wine products, the Company expects to compete with major importers, distributors and suppliers of domestic and foreign wines such as Allied Domecq Spirits and Wine and Worldwide Wine and Spirits, Inc. With respect to its primary spirits product, La Belle Sandrine, the Company anticipates competition from Kobrand Corporation, the importer and distributor of Alize. The Company anticipates increased competition in all of the product markets that it serves. Increased competition could result in price reductions, reduced margins and loss of market share, all of which could have a material adverse effect on the Company. EMPLOYEES As of the date of this Prospectus, the Company employs two persons other than its executive officers. One of these two persons is Robert K. Walker, whom the Company considers to be a key employee. ROBERT K. WALKER has been General Manager of the Company since its inception and served as the Company's President from the Company's inception to March 1997. From December 1991 to January 1996, Mr. Walker was President of Leasing Associates, a Hollywood, Florida based company engaged in store site development for Food Lion, Inc. Also from 1993 through 1995, Mr. Walker served as President of Never Burn, Inc., a Hollywood, Florida based suncare products distributor. Mr. Walker holds a BA degree from Virginia Wesleyan College. The Company expects to hire additional employees in the first quarter of 1998. It is anticipated that additional employees will be hired in the areas of sales and marketing and administration. See "Plan of Operation -- Expansion of Management and Administrative Personnel." CONSULTANTS The Company has formed a team of consultants with which it may consult on various matters relating to the business of the Company. Consultants may not be officers or directors of the Company although they may be shareholders. The establishment of a consulting team is not intended to be a delegation by the Company's officers and directors of their power of management and control of the Company, as management and control of the Company shall at all times be retained by the Company's officers and directors. As of the date of this Prospectus, the following persons have agreed to provide consulting services to the Company: KEN CALLIHAN is a marketing consultant responsible for researching market conditions in the alcoholic beverage industry, and designing and implementing marketing strategies for the Company. Mr. Callihan has worked with beer producers such as Anheuser-Busch, and has been a consultant to Sweden's Kalbach Beer. Mr. Callihan holds a BA degree from Drew University and an MBA from Fairleigh Dickinson University. EMMANUEL LEBLANC is collaborating with the Company on coordinating and facilitating container shipments of the Company's products from France to the United States. From April 1995 to December 1996, Mr. LeBlanc was Station Manager for Regional Airlines in Bordeaux, France. As Station Manager for Regional Airlines, Mr. LeBlanc was responsible for overseeing and coordinating all freight shipments on all domestic flights for the airlines. From 1990 to 1995, Mr. LeBlanc was the Airport Agent, Ramp and Freight Coordinator for American Airlines in Paris, France. Mr. LeBlanc received a BA degree in English at the University of Tours (France). JEAN FRANCOIS LOUCHET is consulting with the Company in the area of quality assurance for the Company's wine and spirits products. Mr. Louchet is the former owner of a restaurant in Southwest France where he was constantly involved in the selection and procurement of wines. For a number of years, Mr. Louchet was the Sales Manager and Managing Director for Hepworth Holding Company, a United Kingdom corporation, where he supervised the France branch of Hepworth Holding Company. Mr. Louchet also served in the French Army achieving the rank of Sergeant. 31 34 FACILITIES The Company's corporate offices are located in a 925 square foot facility leased by the Company in Ft. Lauderdale, Florida. The Company entered into the lease for its corporate offices on September 30, 1996. The rental payment is currently $740 per month. The Company's lease expires on September 30, 1998. The Company has an option to renew the lease for its corporate offices for an additional two year period at a rental rate of $775 per month. The Company believes that its current corporate offices are adequate for its present needs. GOVERNMENT REGULATION The Company's business is highly regulated by federal, state and local laws and regulations. Federal and state laws and regulations govern licensing requirements, trade and pricing practices, permitted and required labeling, advertising, promotion and marketing practices, relationships with distributors and related matters. For example, federal and state regulators require warning labels and signage on the Company's products. The Company believes that it has obtained all regulatory permits and licenses necessary to operate its business in the states where the Company's products are to be distributed. Failure on the part of the Company to comply with federal, state or local regulations could result in the loss or revocation or suspension of the Company's licenses, permits or approvals and accordingly could have a material adverse effect on the Company's business. The Company is operating within existing laws and regulations or is taking action aimed at assuring compliance therewith. The Company does not expect compliance with such laws and regulations to materially affect the Company's capital expenditures, earnings or competitive position. TRADEMARKS The Company has applied to the United States Patent and Trademark Office (the "PTO") to register its Red Dragon mark. As of the date of this Prospectus, the PTO has not issued a registration mark. The Company regards its Red Dragon trademark as having substantial value and as being an important factor in marketing its beer products. The Company is not aware of any infringing user that could materially effect its current business or any prior claim to the trademark that would prevent the Company from using such trademark in its business. The Company's policy is to pursue registration of its mark and to oppose vigorously any infringement of its marks. LEGAL PROCEEDINGS The Company is not a party to any litigation. 32 35 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The directors and executive officers of the Company and their ages as of the date of this Memorandum are set forth below:
NAME AGE POSITION(S) HELD ----------------------------------- ---- ----------------------------------- C. Michael Fisher 43 Chairman of the Board, President and Director Francis X. Scanlan 48 Chief Financial Officer Edward L. Magdycz 49 Secretary and Director Regis I. Louchet(1) 28 Subsidiary President Francis J. Hornik, Jr. 56 Director
- --------------- (1) Mr. Louchet is not an executive officer of the Company, but is listed by reason of his status as President of R&R (Bordeaux) Imports, Inc., a wholly-owned subsidiary of the Company. C. MICHAEL FISHER has been Chairman of the Board, President and a Director of the Company since March 31, 1997. Mr. Fisher is also President of Fisher and Associates Realty and Princessboro Development Co., Inc., which are real estate development firms located in Virginia Beach, Virginia; positions which he has held since 1980 and 1984 respectively. In his capacity as President of Fisher and Associates Realty and Princessboro Development Co., Inc., Mr. Fisher has been responsible for locating sites, obtaining anchor tenants and performing leasing duties for approximately 15 food and drug retail shopping centers throughout the Mid-Atlantic region of the United States. Mr. Fisher holds a BA degree from Virginia Wesleyan College. FRANCIS X. SCANLAN has been the Company's Chief Financial Officer since March 4, 1997. Prior to joining the Company, Mr. Scanlan was the MIS Manager, Operations Manager and Controller of Innovation Computers, a retailer and telemarketer of computer related products. From September 1994 through October 1995, Mr. Scanlan was a computer consultant to Sales Control Systems, a manufacturer of computer-related products. From March 1994 through September 1994, Mr. Scanlan was Chief Financial Officer of The Marbledge Group, Inc., an importer, manufacturer and installer of natural stone products. From 1989 through 1994, Mr. Scanlan was Chief Financial Officer of Bernstein/Leibatone Associates, Inc., a Nasdaq Stock Market company engaged in the business of importing and distributing vinyl packaging textiles. Mr. Scanlan holds an MBA degree and a BBA degree in Accounting from Florida Atlantic University. EDWARD L. MAGDYCZ has been Secretary and a Director of the Company since March 31, 1997. From the Company's inception until March 31, 1997, Mr. Magdycz was Director of Sales and Marketing for the Company. From November 1993 to December 1995, Mr. Magdycz was a District Sales Manager for Calico Industries, Inc., an Annapolis Junction, Maryland based company engaged in the sales and distribution of food and beverage service equipment. From December 1992 through November 1993, Mr. Magdycz was a Vice President of Sales and Marketing for Never Burn, Inc., a Hollywood, Florida based suncare products distributor. From 1976 to November 1992, Mr. Magdycz was a District Manager for the Vollrath Company, Inc., a Sheboygan, Wisconsin based food service equipment manufacturer. Mr. Magdycz holds a BS degree from the University of Delaware. REGIS I. LOUCHET has been the President and a Director of R&R (Bordeaux) Import Co., Inc. since April 1, 1997. Prior to becoming President of R&R (Bordeaux) Import Co., Inc., Mr. Louchet served as the Company's Secretary. From February 1995 to November 1996, Mr. Louchet was the President of French Cooking, Inc., a food catering company located in Hollywood, Florida. From July 1993 to February 1995, Mr. Louchet was the head Chef and Director of Purchasing of food and wines at Duo Traituer and La Convention restaurants in France. From January 1992 to July 1993, Mr. Louchet was the head Chef at Le Foch and Le Pelican restaurants in France. From December 1990 to November 1991, Mr. Louchet served at Hotel Matignon where he directed the food and wine staff for French Prime Ministers Michel Rocard and Edith Cresson and where he was responsible for purchasing and quality assurance of all food and beverages. 33 36 FRANCIS J. HORNIK, JR. has been a Director of the Company since April 21, 1997. Since 1980, Mr. Hornik has been the sole proprietor of his own public accounting firm located in Chesapeake, Virginia. COMPENSATION OF DIRECTORS The Company's directors will not receive compensation for services on the Board of Directors or any committee thereof, but directors may be reimbursed for certain expenses in connection with attendance at Board and committee meetings. EXECUTIVE COMPENSATION The following summary compensation table sets forth the aggregate cash compensation paid or accrued by the Company to each of the Company's executive officers and key employees for services rendered to the Company during the Company's fiscal year ended 1996. SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ANNUAL COMPENSATION ------------------------- ------------------------------------ SECURITIES ALL OTHER BONUS OTHER ANNUAL UNDERLYING COMP. NAME AND PRINCIPAL POSITION SALARY($) ($) COMPENSATION OPTIONS(#) ($) - -------------------------------------- --------- ----- ------------ ----------- --------- C. Michael Fisher..................... $ 0 $ 0 $0 $ 0 $ 0 Chairman of the Board and President Edward L. Magdycz..................... 0 0 0 0 0 Secretary Robert K. Walker...................... 0 0 0 0 0 General Manager
EMPLOYMENT AGREEMENTS During the first quarter of 1998, the Company expects to enter into formal employment agreements with C. Michael Fisher, the Company's Chairman of the Board, Edward L. Magdycz, the Company's Secretary, Francis X. Scanlan, the Company's Chief Financial Officer and Robert K. Walker, the Company's General Manager. It is anticipated that said employment agreements will provide that Messrs. Fisher, Magdycz, Scanlan and Walker shall be entitled to an annual base salary of $35,000, $35,000, $40,000 and $35,000 respectively. In addition to securing the annual cash compensation arrangement for Messrs. Fisher, Magdycz, Scanlan and Walker, the employment agreements are also expected to address cash and stock bonuses payable to such officers, medical, life and disability insurance coverage, incentive compensation, automobile allowances and reimbursement of expenses incurred on behalf of the Company. 34 37 STOCK OPTION PLANS 1997 INCENTIVE STOCK OPTION PLAN The Company's 1997 Incentive Stock Option Plan (the "1997 Option Plan") was adopted by the Board of Directors and a majority of the shareholders of the Company on October 10, 1997. A total of 750,000 shares of Common Stock are reserved for issuance under the 1997 Option Plan. The 1997 Option Plan provides for the granting to employees (including officers and employee directors) of "incentive stock options" within the meaning of Section 422 of the Internal Revenue Code of 1986 (the "Code"), and for the granting to employees and consultants of nonstatutory stock options. The 1997 Option Plan may be administered by the Board of Directors or a committee of the Board of Directors (the "Administrator"), which committee shall satisfy the applicable requirements of Section 16 of the Exchange Act and the Code. The Administrator determines the terms of options granted under the 1997 Option Plan, including the number of shares subject to the option, exercise price, term and the rate at which the options become exercisable. The exercise price of all incentive stock options granted under the 1997 Option Plan must be at least equal to the fair market value of the Common Stock of the Company on the date of grant. The exercise price of all nonstatutory stock options must equal at least 85% of the fair market value of the Common Stock on the date of grant other than those granted to certain executive officers of the Company which must have an exercise price equal to 100% of the fair market value of the Common Stock on the date of grant. The exercise price of any stock option granted to an optionee who owns stock representing more than 10% of the voting power of all classes of stock of the Company must equal at least 110% of the fair market value of the Common Stock on the date of grant. The exercise price may be paid in such consideration as determined by the Administrator, including cash and promissory notes. With respect to any participant who owns stock representing more than 10% of the voting power of all classes of stock of the Company, the term of the option is limited to five years or less. The term of all other options may not exceed ten years. If not terminated earlier, the 1997 Option Plan will terminate in 2007. The Administrator has the authority to amend or terminate the 1997 Option Plan as long as such action does not adversely affect any outstanding options. In the event of a proposed sale of all or substantially all of the Company's assets, or a merger of the Company with or into another corporation, each option will be assumed or an equivalent option substituted by the successor corporation, unless the Administrator determines, in the exercise of its sole discretion, that the optionee will have the right to exercise the option as to some or all of the shares of stock covered by the option, including shares as to which the option would not otherwise be exercisable, in which case each option will be exercisable for 30 days from the date of notice of such determination. 1997 DIRECTORS' STOCK OPTION PLAN The 1997 Directors' Stock Option Plan (the "Directors' Plan") was adopted by the Board of Directors and approved by a majority of the stockholders of the Company on October 10, 1997. A total of 250,000 shares of Common Stock has been reserved for issuance under the Directors' Plan. The Directors' Plan provides for the grant of nonstatutory stock options to nonemployee directors of the Company. The Directors' Plan is designed to work automatically without administration; however, to the extent administration is necessary, it will be performed by the Board of Directors. The Directors' Plan provides that each person who is a nonemployee director of the Company upon joining the Board of Directors, shall be granted a nonstatutory stock option to purchase 1,000 shares of Common Stock (the "First Option"). Thereafter, on January 1 of each year commencing January 1, 1998, each nonemployee director shall be automatically granted an additional option to purchase 500 shares of Common Stock (a "Subsequent Option") if, on such date, he or she shall have served on the Company's Board of Directors for at least six months. The Directors' Plan provides that the First Option shall become exercisable in installments as to 25% of the total number of shares subject to the First Option on each anniversary of the date of grant of the First Option; each Subsequent Option shall become exercisable in full on the first anniversary of the date of grant of that Subsequent Option. The exercise price of all stock options granted under the Directors' Plan shall be equal to the fair market value of a share of the Company's Common Stock on the date of grant of the option. Options granted under the Directors' Plan have a term of ten years. In the event of the dissolution or liquidation of the Company, a sale of all or substantially all of the assets of the Company, the merger of the Company with or into another 35 38 corporation in which the Company is not the surviving corporation or any other capital reorganization in which more than 50% of the shares of the Company entitled to vote are exchanged, each nonemployee director shall have either (i) a reasonable time within which to exercise the option, including any part of the option that would not otherwise be exercisable, prior to the effectiveness of such dissolution, liquidation, sale, merger or reorganization, at the end of which time the option shall terminate or (ii) the right to exercise the option, including any part of the option that would not otherwise be exercisable, or receive a substitute option with comparable terms, as to an equivalent number of shares of stock of the corporation succeeding the Company or acquiring its business by reason of such dissolution, liquidation, sale, merger or reorganization. The Board of Directors may amend or terminate the Directors' Plan; provided, however, that no such action may adversely affect any outstanding option, and the provisions regarding the grant of options under the plan may be amended only once in any six-month period, other than to comport with changes in the Employee Retirement Income Security Act of 1974, as amended or the Code. If not terminated earlier, the Directors' Plan will have a term of ten years. During the period in which the Registration Statement of which this Prospectus is a part is effective, the total amount of shares of Common Stock issuable pursuant to outstanding options of the Company granted under the 1997 Option Plan and the Directors' Plan shall not exceed 10% of the shares of Common Stock to be outstanding upon completion of the offering of the Units hereby. 36 39 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS PRIOR ISSUANCES OF THE COMPANY'S SECURITIES The Company was formed on February 12, 1996. From approximately March 31, 1996 to May 31, 1996, the Company issued 1,722,400 shares of its Common Stock to six persons for an aggregate cash purchase price of $4,080. From approximately June 14, 1996 to March 31, 1997, the Company issued 443,600 shares of its Common Stock to 47 persons for an aggregate cash purchase price of $110,900. On March 31, 1997, the Company acquired R&R (Bordeaux) Imports, Inc., a Florida corporation and wholly owned subsidiary of the Company. In the acquisition of R&R (Bordeaux) Imports, Inc., the Company issued 60,000 shares of its Common Stock to three persons. From July 30, 1997 to October 1997, the Company issued 38,000 shares of its Series A Preferred Stock to five persons for an aggregate cash purchase price of $95,000. CERTAIN MATERIAL CONTRACTS On December 13, 1996, the Company entered into an Import and Distribution Agreement with Cave du Vignoble Gursonnais pursuant to which the Company was appointed the exclusive distributor in North America and the Caribbean Islands of all wine products produced by Cave du Vignoble Gursonnais. The term of the agreement is for three years and is automatically renewed for additional terms of 10 years each, unless either party gives the other sufficient written notice of non-renewal. During the calendar year beginning January 1, 1997, the Company is required to make a minimum annual total purchase of wine products of $100,000 U.S. Commencing with the calendar year beginning January 1, 1998, the Company is required to make a minimum annual total purchase of wine products of $150,000 U.S. Commencing with the calendar year beginning January 1, 1999, the Company is required to make a minimum annual total purchase of wine products of $400,000. If, commencing with the 1999 calendar year, the Company fails to meet the minimum annual purchase requirements set forth above, then the agreement between the Company and Cave du Vignoble Gursonnais will become a non-exclusive agreement. On March 7, 1997, the Company entered into an Import and Distribution Agreement with Armadis pursuant to which the Company was appointed the exclusive distributor in North America and the Caribbean Islands of all wine and spirits products produced by Armadis. The term of the agreement is for 30 years and is automatically renewed for additional terms of 10 years each, unless either party gives the other sufficient written notice of non-renewal. During the calendar year beginning January 1, 1997, the Company is required to make a minimum annual total purchase of wine products of $300,000 U.S. Commencing with the calendar year beginning January 1, 1998, the Company is required to make a minimum annual total purchase of wine products of $500,000. Commencing with the calendar year beginning January 1, 1999, the Company is required to make a minimum annual total purchase of wine products of $1,000,000. If, commencing with the 1999 calendar year, the Company fails to meet the minimum annual purchase requirements set forth above, then the agreement between the Company and Armadis will become a non-exclusive agreement. On March 11, 1997, the Company entered into an Import and Distribution Agreement with Les Chais du Prevot pursuant to which the Company was appointed the exclusive distributor in North America and the Caribbean Islands of all wine products produced by Les Chais du Prevot. The term of the agreement is for three years and is automatically renewed for additional terms of three years each, unless either party gives the other sufficient written notice of non-renewal. During the calendar year beginning January 1, 1997, the Company is required to make a minimum annual total purchase of wine products of $100,000 U.S. Commencing with the calendar year beginning January 1, 1998, the Company is required to make a minimum annual total purchase of wine products of $150,000 U.S. Commencing with the calendar year beginning January 1, 1999, the Company is required to make a minimum annual total purchase of wine products of $400,000 U.S. If, commencing with the 1999 calendar year, the Company fails to meet the minimum annual 37 40 purchase requirements set forth above, then the agreement between the Company and Les Chais du Prevot will become a non-exclusive agreement. On April 16, 1997, the Company entered into an Import and Distribution Agreement with Vignerons De Buzet pursuant to which the Company was appointed the exclusive distributor in the United States (excluding the State of New York) and the Caribbean Islands of all wine products produced by Vignerons De Buzet. The term of the agreement is for 10 years and is automatically renewed for additional terms of five years each, unless either party gives the other sufficient notice of non-renewal. During the calendar year beginning January 1, 1997, the Company is required to make a minimum annual purchase of wine products of 275,000 French Francs (FF). Commencing with the calendar year beginning January 1, 1998, the Company is required to make a minimum annual total purchase of wine products of 825,000 FF. Commencing with the calendar year beginning January 1, 1999, the Company is required to make a minimum annual total purchase of wine products of 2,200,000 FF. If, commencing with the 2000 calendar year, the Company fails to meet the minimum annual purchase requirements set forth in the agreement, then the agreement between the Company and Vignerons De Buzet shall become a non-exclusive agreement. On September 29, 1997, the Company entered into an Import and Distribution Agreement with Godet Freres pursuant to which the Company was appointed the exclusive distributor in North America and the Carribean Islands of champagne products produced by Godet Freres. The term of the agreement is for five years and is automatically renewed for additional terms of five years each, unless either party gives the other sufficient notice of non-renewal. During the calendar year beginning 1997, the Company is required to make a minimum annual total purchase of champagne products of 400 cases (each case consisting of 12 bottles). Commencing with the calendar year beginning just after the Company receives required regulatory approval related to labeling of the champagne products, the Company is required to make a minimum annual total purchase of 600 cases, followed by a minimum of 800 cases the next calendar year and a minimum of 1,000 cases the calendar year thereafter. If, commencing with the 1998 calendar year, the Company fails to meet the minimum annual purchase requirements set forth in the agreement, then the agreement between the Company and Godet Freres shall become a non-exclusive agreement. On November 24, 1997, the Company entered into a Distribution Agreement with the People's Republic of China, Tsingtao Brewery No. 3 Co., Ltd. pursuant to which the Company was appointed the exclusive distributor in North America of all Red Dragon beer products produced by the Tsingtao Brewery No. 3. The term of the agreement is for five years and is automatically renewed for additional terms of 10 years each, unless either party gives the other sufficient written notice of non-renewal. During the calendar year beginning January 1, 1998, the Company is required to make a minimum annual total purchase of beer products of $200,000 U.S. Commencing with the calendar year beginning January 1, 1999, the Company is required to make a minimum annual total purchase of beer products of $250,000 U.S. Commencing with the calendar year beginning January 1, 2000, the Company is required to make a minimum annual total purchase of beer products of $1,000,000 U.S. If, commencing with the 2000 calendar year, the Company fails to meet the minimum annual purchase requirements set forth above, then the agreement between the Company and the Tsingtao Brewery No. 3 Co., Ltd. will become a non-exclusive agreement. OTHER EVENTS The Law Offices of John W. Martin is presently retained and has been retained by the Company as its outside general counsel since its inception. On April 29, 1996, the Company issued 400,000 shares of its Common Stock to the Law Offices of John W. Martin in consideration for certain legal services rendered to the Company by the Law Offices of John W. Martin. See "Legal Matters." The Company believes that all of the transactions set forth above involving officers, directors, employees, promoters and agents of the Company were made on terms no less favorable to the Company than could have been obtained from unaffiliated third parties. All future transactions, including loans between the Company and its officers, directors and principal shareholders and their affiliates will be approved by a majority of the Board of Directors, including a majority of the disinterested directors of the Board of Directors, and will be on terms no less favorable to the Company than could be obtained from unaffiliated third parties. 38 41 PRINCIPAL STOCKHOLDERS The following table sets forth certain information as of the date of this Prospectus, regarding ownership of the Company's Common Stock (i) by each person known by the Company to be the beneficial owner of more than 5% of the Company's outstanding Common Stock, (ii) by each director of the Company, (iii) by certain related stockholders, and (iv) by all executive officers and directors of the Company as a group. All persons named have sole voting and investment power with respect to such shares, subject to community property laws, and except as otherwise noted.
PERCENT BENEFICIALLY OWNED ------------------------ NUMBER OF BEFORE AFTER NAME OF SHAREHOLDER(1) SHARES OWNED OFFERING OFFERING(2) - ---------------------------------------------------------- ------------ -------- ----------- C. Michael Fisher(3)...................................... 394,800 18% 16% 1717 Jermyn Lane Virginia Beach, Virginia 23454 Robert K. Walker(4)....................................... 781,200 35% 31% 3835 S.W. 56th Street Ft. Lauderdale, Florida 33312 Edward L. Magdycz......................................... 2,000 * * 1800 Bayberry Drive Pembroke Pines, Florida 33024 Regis Louchet(5).......................................... 67,600 3% 3% 1809 Taylor Street Hollywood, Florida 33020 John W. Martin............................................ 400,000 18% 16% 5777 West Century Boulevard Suite 1540 Los Angeles, California 90045 All officers and directors as a group (4 persons)............................................. 396,800 18% 16%
- --------------- * Less than 1%. (1) See table under "Management of the Company" for offices and directorships held by the persons listed hereunder. (2) Assumes all Units offered hereby are sold. (3) Includes 148,000 shares held by Euro Imperial Group, Ltd., a corporation in which Mr. Fisher is the beneficial owner of all of the shares of common stock. Also includes 222,000 shares held by Paris International Holding, Ltd., a corporation in which Mr. Fisher is the beneficial owner of one-half ( 1/2) of the shares of common stock of such corporation and 800 shares owned by Katie Fisher and Lauren Fisher, the children of Mr. Fisher. Also reflects the conversion into Common Stock of 8,000 shares of Series A Preferred Stock owned by Euro Imperial Group, Ltd. and 16,000 shares of Series A Preferred Stock owned by Mr. Fisher. (4) Includes 222,000 shares held by Paris International Holding, Ltd., a corporation in which Mr. Walker is the beneficial owner of one-half ( 1/2) of the shares of common stock of such corporation. Also includes 10,800 shares held by Kristopher Walker and Kendall Walker, Mr. Walker's minor children. Also includes 60,000 shares held by Mr. Robert H. Walker, Mr. Walker's father. Mr. Walker disclaims any beneficial ownership of all shares held by Mr. Robert H. Walker. (5) Includes 40,000 shares held by Mr. Jean Francois Louchet, Mr. Louchet's father. Mr. Louchet disclaims beneficial ownership of all shares held by Mr. Jean Francis Louchet. 39 42 DESCRIPTION OF SECURITIES The Company's authorized capital stock consist of 100,000,000 shares of Common Stock, $.0001 par value and 10,000,000 shares of Preferred Stock, $.0001 par value. Giving effect to the sale of the maximum number of Units offered hereby, there will be outstanding 2,524,000 shares of Common Stock. The following description is a summary and is qualified in its entirety by the provisions of the Company's Articles of Incorporation and Bylaws, copies of which have been filed as exhibits to the Registration Statement of which this Prospectus is a part. UNITS Each Unit offered hereby consists of one share of Common Stock and one Warrant. The Common Stock and the Warrants are immediately detachable and separately transferable. COMMON STOCK The holders of the issued and outstanding shares of Common Stock are entitled to receive dividends when, as and if declared by the Company's board of directors out of any funds lawfully available therefore. The Board of Directors intends to retain future earnings to finance the development and expansion of the Company's business and does not expect to declare any dividends in the foreseeable future. The holders of the Common Stock have the right in the event of liquidation to receive pro rata all assets remaining after payment of debts and expenses. The Common Stock does not have any preemptive rights. The issued and outstanding shares of Common Stock are fully paid and nonassessable. Holders of shares of Common Stock are entitled to vote at all meetings of such shareholders for the election of directors and for other purposes. Such holders have one vote for each share of Common Stock held by them. PREFERRED STOCK The Company's Preferred Stock may be issued from time to time in one or more series. The Board of Directors is authorized to determine or alter any or all of the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock, and to fix, alter or reduce (but not below the number then outstanding) the number of shares comprising any such series and the designation thereof, or any of them, and to provide for the rights and terms of redemption or conversion of the shares of any such series. As of the date of this Prospectus, the Board of Directors has authorized the issuance of 100,000 shares of a series of Preferred Stock designated as "Series A Preferred Stock". Of the 100,000 shares of Series A Preferred Stock authorized, 38,000 shares of Series A Preferred Stock are issued and outstanding. The Series A Preferred Stock ranks senior to the Common Stock with respect to dividends. Holders of shares of Series A Preferred Stock are entitled to receive dividends at the rate of $0.25 per share per annum, payable out of funds legally available therefor. Such dividends are payable only when, as, and if declared by the Board of Directors and are non-cumulative. Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, before any distribution or payment is made to any person holding Common Stock or of any shares ranking junior to the Series A Preferred Stock in respect of distribution of assets, the persons holding Series A Preferred Stock will be entitled to be paid an amount in cash equal to the sum of $2.50 plus any declared but unpaid dividends on each share of Series A Preferred Stock. Each share of Series A Preferred Stock will be automatically converted in whole into one share of Common Stock upon the closing of the sale of the Company's Common Stock in a firm commitment underwritten or best efforts public offering registered under the Securities Act, at a public offering price equal to or exceeding $3.50 per share of Common Stock. At such time, the rights of the holders of Series A Preferred Stock, as preferred stockholders, shall cease, and such person or persons shall thereupon and thereafter be deemed to be for all purposes the holder of shares of Common Stock of the Company. 40 43 WARRANTS General. Each Warrant entitles the registered holder to purchase one share of Common Stock at an exercise price of $8.00 per share at any time until 5:00 p.m., New York Time, on , 2001. Commencing immediately after the date of this Prospectus, the Warrants are redeemable by the Company on 30 days' written notice at a redemption price of $.05 per Warrant if the closing bid price of the Common Stock equals or exceeds $10.00 per share for any 30 consecutive trading days ending within 10 days of the notice of redemption. The Company presently expects to call all of the Warrants for redemption as soon as the trading price of its Common Stock meets the minimum amount of the specified number of days. In the event the Company gives notice of its intention to redeem, a holder would be forced either to exercise his or her Warrants within the period set forth in the notice of redemption or accept the redemption price. See "Risk Factors -- Current Prospectus and State Registration to Exercise Warrants." The Warrants will be issued pursuant to a warrant agreement (the "Warrant Agreement") by and between the Company and Florida Atlantic Stock Transfer, Inc., as warrant agent for the Company (the "Warrant Agent"), and will be evidenced by warrant certificates in registered form. The Warrants provide for adjustment of the exercise price and for a change in the number of shares issuable upon exercise to protect holders against dilution in the event of a stock dividend, stock split, combination or reclassification of the Common Stock or upon issuance of shares of Common Stock at prices lower than the market price of the Common Stock, with certain exceptions. The Company is not required to issue fractional shares upon the exercise of a Warrant. The holder of a Warrant will not possess any rights as a shareholder of the Company until such holder exercises the Warrant. The exercise price of the Warrants was determined by the Company and should not be construed to be predictive of or to imply that any price increases in the Shares will occur. The Company has reserved from its authorized but unissued shares of Common Stock a sufficient number of shares of Common Stock for issuance upon the exercise of the Warrants. A Warrant may be exercised upon surrender of the Warrant certificate on or prior to its expiration date (or earlier redemption date) at the offices of the Warrant Agent, with the form of "Election to Purchase" on the reverse side of the Warrant certificate completed and executed as indicated, accompanied by payment of the full exercise price (by certified or bank check payable to the order of the Company) for the number of shares with respect to which the Warrant is being exercised. Shares of Common Stock issued upon exercise of Warrants and payment in accordance with the terms of the Warrants will be fully paid and nonassessable. For the life of the Warrants, the holders thereof have the opportunity to profit from a rise in the market value of the Common Stock, with a resulting dilution in the interest of all other stockholders. So long as the Warrants are outstanding, the terms on which the Company could obtain additional capital may be adversely affected. The holders of Warrants might be expected to exercise them at a time when the Company would, in all likelihood, be able to obtain any needed capital by a new offering of securities on terms more favorable than those provided for by the Warrants. Federal Income Tax Aspects of Investment in the Warrants. The following is a description of certain of the tax effects occasioned by an investment in the Warrants. No gain or loss will be recognized by the holder of a Warrant upon the exercise of a Warrant. The cost basis of the shares of Common Stock acquired upon such exercise will be the cost basis of the Warrant plus any additional amount paid upon the exercise of the Warrant. Gain or loss will be recognized upon the subsequent sale or exchange of the shares of Common Stock acquired by the exercise of the Warrant, measured by the difference between the amount realized upon sale or exchange and the cost basis of the shares of Common Stock. 41 44 If a Warrant is not exercised, but is sold or exchanged (whether pursuant to redemption or otherwise), gain or loss will be recognized upon such event, measured by the difference between the amount realized by the holder of the Warrant as a result of the sale, exchange or redemption and the cost basis of the Warrant. If a Warrant is not exercised and is allowed to expire, the Warrant will be deemed to be sold or exchanged on the date of expiration. In such event, the holder of the Warrant will recognize a loss to the extent of the cost basis of the Warrant. Generally, any gain or loss recognized as a result of the foregoing will be a capital gain or loss and will either be long term or short term depending upon the period of time the shares of Common Stock sold or exchanged or the Warrant sold, exchanged, redeemed, or allowed to expire, as the case may be, was held. A holding period of more than one year results in long term capital gain or loss treatment. If a Warrant is exercised, the holding period of the shares of Common Stock so acquired will not include the period during which the Warrant was held. ALTHOUGH IN THE OPINION OF COUNSEL TO THE COMPANY THE FOREGOING IS AN ACCURATE DESCRIPTION OF THE TAX EFFECTS DESCRIBED, EACH PURCHASER OF THE WARRANTS SHOULD SEEK THE ADVICE OF HIS/HER OWN TAX ADVISOR REGARDING THE EFFECTS THAT AN INVESTMENT IN THE WARRANTS WILL HAVE FOR HIS/HER INDIVIDUAL TAX SITUATION. TRANSFER AGENT Florida Atlantic Stock Transfer, Inc., Tamarac, Florida has been appointed the transfer agent of the Company's Common Stock and Preferred Stock and the warrant agent for the Company's Warrants. CERTAIN PROVISIONS OF FLORIDA LAW AND OF THE COMPANY'S ARTICLES OF INCORPORATION AND BYLAWS The Company's Articles of Incorporation and Bylaws require the Company to indemnify its directors and officers to the fullest extent permitted by Florida law. Florida law presently provides that in the case of a nonderivative action (that is, an action other than by or in the right of a corporation to procure a judgment in its own favor), a corporation has the power to indemnify any person who was or is a party or is threatened to be made a party to any proceeding by reason of the fact that the person is or was an agent of the corporation, against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with the proceeding if that person acted in good faith and in a manner the person reasonably believed to be in the best interests of the corporation and, in the case of a criminal proceeding, had no reasonable cause to believe that the conduct of the person was unlawful. The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent does not, of itself, create a presumption that the person did not act in good faith and in a manner that the person reasonably believed to be in the best interests of the corporation or that the person had reasonable cause to believe that the person's conduct was unlawful. With respect to derivative actions, Florida law provides that a corporation has the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was an agent of the corporation, against expenses actually and reasonably incurred by that person in connection with the defense or settlement of the action if the person acted in good faith, in a manner the person believed to be in the best interests of the corporation and its shareholders. Indemnification is not permitted to be made in respect of any claim, issue, or matter as to which the person shall have been adjudged to be liable to the corporation in the performance of that person's duty to the corporation and its shareholders, unless and only to the extent that the court in which the proceeding is or was pending determines that, in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for expenses, and then only to the extent that the court shall determine. 42 45 SHARES ELIGIBLE FOR FUTURE SALE Upon completion of the offer and sale of the maximum number of Units offered hereby, the Company will have outstanding 2,524,000 shares of Common Stock (assuming that the Warrants are not exercised). The 260,000 shares of Common Stock sold in this offering will be freely tradeable without restrictions under the Securities Act, except for any shares held by an "affiliate" of the Company, which will be subject to the resale limitations of Rule 144 under the Securities Act. 443,600 of the 2,226,000 shares of Common Stock currently issued and outstanding are freely tradeable without restrictions under the Securities Act, except for any shares held by an "affiliate" of the Company, which are subject to the resale limitations of Rule 144 under the Securities Act. 1,782,400 of the 2,226,000 shares of Common Stock currently outstanding are "restricted securities" within the meaning of Rule 144 promulgated under the Securities Act, and may not be sold except in compliance with the registration requirements of the Securities Act or an applicable exemption under the Securities Act, including an exemption pursuant to Rule 144 thereunder. In general, under Rule 144 as currently in effect, any affiliate of the Company and any person (or persons whose sales are aggregated) who has beneficially owned his or her restricted shares for at least one year, is entitled to sell in the open market within any three-month period a number of shares of Common Stock that does not exceed the greater of (i) 1% of the then outstanding shares of the Company's common stock, or (ii) the average weekly trading volume in the Common Stock during the four calendar weeks preceding such sale. Sales under Rule 144 are also subject to certain limitations on manner of sale, notice requirements, and availability of current public information about the Company. Non-affiliates of the Company who have held their restricted shares for two years are entitled to sell their shares under Rule 144 without regard to any of the above limitations, provided they have not been affiliates for the three months preceding such sale. Further, Rule 144A as currently in effect, in general, permits unlimited resales of certain restricted securities of any issuer provided that the purchaser is an institution that owns and invests on a discretionary basis at least $100 million in securities or is a registered broker-dealer that owns and invests $10 million in securities. Rule 144A allows the existing stockholders of the Company to sell their shares of Common Stock to such institutions and registered broker-dealers without regard to any volume or other restrictions. Unlike under Rule 144, restricted securities sold under Rule 144A to nonaffiliates do not lose their status as restricted securities. As a result of the provisions of Rule 144, all of the restricted securities could be available for sale in the public market beginning 90 days after the date of this Prospectus. However, notwithstanding the foregoing, certain of the Company's officers, directors and stockholders, who in the aggregate own 1,750,000 shares of Common Stock (hereinafter collectively referred to as the "Promotional Shares"), have agreed, pursuant to the terms of a Promotional Share Lock-In Agreement entered into by and between such persons and the Company (the "Lock-In Agreement"), not to offer, pledge, sell, contract to sell, or otherwise transfer or dispose of, directly or indirectly, any of the Promotional Shares without the occurrence of certain conditions. In this regard, the restrictions on transferability of the Promotional Shares may only be terminated under the following circumstances: (1) With respect to twenty-five percent (25%) of the Promotional Shares on the sixth, seventh, eighth and ninth anniversary dates of this Prospectus; or (2) With respect to one hundred percent (100%) of the Promotional Shares after the Company has had annual net earnings per share equal to, or greater than, $0.29, according to generally accepted accounting principles (GAAP), after taxes and excluding extraordinary items, for any two consecutive fiscal years after the date of this Prospectus; or (3) With respect to one hundred percent (100%) of the Promotional Shares after the Company has had average annual net earnings per share equal to, or greater than, $0.29, according to GAAP, after taxes and excluding extraordinary items, for any five consecutive fiscal year period after the date of this Prospectus; or 43 46 (4) With respect to one hundred percent (100%) of the Promotional Shares on the date that the Common Stock becomes listed, or authorized for listing, on the New York Stock Exchange or the American Stock Exchange, or listed on the National Market System of the Nasdaq Stock Market (or any successor to such entities). In addition to the foregoing, certain other shareholders of the Company, who in the aggregate own 441,200 shares of Common Stock (the "Lock-Up Shares"), have agreed pursuant to the terms of a lock-up agreement entered into by and between such stockholders, the Company and the Placement Agent (the "Lock-Up Agreement") not to offer, pledge, sell, contract to sell, or otherwise transfer or dispose of, directly or indirectly, any of the Lock-Up Shares without the occurrence of certain conditions. In this regard, the restrictions on transferability of the Lock-Up Shares may only be terminated under the following circumstances: (1) Upon the prior written consent of the Placement Agent; or (2) Upon the expiration of 30 months after the date of this Prospectus; or (3) Upon the Company achieving annual gross revenues of $10,000,000; or (4) Upon the Company achieving annual net earnings per share equal to, or greater than, $0.57 after taxes and excluding extraordinary items; or (5) Upon the Company's shares of Common Stock trading on either the New York Stock Exchange, American Stock Exchange or the Nasdaq Stock Market (including the Nasdaq SmallCap Market), at a price of at least $8.62 for at least 90 consecutive trading days after at least six months after the date of this Prospectus. See "Plan of Distribution." Prior to this offering, no public market for the Company's securities has existed. Following this offering, no predictions can be made of the effect, if any, of future public sales of restricted securities or the availability of restricted securities for sale in the public market. Moreover, the Company cannot predict the number of shares of Common Stock that may be sold in the future pursuant to Rule 144 because such sales will depend on, among other factors, the market price of the Common Stock and the individual circumstances of the holders thereof. The availability for sale of substantial amounts of Common Stock under Rule 144 could adversely affect prevailing market prices for the Company's securities. PLAN OF DISTRIBUTION On the date of this Prospectus, the Company will have entered into a Placement Agent Agreement with West America Securities Corp. (the "Placement Agent"). Pursuant to the terms of the Placement Agent Agreement, the Placement Agent has agreed to use its best efforts to sell, as exclusive agent for the Company, up to 260,000 Units at a purchase price of $5.75 per Unit. The Units will be sold on a "best efforts, all or none" basis with respect to the first 95,000 Units, and on a "best efforts" basis as to the remaining 165,000 Units. The minimum number of Units offered hereby must be sold, if any are to be sold, within a period of 90 days (or a period of 180 days if extended upon mutual agreement between the Company and the Placement Agent) from the date of this Prospectus (the "Offering Period"). If the Placement Agent is unable to sell 95,000 Units within the Offering Period, the offering of the Units will be terminated and all funds will be returned to subscribers in full with interest, but without deduction for commissions or other expenses related to the offering. All funds received by the Placement Agent during the offering will be transmitted promptly, pursuant to the terms of an escrow agreement, to Bank, California, until the minimum number of Units offered hereby are sold. Purchasers of the Units will not receive Common Stock or Warrant certificates unless and until subscription funds have been released from escrow. Such subscription funds will be held in escrow for the benefit of subscribers until the minimum number of Units offered hereby are sold and subscription funds are released from escrow. 44 47 Subject to the sale of 95,000 Units, the Company has agreed to pay the Placement Agent a sales commission equal to ten percent (10%) of the gross offering price of the Units. In addition, the Placement Agent Agreement provides for the payment to the Placement Agent of a nonaccountable expense allowance equal to two and one-half percent (2.5%) of the gross proceeds from the public offering of the Units, or $13,656 if the minimum number of Units offered hereby are sold, and $37,375 if the maximum number of Units offered hereby are sold. The amount will be used to reimburse the Placement Agent for its expenses, including fees and disbursements of counsel and such other due diligence and customary expenses as are normally incurred by a placement agent. At this time, $3,500 of such expense allowance has been paid on an accountable basis, to be applied toward the nonaccountable expense allowance at the closing of the offering. Subject to the sale of 95,000 Units, the Company has agreed to sell to the Placement Agent a Placement Agent Unit Purchase Option to purchase not more than 10% of the Units sold by the Company for a price of $260.00. The Placement Agent Unit Purchase Option will be exercisable 12 months after the date of issuance at an exercise price of $7.00 per Unit and will be subject to certain antidilution rights. The Placement Agent Unit Purchase Option is not transferable for 12 months except to partners and officers of the Placement Agent. During the period that the Placement Agent Unit Purchase Option is exercisable, the Placement Agent and any transferee will have the opportunity to profit from a rise in the market price of the Common Stock with a resulting dilution in the interest of other stockholders. In addition, the terms on which the Company will be able to obtain additional capital during the exercise period of the Placement Agent Unit Purchase Option may be adversely affected because the Placement Agent is likely to exercise the Placement Agent Unit Purchase Option at a time when the Company would, in all likelihood, be able to obtain capital by a new offering of securities on terms more favorable than those provided by the terms of the Placement Agent Unit Purchase Option. The Company has agreed to indemnify the Placement Agent against certain liabilities, including liabilities under the Securities Act. The Company and the Placement Agent have required that certain stockholders of the Company, who in the aggregate own 441,200 shares of the Company's Common Stock (the Lock-Up Shares), agree not to sell any of the Company's Common Stock owned by them for a period of 30 months from the date of this Prospectus unless the Placement Agent consents to a sale of such shares or unless certain other conditions occur. See "Shares Eligible For Future Sale." It is anticipated that after this offering, the Common Stock will be traded in the over-the-counter market, and the Company has been advised that the Placement Agent intends to make a market in the Common Stock following this offering. The foregoing is a brief summary of the provisions of the Placement Agent Agreement and does not purport to be a complete statement of its terms and conditions. A copy of the Placement Agent Agreement has been filed as an exhibit to the Registration Statement of which this Prospectus is a part. LEGAL MATTERS The validity of the securities being offered hereby will be passed upon for the Company by the Law Offices of John W. Martin, Los Angeles, California. Certain legal matters will be passed upon for the Placement Agent by David L. Kagel, Esq. John W. Martin, Esq., the sole proprietor of the Law Offices of John W. Martin is the beneficial owner of 400,000 shares of Common Stock. See "Principal Stockholders." EXPERTS The Financial Statements of the Company for the period February 12, 1996 (date of inception) to December 31, 1996 and for the period ended therein, have been included in this Prospectus in reliance upon the report appearing elsewhere herein, of Baum & Company, P.A., independent certified public accountants, and upon the authority of said independent certified public accountants as experts in accounting and auditing. 45 48 AVAILABLE INFORMATION Cuidao Holding Corp., a Florida corporation (the "Company") has filed with the Commission a Registration Statement on Form SB-2 (Registration No. ) under the Securities Act for the registration of the Units offered hereby. This Prospectus omits certain of the information contained in the Registration Statement, and reference is hereby made to the Registration Statement and exhibits and schedules thereto for further information with respect to the Company and the securities to which this Prospectus relates. Statements made herein concerning the provisions of any document are not necessarily complete and, in each instance, reference is made to the copy of such document filed as an exhibit to the Registration Statement. Each such statement is qualified in its entirety by such reference. Items of information omitted from this Prospectus but contained in the Registration Statement may be inspected without charge at the Public Reference Room of the Commission, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, at prescribed rates. Upon consummation of the offering of the Units, the Company will become subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith will file reports and other information with the Commission. Such reports and other information can be inspected at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's New York Regional Office, 26 Federal Plaza, New York, New York 10007, and its Chicago Regional Office, Everett McKinley Dirksen Building, 219 South Dearborn Street, Room 1204, Chicago, Illinois 60604. Copies of such material can be obtained from the Public Reference Section of the Commission, Washington, D.C. 20549, at prescribed rates. The Commission also makes electronic filings publicly available on the Internet within 24 hours of acceptance. The Commission's Internet address is http://www.sec.gov. The Commission web site also contains reports, proxy and information statements, and other information regarding registrants that file electronically with the Commission. The Company intends to deliver annual reports to the holders of its securities, which will contain, among other information, audited financial statements examined and reported upon by its independent certified public accountants. 46 49 CUIDAO HOLDING CORP., INC. INDEX TO FINANCIAL STATEMENTS
PAGE ----- Report of Independent Accountants................................................... F-2 Consolidated Balance Sheet as of December 31, 1996.................................. F-3 Consolidated Statement of Operations for the period from February 12, 1996 (date of inception) to December 31, 1996................................................... F-4 Consolidated Statement of Stockholders' Equity for the period from February 12, 1996 (date of inception) to December 31, 1996.......................................... F-5 Consolidated Statement of Cash Flows for the period from February 12, 1996 (date of inception) to December 31, 1996................................................... F-6 Notes to Financial Statements....................................................... F-7 Interim Financial Statements: Consolidated Balance Sheet as of October 31, 1997 (unaudited)....................... F-10 Interim Consolidated Statement of Operations for the ten month period ended October 31, 1997 (unaudited).............................................................. F-11 Interim Consolidated Statement of Stockholders' Equity for the ten month period ended October 31, 1997 (unaudited)................................................ F-12 Interim Consolidated Statement of Cash Flows for the ten month period ended October 31, 1997 (unaudited).............................................................. F-13 Notes to Interim Financial Statements............................................... F-14
F-1 50 INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Stockholders of Cuidao Holding Corp. We have audited the accompanying consolidated balance sheet of Cuidao Holding Corp. and its subsidiaries (a development stage company) as of December 31, 1996 and the related consolidated statements of operations, stockholders' equity and cash flows from February 12, 1996 (date of inception) through December 31, 1996. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cuidao Holding Corp. and subsidiaries (a development stage company) as of December 31, 1996, and the results of its operations and its cash flows from February 12, 1996 (date of inception) through December 31, 1996, in conformity with generally accepted accounting principles. BAUM & COMPANY, P.A. July 15, 1997 Coral Springs, Florida F-2 51 CUIDAO HOLDING CORP. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED BALANCE SHEET DECEMBER 31, 1996 ASSETS Current Assets Cash and Cash Equivalents..................................................... $ 11,693 -------- Office Equipment (Net of $247 of accumulated depreciation)...................... 1,476 -------- Other Assets Organizational Costs (Net of $296 of accumulated amortization)................ 2,367 Deferred Offering Costs....................................................... 20,500 Prepayments and Deposits...................................................... 1,808 -------- Total Other Assets......................................................... 24,675 -------- Total Assets.......................................................... $ 37,844 ======== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Accrued Expenses.............................................................. $ 1,187 -------- Stockholders' Equity Common Stock, par value $0.0001, 100,000,000 shares authorized 1,936,800 issued and outstanding..................................................... 194 Additional Paid-In Capital...................................................... 57,986 Deficit Accumulated during Development Stage.................................... (21,523) -------- Total Stockholders' Equity................................................. 36,657 -------- Total Liabilities and Stockholders' Equity............................ $ 37,844 ========
See Accompanying Auditor's Report and Notes to Financial Statements. F-3 52 CUIDAO HOLDING CORP. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENT OF OPERATIONS FEBRUARY 12, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 1996 Revenues Interest Earned................................................................ $ 192 Operating Expenses General and Administrative..................................................... 21,715 ---------- Net Loss during Development Stage................................................ $ (21,523) ========== Loss per Common Share............................................................ $ (.012) ========== Weighted Average Common Shares Outstanding....................................... 1,833,600 ==========
See Accompanying Auditor's Report and Notes to Financial Statements. F-4 53 CUIDAO HOLDING CORP. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FEBRUARY 12, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 1996
DEFICIT ACCUMULATED COMMON STOCK DURING THE ------------------- PAID-IN DEVELOPMENT # SHARES AMOUNT CAPITAL STAGE ---------- ------ ------- ----------- Common Shares issued -- initial incorporation, February 1996....................................... 3,940,000 $ 394 $ 3,686 Cancellation of Original Shares (March 1997).......... (2,217,600) (222) 222 Issuance of common stock in private placement offering............................................ 214,400 22 54,078 Net Loss.............................................. $ (21,523) ========= ===== ======= ======== 1,936,800 $ 194 $57,986 $ (21,523) ========= ===== ======= ========
See Accompanying Auditor's Report and Notes to Financial Statements. F-5 54 CUIDAO HOLDING CORP. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENT OF CASH FLOW FEBRUARY 12, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss........................................................................ $(21,523) Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: Depreciation................................................................. 247 Amortization of Organizational Costs......................................... 296 Increase in Accrued Expenses................................................. 1,187 --------- Net Cash Used in Operating Activities........................................... (19,793) --------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of Office Equipment................................................. (1,723) Increase in Deferred Offering Costs............................................. (20,500) Increase in Organizational Costs................................................ (2,663) Increase in Prepayments and Deposits............................................ (1,808) --------- Net Cash Used in Investing Activities........................................... (26,694) --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuing Common Stock.............................................. 58,180 --------- Net Cash Provided by Financing Activities....................................... 58,180 --------- NET INCREASE IN CASH AND CASH EQUIVALENTS......................................... 11,693 CASH AND CASH EQUIVALENTS -- BEGINNING OF PERIOD.................................. 0 --------- CASH AND CASH EQUIVALENTS -- END OF PERIOD........................................ $ 11,693 =========
SUPPLEMENTAL CASH FLOW INFORMATION: During the period ended December 31, 1996 the Company issued 400,000 shares of its common stock to a certain individual for legal services rendered to the Company. See Accompanying Auditor's Report and Notes to Financial Statements. F-6 55 CUIDAO HOLDING CORP. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 NOTE 1 -- ORGANIZATION AND OPERATIONS Cuidao Holding Corp. (the "Company") was organized under the laws of the State of Florida on February 12, 1996. On June 27, 1996, the Company formed Cuidao (USA) Import Co., Inc., a wholly owned subsidiary incorporated under the laws of the State of Florida. On March 31, 1997, the Company acquired all of the issued and outstanding common stock of R & R (Bordeaux) Imports, Inc., a Florida corporation, making R & R (Bordeaux) Imports, Inc. a wholly owned subsidiary of the Company. At the time of the acquisition, Robert K. Walker, a major beneficial owner of Cuidao Holding Corp., was also a beneficial owner of R & R (Bordeaux) Imports, Inc. The Company and its subsidiaries are development stage companies which import, develop, manage and distribute a portfolio of international and regional brands of beer, wine and spirits. NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The Company's policy is to prepare its financial statements using the accrual basis of accounting in accordance with generally accepted accounting principles. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, cash in banks, and any highly liquid investments with a maturity of three months or less at the time of purchase. The Company maintains cash and cash equivalent balances at a financial institution which is insured by the Federal Deposit Insurance Corporation up to $100,000. At December 31, 1996 there is no concentration of credit risk from uninsured bank balances. Office Equipment Office Equipment is stated at cost and depreciated over its estimated allowable useful life (7 years), using the double declining balance method. Expenditures for major renewals and betterments that extend the useful lives of fixed assets are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. F-7 56 CUIDAO HOLDING CORP. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1996 NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Organizational Costs The Company has incurred certain federal and state filing and registration fees, legal and promotional fees, and trademark research and registration expenditures in its formation and capitalization, which will benefit the Company in future periods. These costs are being amortized over a five year life using the straight-line method. Deferred Offering Costs Deferred offering costs include the costs associated with the proposed initial public offering. The costs related to the initial public offering will be capitalized and netted against the amount received from the public offering. All deferred offering costs will be expended in the event the offering is not consummated. Income Taxes In February 1992, the Financial Accounting Standards Board issued Statement on Financial Accounting Standards No. 109, "Accounting for Income Taxes." Under SFAS No. 109, deferred assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective basis. Deferred assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Net Loss per Common Share Net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. NOTE 3 -- EQUIPMENT Equipment................................................... $1,723 Less: Accumulated Depreciation............................ 247 ------ Net Equipment............................................. $1,476 ======
Depreciation expense amounted to $247 for the period ended December 31, 1996. NOTE 4 -- COMMITMENTS Operating Lease Effective July 1, 1996, the Company has assumed all obligation under a 14 month lease ending September, 1997. The lease calls for monthly rent payments starting in September and October 1996 of $500 per month, increased to $740 for the duration of the lease term. Upon its expiration, management intends to extend the lease for a two year period. Rent expense amounted to $3,816 for the period ended December 31, 1996. F-8 57 CUIDAO HOLDING CORP. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1996 NOTE 4 -- COMMITMENTS (CONTINUED) Remaining future minimum lease payments under this operating lease at December 31, 1996, net of deposit and prepayment, is $4,348. Stock Options At December 31, 1996 the Company has an agreement with a certain individual to provide the Company with consulting advisory services in exchange for the right to exercise options to acquire 45,000 shares of stock at a total cost of $900. These options are exercisable in 1997 and 1998 (See Note 6). NOTE 5 -- DEFERRED INCOME TAXES As discussed in Note 2, the Company applied the provision of SFAS No. 109. The significant components of deferred income tax benefit arising from a net operating loss carry forward of approximately $22,400 is as follows at December 31, 1996. Deferred Tax Benefit........................................ $3,400 Valuation Allowance......................................... 3,400 ------ $ 0 ======
The valuation allowance has been estimated at 100% due to the Company being in the development stage. NOTE 6 -- SUBSEQUENT EVENT On July 28, 1997, the Company effectuated a 1 for 2.5 reverse common stock split. In order to properly reflect this event, all financial statements are being presented as if this had occurred at inception. All options were terminated during 1997; there remains no outstanding options. F-9 58 CUIDAO HOLDING CORP. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) INTERIM CONSOLIDATED BALANCE SHEET OCTOBER 31, 1997 (UNAUDITED) ASSETS Current Assets Cash and Cash Equivalents...................................................... $ 39,044 Stock Subscription Receivable.................................................. 20,000 Prepaid Rent................................................................... 784 --------- Total Current Assets........................................................ 59,828 Office Equipment (Net of $1,842 of accumulated depreciation).................................... 10,326 --------- Other Assets Organizational Costs (Net of $951 of accumulated amortization)................................... 3,224 Deferred Offering Costs........................................................ 20,700 Prepayments and Deposits....................................................... 1,658 --------- Total Other Assets.......................................................... 25,582 --------- Total Assets........................................................... $ 95,736 ========= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Accrued Expenses and Taxes..................................................... $ 793 --------- Stockholders' Equity Common Stock, par value $0.0001, 100,000,000 shares authorized; 2,226,000 issued and outstanding...................................................... 223 Preferred Stock, par value $0.0001, 10,000,000 shares authorized; 38,000 issued and outstanding............................................................. 4 Additional Paid-In Capital....................................................... 210,254 Deficit Accumulated during Development Stage..................................... (115,538) --------- Total Stockholders' Equity.................................................. 94,943 --------- Total Liabilities and Stockholders' Equity............................. $ 95,736 =========
See Accompanying Notes to Interim Financial Statements. F-10 59 CUIDAO HOLDING CORP. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) INTERIM CONSOLIDATED STATEMENT OF OPERATIONS FOR THE TEN MONTHS ENDED OCTOBER 31 1997 AND CUMULATIVE TOTALS FOR DEVELOPMENT STAGE OPERATIONS FROM FEBRUARY 12, 1996 (DATE OF INCEPTION) TO OCTOBER 31, 1997 (UNAUDITED)
DEVELOPMENT TEN MONTHS STAGE ENDED FEBRUARY 12, 1996 OCTOBER 31, 1997 TO OCTOBER 31, 1997 ------------------ --------------------- Revenues Interest Earned.......................................... $ 149 $ 341 Operating Expenses General and Administrative............................... 94,164 115,879 --------- --------- Net Loss during Development Stage.......................... $ (94,015) $ (115,538) ========= ========= Loss per Common Share...................................... $ (.046) $ (.060) ========= ========= Weighted Average Common Shares Outstanding................. 2,035,960 1,929,962 ========= =========
See Accompanying Notes to Interim Financial Statements. F-11 60 CUIDAO HOLDING CORP. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE TEN MONTHS ENDED OCTOBER 31, 1997 AND CUMULATIVE TOTALS FOR DEVELOPMENT STAGE OPERATIONS FROM FEBRUARY 12, 1996 (DATE OF INCEPTION) TO OCTOBER 31, 1997 (UNAUDITED)
DEFICIT ACCUMULATED COMMON STOCK PREFERRED STOCK DURING THE ------------------- ----------------- PAID-IN DEVELOPMENT # SHARES AMOUNT # SHARES AMOUNT CAPITAL STAGE ---------- ------ -------- ------ -------- ----------- Common Shares issued -- initial incorporation February, 1996............................. 3,940,000 $394 $ 3,686 Cancellation of Original Shares (March, 1997)...................................... (2,217,600) (222) 222 Issuance of Common Stock in Private Placement Offering................................... 214,400 22 54,078 Net Loss December 31, 1996................... $ (21,523) ---------- ---- ------ -- --------- --------- Balance December 31, 1996.................... 1,936,800 194 57,986 (21,523) Additional Shares of Common Stock Issued In Private Placement Offering................. 229,200 23 38,000 4 152,274 Shares Issued for Acquisition of Subsidiary................................. 60,000 6 (6) Net Loss for the ten months ended October 31, 1997....................................... (94,015) -- ---------- ---- ------ --------- --------- Balance October 31, 1997..................... 2,226,000 $223 38,000 $4 $210,254 $(115,538) ========== ==== ====== == ========= =========
See Accompanying Notes to Interim Financial Statements. F-12 61 CUIDAO HOLDING CORP. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE TEN MONTHS ENDED OCTOBER 31, 1997 AND CUMULATIVE TOTALS FOR DEVELOPMENT STAGE OPERATIONS FROM FEBRUARY 12, 1996 (DATE OF INCEPTION) TO OCTOBER 31, 1997 (UNAUDITED)
DEVELOPMENT STAGE TEN MONTHS FEBRUARY 12, 1996 ENDED TO OCTOBER 31, 1997 OCTOBER 31, 1997 ---------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss.............................................. $(94,015) $(115,538) Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: Depreciation....................................... 1,595 1,842 Amortization of Organizational Costs............... 655 951 Increase in Organizational Costs................... (1,512) (4,175) Increase in Deferred Offering Costs................ (200) (20,700) Increase in Prepayments and Deposits............... (635) (2,443) Decrease in Accrued Expenses....................... (394) 793 -------- --------- Net Cash Used in Operating Activities................. (94,506) (139,270) CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of Office Equipment....................... (10,444) (12,167) -------- --------- Net Cash Used in Investing Activities................. (10,444) (12,167) -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuing Common Stock.................... 37,301 95,481 Proceeds from issuing Preferred Stock................. 95,000 95,000 -------- --------- Net Cash Provided by Financing Activities............. 132,301 190,481 -------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS............... 27,351 39,044 CASH AND CASH EQUIVALENTS -- BEGINNING OF PERIOD........ 11,693 0 -------- --------- CASH AND CASH EQUIVALENTS -- END OF PERIOD.............. $ 39,044 $ 39,044 ======== =========
SUPPLEMENTAL CASH FLOW INFORMATION: During the period ended December 31, 1996 the Company issued 400,000 shares of its common stock to a certain individual for legal services rendered to the Company. On October 31, 1997, the Company subscribed 8,000 shares of its preferred stock which was fully paid for in the subsequent month. See Accompanying Notes to Interim Financial Statements. F-13 62 CUIDAO HOLDING CORP. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) NOTES TO INTERIM FINANCIAL STATEMENTS OCTOBER 31, 1997 (UNAUDITED) NOTE 1 -- ORGANIZATION AND OPERATIONS Cuidao Holding Corp. (the "Company") was organized under the laws of the State of Florida on February 12, 1996. On June 27, 1996, the Company formed Cuidao (USA) Import Co., Inc., a wholly owned subsidiary incorporated under the laws of the State of Florida. On March 31, 1997, the Company acquired all of the issued and outstanding common stock of R & R (Bordeaux) Imports, Inc., a Florida corporation, making R & R (Bordeaux) Imports, Inc. a wholly owned subsidiary of the Company. At the time of the acquisition, Robert K. Walker, a major beneficial owner of Cuidao Holding Corp, was also a beneficial owner of R & R (Bordeaux) Imports, Inc. The Company and its subsidiaries are development stage companies which import, develop, manage and distribute a portfolio of international and regional brands of beer, wine and spirits. NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, cash in banks, and any highly liquid investments with a maturity of three months or less at the time of purchase. The Company maintains cash and cash equivalent balances at a financial institution which is insured by the Federal Deposit Insurance Corporation up to $100,000. At October 31, 1997 there is no concentration of credit risk from uninsured bank balances. Office Equipment Office Equipment is stated at cost and depreciated over its estimated allowable useful life (7 years), using the double declining balance method. Expenditures for major renewals and betterments that extend the useful lives of fixed assets are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. F-14 63 CUIDAO HOLDING CORP. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) NOTES TO INTERIM FINANCIAL STATEMENTS (CONTINUED) OCTOBER 31, 1997 (UNAUDITED) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Organizational Costs The Company has incurred certain federal and state filing and registration fees, legal and promotional fees, and trademark, research and registration expenditures in its formation and capitalization, which will benefit the Company in future periods. These costs are being amortized over a five year life using the straight-line method. Deferred Offering Costs Deferred offering costs include the costs associated with the proposed initial public offering. The costs related to the initial public offering will be capitalized and netted against the amount received from the public offering. All deferred offering costs will be expended in the event the offering is not consummated. Income Taxes In February 1992, the Financial Accounting Standards Board issued Statement on Financial Accounting Standards No. 109, "Accounting for Income Taxes." Under SFAS No. 109, deferred assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective basis. Deferred assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Net Loss per Common Share Net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. NOTE 3 -- EQUIPMENT Machinery and Office Equipment............................. $ 12,168 Less: Accumulated Depreciation........................... 1,842 -------- Net Equipment............................................ $ 10,326 =======
Depreciation expense amounted to $1,595 for the ten months ended October 31, 1997. NOTE 4 -- COMMITMENTS Operating Lease Effective July 1, 1996, the Company has assumed all obligation under a 14 month lease ending September, 1997. The lease calls for monthly rent payments starting in September and October 1996 of $500 per month, increased to $740 for the duration of the lease term. The lease was extended one year on September 30, 1997. Rent expense amounted to $6,657 for the ten months ended October 31, 1997. F-15 64 CUIDAO HOLDING CORP. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) NOTES TO INTERIM FINANCIAL STATEMENTS (CONTINUED) OCTOBER 31, 1997 (UNAUDITED) NOTE 5 -- DEFERRED INCOME TAXES As discussed in Note 2, the Company applied the provision of SFAS No. 109. The significant components of deferred income tax benefit arising from a net operating loss carry forward of approximately $74,000 is as follows at October 31, 1997. Deferred Tax Benefit....................................... $ 13,500 Valuated Allowance......................................... 13,500 -------- $ 0 =======
The valuation allowance has been estimated at 100% due to the Company being in the development stage. NOTE 6 -- CAPITALIZATION On July 28, 1997, the Company effectuated a 1 for 2.5 reverse common stock split. In order to properly reflect this event, all financial statements are being presented as if this had occurred at inception. F-16 65 APPENDIX A CUIDAO HOLDING CORP. 3201 WEST GRIFFIN ROAD, SUITE 204 FT. LAUDERDALE, FLORIDA 33312-6900 SUBSCRIPTION AGREEMENT AND SIGNATURE PAGE (ALL INVESTORS MUST SIGN THIS SUBSCRIPTION AGREEMENT) - -------------------------------------------------------------------------------- ================================================================================ SUBSCRIBER DATA: (Must be completed in full) ================================================================================ FULL NAME OF SUBSCRIBER: (Do not use initials) First Full Name (Do not use initials) Middle Initial Last Name RESIDENCE ADDRESS, INCLUDING ZIP CODE: (Do not use P.O. box) CORRESPONDENCE ADDRESS, INCLUDING ZIP CODE: RESIDENCE TELEPHONE NUMBER: BUSINESS TELEPHONE NUMBER: SOCIAL SECURITY: OR TAX I.D. NUMBER: ================================================================================ SUBSCRIPTION: (Must be completed in full) ================================================================================ NUMBER OF UNITS BEING PURCHASED: _______________ X $5.75 PER UNIT = TOTAL PURCHASE PRICE FOR UNITS: $__________________ AMOUNT OF PAYMENT RECEIVED: $__________________ _______________________ [INITIALS OF RECIPIENT] DATE PAYMENT RECEIVED:_________________________ The undersigned subscriber hereby authorizes and directs the immediate deposit of his/her subscription amount into the Bank, , , California . ================================================================================ BROKER/DEALER INFORMATION TO BE COMPLETED BY THE REGISTERED REPRESENTATIVE ================================================================================ Registered Representative Name:_____________________ No. ______________________ Branch Office Address:__________________________________________________________ City:____________________ State:_____ Zip:______ Phone:_________________________ Broker/Dealer NASD Firm Name:___________________________________________________ Home/Main Office Address:_______________________________________________________ City:____________________ State:_____ Zip:______ Phone:_________________________ ______________________________________ ______________________________________ SIGNATURE OF REGISTERED REPRESENTATIVE SIGNATURE OF REGISTERED REPRESENTATIVE (IF MORE THAN ONE) ================================================================================ SIGNIFICANT DISCLOSURE ================================================================================ THIS SUBSCRIPTION IS MADE PURSUANT TO, AND IS SUBJECT TO, THE TERMS AND CONDITIONS OF THE QUALIFICATION APPROVED BY THE SECURITIES COMMISSIONS OF THE STATES IN WHICH THE UNITS ARE BEING OFFERED. SIGNATURE MUST BE IDENTICAL TO NAME OF REGISTERED OWNER ______________________________________________________ Printed Name of Subscriber ______________________________________________________ _________________ Signature of Subscriber Date ______________________________________________________ Printed Name of Subscriber (if more than one) ______________________________________________________ _________________ Signature of Subscriber Date ================================================================================ ADDITIONAL INFORMATION ================================================================================ In order to facilitate processing of your subscription, please be sure you have completed each of the following: - A check made payable to "Bank as Escrow Agent for Cuidao Holding Corp." - Enter the number of units being purchased and total cash contribution on this Subscription Agreement. - Enter the state in which you are a legal resident in the "Residence Address" column above. - Please mail check and this Subscription Agreement to: West America Securities Corp. 4510 E. Thousand Oaks Boulevard, Ste. 100 Westlake Village, California 91362 Attn: Mr. Tracy Spencer A-1 66 ====================================================== NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, BY ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION IN THIS PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS. ------------------------ TABLE OF CONTENTS Unit Purchase Information............. 3 Prospectus Summary.................... 4 Risk Factors.......................... 7 The Company........................... 16 Use of Proceeds....................... 17 Dividend Policy....................... 17 Dilution.............................. 17 Capitalization........................ 20 Selected Financial Data............... 21 Plan of Operation..................... 22 Business.............................. 25 Management............................ 33 Stock Option Plans.................... 35 Certain Relationships and Related Transactions........................ 37 Principal Stockholders................ 39 Description of Securities............. 40 Certain Provisions of Florida Law and of the Company's Articles of Incorporation and Bylaws............ 42 Shares Eligible for Future Sale....... 43 Plan of Distribution.................. 44 Legal Matters......................... 45 Experts............................... 45 Available Information................. 46 Index to Financial Statements......... F-1 Subscription Agreement (Appendix A)... A-1
------------------------ UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS. ====================================================== ====================================================== [COMPANY LOGO] ------------------------ 260,000 UNITS CONSISTING OF 260,000 SHARES OF COMMON STOCK AND WARRANTS TO PURCHASE 260,000 SHARES OF COMMON STOCK ------------------------ PROSPECTUS ------------------------ , 1998 ====================================================== 67 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Articles of Incorporation and the Bylaws of the Registrant contain provisions providing for the indemnification by the Registrant of all past and present directors, officers, employees or agents of the Registrant. Such indemnification applies only to the extent that any such person by reason of acting in such capacity is, or is threatened to be made, a witness in, or party to, any action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or other proceeding. In that event, such person (1) shall be indemnified, with respect to any proceeding other than a proceeding brought by or in the right of the Registrant, against all judgments, penalties, fines and amounts paid in settlement, and all reasonable expenses incurred, in connection therewith, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Registrant, and if, with respect to criminal proceeding, he had no reasonable cause to believe his conduct was unlawful, (2) shall be indemnified, to the extent permitted by applicable law, with respect to any proceeding brought by or in the right of the Registrant to procure a judgment in its favor, for his reasonable expenses in connection therewith if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Registrant, (3) shall be indemnified for reasonable expenses incurred in connection with any proceeding in which he is wholly or partly successful on the merits, and (4) shall be indemnified for reasonable expenses incurred in connection with being, or being threatened to be made, a witness in any proceeding. The specific provisions of the Articles of Incorporation of the Registrant with respect to the indemnification of directors and officers are as follows: ARTICLE 13 -- Indemnification: The Corporation shall indemnify its officers, directors and authorized agents for all liabilities incurred directly, indirectly or incidentally for services performed for the Corporation, to the fullest extent permitted under Florida law existing now or hereafter enacted. The specific provisions of the Bylaws of Registrant with respect to the indemnification of directors and officers are as follows: The corporation shall indemnify any person: (1) Who was or is a party, or is threatened to be made a party, to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by, or in the right of, the corporation) by reason of the fact that he is or was a director, officer, employee, or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against such costs and expenses, and to the extent and in the manner provided under Florida law. (2) Who was or is a party, or is threatened to be made a party, to any threatened, pending, or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee, or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against such costs and expenses, and to the extent and in the manner provided under Florida law. The extent, amount, and eligibility for the indemnification provided herein will be made by the Board of Directors. Said determinations will be made by a majority vote to a quorum consisting of directors who were not parties to such action, suit, or proceeding or by the shareholders by a majority vote of a quorum consisting of shareholders who were not parties to such action suit or proceeding. The corporation will have the power to make further indemnification as provided under Florida law except to indemnify any person against gross negligence or willful misconduct. II-1 68 The corporation is further authorized to purchase and maintain insurance for indemnification of any person as provided herein and to the extent provided under Florida law. ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The expenses of this offering are estimated as follows:* SEC Registration Fee............................................... $ 1,032 Blue Sky fees and expenses......................................... 5,930 Transfer Agent and Registrar fees.................................. 1,000 Printing and engraving expenses.................................... 25,000 Legal fees and expenses............................................ 20,000 Accounting fees and expenses....................................... 1,500 Miscellaneous...................................................... 10,000 ------- Total.................................................... $64,462 =======
- --------------- * All amounts other than the SEC registration fee are estimated. ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES Within the past three years, the Registrant sold securities without registration under the Securities Act of 1933, as amended (the "Act") as follows:
NAMES OF EXEMPTION FROM SECURITIES SOLD INVESTORS CONSIDERATION RECEIVED REGISTRATION - ------------------------- -------------- ----------------------- ----------------------- 1,722,400 Shares 6 Persons(1) $4,080 in cash and past Section 4(2) of the of Common Stock services valued at Securities Act $5,000 443,600 Shares of 47 Persons(2) $110,900 Section 3(b) of the Common Stock Securities Act and Rule 504 of Regulation D promulgated thereunder. 60,000 Shares of 3 Persons(3) 50,000 Shares of Common Section 4(2) of the Common Stock Stock of R&R (Bordeaux) Securities Act Imports,Inc. 38,000 Shares of 5 Persons(4) $95,000 Section 3(b) of the Series A Preferred Stock Securities Act and Rule 504 of Regulation D promulgated thereunder.
- --------------- (1) The six persons who purchased the 1,722,400 shares of Common Stock are Robert K. Walker (488,400 shares), Euro Imperial Group, Ltd. (148,000 shares), Lucia & Tai Shing Chaw (222,000 shares), Paris International Holding Corp. (444,000 shares), Lui Hoa Xue (20,000 shares) and John W. Martin (400,000 shares). (2) The 47 persons who purchased 443,600 shares of Common Stock are Barbara Occhuzzi (12,000 shares), Filomena Gerasimchik (4,000 shares), Kristopher Walker (800 shares), Clorinda Gerasimchik (6,000 shares), Hilda Tornatta (4,000 shares), Nora Marin (4,000 shares), Violet Walker (800 shares), Shirley Ferguson (400 shares), Lee and Robin Still (400 shares), Elizabeth Schmale (800 shares), Ed and Gail Magdycz (2,000 shares), Carole Still (400 shares), Katie and Lauren Fisher (800 shares), Robert E. Friend III, Lee Friend, Michelle F. Edwards and Owen Kelly Feild (1,600 shares), Dorthy and Robert Friend (4,800 shares), Carolyn L. Blenne (6,000 shares), Robert H. Callis (4,000 shares), Bertrand Ross (20,000 shares), Thomas Dobson (10,000 shares), Bretharte Jones (22,000 shares), Amy Lampert (4,000 shares), John Fowler (20,000 shares), Gaynelle Ayers (20,000 shares), Ernest Sutton (20,000 shares), Diane Anders (10,000 shares), Robert Kerr (4,000 shares), Andy Powell (12,000 shares), Janet Courtney (2,000 shares), Charmeine Wiktor (2,000 shares), Regis and Sylvia Louchet (17,600 shares), II-2 69 Luis Ramos (2,000 shares), Edward Mojena (4,000 shares), Harry Newman (44,000 shares), Robert H. Walker (60,000 shares), Theresa Schopler (24,000 shares), Michael McDonnell (16,000 shares), Roy Bee (32,000 shares), Jonathan Smith (800 shares), Betty Lachman (20,000 shares), Jason Mistler (1,600 shares), Marcos Fiegler (6,400 shares), Jeannette Caissie (4,800 shares), John Gillespie (1,200 shares), James Schindel (4,000 shares), Mary Knaak (2,000 shares), Kristene Klein (400 shares) and Mark Warren (4,000 shares). (3) The three persons who acquired the 60,000 shares of Common Stock are Robert K. Walker (10,000 shares), Regis Louchet (10,000 shares) and Jean Francis Louchet (40,000 shares). (4) The five persons who purchased 38,000 shares of Series A Preferred Stock are Phillipe F. Drefus (4,000 shares), C. Michael Fisher (16,000 shares), P. Tristan & Helene F. Bourgolgnie (2,000 shares), Euro Imperial Group, Ltd. (8,000 shares)and Edward Mojena (8,000 shares). ITEM 27. EXHIBITS
EXHIBIT NUMBER DESCRIPTION ----- -------------------------------------------------------------------------------- 1.1 Placement Agent Agreement 1.2 Escrow Agreement by and between Cuidao Holding Corp. and Bank 1.3 Warrant Agreement by and between Cuidao Holding Corp. and Florida Atlantic Stock Transfer 3.0 Amended and Restated Articles of Incorporation of Cuidao Holding Corp. 3.1 Bylaws of Cuidao Holding Corp. 4.0 Specimen Stock Certificate 5.0 Opinion of Law Offices of John W. Martin as to legality 10.0 Cuidao Holding Corp. 1997 Incentive Stock Option Plan 10.1 Cuidao Holding Corp. 1997 Directors' Stock Option Plan 10.2 Import and Distribution Agreement by and between Cuidao Holding Corp. and the People's Republic of China, Tsingtao Brewery No. 3 Co., Ltd. 10.3 Import and Distribution Agreement by and between Cuidao Holding Corp. and Cave du Vignoble Gursonnais 10.4 Import and Distribution Agreement by and between Cuidao Holding Corp. and Armadis 10.5 Import and Distribution Agreement by and between Cuidao Holding Corp. and Les Chais du Prevot 10.6 Import and Distribution Agreement by and between Cuidao Holding Corp. and Vignerons De Buzet 10.7 Import and Distribution Agreement by and between Cuidao Holding Corp. and Godet Freres 10.8 Form of Lock-Up Agreement by and between the Cuidao Holding Corp., West America Securities Corp. and certain shareholders of Cuidao Holding Corp. 10.9 Form of Promotional Share Lock-In Agreement by and between Cuidao Holding Corp. and certain shareholders of Cuidao Holding Corp. 24.0 Consent of Baum & Company, independent certified public accountants 24.1 Consent of Law Offices of John W. Martin (included in Exhibit 5.0)
II-3 70 ITEM 28. UNDERTAKINGS A. Undertaking pursuant to Rule 415. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement to: (i) Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) Reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof), which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; and (iii) Include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment will be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time will be deemed to be the initial bona fide offering thereof. (3) To remove from registration, by means of a post-effective amendment, any of the securities being registered that remain unsold at the termination of the offering. B. Undertaking in respect of indemnification. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and other agents of the Company, the Company has been informed that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities, 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 Securities Act and will be governed by the final adjudication of such issue. II-4 71 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 of filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, in the City of Ft. Lauderdale, State of Florida, on the 12th day of December, 1997. CUIDAO HOLDING CORP. /s/ C. MICHAEL FISHER -------------------------------------- C. Michael Fisher Chairman of the Board and President /s/ FRANCIS X. SCANLAN -------------------------------------- Francis X. Scanlan Chief Financial Officer (Principal Accounting Officer) Pursuant to the requirements of the Securities Act of 1933, this Registration Statement was signed by the following persons in the capacities and on the dates stated.
SIGNATURE TITLE DATE - ----------------------------------------------- ------------------------ ------------------- /s/ C. MICHAEL FISHER Chairman of the Board, December 12, 1997 - ----------------------------------------------- President and Director C. Michael Fisher /s/ EDWARD L. MAGDYCZ Secretary and Director December 11, 1997 - ----------------------------------------------- Edward L. Magdycz /s/ FRANCIS J. HORNIK Director December 12, 1997 - ----------------------------------------------- Francis J. Hornik
II-5 EX-1.1 2 PLACEMENT AGENT AGREEMENT 1 EXHIBIT 1.1 CUIDAO HOLDING CORP. A Florida Corporation 260,000 Units Consisting of 260,000 Shares of Common Stock and Warrants to Purchase 260,000 Shares of Common Stock PLACEMENT AGENT AGREEMENT Westlake Village,California , 1998 West America Securities Corp. 4510 E. Thousand Oaks Boulevard Suite 100 Westlake Village, California 91362 Gentlemen: The undersigned, Cuidao Holding Corp., a Florida corporation (the "Company"), hereby confirms its agreement with West America Securities Corp. (the "Placement Agent") as follows: SECTION 1. Description of Units. The Company is offering for sale an aggregate of 260,000 units, each unit consisting of one share of the Company's common stock, $.0001 par value ("Share") and one redeemable common stock purchase warrant ("Warrant")(the aggregate of such 260,000 units being hereinafter referred to as the "Units"). The offering of the Units is further described in the Company's Registration Statement (File No. 33- )filed on Form SB-2 with the United States Securities and Exchange Commission ("Commission"). The Placement Agent, as a licensed broker-dealer capable of participating in the offering of the Units is invited to assist the Company in the offer and sale of the Units by using its best efforts to solicit offers for the purchase of the Units, and in this regard, the Placement Agent has agreed to act in such capacity on the terms and conditions set forth in this Placement Agent Agreement (the "Agreement"). SECTION 2. Representations and Warranties of the Company. In order to induce the Placement Agent to enter into this Agreement, and to further the offering of the Units, the Company hereby represents and warrants as follows: (a) The Company has filed a Registration Statement (No. 33- ) on Form SB-2 relating to the Units with the Commission pursuant to the Securities Act of 1933, as amended (the "Securities Act"), and the Registration Statement was declared effective on ________________, 1998. As used in this Agreement, the term "Registration Statement" means the Registration Statement, 2 including the Prospectus, the exhibits and the financial statements, and all amendments thereto, including any amendments after the effective date of the Registration Statement. The term "Prospectus" means the prospectus filed as a part of Part I of the Registration Statement, including all pre-effective and post-effective amendments and supplements thereto. (b) The Registration Statement and all other documents previously filed or filed after the date hereof with the Commission conform and will conform with all of the requirements of the Securities Act in all material respects. Neither the Registration Statement, the Prospectus nor the material filed or to be filed with the Commission contains nor will contain any untrue statements of material fact nor are there or will there be any omissions of material facts required to be stated therein or that are necessary to make the statements therein not misleading, except that this warranty does not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by and with respect to the Placement Agent, or any dealer through the Placement Agent, expressly for use in the Registration Statement or Prospectus or any amendment or supplement thereto. (c) The Company has obtained a CUSIP number for its common stock. The materials previously filed or filed after the date hereof with any state do not and will not contain any untrue statements of material fact nor are there or will there be any omissions of material facts required to be stated therein or that are necessary to make the statements therein not misleading. (d) The Company has been legally incorporated and is now and always during the period of the offering will be, a validly existing corporation under the laws of the state of Florida, lawfully qualified to conduct the business for which it was organized and which it proposes to conduct. The Company will always during the period of the offering be qualified to conduct business as a foreign corporation in each jurisdiction where the nature of its business requires such qualification. (e) The outstanding capital stock of the Company has been duly and validly authorized, issued and is fully paid and non-assessable and conforms to all statements made in the Registration Statement and Prospectus with respect thereto. The Units, Shares, Warrants, shares underlying the Warrants (the "Warrant Shares"), Placement Agent Unit Purchase Option (as defined in Section 4(e)(ii) hereof) and the shares of common stock underlying the Placement Agent Unit Purchase Option (the "Placement Agent Option Shares") have been duly and validly authorized and, when issued and delivered against payment as provided in this Agreement, will be validly issued, fully paid and nonassessable. The Shares and Warrant Shares, upon issuance, will not be subject to the preemptive rights of any shareholders of the Company. The Warrants 2 3 and Placement Agent Unit Purchase Option, when sold and delivered, will constitute valid and binding obligations of the Company enforceable in accordance with their terms. A sufficient number of shares of common stock have been reserved for issuance upon exercise of the Warrants and Placement Agent Unit Purchase Option. The Units, Shares, Warrant Shares, Placement Agent Unit Purchase Option and the Placement Agent Option Shares will conform to all statements in the Registration Statement and Prospectus. Upon delivery of the payment for the Placement Agent Unit Purchase Option to be sold by the Company as set forth in this Agreement, the Placement Agent and its designees will receive good and marketable title thereto, free and clear of all liens, encumbrances, charges and claims except those created by, through or under the Placement Agent and except restrictions on transfer arising under federal and state securities laws and the rules and regulations promulgated thereunder. The Company will have on the Effective date (as hereinafter defined in subsection (h) of this Section 2) of the Registration Statement and at the time of delivery of such Placement Agent Unit Purchase Option full legal right and power and all authorization and approval required by law to sell, transfer and deliver such Placement Agent Unit Purchase Option in the manner provided thereunder. (f) The Company has an authorized capitalization of 100,000,000 shares of Common Stock, $.0001 par value, and 10,000,000 shares of Preferred Stock, $.0001 par value. If all of the Units are sold, the Shares will represent at least 10% of the Company's shares of common stock outstanding after the public offering. Common stock underlying outstanding options and warrants except options issued pursuant to the Company's 1997 Incentive Stock Option Plan and 1997 Directors' Stock Option Plan described in subsection (g) of this Section 2 and except the Warrants and Placement Agent Unit Purchase Option will be deemed to be outstanding for purposes of determining the number of shares of the Company's common stock outstanding after the public offering. There are no outstanding options, warrants or other rights to purchase securities of the Company, however characterized, except as described in the Registration Statement. There are no securities of the Company, however characterized, held in its treasury. With respect to the sell, sale, offer to purchase or purchase of any of its securities, the Company has not made any intentional or reckless violations of the antifraud provisions of the federal securities laws, rules or regulations promulgated thereunder or the laws, rules or regulations of any jurisdiction wherein such securities transactions or solicitation occurred. (g) The Board of Directors of the Company and the shareholders of the Company have adopted a 1997 Incentive Stock Option Plan designed to qualify under Section 422A of the Internal Revenue Code. The Board of Directors of the Company and the shareholders of the Company have also adopted a 1997 Directors' Stock Option Plan which is designed to attract and reward non- 3 4 employee directors. The Incentive Stock Option Plan relates to 750,000 shares of the Company's common stock. The 1997 Directors' Stock Option Plan relates to 250,000 shares of the Company's common stock. (h) During the period of the offering of the Units and for one year from the date the Commission declares the Registration Statement to be effective (the "Effective Date"), the Company will not sell any equity or long-term debt securities (except options issued pursuant to the Company's 1997 Incentive Stock Option Plan and 1997 Directors' Stock Option Plan, except any shares issued upon the exercise of such options, except any shares issued upon the exercise of any other options or warrants outstanding on the Effective Date and except the Warrants and Placement Agent Unit Purchase Option) without the Placement Agent's prior written consent, which will not be unreasonably withheld. (i) The Company has caused each of its officers, directors, promoters and principal stockholders to enter into a Promotional Share Lock-In Agreement in the form attached hereto as Exhibit "A". The Company has obtained such an agreement from shareholders owning at least 1,750,000 shares of the Company's outstanding common stock. (j) The Company has caused each of its shareholders, other than its officers, directors, promoters and principal stockholders, to enter into a Lock-Up Agreement with the Placement Agent in the form attached hereto as Exhibit "B". The Company has obtained such an agreement from shareholders owning at least 441,200 shares of the Company's outstanding common stock. (k) The audited financial statements, together with related schedules and notes, included in the Registration Statement and Prospectus present fairly the financial condition of the Company and are reported upon by independent public accountants according to generally accepted accounting principles and as required by the rules and regulations of the Commission. (l) Except as disclosed in the Registration Statement and the Prospectus, the Company does not have any contingent liabilities, obligations, or claims nor has it received threats of claims or regulatory action. Further, except as disclosed in the Registration Statement and the Prospectus, subsequent to the date information is given in the Registration Statement and definitive Prospectus, and prior to the close of the offering: (a) there shall not be any material adverse change in the management or condition, financial or otherwise, of the Company or in its business taken as a whole; (b) there shall not have been any material transaction entered into by the Company other than transactions in the ordinary course of business; (c) the Company shall not have incurred any material obligations, contingent or otherwise, which are not disclosed in the Registration Statement 4 5 and the Prospectus; (d) there shall not have been nor will there be any change in the capital or long-term debt (except current payments) of the Company; and (e) the Company has not and will not have paid or declared any dividends or other distributions on its common stock. (m) The Company will have the legal right and authority to enter into this Agreement upon its execution, to effect the proposed sale of the Units, and to effect all other transactions contemplated by this Agreement. (n) The Company knows of no person who rendered any services in connection with the introduction of the Company to the Placement Agent. No broker's or other finder's fees are due and payable by the Company and none will be paid by it. (o) The Company is eligible to use Form SB-2 for the offering of the Units. (p) The Company and its affiliates are not currently offering any securities nor has the Company or its affiliates offered or sold any securities except as required to be described in the Registration Statement. (q) The Company will not file any amendment or supplement to the Registration Statement, Prospectus, or exhibits if the Placement Agent and its counsel have not been previously furnished a copy, or if the Placement Agent or its counsel have objected in writing to the filing of the amendment or supplement. (r) The Company possesses adequate certificates or permits issued by the appropriate federal, state or local regulatory authorities necessary to conduct its business and to retain possession of its properties. The Company has not received any notice of any proceeding relating to the revocation or modification of any of these certificates or permits. (s) The Company has filed all tax returns required to be filed and is not in default in the payment of any taxes which have become due pursuant to any law or any assessment. (t) The Company has marketable title to all properties including intellectual properties described in the Registration Statement as owned by it. The properties are free and clear of all liens, charges, encumbrances or restrictions, however characterized, except as described in the Registration Statement. All of the contracts, leases, subleases, patents, copyrights, licenses, and agreements, however characterized, under which the Company holds its properties as described in the Registration Statement are in full force and effect. The Company is not in default under any of the material terms or provisions of any contracts, leases, subleases, patents, copyrights, licenses or 5 6 agreements under which the Company holds its properties. There are no known claims against the Company concerning the Company's rights under the leases, subleases, patents, copyrights, licenses and agreements and concerning its right to continued possession of its properties. (u) All original documents and other information relating to the Company's affairs has and will continue to be made available upon request to the Placement Agent and to the Placements Agent's counsel at the Placement Agent's office or at the office of the Placement Agent's counsel and copies of any such documents will be furnished upon request to the Placement Agent and to the Placement Agent's counsel. Included within the documents made available have been at least the Articles of Incorporation and any amendments thereto, minutes of all of the meetings of the Incorporators, Directors and Shareholders of the Company, all financial statements and copies of all contracts, leases, patents, copyrights, licenses or agreements to which the Company is a party or in which the Company has an interest. (v) The Company has appointed Florida Atlantic Stock Transfer, Tamarac, Florida, as the Company's transfer agent and warrant agent. The Company will continue to retain a transfer agent for so long as the Company is subject to the reporting requirements under Section 12(g) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company will make arrangements to have available at the office of the transfer agent sufficient quantities of the Company's common stock certificates and Warrant certificates as may be needed for the quick and efficient transfer of the Units. (w) The Company will use the proceeds from the sale of the Units as set forth in the Registration Statement and Prospectus. (x) There are no contracts or other documents required to be described in the Registration Statement or to be filed as exhibits to the Registration Statement which have not been described or filed as required. (y) The Company is not in material default under any of the contracts, leases, licenses or agreements to which it is a party. The proposed offering of the Units will not cause the Company to become in material default under any of its contracts, leases, subleases, patents, copyrights, licenses or agreements nor will it create a conflict between the Company and any of the contracting parties to the contracts, leases and other agreements. Further, the Company is not in material default in the performance of any obligation, agreement or condition contained in any debenture, note or other evidence of indebtedness or any indenture or loan agreement of the Company. The execution and delivery of this Agreement and the consummation of the transactions herein 6 7 contemplated and compliance with the terms of this Agreement will not conflict with or result in a breach of any of the material terms, conditions or provisions of, or constitute a material default under, the Articles of Incorporation or Bylaws of the Company, as amended, or any note, indenture, mortgage, deed of trust, or other agreement or instrument to which the Company is a party or by which it or any of its property is bound, or any existing law, order, rule, regulation, writ, injunction, or decree of any government, governmental instrumentality, agency or body, arbitration, tribunal or court, domestic or foreign, having jurisdiction over the Company or its property. The consent, approval, authorization, or order of any court or governmental instrumentality, agency or body is not required for the consummation of the transactions herein contemplated except such as may be required under the Act, under the Blue Sky or securities laws of any state or jurisdiction, or the rules of the NASD (as defined in Section 3(c) hereof). Each contract to which the Company is a party has been duly and validly executed, is in full force and effect in all material respects in accordance with its respective terms, and no contracts have been assigned by the Company, except as disclosed in the Registration Statement and Prospectus by the Company. The Company knows of no present situation, condition or fact which would prevent compliance with the terms of such contracts. Except for amendments or modifications of contracts in the ordinary course of business and except as disclosed in the Registration Statement and Prospectus, the Company has no intention of exercising any right which would cancel any of its obligations under any contract, and has no knowledge that any other party to any contract, in which the Company has an interest, has any intention not to render full performance under such contract. (z) Except as disclosed in the Registration Statement and Prospectus, there is, and prior to the close of the offering of the Units to the public there will be, no action, suit or proceeding before any court or governmental agency, authority or body pending or to the knowledge of the Company threatened which might result in judgments against the Company not adequately covered by insurance or which collectively might result in any material adverse change in the condition (financial or otherwise), the business or the prospects of the Company, or would materially affect the properties or assets of the Company. 7 8 SECTION 3. Representations and Warranties of the Placement Agent. The Placement Agent hereby represents and warrants to the Company and agrees as follows: (a) This Agreement has been duly and validly authorized, executed and delivered by the Placement Agent and is a valid, binding and enforceable agreement of the Placement Agent. (b) Neither the execution and delivery of this Agreement, and the performance and consummation of the transactions contemplated in this Agreement will result in any breach of any of the terms and conditions of, or constitute a default under, the Placement Agent's Articles of Incorporation or Bylaws, or any indenture, agreement, or instrument by which the Placement Agent is a party or violate any order directed to the Placement Agent of any court or any federal or state regulatory body or administrative agency having jurisdiction over the Placement Agent or its affiliates. (c) The Placement Agent represents that it is a member in good standing of the National Association of Securities Dealers, Inc. ("NASD") and registered as a broker-dealer with the Commission, or that it is a foreign broker-dealer not eligible for membership under Section 1 of the Bylaws of the NASD who agrees to make no sales within the United States, its territories or possessions or to persons who are nationals thereof or residents therein. The Placement Agent's attention is called to the following: (a) Article III, Section 1 of the Rules of Fair Practice of the NASD and the interpretations of said Section promulgated by the Board of Governors of the NASD; (b) Section 10(b) of the Exchange Act and Rule 10b-9 of the general rules and regulations promulgated under the Exchange Act; (c) Section 15 of the Exchange Act and Rule 15c2-4 of the general rules and regulations promulgated under the Exchange Act; and (d) Rule 15c2-8 of the general rules and regulations promulgated under the Exchange Act and Securities Act Release No. 4968 requiring the distribution of a Preliminary Prospects to all persons reasonably expected to be purchasers of Units from the Placement Agent at least 48 hours prior to the time it expects to mail confirmations of purchase. The Placement Agent, if a member of the NASD, by signing this Agreement, acknowledges that its is familiar with the cited law, rules and releases and agrees that it will not directly and/or indirectly violate any provisions of applicable law in connection with its participation in the distribution of the Units. (d) The Placement Agent will not, until advised by the Company in writing or by wire that the offering of Units has been distributed and closed, bid for or purchase Shares or Warrants in the open market or otherwise make a market in the Shares or Warrants or otherwise attempt to induce others to purchase Shares or Warrants in the open market. 8 9 (e) Neither the Placement Agent nor its directors or officers (or any other person serving in a similar capacity): (1) Has been convicted within ten years prior hereto of any crime or offense involving the purchase or sale, or any conduct or practice in connection with the purchase or sale, of any security; involving the making of a false statement with the Commission; or has been convicted or charged with a crime or offense arising out of the Placement Agent engaging in the business of an underwriter, broker, dealer, municipal securities dealer, or investment adviser. (2) Is subject to any order, judgment, or decree of any court of competent jurisdiction temporarily or permanently enjoining or restraining such person from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security; involving the making of a false statement with the Commission; or has been convicted or charged with a crime or offense arising out of such person engaging in the business of an underwriter, broker, dealer, municipal securities dealer, or investment adviser. (3) Is subject to an order of the Commission entered pursuant to Section 15(b), 15B(a) or 15B(c) of the Exchange Act; has been found by the Commission to be a cause of any such order which is still in effect; or is subject to an order of the Commission entered pursuant to Section 203(e) or (f) of the Investment Advisers Act of 1940. (4) Has been and is suspended or expelled from membership in a national or regional securities dealers association or a national securities exchange or a Canadian securities exchange for conduct inconsistent with just and equitable principles of trade. (5) Is subject to a United States Postal Service fraud order or is subject to any restraining order or preliminary injunction entered under Section 3007 of Title 30, United States Code, with respect to any conduct alleged to constitute postal fraud. (6) Has been an underwriter or named as an underwriter of any securities covered by any registration statement which is the subject of any proceeding or examination under Section 8 of the Securities Act, or is the subject of any refusal order or stop order entered thereunder within five (5) years prior to the date hereof. (f) To the Placement Agent's knowledge, no action or proceeding is pending against it or any of its officers or directors concerning its activities as a broker or dealer that would affect the Company's offering of the Units. 9 10 (g) The Placement Agent will offer the Units only in those states and in the quantities that are identified in the Blue Sky Memorandum from the Company's counsel to the Placement Agent that the offering of the Units has been qualified for sale under applicable state statutes and regulations. (h) The Placement Agent, in connection with the offer and sale of the Units, and in the performance of its duties and obligations under this Agreement, agrees to use its best efforts to comply with all applicable federal laws, the laws of the states or other jurisdictions in which the Units are offered and sold, and the Rules and Regulations of the NASD. (i) The Placement Agent will not make any offer or sale of Units unless the offer or sale is made in compliance with the Securities Act, the Rules of Fair Practice of the NASD, and the applicable securities or Blue Sky laws of jurisdictions in which offers or sales are made, and the rules and regulations thereunder. The Placement Agent agrees that it will not offer or sell Units to any subscriber unless it has reasonable grounds to believe that the investment in Units is suitable for the subscriber. (j) The Placement Agent will, reasonably promptly after the closing of the offering of the Units, supply the Company with all information as the Company may reasonably request to be supplied to the securities commission of such states in which the Units have been qualified for sale. All of the above representations and warranties shall survive the performance or termination of this Agreement. SECTION 4. Retention of Placement Agent. In reliance upon the representations and warranties set forth herein, and subject to the terms and conditions of this Agreement: (a) The Placement Agent hereby agrees to solicit, as an independent contractor and not as the Company's agent, persons who will acquire the Units. The Placement Agent will be promptly advised when the Registration Statement becomes effective. The Placement Agent, in selling Units pursuant hereto, agrees that it will comply with the applicable requirements of the Securities Act and the Exchange Act and any applicable rules and regulations issued under the Securities Act and/or the Exchange Act. Neither the Placement Agent nor any other person is or has been authorized to give any information or to make any representations other than those contained in the Prospectus in connection with the sale of the Units, and the Placement Agent hereby agrees not to give any such information or make any such representations. (b) The Company shall have full authority to take such action as it may deem advisable in respect of all matters pertaining to the offering or arising thereunder. The Company 10 11 shall be under no liability to the Placement Agent, except such as may be incurred under the Securities Act and the rules and regulations thereunder, except for lack of good faith and except for obligations expressly assumed by the Company in this Agreement, and no obligation on the Company's part shall be implied or inferred herefrom. (c) The Placement Agent will be informed by the Company as to the states in which the Company has been advised by counsel that the Units have been qualified for sale or are exempt under the respective securities or blue sky laws of such states, but the Company has not assumed and will not assume any obligation or responsibility as to the right of the Placement Agent or any other participating broker-dealer to sell Units in any states. (d) An escrow account shall be established for the Company's offering at __________ Bank, __________, California (the "Escrow Agent"). The Placement Agent shall deliver all checks received from purchasers of the Units solicited by it to the Escrow Agent by twelve o'clock noon of the next business day after the date of receipt, and all checks should be made payable to " Bank, as Escrow Agent for Cuidao Holding Corp." (e) Subject to the sale of 95,000 of the Units to be offered by the Company, the Company agrees to: (i) pay a cash commission equal to ten percent (10%) of the purchase price of all Units sold by the Placement Agent. In the event that a sale of a Unit for which the Placement Agent has solicited a purchaser shall not occur, no payment with respect to such Unit shall be paid to the Placement Agent. Payment of commissions due the Placement Agent will be made promptly after the release of the funds which have been deposited in the escrow account; and (ii) simultaneously with the payment of the cash commission set forth in subsection (i) hereinabove, sell, at a price of $260, and issue and deliver to the Placement Agent or its designees, a Placement Agent Unit Purchase Option to purchase up to 26,000 Units. Such Placement Agent Unit Purchase Option shall be in the form and substance of the Placement Agent Unit Purchase Option attached hereto as Exhibit "C" and shall represent the right to purchase up to an aggregate of 26,000 Units for the four-year period commencing on the first and ending on the fifth anniversary of the effective date of the Registration Statement, at a price of $7.00 per Unit. The Placement Agent Unit Purchase Option shall not be sold, transferred, assigned or hypothecated for a period of twelve (12) months from the effective date of the Registration Statement except to partners or officers of the Placement Agent. 11 12 SECTION 5. Expenses. (a) Subject to the sale of all of the Units offered by the Company, the Company shall reimburse the Placement Agent for its expenses on a nonaccountable basis in an amount equal to two and one-half percent (2.5%) of the aggregate gross dollar amount of Units sold by the Placement Agent. Subject to the provisions of this Section, the nonaccountable expense allowance shall be due on the release of the funds in the escrow account to the Company. (b) Except as stated elsewhere in this Agreement, the Placement Agent agrees that out of its nonaccountable expense allowance, it will pay all costs incurred or to be incurred by it or its personnel in connection with the offering of the Units, except those to be paid by the Company as described in Section 6 hereof. SECTION 6. Payment of Expenses and Fees. The Company agrees that it will pay the following fees and expenses: (a) All fees and expenses of its legal counsel who will be engaged to prepare certain information, documents and papers for filing with the Commission, and with state or local securities authorities; (b) All fees and expenses of its accountants incurred in connection with the offering of the Units and preparation of all documents and filings made as part of the offering; (c) All costs in issuing and delivering the Units; (d) All costs of printing and delivering to the Placement Agent as many copies of the Registration Statement and amendments thereto, Preliminary Prospectuses and definitive Prospectuses as reasonably requested by the Placement Agent; (e) All of the Company's mailing, telephone, travel, clerical and other office costs incurred or to be incurred in connection with the offering of the Units; (f) All fees and costs which may be imposed by the various state or local securities authorities and the NASD for review of the offering of the Units; and (g) All other expenses incurred by the Company in performance of its obligations under this Agreement. SECTION 7. Company Indemnification. The Company agrees to indemnify, defend and hold the Placement Agent harmless against any losses, claims, damages or liabilities, joint or several: 12 13 (a) To which the Placement Agent may become subject under applicable law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, Prospectus, or any amendment or supplement thereto or in any sales literature, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; or (b) To which the Placement Agent may become subject due to the misrepresentation by the Company or its agents (other than the Placement Agent or any other participating broker-dealer) of material facts in connection with the sale of the Units, unless the misrepresentation of such material facts was the direct result of misleading information provided to the Company or its agents by the Placement Agent; or (c) To which the Placement Agent may become subject as a result of any breach by the Company of the representations and warranties contained in this Agreement. The Company will reimburse the Placement Agent for any legal or other expenses reasonably incurred in connection with investigating or defending any such loss, claim, damage or liability (or actions in respect thereof); provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, Prospectus or such amendment or supplement or in any sales literature, in reliance upon and in conformity with written information furnished to the Company by the Placement Agent specifically for use in the preparation thereof. This indemnity agreement shall be in addition to any liabilities which the Company may otherwise have in connection with this offering. The foregoing indemnity agreement shall extend upon the same terms and conditions to, and shall inure to the benefit of, each person, if any, who controls the Placement Agent. SECTION 8. Placement Agent Indemnification. The Placement Agent agrees to indemnify, defend and hold the Company harmless against any losses, claims, damages or liabilities, joint or several to which the Company may become subject under applicable law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, Prospectus, or any amendment or supplement thereto or in any sales literature, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or 13 14 necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, Prospectus, or any amendment or supplement thereto or in any sales literature, in reliance upon and in conformity with written information furnished to the Company by the Placement Agent specifically for use in the preparation thereof; and will reimburse the Company for any legal or other expenses reasonably incurred in connection with investigating or defending any such loss, claim, damage or liability (or actions in respect thereof). This indemnity agreement shall be in addition to any liabilities which the Company may otherwise have in connection with this offering. The foregoing indemnity agreement shall extend upon the same terms and conditions to, and shall inure to the benefit of, each person, if any, who controls the Company. SECTION 9. Indemnification Procedures: Promptly after receipt by an indemnified party of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under Section 7 or Section 8 of this Agreement, notify the indemnifying party in writing of the commencement thereof; but the omission to so notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such Sections. In case any such action shall be brought against such indemnified party, it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in, and, to the extent that it shall wish, jointly with any other indemnifying party, similarly notified, assume the defense thereof, with counsel satisfactory to such indemnifying and indemnified parties. Any indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (a) the employment thereof has been specifically authorized by the indemnifying party in writing, or (b) the indemnifying party has failed to assume the defense and employ counsel or (c) the named parties to any such action (including any impleaded parties) include both such indemnified party and the indemnifying party, and such indemnified party shall have been advised by such counsel that representation of such indemnified party and the indemnifying party by the same counsel would be inappropriate under applicable standards of professional conduct due to actual or potential differing interests between them, in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party; provided, however, that the indemnifying party shall, in connection with any one such action or separate or substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of 14 15 only one separate firm of attorneys at any time for all such indemnified parties, which firm shall be designated in any settlement of any such action effected without the written consent of the indemnifying party, but if settled with such written consent, or if there be a final judgment or decree for the plaintiff in any such action by a court of competent jurisdiction and the time to appeal shall have expired or the last appeal shall have been denied, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. SECTION 10. Termination. This Agreement may be terminated by either party hereunder at any time upon five days' written notice to the other party. The Placement Agent's participation in the offer and sale of the Units will be governed by the conditions herein set forth until this Agreement is terminated. If this Agreement is not terminated sooner as provided in this Section, then this Agreement will terminate when the offering is completed. SECTION 11. Notices. Except as otherwise expressly provided in this Agreement: (a) Whenever notice is required by the provisions of this Agreement to be given to the Company, such notice shall be in writing addressed to the Company as follows: Cuidao Holding Corp. 3201 West Griffin Road, Suite 204 Ft. Lauderdale, Florida 33312-6900 Attention: Mr. C. Michael Fisher, President With a copy to: John W. Martin, Esq. 5777 West Century Boulevard, Suite 1540 Los Angeles, California 90045 (b) Whenever notice is required by the provisions of this Agreement to be given to the Placement Agent, such notice shall be given in writing addressed to the Placement Agent as follows: West America Securities Corp. 4510 E. Thousand Oaks Boulevard, Suite 100 Westlake Village, California 91362 Attention: Mr. Robert B. Kay, President With a copy to: David R. Kagel, Esq. 1801 Century Park East, Suite 2400 Los Angeles, California 90067 15 16 SECTION 12. Binding Effect. This Agreement shall inure to the benefit of and be binding upon the Placement Agent and the Company and the Company's respective successors. Nothing expressed in this Agreement is intended to give any person other than the persons mentioned in the preceding sentence any legal or equitable right, remedy or warranties included in this Agreement. SECTION 13. Miscellaneous Provisions. (a) Nothing contained herein shall constitute the relationship between the Placement Agent and the Company as an association, partnership, unincorporated business or other separate entity. (b) This Agreement shall be construed according to the laws of the State of California. (c) The representations and warranties made in this Agreement shall survive the termination of this Agreement and shall continue in full force and effect regardless of any investigation made by the party relying upon any such representation or warranty. (d) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Please confirm your agreement to solicit persons to acquire Units on the foregoing terms and conditions by signing and returning the form enclosed herewith. Very truly yours, CUIDAO HOLDING CORP. a Florida corporation By --------------------------------- C. Michael Fisher, President 16 17 Cuidao Holding Corp. 3201 West Griffin Road Suite 204 Ft. Lauderdale, Florida 33312-6900 Gentlemen: The undersigned confirms its agreement to act as Placement Agent as referred to in the foregoing Placement Agent Agreement, subject to the terms and conditions of such agreement. The undersigned confirms that it is a member in good standing of the National Association of Securities Dealers, Inc. WEST AMERICA SECURITIES CORP. By ---------------------------------- (Signature) ----------------------------------- (Print Name and Title of Authorized Representative) ----------------------------------- (NASD Firm Number) Dated:_____________________ , 1998 4510 E. Thousand Oaks Boulevard Suite 100 Westlake Village, CA 91362 Telephone (805) 777-9124 17 18 NO SALE, OFFER TO SELL OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR ANY INTEREST THEREIN SHALL BE MADE UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, WITH RESPECT TO SUCH TRANSACTION IS THEN IN EFFECT, OR THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH TRANSFER DOES NOT REQUIRE REGISTRATION UNDER THAT ACT. This Unit Purchase Option will be void after 5:00 p.m. New York time on ______________, _______ (i.e. five years from the effective date of the Registration Statement). CUIDAO HOLDING CORP. PLACEMENT AGENT UNIT PURCHASE OPTION THIS CERTIFIES THAT WEST AMERICA SECURITIES CORP. (herein sometimes called "West America") is entitled to purchase from CUIDAO HOLDING CORP., a Florida corporation (hereinafter called the "Company"), at the price and during the period hereinafter specified, 26,000 Units ("Units"), each Unit consisting of one (1) share of the Company's common stock, $.0001 par value ("Common Stock"), and one (1) Common Stock Purchase Warrant (the "Warrant"). Each Warrant entitles the holder thereof to purchase one share of the Company's Common Stock at a price of $8.00 per share of Common Stock for a period of three years after the effective date of the Registration Statement. The Units have been registered under a Registration Statement on Form SB-2 (File No. 33- ), declared effective by the Securities and Exchange Commission on ___________, 19__ (the "Registration Statement"). The option (the "Option") herein granted (the document granting the Option and the rights represented thereby are sometimes hereinafter 1 19 referred to as "this Option") to purchase 26,000 Units was originally issued at an aggregate price of $260 pursuant to a Placement Agent Agreement between the Company and West America in connection with a public offering of up to 260,000 Units (the "Offering") through West America. Except as otherwise specially provided herein the Common Stock and the Warrants issued pursuant to the option herein granted shall bear the same terms and conditions as described under the caption "Description of Securities" in the Registration Statement. The Warrants shall have the same terms as the Warrants contained in the Units sold to the public. In the event the number of shares of Common Stock into which the Warrants may be exercised is changed, or there are any other adjustments in the terms or conditions of the Warrants included in the Units sold pursuant to the Registration Statement, the terms and conditions of the Warrants issued pursuant to this Option shall likewise be adjusted. 1. During the period from ____________, 19__ to ___________, 200__, inclusive, West America shall have the option to purchase the Units hereunder at a price per Unit of $7.00 (equal to approximately 120% of the offering price of the Units to the public (the "Exercise Price")). 2. The rights represented by this Option may be exercised at any time within the period above specified, in whole or in part, by (i) the surrender of this Option (with the purchase form at the end hereof properly executed) at the principal 2 20 executive office of the Company, located at 3201 West Griffin Road, Suite 204, Ft. Lauderdale, Florida 33312-6900 (or such other office or agency of the Company as it may designate by notice in writing to West America at the address of West America appearing on the books of the Company) and (ii) payment to the Company of the Exercise Price for the number of Units specified in the above-mentioned purchase form together with applicable stock transfer taxes, if any. This Option shall be deemed to have been exercised, in whole or in part to the extent specified, immediately prior to the close of business on the date this Option is surrendered and payment is made in accordance with the foregoing provisions of this paragraph 2, and the person or persons in whose name or names the certificates for shares of Common Stock and the Warrants shall be issuable upon such exercise shall become the holder or holders of record of such Common Stock and Warrants at that time and date. The Common Stock and Warrants and the certificates for the Common Stock and Warrants so purchased shall be delivered to West America within a reasonable time, not exceeding ten (10) days, after the rights represented by this Option shall have been so exercised. 3 21 3. This Option shall not be transferred, sold, assigned or hypothecated for a period of one year commencing ___________, 19__, except that it may be assigned during such period, in whole or in part to an officer of West America or to a related person of any broker/dealer participating in the Offering. Any such assignment shall be effected by West America (i) executing a form of assignment at the end hereof and (ii) surrendering this Option for cancellation at the office or agency of the Company referred to in paragraph 2 hereof, accompanied by a certificate (signed by an officer of West America), stating that each transferee is a permitted transferee under this paragraph 3 hereof; whereupon the Company shall issue, in the name or names specified by West America (including West America) a new Option or Options of like tenor and representing in the aggregate rights to purchase the same number of Units as are purchasable hereunder. 4. The Company covenants and agrees that all shares of Common Stock which are sold as part of the Units purchased hereunder and the Common Stock which may be issued upon exercise of the Warrants will, upon issuance, be duly and validly issued, fully paid and nonassessable and no personal liability will attach to the holder thereof. The Company further covenants and agrees that during the periods within which this Option may be exercised, the Company will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of this Option and that it will have authorized and reserved a 4 22 sufficient number of shares of Common Stock for issuance upon exercise of the Warrants included in the Units. 5. This Option shall not entitle West America or any other holder thereof to any voting rights or other rights as a stockholder of the Company. 6. In the event that the Warrants or the outstanding shares of Common Stock of the Company are at any time increased or decreased or changed into or exchanged for a different number or kind of share or other security of the Company or of another corporation through reorganization, merger, consolidation, liquidation, recapitalization, or, in the case of Common Stock, stock split, combination of shares or stock dividends payable with respect to such Common Stock, appropriate adjustments in the number and kind of such securities then subject to this Option shall be made effective as of the date of such occurrence so that the position of the holder of this Option, upon exercise, will be the same as it would have been had he owned immediately prior to the occurrence of such events the Warrants and Common Stock subject to this Option. Such adjustment shall be made successively whenever any event listed above shall occur. 5 23 IN WITNESS WHEREOF, Cuidao Holding Corp. has caused this Placement Agent Unit Purchase Option to be signed by its duly authorized officers under its corporate seal, and this Placement Agent Unit Purchase Option to be dated ___________, 19___. CUIDAO HOLDING CORP. By: -------------------------------- , President (Corporate Seal) Attest: - ---------------------------- , Secretary 6 24 PURCHASE FORM Dated: , 199 The undersigned hereby irrevocably elects to exercise the within Placement Agent Unit Purchase Option to the extent of purchasing _______ Units and hereby makes payment of $_______ in payment of the actual exercise price thereof. ----------------------------- INSTRUCTIONS FOR REGISTRATION OF COMMON STOCK AND WARRANTS COMPRISING UNITS Name____________________________________________________________________________ (please typewrite or print in block letters) Address_________________________________________________________________________ Signature_______________________________________________________________________ 7 25 ASSIGNMENT FORM FOR VALUE RECEIVED, ________________________________________ hereby sells, assigns and transfers unto Name____________________________________________________________________________ (please typewrite or print in block letters) Address_________________________________________________________________________ the right to purchase Units represented by this Placement Agent Unit Purchase Option as to which such right is exercisable and does hereby irrevocably constitute and appoint _________________________________________________________ attorney, to transfer the same on the books of the Company with full power of substitution in the premises. Signature__________________________ Dated:___________________, 199_. 8 EX-1.2 3 ESCROW AGREEMENT 1 EXHIBIT 1.2 ESCROW AGREEMENT THIS ESCROW AGREEMENT ("Agreement") is made and entered into as of ___________, 1997, by and among Bank (the "Escrow Agent"), having its Principal place of business at , , California and Cuidao Holding Corp., a Florida corporation (the"Company"), having its principal place of business at 3201 West Griffin Road, Suite 204, Ft. Lauderdale, Florida 33312-6900. RECITALS A. The Company proposes to offer for sale to investors up to 260,000 Units, each Unit consisting of one share of the Company's common stock, $.0001 par value ("Common Stock") and one Common Stock Purchase Warrant, for a maximum aggregate offering price of $1,495,000 (the "Proceeds"). B. The Company has engaged West America Securities Corp., a member of the National Association of Securities Dealers, Inc. (the "Placement Agent") to use its best efforts to sell, as exclusive agent for the Company, the Units. The Placement Agent shall be bound by this Agreement. However, for purposes of communications and directives, the Escrow Agent need only accept those signed by the Company. C. The Company desires to establish an escrow account in which funds received from subscribers for the Units will be deposited pending completion of the escrow period. Bank agrees to serve as Escrow Agent in accordance with the terms and conditions set forth herein and subject to the approval of the state securities administrators set forth on the list attached hereto as Exhibit "A" (hereinafter referred to as the "State Administrators"). The purpose of this Agreement is to comply with the provisions of Rules 10(b)-9 and 15c2-4 promulgated under the Securities Exchange Act of 1934, as amended, and under the applicable securities laws of all states in which the offering of Units (the "Offering") is made. D. The Escrow Agent must be satisfactory to the State Administrators and it is not affiliated with the Company. AGREEMENT 1. ESTABLISHMENT OF ESCROW ACCOUNT. Effective as of the date of the commencement of the Offering, the parties hereby establish an escrow account with the Escrow Agent, which escrow account shall be entitled "Cuidao Holding Corp./ Bank Escrow Account (the "Escrow Account"). The Company and the Placement Agent will instruct subscribers to make checks for subscriptions payable to " BANK , AS ESCROW AGENT FOR CUIDAO HOLDING CORP." until a minimum of 95,000 Units have been sold in the Offering. Any checks received that are made payable to a party other than the Escrow Agent shall be returned to the Company or the Placement Agent. 2 2. ESCROW PERIOD. The period for the existence of the escrow (the "Escrow Period") shall begin with the commencement of the Offering and shall terminate upon the earlier to occur of the following dates: A. The date upon which the Escrow Agent confirms to the State Administrators as hereinafter provided that it has received in the Escrow Account gross proceeds of $546,250 in deposited funds (the "Minimum Offering Amount"); or B. The expiration of ninety (90) days from the date of commencement of the Offering (unless extended as permitted in the Registration Statement filed with the Securities and Exchange Commission in connection with the Offering for an additional ninety (90) days at the sole discretion of the Company with a copy of such extension to the Escrow Agent and the State Administrators); or C. The date upon which a determination is made by the Company to terminate the Offering prior to the sale of the Minimum Offering Amount. During the Escrow Period, the Company is aware and understands that it is not entitled to any funds received into escrow and no amounts deposited in the Escrow Account shall become the property of the Company or any other entity, or be subject to the debts of the Company or any other entity. 3. DEPOSITS INTO THE ESCROW ACCOUNT. All monies received from subscribers of the Units will be deposited with the Escrow Agent by twelve o'clock noon of the next business day after receipt of said monies from subscribers, together with a written account of each sale, which account shall set forth, among other things, the subscriber's name and address, the number of Units purchased, the amount paid therefor, whether the consideration received was in the form of a check, draft, or money order, the date of said check, draft, or money order, and the date received and delivered to the Escrow Agent. All monies so deposited in the Escrow Account are hereinafter referred to as the "Escrow Amount." The State Administrators shall have the authority to inspect the Escrow Account without obtaining any further permission from the Company and/or the Escrow Agent. Unless and until all of the State Administrators order the release of the Escrow Amount to the Company, such Escrow Amount shall not be, nor shall such Escrow Amount be considered to be, assets of the Company. 4. DISBURSEMENTS FROM THE ESCROW ACCOUNT. A. In the event the Escrow Agent does not receive deposits totalling the Minimum Offering Amount prior to the termination of the Escrow Period, the Escrow Agent shall promptly notify the State Administrators by telephone, confirmed in writing, of such fact and shall, upon approval by the State Administrators, promptly thereafter refund to each subscriber the amount received from the subscriber, without deduction, penalty, or expense to 2 3 the subscriber, and the Escrow Agent shall notify the Company and the Placement Agent of its distribution of the funds. The purchase money returned to each subscriber shall be free and clear of any and all claims of the Company or any of its creditors. B. In the event the Escrow Agent receives the Minimum Offering Amount prior to termination of the Escrow Period, the Escrow Amount will not be released to the Company until such amount is received by the Escrow Agent in collected funds and the release provisions set forth in paragraph C below are complied with. For purposes of this Agreement, the term "collected funds" shall mean all funds received by the Escrow Agent which have cleared normal banking channels and are in the form of cash. The Minimum Offering Amount may be met by funds that are deposited from the effective date of the Offering up to and including the date on which the contingency must be met, i.e., during the Escrow Period. However, escrow cannot be broken and the Offering may not proceed to closing until customer checks have been collected through the normal banking channels in an aggregate amount sufficient to meet the Minimum Offering Amount. Purchases made after the Escrow Period has terminated, but prior to the date escrow is broken pending clearance of subscribers' funds, may not subsequently be counted to meet the Minimum Offering Amount should checks tendered prior to the termination of the Escrow Period fail to clear the banking system. In no event may the Placement Agent substitute its own good check for the check of a purchaser that has insufficient funds nor otherwise purchase Units to satisfy the offering contingency unless purchasing for investment prior to the termination of the Escrow Period and the offering document discloses the maximum amount of such potential purchase and such arrangement has been approved by the State Administrators. C. In no event will funds be released to the Company until the State Administrators have entered an Order authorizing the release of funds in the Escrow Account. Such Order will be entered only five business days after receipt by the State Administrators of an application that includes the following: (1) A verified statement duly executed by the Escrow Agent setting forth the total amount in collected funds on deposit with the Escrow Agent on the termination date (including purchases for which check or other payment had been received by the purchaser and were subsequently collected as provided in paragraph 4B hereof) and states therein that all of the conditions of this Agreement have been met. (2) A verified statement duly executed by the Company which states: (a) That all required proceeds from the sale of the Units have been placed with the Escrow Agent in accordance with the terms and conditions of this Agreement and that there have been no material omissions or changes in the financial condition of the Company, or other changes of circumstances, that would render the amount of the proceeds inadequate to finance the Company's proposed plan of operations, business or enterprise; 3 4 (b) That the required proceeds are represented by unconditional subscription agreements which are not loans and are not subject to rescission or rejection by the Company or the subscribers; (c) That there have been no material omissions or changes that would render the representations contained in the Registration Statement to be fraudulent, false or misleading; and (d) Such other information as the State Administrators may require. 5. COLLECTION PROCEDURE. The Escrow Agent is hereby authorized to forward each check for collection and, upon collection of the proceeds of each check, deposit the collected proceeds in the Escrow Account. As an alternative, the Escrow Agent may telephone the bank on which the check is drawn to confirm that the check has been paid. Any check returned unpaid to the Escrow Agent shall be returned to the Company or the Placement Agent. In such cases, the Escrow Agent will promptly notify the Company of such return. If the Company rejects any subscription for which the Escrow Agent has already collected funds, the Escrow Agent shall promptly issue a refund check to the rejected subscriber. If the Company rejects any subscription for which the Escrow Agent has not yet collected funds but has submitted the subscriber's check for collection, the Escrow Agent shall promptly issue a check in the amount of the subscriber's check to the rejected subscriber after the Escrow Agent has cleared such funds. If the rejected subscriber's check which has been submitted for collection by the Escrow Agent is uncollectible, and if the Escrow Agent has issued a check to the rejected subscriber hereunder, then the Escrow Agent shall notify the Company and the Company shall immediately reimburse the Escrow Agent for the amount of such funds. If the Escrow Agent has not yet submitted a rejected subscriber's check for collection, the Escrow Agent shall promptly remit the subscriber's check directly to the subscriber. 6. INVESTMENT OF ESCROW AMOUNT. The Escrow Agent may invest the Escrow Amount only in such accounts or investments as the Company may specify by written notice. The Company may only specify investment in (1) bank accounts, (2) bank money-market accounts, (3) short-term certificates of deposit issued by a bank, or (4) short-term securities issued or guaranteed by the U.S. Government. 7. COMPLIANCE WITH TAXATION MATTERS. The Company shall provide the Escrow Agent with a completed Internal Revenue Service ("IRS") Form W-8 or Form W-9 upon the execution of this Agreement. The Escrow Agent may delay accepting escrow funds until the IRS forms have been provided. For purposes of reporting to tax authorities, the Escrow Agent will treat all income earned by the Escrow Agent as paid to the Company at the time income is received by the Escrow Account. 4 5 The Company shall be responsible for determining any requirements for paying taxes or reporting any payments for tax purposes. The Company shall give written directions to the Escrow Agent to prepare and file tax information or to withhold any payments hereunder for tax purposes. The Company covenants and agrees to indemnify and hold the Escrow Agent harmless against all liability for tax withholding and/or reporting for any payments made by the Escrow Agent pursuant to this Agreement. 8. COMPENSATION OF ESCROW AGENT. The Company shall pay the Escrow Agent a fee for its escrow services hereunder in accordance with the fee schedule attached hereto as Exhibit "B". However, no such fee or any monies whatsoever shall be paid out of or chargeable to the funds on deposit in the Escrow Account. In the event Escrow Agent performs any service not specifically provided hereinabove, or that there is any assignment or attachment of any interest in the subject matter of this escrow or modification thereof, or that any controversy arises hereunder, or that Escrow Agent is named a party to, or intervenes in, any litigation pertaining to this escrow or the subject matter thereof, Escrow Agent shall be reasonably compensated therefor and reimbursed for all costs and expenses including attorneys' fees occasioned thereby. Escrow Agent shall have a first lien on the property and papers held by it hereunder for such compensation and expenses, and the Company agrees to pay the same. 9. RESIGNATION OF ESCROW AGENT. The Escrow Agent may not resign as escrow agent without the express consent of the State Administrators, and may further do so upon giving ten (10) days written notice of such resignation to the Company at the address set forth hereinbelow. On the effectiveness of such resignation, the Escrow Agent shall deliver to any escrow agent appointed by the Company (or if there is no escrow agent appointed by the Company, then to the purchasers of the Units), all documents and money in the Escrow Account, and thereupon the Escrow Agent will be released of any further responsibility or obligation in connection with the Escrow Account or this Agreement. 10. LIABILITY OF THE ESCROW AGENT. The Escrow Agent may rely on and shall be protected, indemnified and held harmless by the Company in acting upon the written or oral instructions of any officer or director of the Company or of the Company's counsel, and the Escrow Agent will be entitled to request that further instructions be given by such persons or to request that instructions be given in writing. In performing duties under this Agreement, the Escrow Agent is authorized to rely upon any statement, consent, agreement or other instrument not only as to its due execution, its validity, and the effectiveness of its provisions, but also as to the truth and accuracy of any information contained therein, which the Escrow Agent in good faith believes to be genuine or to have been represented or signed by a proper person or persons. The Escrow Agent shall not be liable for any error of judgement made in good faith by one of its officers or directors, unless it shall be proved that the Escrow Agent or such officer or director was grossly negligent in ascertaining the pertinent facts or acted intentionally in bad faith. The Escrow Agent will have 5 6 no liability for any action or omission to act with respect to its duties under this Agreement undertaken in good faith reliance upon reasonable advice of its counsel or the Company's counsel. Should the Escrow Agent, before or after the performance of its obligations under this Agreement, receive or become aware of any conflicting demands or claims with respect to funds deposited in the Escrow Account or the rights of the Company or any of the subscribers, the Escrow Agent shall have the right to discontinue any or all acts conducted pursuant to the terms of this Agreement until such conflict has been resolved to its satisfaction. The Escrow Agent shall have a further right to commence or defend any actions or proceedings for the determination of such conflicting demands or complaints. The Company hereby covenants and agrees to indemnify the Escrow Agent and hold it harmless against any loss, liability or expense, and pay all costs, damages, judgments and expenses, including reasonable attorneys' fees, suffered or incurred by the Escrow Agent in connection with, or arising out of, this Agreement, including without limitation, any suit in interpleader brought by the Escrow Agent, except, that the Escrow Agent will not be indemnified against any such loss, liability or expense arising out of the Escrow Agent's gross negligence or willful misconduct. The Escrow Agent will be under no obligation to institute, or defend any action, suit or legal proceeding in connection herewith unless first indemnified and held harmless to the Escrow Agent's satisfaction in accordance with the foregoing. In the event the Escrow Agent shall bring a suit in interpleader, the Escrow Agent shall ipso facto be fully released and discharged from all its obligations to perform any and all duties or obligations under this Agreement. Such indemnity shall survive the termination or discharge of this Agreement or resignation of the Escrow Agent. 11. MAINTENANCE OF RECORDS. The Escrow Agent shall at all times keep and maintain a complete set of books, records and accounts relating to the subscriptions received by the Escrow Agent hereunder, and the disposition by the Escrow Agent of the proceeds thereof. All such records maintained by the Escrow Agent shall be available for inspection by the State Administrators, and the Escrow Agent shall furnish to the State Administrators, upon demand, at such place designated in such demand, true, correct, complete and current copies of any or all of such records. 12. MISCELLANEOUS. A. All notices, reports, instructions, requests and other communications given under this Agreement shall be either (a) sent in writing and served personally by delivery to a responsible officer at the party's offices listed on the signature pages hereto; or delivered by first class registered or certified U.S. mail, return receipt requested, postage prepaid; or (b) sent by telex or telecopier and then acknowledged as received by return telex or telecopier by the intended recipient. Notices shall be deemed received only upon receipt. Notices shall be directed to the addresses or telex or telecopier numbers indicated on the signature pages hereto; provided that a party may change its address or numbers for notices by giving notice to all other 6 7 parties in accordance with this paragraph. Escrow Agent shall be protected in acting upon any notice, request, waiver, consent, receipt or other paper or document believed by Escrow Agent to be signed by the proper party or parties. B. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of California. This Agreement, together with any exhibits and/or schedules referred to herein, constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements and undertakings of the parties in connection herewith. C. All of the terms, covenants, conditions and provisions of this Agreement shall bind and inure to the benefit of the parties hereto and to their respective representatives, successors and assigns. D. No failure or delay on the part of the Escrow Agent in exercising any right, power or remedy may be, or may be deemed to be, a waiver thereof; nor may any single or partial exercise of any right, power or remedy preclude any other or further exercise of any other right, power or remedy. E. The invalidity of any provision hereof shall in no way affect the validity of any other provision hereof. Each of the parties hereto shall at the request of the other party, deliver to the requesting party all further documents or other assurances as may reasonably be necessary or desirable in connection with this Agreement. F. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. G. In the event of any dispute arising out of the subject matter of this Agreement, the prevailing party shall recover, in addition to any other damages assessed, its attorneys' fees and court costs incurred in litigating or otherwise settling or resolving such dispute. H. Escrow Agent may consult with legal counsel in the event of any dispute or question as to the instructions provided hereunder or Escrow Agent's duties thereunder, and Escrow Agent shall incur no liability and/or expense therefor by acting in accordance with instructions of legal counsel. I. Escrow Agent shall not be required to take or be bound by notice of such default involving any expense or liability, unless notice in writing is given to the Escrow Agent at the office above named, and unless it is indemnified in a manner satisfactory to it against such expense or liability. 7 8 J. In the event the escrow created by this Agreement is canceled for any reason, the Company will nevertheless pay the escrow fee, plus all other costs and expenses of Escrow Agent, as established under Section 8 of this Agreement. Should the Escrow Agent resign as escrow hereunder pursuant to Section 9 of this Agreement, Escrow Agent shall be entitled to reimbursement only for those costs and expenses incurred by Escrow Agent to date of such resignation. The Company and the Escrow Agent have entered into this Agreement on this ___ day of _____, 1998 in multiple counterparts, each of which shall be considered an original. Escrow Agent, by its signature hereon, accepts the escrow agency created by this Agreement, and agrees to carry out its duties as escrow agent pursuant to the terms and conditions contained herein. COMPANY Cuidao Holding Corp. By:________________________________________ President Address for Notices: 3201 West Griffin Road, Suite 204 Ft. Lauderdale, Florida 33312-6900 Facsimile: (954) 964-7087 ESCROW AGENT Bank By:________________________________________ Authorized Officer Address for Notices: , California 8 9 EXHIBIT A STATE SECURITIES COMMISSIONS 1. Colorado Department of Regulatory Agencies, Division of Securities 2. Delaware Division of Securities 3. Florida Division of Securities and Investor Protection 4. Georgia Secretary of State, Securities Division 5. Illinois Securities Department 6. Maryland Office of the Attorney General, Division of Securities 7. New Jersey Department of Law and Public Safety, Division of Consumer Affairs, Bureau of Securities 8. New York Department of Law 9. North Carolina Secretary of State, Securities Division 10. Ohio Division of Securities 11. Virginia Corporation Commission, Division of Securities and Retail Franchising 9 10 EXHIBIT B ESCROW FEE SCHEDULE 10 EX-1.3 4 WARRANT AGREEMENT 1 EXHIBIT 1.3 WARRANT AGREEMENT BETWEEN CUIDAO HOLDING CORP. AND FLORIDA ATLANTIC STOCK TRANSFER, INC., AS WARRANT AGENT DATED AS OF _______________, 1998 2 WARRANT AGREEMENT dated as of __________, 199__ between Cuidao Holding Corp., a Florida corporation (the "COMPANY") and Florida Atlantic Stock Transfer, Inc. (together with its permitted successors and assigns, the "WARRANT AGENT"). WHEREAS, the Company proposes to offer for sale 260,000 Units, consisting of 260,000 shares of its common stock, $.0001 par value (the "COMMON STOCK") 260,000 Common Stock Purchase Warrants (the "WARRANTS") at a price of $5.75 per Unit, for an aggregate offering price of $1,495,000; WHEREAS, each Warrant entitles the holder thereof to purchase one share of Common Stock at an exercise price of $8.00, subject to adjustment, at any time until ________, 2001 (the Common Stock issuable upon exercise of the Warrants shall hereinafter be referred to as the "WARRANT SHARES"); WHEREAS, the Company wishes the Warrant Agent to act as warrant agent on behalf of the Company in connection with the issuance, division, transfer, exchange, substitution and exercise of the Warrants, and the Warrant Agent is willing to so act. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows: SECTION 1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the instructions set forth hereinafter in this Agreement, and the Warrant Agent hereby accepts such appointment. SECTION 2. Warrant Certificates. The certificates evidencing the Warrants (the "WARRANT CERTIFICATES") shall be substantially in the form set forth in Exhibit A attached hereto. SECTION 3. Execution of Warrant Certificates. Warrant Certificates shall be signed on behalf of the Company by its Chairman of the Board, its President or a Vice President, and by its Secretary or an Assistant Secretary. Each such signature may be in the form of a facsimile signature of the present or any future Chairman of the Board, President, Vice President, Secretary or Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant Certificates and for that purpose the Company may adopt and use the facsimile signature of any person who shall have been Chairman of the Board, President, Vice President, Secretary or Assistant Secretary, notwithstanding the fact that at the time the Warrant Certificates shall be delivered or disposed of he shall have ceased to hold such office. 1 3 In case any officer of the Company who shall have signed any of the Warrant Certificates shall cease to be such officer before the Warrant Certificates so signed shall have been disposed of by the Company, such Warrant Certificates nevertheless may be delivered or disposed of as though such person had not ceased to be such officer of the Company; and any Warrant Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer of the Company to sign such Warrant Certificate, although at the date of the execution of this Warrant Agreement any such person was not such officer. SECTION 4. Registration and Countersignature. Warrant Certificates shall be manually countersigned by the Warrant Agent and shall not be valid for any purpose unless so countersigned. The Warrant Agent shall, upon written instructions of the Chairman of the Board, Chief Executive Officer, Chief Operating Officer, or Chief Financial Officer of the Company, countersign and deliver Warrant Certificates as provided in this Agreement entitling the holders thereof initially to purchase not more than the number of Warrant Shares referred to in the first recital hereof. The Company has appointed the Warrant Agent as the register with respect to the Warrants. The Warrant Agent shall number and register the Warrant Certificates in a register. The Company and the Warrant Agent may deem and treat the registered holder(s) of the Warrants as the absolute owner(s) thereof (notwithstanding any notation of ownership or other writing on the certificate relating thereto), for all purposes, and shall not be affected by any notice to the contrary and shall not be bound to recognize any equitable or other claim to or in the Warrant on the part of any other person. SECTION 5. Registration of Transfers and Exchanges. (a) Transfer and Exchange of Warrants. When Warrants are presented to the Warrant Agent with a request (i) to register the transfer of the Warrants or (ii) to exchange such Warrants for an equal number of Warrants of other authorized denominations, the Warrant Agent shall register the transfer or make the exchange as requested if its requirements for such transactions are met; provided, however, that the Warrants so presented have been duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Warrant Agent, duly executed by the holder thereof or by his attorney and duly authorized in writing. 2 4 (b) Obligations with Respect to Transfers and Exchanges of Warrants. To permit registrations of transfers and exchanges, the Company shall execute and the Warrant Agent is hereby authorized to countersign, in accordance with the provisions of Sections 3 and 4 and this Section 5, Warrants as required pursuant to the provisions of this Section 5. All Warrants issued upon any registration of transfer or exchange of Warrants shall be the valid obligations of the Company, entitled to the same benefits under this Warrant Agreement, as the Warrants surrendered upon such registration of transfer or exchange. Prior to due presentment for registration of transfer of any Warrant, the Warrant Agent and the Company may deem and treat the person in whose name any Warrant is registered as the absolute owner of such Warrant and neither the Warrant Agent, nor the Company shall be affected by notice to the contrary. No service charge shall be made to a holder for any registration, transfer or exchange. SECTION 6. Exercise of Warrants. (a) Subject to the terms of this Agreement, each Warrant holder shall have the right, which may be exercised commencing on ________, 1998 and until 5:00 P.M., New York Time, on __________, 2001 to receive from the Company the number of fully paid and nonassessable Warrant Shares which the holder may at the time be entitled to receive on exercise of such Warrants and payment of the Exercise Price (as herein defined) then in effect for such Warrant Shares. Each Warrant not exercised prior to 5:00 P.M., New York Time, on _________, 2001 shall become void and all rights thereunder and all rights in respect thereof under this Agreement shall cease as of such time. (b) A Warrant may be exercised upon surrender to the Company at the principal office of the Warrant Agent of the certificate or certificates evidencing the Warrants to be exercised, with the form of election to purchase on the reverse thereof duly filled in and signed, which signature shall be guaranteed by an "eligible guarantor institution" as defined in Rule 17Ad- 15(a)(2) promulgated under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and upon payment to the Company of the exercise price of $8.00 (the "EXERCISE PRICE"), as adjusted as provided herein, for each 3 5 Warrant Share in respect of which a Warrant is then exercised. Payment of the aggregate Exercise Price shall be made in cash or by certified or official bank check in lawful money of the United States of America to the order of the Company. Subject to the provisions of Section 7 hereof, upon such surrender of Warrants and payment of the Exercise Price, the Company shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the holder and in such name or names as the holder may designate, a certificate or certificates for the number of full Warrant Shares issuable upon the exercise of such Warrants together with cash as provided in Section 13 hereof. The Warrants shall be exercisable, at the election of the holders thereof, either in full or from time to time in part and, in the event that a certificate evidencing Warrants is exercised in respect of fewer than all of the Warrant Shares issuable on such exercise at any time prior to the date of expiration of the Warrants, a new certificate evidencing the remaining Warrant or Warrants will be issued and the Warrant Agent is hereby irrevocably authorized to countersign and to deliver the required new Warrant Certificate or Certificates pursuant to the provisions of this Section and of Section 4 hereof, and the Company, whenever required by the Warrant Agent, will supply the Warrant Agent with Warrant Certificates duly executed on behalf of the Company for such purpose. (c) All Warrant Certificates surrendered upon exercise of Warrants shall be canceled by the Warrant Agent and disposed of by the Company in accordance with applicable law. 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 the Warrant Shares through the exercise of such Warrants. The Warrant Agent shall keep copies of this Agreement and any notices given or received hereunder available for inspection by the holders and the Company during normal business hours at its office. The Company shall supply the Warrant Agent from time to time with such numbers of copies of this Agreement as the Warrant Agent may request. SECTION 7. Redemption Right. The Company shall have the right, exercisable immediately, to redeem all or, at the discretion of the Company, any portion of the Warrants at a price of $.05 per Warrant, at any time prior to their expiration on not less than 30 days' written notice, if the Quoted Price (as defined in Section 13 hereof) of the Common Stock equals or exceeds $10.00 per share for 30 consecutive trading days ending within 10 days of a notice of redemption from the Company. The redemption right provided for 4 6 herein shall be exercisable by written notice (the "REDEMPTION NOTICE") delivered to a registered holder of a Warrant. The Redemption Notice shall at least indicate the number of Warrants to be repurchased and the date on which the redemption is to be effected, such date to be not more than forty-five (45) days after the date of the Redemption Notice. No fractional Warrants shall be repurchased by the Company. SECTION 8. Payment of Taxes. The Company shall pay any documentary stamp taxes attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided that the Company shall not be required to pay any tax or taxes that may be payable in respect of any transfer involved in the issuance of any Warrant Certificates or any certificates for Warrant Shares in a name other than that of the registered holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and the Company shall not be required to issue or deliver such Warrant Certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid or is not due. SECTION 9. Mutilated or Missing Warrant Certificates.If any mutilated Warrant Certificate is surrendered to the Warrant Agent, or the Company and the Warrant Agent receive evidence to their satisfaction of the destruction, loss or theft of any Warrant Certificate, the Company shall issue and the Warrant Agent, upon the written order of the Company signed by two officers of the Company, shall countersign a replacement Warrant Certificate if the Warrant Agent's requirements for replacements of Warrant Certificates are met. If required by the Warrant Agent or the Company, an indemnity bond must be supplied by the holder of such Warrant Certificate that is sufficient in the judgment of the Warrant Agent and the Company to protect the Company, the Warrant Agent or any agent from any loss that any of them may suffer if a Warrant Certificate is replaced. The Company or the Warrant Agent may charge for the expenses in replacing a Warrant Certificate. Every replacement Warrant Certificate is an obligation of the Company and shall be entitled to all of the benefits of this Agreement equally and proportionately with all other Warrant Certificates duly issued hereunder. SECTION 10. Reservation of Warrant Shares. The Company shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock or its authorized and issued Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the maximum number of shares of Common Stock that may then be deliverable upon the exercise of all outstanding Warrants. 5 7 The Company or, if appointed, the transfer agent for the Common Stock shall be irrevocably authorized and directed at all times to reserve such number of authorized shares of Common Stock as shall be required for such purpose. The Company shall keep a copy of this Agreement on file with the transfer agent for the Common Stock. Before taking any action that would cause an adjustment pursuant to Section 12 hereof to reduce the Exercise Price below the then par value (if any) of the Warrant Shares, the Company shall take all action that may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares at the Exercise Price as so adjusted. The Company covenants that all Warrant Shares issued upon exercise of Warrants shall, upon issue, be fully paid, nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issue thereof. SECTION 11. Government Approvals and Stock Exchange Listings. The Company shall use its best efforts to (a) obtain and keep effective any and all permits, consents and approvals of governmental agencies and authorities and to make securities acts filings under federal and state laws, if any, that are required to permit the exercise of the Warrants and the issuance, sale, transfer and delivery of the Warrant Shares issued upon exercise of the Warrants, and (b) have the Warrant Shares, immediately upon their issuance, listed on the principal securities exchanges and markets within the United States of America, if any, on which other shares of Common Stock are then listed. SECTION 12. Adjustments; Etc. The Exercise Price and the number of shares purchasable hereunder are subject to adjustment from time to time as follows: (a) Merger, Sale of Assets, etc. If at any time while the Warrants, or any portion thereof, are outstanding and unexpired there shall be (1) a reorganization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), (2) a merger or consolidation of the Company with or into another corporation in which the Company is not the surviving entity, or a reverse triangular merger in which the Company is the surviving entity but the shares of the Company's capital stock outstanding immediately prior to the merger are converted by virtue of the merger into other property, whether in the form of securities, cash, or otherwise, or (3) a sale or transfer of the Company's properties and assets as, or substantially as, an entirety to any 6 8 other person, then as part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the holder of Warrants shall thereafter be entitled to receive upon exercise of the Warrants, during the period specified herein and upon payment of the Exercise Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from such reorganization, merger, consolidation, sale or transfer that a holder of the Warrant Shares deliverable upon exercise of the Warrants would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if the Warrants had been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 12. The foregoing provisions of this Section 12(a) shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation that are at the time receivable upon the exercise of Warrants. If the per-share consideration payable to the holder thereof for shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Company's Board of Directors. In all events, appropriate adjustment (as determined in good faith by the Company's Board of Directors) shall be made in the application of the provisions of the Warrants with respect to the rights and interests of the holders thereof after the transaction, to the end that the provisions of the Warrants shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of Warrants. (b) Reclassification, etc. If the Company, at any time while Warrants, or any portion thereof, remain outstanding and unexpired, by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under the Warrants exist into the same or a different number of securities of any other class or classes, the Warrants shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to the purchase rights under the Warrants immediately prior to such reclassification or other change and the Exercise Price thereof shall be appropriately adjusted, all subject to further adjustment as provided in this Section 12. (c) Split, Subdivision or Combination of Shares. If the Company at any time while Warrants, or any portion thereof, remain outstanding and unexpired, shall split, subdivide or combine the securities as to which purchase rights under the Warrants exist, into a different number of securities of the same class, the Exercise Price for such 7 9 securities shall be proportionately decreased in the case of a split or subdivision or proportionately increased in the case of a combination. (d) Adjustments for Dividends in Stock or Other Securities or Property. If while Warrants, or any portion thereof, remain outstanding and unexpired, the holders of the securities as to which purchase rights under the Warrants exist at the time shall have received, or, on or after the record date fixed for the determination of eligible stockholders, shall have become entitled to receive, without payment therefor, other or additional stock or other securities or property (other than cash) of the Company by way of dividend, then and in each case, Warrants shall represent the right to acquire, in addition to the number of shares of the security receivable upon exercise of Warrants, and without payment of any additional consideration therefor, the amount of such other or additional stock or other securities or property (other than cash) of the Company that such holder would hold on the date of such exercise had he been the holder of record of the security receivable upon exercise of a Warrant on the date hereof and had thereafter, during the period from the date hereof to and including the date of such exercise, retained such shares and/or all other additional stock available by it as aforesaid during such period, giving effect to all adjustments called for during such period by the provisions of this Section 12. (e) Form of Warrants. The Company may, at its option, issue new Warrant Certificates evidencing Warrants in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Exercise Price per Warrant Share and the number or kind or class of shares or other securities or property purchasable under the Warrant Certificate made in accordance with the provisions of this Agreement. However, irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon the exercise of the Warrants, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are used in the Warrants initially issuable pursuant to this Agreement. SECTION 13. Fractional Interests. The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same holder, the number of full Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of the Warrants so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 8 10 13, be issuable on the exercise of any Warrants (or specified portion thereof), upon payment in full of the Exercise Price with respect to such fraction of a Warrant Share the Company shall pay an amount in cash equal to the same fraction of the Current Market Price of such share of Common Stock on the day immediately preceding the date the Warrant is presented for exercise, provided that at the request of the Warrant holder, the Exercise Price with respect to such fraction of a Warrant Share may be netted against the cash to be paid by the Company under this Section 13. With respect to this Agreement, the "CURRENT MARKET PRICE" per share of Common Stock on any date is the average of the Quoted Prices of the Common Stock for 30 consecutive trading days commencing 45 trading days before the date in question. The "QUOTED PRICE" of the Common Stock is the last reported sales price of the Common Stock as reported by the Nasdaq Stock Market, or if the Common Stock is listed on a securities exchange, the last reported sales price of the Common Stock on such exchange which shall be for consolidated trading if applicable to such exchange, or if neither so reported or listed, the last reported bid price of the Common Stock. In the absence of one or more such quotations, the Current Market Price shall be determined in good faith by a nationally recognized investment banking firm that is a member firm of the National Association of Securities Dealers, Inc. and independent of the Company. SECTION 14. Notices to Warrant Holders. Upon any adjustment or action required to be taken pursuant to Section 12 of this Agreement, the Company shall (a) promptly prepare a certificate setting forth such adjustment or action and a brief statement of the facts accounting for such adjustment or action, (b) promptly file with the Warrant Agent and with each transfer agent for the Common Stock a copy of such certificate and (c) send a brief summary thereof to each holder of a Warrant Certificate in accordance with Section 19 hereof. In case: (a) of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or of the conveyance or transfer of the properties and assets of the Company substantially as an entirety, or of any reclassification or change of Common Stock issuable upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or a tender offer or exchange offer for shares of Common Stock; or 9 11 (b) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall cause to be given to each of the registered holders of the Warrant Certificates at his address appearing on the Warrant register, at least 20 days prior to the applicable record date hereinafter specified, or promptly in the case of events for which there is no record date, in accordance with Section 19 hereof, a written notice stating, as appropriate, (i) the initial expiration date set forth in any tender offer or exchange offer for shares of Common Stock, or (ii) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange such shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up. The failure to give the notice required by this Section 14 or any defect therein shall not affect the legality or validity of any consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up, or the vote upon any action. Nothing contained in this Agreement or in any of the Warrant Certificates 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 or the election of Directors of the Company or any other matter, or any rights whatsoever as stockholders of the Company. SECTION 15. Concerning the Warrant Agent. The Company agrees to pay to the Warrant Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Warrant Agent, its reasonable expenses and counsel fees and disbursements and other reasonable disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Warrant Agent for, and to hold it harmless against, any loss, liability, or expense incurred without negligence, bad faith or willful misconduct on the part of the Warrant Agent for anything done or omitted by the Warrant Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability arising therefrom, directly or indirectly. The indemnification provided for hereunder shall survive the expiration of the Warrants and the termination of this Agreement. The Warrant Agent shall be protected and shall incur no liability for, or in respect of, any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Warrant Certificate or certificate for Warrant Shares or for other securities of the Company, 10 12 instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it, after proper inquiry or examination, to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper person or persons. SECTION 16. Merger or Consolidation or Change of Name of Warrant Agent. Any corporation into which the Warrant Agent or any successor 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 or any successor Warrant Agent shall be a party, or any corporation succeeding to the corporate trust or stock transfer business of the Warrant Agent or any successor Warrant Agent, shall be the successor to the Warrant Agent under this Agreement 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 18 hereof. In case at the time such successor Warrant Agent shall succeed to the agency created by this Agreement any of the Warrant Certificates shall have been countersigned but not delivered, any such successor Warrant Agent may adopt the countersignature of the predecessor Warrant Agent and deliver such Warrant Certificates so countersigned; and, in case at that time any of the Warrant Certificates shall not have been countersigned, any successor Warrant Agent may countersign such Warrant Certificate either in the name of the predecessor or in the name of the successor Warrant Agent; and in all such cases such Warrant Certificates shall have the full force provided in the Warrant Certificates in this Agreement. In case at any time the name of the Warrant Agent shall be changed, and at such time any of the Warrant Certificates shall have been countersigned but not delivered, the Warrant Agent may adopt the countersignature under its prior name and deliver Warrant Certificates so countersigned; and, in case at that time any of the Warrant Certificates shall not have been countersigned, the Warrant Agent may countersign such Warrant Certificates either in its prior name or in its changed name; and in all such cases such Warrant Certificates shall have the full force provided in the Warrant Certificates and in this Agreement. SECTION 17. Duties of Warrant Agent. The Warrant Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, all of which the Company, by its acceptance hereof, and the holders of Warrant Certificates, by their acceptance thereof, shall be bound: 11 13 (a) The Warrant Agent may consult with legal counsel selected by it (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Warrant Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Agreement the Warrant Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by a person reasonably believed by the Warrant Agent to be the Chairman of the Board, the President, any Vice President, the Treasurer, the Secretary or any Assistant Secretary of the Company and delivered to the Warrant Agent; and such certificate shall be full authorization to the Warrant Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Warrant Agent shall be liable hereunder only for its own negligence, bad faith or willful misconduct. (d) The Warrant Agent shall not be liable for, or by reason of, any statements of fact or recitals contained in this Agreement or in the Warrant Certificates (except as to the fact that it has countersigned the Warrant Certificates) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Warrant Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Warrant Agent) or in respect of the validity or execution of any Warrant Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Warrant Certificate; nor shall it be responsible for any adjustment required under the provisions of Section 12 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Warrants evidenced by Warrant Certificates after receipt of the certificate described in Section 14 hereof); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of 12 14 any shares of Common Stock or other securities to be issued under this Agreement or any Warrant Certificate or as to whether any shares of Common Stock or other securities shall, when so issued, be validly authorized and issued, fully paid and nonassessable. (f) The Warrant Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder and certificates delivered pursuant to any provision hereof from any person reasonably believed by the Warrant Agent to be the Chairman of the Board, the President, any Vice President, the Secretary, any Assistant Secretary or the Treasurer of the Company, and is authorized to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with written instructions of any such person. Any application by the Warrant Agent for written instructions from the Company may, at the option of the Warrant Agent, set forth in writing any action proposed to be taken or omitted by the Warrant Agent under this Agreement and the date on and/or after which such action shall be taken or such omission shall be effective. The Warrant Agent shall not be liable for any action taken by, or omission of, the Warrant Agent in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than five business days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to any earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Warrant Agent shall have received written instructions in response to such application specifying the action to be taken or omitted. (g) 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 pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Warrant Agent under this Agreement to the extent lawfully permitted to so act. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. (h) The Warrant Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents (which shall not include its employees), and the Warrant Agent shall not be answerable or accountable for any act or omission, default, neglect or misconduct of any such attorneys or agents or for 13 15 any loss to the Company or to the holders of the Warrants resulting from any such act, omission, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof. (i) No provision of this Agreement shall require the Warrant Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. (j) If, with respect to any Warrant Certificate surrendered to the Warrant Agent for exercise or transfer, the form of election to purchase or transfer, as the case may be, has not been completed, the Warrant Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company. (k) The Warrant Agent shall not be required to take notice of, or be deemed to have notice of, any fact, event or determination under this Agreement unless and until the Warrant Agent shall be specifically notified in writing of such fact, event or determination. SECTION 18. Change of Warrant Agent. The Warrant Agent or any successor Warrant Agent may resign and be discharged from its duties under this Agreement upon 30 days' notice in writing mailed to the Company and to each transfer agent of the Common Stock by registered or certified mail. The Company may remove the Warrant Agent or any successor Warrant Agent upon 30 days' notice in writing mailed to the Warrant Agent or successor Warrant Agent, as the case may be, and to each transfer agent of the Common Stock by registered or certified mail. 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 giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Warrant Agent, then the holder of any Warrant Certificate may apply to any court of competent jurisdiction for the appointment of a new Warrant Agent. Notwithstanding any provision to the contrary contained herein, the removal or resignation of the Warrant Agent will not be effective until such time as a successor Warrant Agent has been appointed in accordance with the terms of this Agreement. Any successor Warrant Agent, whether appointed by the Company or by such a court, shall be a corporation or other business organization organized and doing business under the laws of the United States or any state of the United States, in good standing, which is authorized under such laws to exercise corporate trust or 14 16 stock transfer powers. 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 predecessor 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. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Warrant Agent and each transfer agent of the Common Stock and mail notice thereof in writing to the registered holders of the Warrant Certificates. Failure to give any notice provided for in this Section 18, 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. SECTION 19. Notices. Any notice or demand authorized by this Agreement to be given or made by the registered holder of any Warrant Certificate to or on the Company shall be sufficiently given or made when and if deposited in the mail, first class or registered, postage prepaid, or next-day air courier, addressed to the office of the Company expressly designated by the Company at its office for purposes of this Agreement (until the Warrant holders are otherwise notified in accordance with this Section by the Company) as follows: Cuidao Holding Corp. 3201 West Griffin Road, Suite 204 Ft. Lauderdale, Florida 33312-6900 Attention: Mr. C. Michael Fisher, President with a copy to: Law Offices of John W. Martin 5777 West Century Boulevard, Suite 1540 Los Angeles, California 90045 Attention: John W. Martin, Esq. Subject to the provisions of Section 16 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the registered holder of any Warrant Certificate 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 with the Company) as follows: 15 17 Florida Atlantic Stock Transfer, Inc. 5701 N. Pine Island Road, Suite 310B Tamarac, Florida 33321 Attention: Mr. Rene Garcia, President Any notice pursuant to this Agreement to be given by the Company to the registered holder(s) of any Warrant Certificate shall be sufficiently given and when and if deposited in the mail, first class or registered, postage prepaid, or next-day air courier, addressed (until the Company is otherwise notified in accordance with this Section by such holder) or next-day air courier to such holder at the address appearing on the Warrant register of the Company. SECTION 20. Supplements and Amendments. The Company and the Warrant Agent may from time to time supplement or amend this Agreement without the approval of any holders of Warrant Certificates in order (i) to cure any ambiguity or (ii) to correct or supplement any provision contained herein that may be defective or inconsistent with any other provision herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company may deem necessary or desirable and which shall not in any way materially adversely affect the interests of the holders of Warrant Certificates. Any amendment or supplement to this Agreement that has a material adverse effect on the interests of holders shall require the written consent of registered holders of a majority of the then outstanding Warrants. The consent of each registered holder of a Warrant affected shall be required for any amendment pursuant to which the Exercise Price would be increased or the number of Warrant Shares purchasable upon exercise of Warrants would be decreased. The Warrant Agent shall be entitled to receive and, subject to Section 17 hereof shall be fully protected in relying upon an officers' certificate and opinion of counsel as conclusive evidence that any such amendment or supplement is authorized or permitted hereunder, that it is not inconsistent herewith, and that it will be valid and binding upon the Company in accordance with its terms. The Company may not sign any amendment or supplement until the Company's board of directors approves it. SECTION 21. Determinations and Actions by the Board of Directors, etc. All actions, calculations, interpretations and determinations (including, without limitation, all omissions with respect to the foregoing) which are done or made by the Board of Directors in good faith shall not subject the Board of Directors, or any member thereof, to any liability to the holders of the Warrant Certificates. 16 18 SECTION 22. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company shall bind and inure to the benefit of its successors and assigns hereunder. Upon becoming a successor to the Company, such successor shall be deemed to be the Company for the purposes of this Agreement. SECTION 23. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF FLORIDA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. SECTION 24. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. SECTION 25. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. SECTION 26. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 17 19 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. CUIDAO HOLDING CORP. By______________________________________ Name: C. Michael Fisher Title: President FLORIDA ATLANTIC STOCK TRANSFER, INC. By:_____________________________________ Name: Rene Garcia Title: President 18 20 EXHIBIT A [Form of Warrant Certificate] [Face] CUIDAO HOLDING CORP. Void After ______________, 2001 COMMON STOCK PURCHASE WARRANT CERTIFICATE THIS CERTIFIES THAT, for value received, ____________________ or registered assigns, is the owner of the number of Common Stock Purchase Warrants ("Warrants") set forth above. Each Warrant (subject to adjustments as hereinafter referred to) entitles the owner hereof to purchase during the three year period commencing _____________, 1998 until 5:00 P.M., New York Time, on ______________, 2001, one fully paid and nonassessable share of common stock, $.0001 par value, of Cuidao Holding Corp., a Florida corporation (hereinafter called the "Corporation") (such shares of common stock being hereinafter referred to as the "Common Stock"), upon payment of the warrant price (as hereinafter described); provided, however, that under certain conditions set forth in the Warrant Agreement hereinafter mentioned, the number of shares of Common Stock purchasable upon the exercise of the Warrants may be increased or reduced and the warrant price may be adjusted. Subject to adjustment as aforesaid, the initial warrant price per Warrant (hereinafter called the "warrant price") shall be $8.00 per Warrant. As provided in said Warrant Agreement, the warrant price and any and all applicable taxes due in connection with the exercise of the Warrants, the exchange of the initial Warrants for Common Stock and the issuance of the Common Stock is payable, upon the exercise of the Warrants, in lawful money of the United States either in cash or by certified check or bank draft to the order of the Corporation. Under certain conditions as set forth in the Warrant Agreement, the Warrants may be called for redemption as a whole at any time or in part from time to time after the Warrants become exercisable and prior to the expiration of the Warrants at a redemption price of $.05 per Warrant upon not less than 30 days' prior written notice if the closing bid price of the Common Stock equals or exceeds $10.00 per share for 30 consecutive trading days ending within 10 days of the notice of redemption. A-1 21 Upon the exercise of the Warrants, the form of election to purchase on the reverse hereof must be properly completed and executed and this Warrant Certificate surrendered. In the event that less than all of the Warrants represented by this certificate are exercised at any one time, a new Warrant Certificate for the remaining number of unexercised Warrants will be issued upon such surrender. Prior to the due presentment for registration of transfer of this Warrant Certificate, the Corporation and the Warrant Agent may deem and treat the registered holder as the absolute owner hereof and of each Warrant represented hereby (notwithstanding any notation of ownership or other writing herein made by anyone other than a duly authorized officer of the Corporation or the Warrant Agent), for all purposes, and neither the Corporation nor the Warrant Agent shall be affected by any notice to the contrary. This Warrant Certificate is issued under, and the rights represented hereby are subject to, the terms and provisions contained in a Warrant Agreement dated , 1998, by and among the Corporation and Florida Atlantic Stock Transfer, Inc., as Warrant Agent (the "Warrant Agent"), and is further subject to all the terms and provisions of which the registered holder of this Warrant Certificate, by acceptance hereof, assents. Reference is hereby made to said Warrant Agreement for a more complete statement of the rights and limitations of rights of the registered holders hereof, the rights and duties of the Warrant Agent and the rights and obligations of the Corporation thereunder. Copies of said Warrant Agreement are on file at the office of the Warrant Agent. The Corporation shall not be required upon the exercise of the Warrants to issue fractions of shares of Common Stock. The Warrants are transferable at the office of the Warrant Agent (or of its successor as Warrant Agent) by the registered holder hereof in person or by attorney duly authorized in writing but only in the manner and subject to the limitations provided in the Warrant Agreement and upon surrender of this Warrant Certificate and the payment of any transfer taxes. Upon any such transfer, a new Warrant Certificate, or new Warrant Certificates of different denomination, of like tenor and representing an equal aggregate number of Warrants will be issued to the transferee in exchange for this Warrant Certificate which shall be canceled. This Warrant Certificate when surrendered at the office of the Warrant Agent (or of its successors as Warrant Agent) by the registered holder hereof in person or by attorney duly authorized in writing may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement for another Warrant Certificate, or other Warrant Certificates of different denominations, of like tenor and representing A-2 22 an equal number of Warrants; provided, however, that in the event that a Warrant Certificate surrendered for transfer bears a restrictive legend, the Warrant Agent shall not cancel such certificate and issue new Warrant Certificates in exchange therefor until the Warrant Agent has received an opinion of counsel for the Corporation stating that such transfer may be made and indicating whether the new Warrant Certificate must also bear a restrictive legend. If this Warrant Certificate shall be surrendered for exercise within any period during which the transfer books for the Common Stock purchasable upon the exercise of the Warrants are closed for any purpose, the Corporation shall not be required to make delivery of certificates for the Common Stock purchasable upon such exercise until the date of the reopening of said transfer books. The Corporation shall not be obligated to deliver any shares of Common Stock pursuant to the exercise of the Warrants unless a registration statement under the Securities Act of 1933, as amended, is effective with respect to such Common Stock. Warrants shall not be exercisable by the owner in any state where such exercise would be unlawful. The holder of Warrants shall not be entitled to any of the rights of a stockholder of the Corporation prior to the exercise thereof. This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent. This Warrant Certificate shall be governed by and construed in accordance with the laws of the State of Florida. A-3 23 IN WITNESS WHEREOF, the Corporation has caused this certificate to be executed by the facsimile signature of the President and attested by the facsimile signature of its Secretary. Dated: CUIDAO HOLDING CORP. By:________________________________________ President By:________________________________________ Secretary COUNTERSIGNED FLORIDA ATLANTIC STOCK TRANSFER, INC. Warrant Agent By:_____________________________ Authorized Signature A-4 24 [Reverse Side of Warrant Certificate] ELECTION TO PURCHASE To be Executed by the Registered Holder in Order to Exercise Warrants To: Cuidao Holding Corp. c/o Florida Atlantic Stock Transfer, Inc. 5701 N. Pine Island Road, Suite 310B Tamarac, Florida 33321 The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant(s) for and to purchase thereunder ___________________ shares of Common Stock provided for therein and tenders herewith payment of the purchase price in full to the order of the Corporation and requests that certificates for such shares shall be issued in the name of __________________ and be delivered to _________________ and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant Certificate for the balance remaining of the shares purchasable under the within Warrant(s) be registered in the name of, and delivered to, the undersigned at the address stated below. Dated:_______________________ Signature____________________ NOTE: The above signature must Name:________________________ correspond with the name as written upon the face of this Warrant Address:_____________________ Certificate or with the name of the assignee appearing in _____________________________ the assignment form below in every particular without alteration or enlargement or any change whatever. *Signature Guaranteed:_________ A-5 25 ASSIGNMENT To Be Executed by the Registered Holder in Order to Assign Warrants For value received______________________ hereby sell, assign and transfer unto __________________________________________________(_____) Warrants represented by the within Warrant Certificate, together with all right, title and interest therein, and do hereby irrevocably constitute and appoint ____________________________ attorney, to transfer said Warrants on the books of the within named Corporation, with full power of substitution in the premises. Dated__________________, 19_____ Signature:_________________________________ NOTE: The above signature must correspond with the name as written upon the face of this Warrant Certificate in every particular without alteration or enlargement or any change whatever. *Signature Guaranteed:_____________________ *In case of assignment, or if the Common Stock issued upon exercise is to be registered in the name of a person other than the holder, the holder's signature must be guaranteed by an eligible guarantor institution (Bank,Stockbrokers, Savings and Loan Association and Credit Unions), with membership in an approved signature guarantee medallion program pursuant to S.E.C. Rule 17Ad-15. A-6 EX-3 5 AMENDED & RESTATED ARTICLES OF INCORPORATION 1 EXHIBIT 3.0 AMENDED AND RESTATED ARTICLES OF INCORPORATION OF CUIDAO HOLDING CORP., a Florida corporation C. MICHAEL Fisher and Edward L. Magdycz certify that: 1. They are the duly elected and acting President and Secretary, respectively, of Cuidao Holding Corp, a Florida corporation (hereinafter, "Corporation"). 2. In accordance with Section 607.1007 of the Florida Business Corporation Act, the Articles of Incorporation of this Corporation shall be amended and restated to read as follows: ARTICLE I - NAME The name of this Corporation is CUIDAO HOLDING CORP. ARTICLE 2 - PURPOSE OF CORPORATION The Corporation shall engage in any activity or business permitted under the laws of the United States and of the State of Florida. ARTICLE 3 - PRINCIPAL OFFICE The address of the principal office of this Corporation is 3201 W. Griffin Rd., Suite 204 Ft. Lauderdale Florida 33312 and the mailing address is P.O. Box 820, Hallandale, Florida 33008. ARTICLE 4 - INCORPORATOR The name and street address of the incorporator of this Corporation is: Elsie Sanchez 343 Almeria Avenue Coral Gables, Florida. 33134 2 ARTICLE 5 OFFICERS The officers of the Corporation shall be: President: C. Michael Fisher Secretary: Edward L. Magdycz Chief Financial Officer: Francis X. Scanlan whose addresses shall be the same as the principal address of the Corporation. ARTICLE 6 - DIRECTORS The Director(s) of the Corporation shall be: C. Michael Fisher Edward L. Magdycz Francis J. Hornik, Jr. whose addresses shall be the same as the principal address of the Corporation. ARTICLE 7 - CORPORATE CAPITALIZATION 7.1 The Corporation is authorized to issue two classes of shares designated "Common Stock", $.0001 par value (the "Common Stock") and "Preferred Stock", $.0001 par value (the "Preferred Stock"). The total number of shares of Common Stock authorized to be issued is 100,000,000. The total number of shares of Preferred Stock authorized to be issued is 10,000,000. Upon the amendment of this Article 7 to read as set forth herein, each 2.5 shares of outstanding Common Stock shall be reverse split into one share of Common Stock. No fractional shares shall be issued to the current shareholders of Common Stock as a result of this 1-for-2.5 reverse stock split, but instead, all fractional shares of Common Stock resulting from this 1-for-2.5 reverse stock split shall be rounded, if necessary, to the next lower whole share. The Preferred Stock authorized by these Articles of Incorporation may be issued from time to time in one or more series. The Board of Directors is authorized to determine or alter any or all of the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock other than the Series A Preferred Stock described herein, and to fix, alter or reduce (but not below the number then outstanding) the number of shares comprising any such series and the designation thereof, or any of them, and to provide for the rights and terms of redemption or conversion of the shares of any such series. 3 7.2 The initial series of Preferred Stock shall comprise 100,000 shares and shall be designated "Series A Preferred Stock." The powers, designations, preferences and relative participating, optional or other special rights and the qualifications, limitations, and restrictions of, the Series A Preferred Stock shall be as follows: (A) Dividends. Holders of the Series A Preferred Stock are entitled to receive dividends at the rate of $.25 per share (as adjusted for any stock dividends, combinations or splits with respect to such shares) per annum, respectively, payable out of funds legally available therefor. Such dividends shall be payable only when, as, and if declared by the Board of Directors and shall be non-cumulative. No dividends (other than those payable solely in the Common Stock of the Corporation) shall be paid on any Common Stock of the Corporation during any fiscal year of the Corporation until dividends in the total amount $.25 per share (as adjusted for any stock dividends, combinations or splits with respect to such shares) on the Series A Preferred Stock shall have been paid or declared and set apart during that fiscal year. (B) Voting Rights. Except as otherwise required by law, holders of shares of Series A Preferred Stock will not be entitled to vote on matters submitted to a vote of stockholders of the Corporation. (C) Liquidation. Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any distribution or payment shall be made to any person holding Common Stock or of any shares ranking junior to the Series A Preferred Stock in respect of distribution of assets, the persons holding Series A Preferred Stock will be entitled to be paid an amount in cash equal to $2.50 per share (as adjusted for any stock dividends, combinations or splits with respect to such shares), plus all declared but unpaid dividends on such share for each share of Series A Preferred Stock then held by them. Thereafter, holders of Series A Preferred Stock will not be entitled to any further payment. If upon such liquidation, dissolution or winding up, the assets of the Corporation are insufficient to pay the holders of the Series A Preferred Stock the full amount in cash to which they shall be entitled, all legally available funds of the Corporation will be distributed to the persons holding Series A Preferred Stock in proportion to the amounts to which each such person shall be entitled as aforesaid. The Corporation will mail written notice of such liquidation, dissolution or winding up, not less than 60 days prior to the payment dates stated therein, to each person of record holding Series A Preferred Stock (by air mail if addressed outside the United States). Neither the consolidation or merger of the Corporation into or with any other corporation or corporations, nor the sale or transfer by the Corporation of all or any part of its assets, nor the reduction of the capital stock of the Corporation, will be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this paragraph (C). (D) Conversion Rights. The holders of Series A Preferred Stock shall have conversions rights as follows: (i) Right to Convert. Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of the Corporation or any transfer agent for such stock, 4 into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing $2.50 by the Conversion Price (as hereinafter defined) applicable to such share, in effect on the date the certificate is surrendered for conversion. The price at which shares of Common Stock shall be deliverable upon conversion of shares of the Series A Preferred Stock (the "Series A Conversion Price") shall initially be $2.50 per share of Common Stock. (ii) Automatic Conversion. Each share of Series A Preferred Stock shall automatically be converted into shares of Common Stock at the then effective Conversion Price upon the earlier of (a) the date specified by vote or written consent or agreement of holders of at least two-thirds (2/3) of the shares of such series then outstanding, or (b) immediately upon the closing of the sale of the Corporation's Common Stock in a firm commitment or best efforts public offering registered under the Securities Act of 1933, as amended (the "Securities Act"), other than a registration relating solely to a transaction under Rule 145 under such Act (or any successor thereto) or to an employee benefit plan of the Corporation, at a public offering price (prior to underwriters' discounts and expenses) equal to or exceeding $3.50 per share of Common Stock (as adjusted for any stock dividends, combinations or splits with respect to such shares). If the number of outstanding shares of Common Stock have been increased or decreased since the initial subscription and payment for the Series A Preferred Stock by the holders thereof, by reason of any additional Common Stock issuance, split, stock dividend, merger, consolidation or other capital change or reorganization affecting the number of shares of Common Stock, the number of shares of Common Stock to be issued on conversion to the holders of the Series A Preferred Stock shall be adjusted so as to preserve fairly and equitably, as far as reasonably possible, the original conversion rights of the shares being converted. If any capital reorganization, reclassification, consolidation, merger or any sale of all or substantially all of the Corporation's assets to another individual, partnership or corporation (collectively, any "Organic Change") is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, then, as a condition to such Organic Change, lawful and adequate provision (in form and substance satisfactory to the holders of a majority of the Series A Preferred Stock then outstanding) will be made whereby each of the holders of Series A Preferred Stock will thereafter have the right to acquire and receive in lieu of shares of Common Stock immediately theretofore acquirable and receivable upon the conversion of such holder's Series A Preferred Stock, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for the number of shares of Common Stock immediately theretofore acquirable and receivable upon conversion of the Series A Preferred Stock had such Organic Change not taken place. The holder of any shares of Series A Preferred Stock may exercise the conversion rights granted by this Article by delivering to the Corporation during regular business hours, the certificate or certificates for the shares to be converted, duly endorsed for 4 5 transfer to the Corporation (if required by it), accompanied by written notice stating that the holder elects to convert such shares. Conversion shall be deemed to have been effected on the date when such delivery is made. As promptly as practicable thereafter the Corporation shall issue and deliver to, or upon the written order of such holder, at such office or other place designated by the Corporation, a certificate or certificates for the number of full shares of Common Stock to which such holder is entitled together with a scrip certificate or cash in lieu of any fraction of a share as provided hereunder. The holder shall be deemed to have become a shareholder of record on the next succeeding date on which the transfer books are open. Upon conversion of only a portion of the number of shares of Series A Preferred Stock represented by a certificate surrendered for conversion, the Corporation, upon written order and at its own expense, shall issue and deliver to the holder of the certificate so surrendered for conversion, a new certificate covering the number of shares of Series A Preferred Stock representing the unconverted portion of the certificate so surrendered. No fractional shares of Common Stock shall be issued upon conversion of shares of Series A Preferred Stock. If more than one share of Series A Preferred Stock shall be surrendered for conversion at any one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series A Preferred Stock so surrendered. Instead of any fractional shares of Common Stock which would otherwise be issuable upon conversion of any shares of Series A Preferred Stock, the Corporation shall, in lieu of delivering the fractional share therefor, at its option either (i) adjust the fractional interest by payment to the holder of the converted Series A Preferred Stock in an amount equal (computed to the nearest cent) to the then current market value of the fractional interest, or (ii) issue nondividend bearing and nonvoting scrip certificates for fractions of a share which would otherwise be issuable, in form and containing terms and conditions as determined by the Board of Directors, and exchangeable, within the period following the date of issue as the Board of Directors shall fix, together with other unexpired scrip certificates or like tenor aggregating one or more full shares, for share certificates representing the full share or shares. The Corporation shall at all times reserve and keep available, out of its authorized but unissued Common Stock, solely for the purpose of effecting the conversion of the Series A Preferred Stock, the full number of shares of Common Stock deliverable upon the conversion of all Series A Preferred Stock from time to time (subject to obtaining necessary director and shareholder action), and in accordance with the laws of the State of Florida, increase the authorized amount of its Common Stock if at any time the authorized number of shares of its Common Stock remaining unissued shall not be sufficient to permit the conversion of all of the shares of Series A Preferred Stock at the time outstanding. 7.3 No holders of shares of stock of any class shall have any preemptive right to subscribe to or purchase any additional shares of any class, or any bonds or convertible securities of any nature; provided, however, that the Board of Directors(s) may, in authorizing the issuance of shares of stock of any class, confer any preemptive right that the Board of Director(s) may deem advisable in connection with such issuance. 5 6 7.4 The Board of Director(s) of the Corporation may authorize the issuance from time to time of shares of its stock of any class, whether now or hereafter authorized, or securities convertible into shares of its stock of any class, whether now or hereafter authorized, for such consideration as the Board of Director(s) may deem advisable, subject to such restrictions or limitations, if any, as may be set forth in the bylaws of the Corporation. 7.5 The Board of Directors(s) of the Corporation may, by Restated Articles of Incorporation, classify or reclassify any unissued stock from time to time by setting or changing the preferences, conversions or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption of the stock. ARTICLE 8 - POWERS OF CORPORATION The Corporation shall have the same powers as an individual to do all things necessary or convenient to carry out its business and affairs, subject to any limitations or restrictions imposed by applicable law or these Articles of Incorporation. ARTICLE 9 - TERM OF EXISTENCE This Corporation shall have perpetual existence. ARTICLE 10 - REGISTERED OWNER(S) The Corporation, to the extent permitted by law, shall be entitled to treat the person in whose name any share or right is registered on the books of the Corporation as the owner thereto, for all purposes, and except as may be agreed in writing by the Corporation, the Corporation shall not be bound to recognize any equitable or other claim to, or interest in, such share or right on the part of any other person, whether or not the Corporation shall have notice thereof. ARTICLE 11 - REGISTERED OFFICE AND REGISTERED AGENT The initial address of the registered office of this Corporation is The Law Firm of Lawrence J. Spiegel, Chartered, doing business as AmeriLawyer, located at 343 Almeria Avenue, Coral Gables, Florida 33134. The name and address of the registered agent of this Corporation is The Law Firm of Lawrence J. Spiegel, Chartered, doing business as AmeriLawyer, 343 Almeria Avenue, Coral Gables, Florida 33134. ARTICLE 12 - BYLAWS The Board of Director(s) of the Corporation shall have power, without the assent or vote of the shareholders, to make, alter, amend, or repeal the Bylaws of the Corporation, but the 6 7 affirmative vote of a number of Directors equal to a majority of the number who would constitute a full Board of Director(s) at the time of such action shall be necessary to take any action for the making, alteration, amendment or repeal of the Bylaws. ARTICLE 13 - INDEMNIFICATION The Corporation shall indemnify its officers, directors and authorized agents for all liabilities incurred directly, indirectly or incidentally for services performed for the Corporation, to the fullest extent permitted under Florida law existing now or hereinafter enacted. ARTICLE 14 - EFFECTIVE DATE These Articles of Incorporation shall be effective immediately upon approval of the Secretary of State, State of Florida. ARTICLE 15 - AMENDMENT The Corporation reserves the right to amend, alter, change or repeal any provision contained in these Articles of Incorporation, or in any amendment hereto, or to add any provision to these Articles of Incorporation or to any amendment hereto, in any manner now or hereafter prescribed or permitted by the provisions of any applicable statute of the State of Florida, and all rights conferred upon shareholders in these Articles of Incorporation or any amendment hereto are granted subject to this reservation. 3. The foregoing Amended and Restated Articles of Incorporation have been duly approved by the Board of Directors of the Corporation. 4. The foregoing Amended and Restated Articles of Incorporation have been duly approved by the required vote of shareholders in accordance with Section 607.1003 and Section 607.1007 of the Florida Business Corporation Act; the total number of outstanding shares of the Corporation is 5,565,000 shares of Common Stock. The number of shares voting in favor of the amendment equaled or exceeded the vote required, such required vote being a majority of the outstanding shares of Common Stock on July 24, 1997. 7 8 IN WITNESS WHEREOF, we have subscribed our names this 24th day of July, 1997 [SIG] ------------------------------- C. Michael Fisher, President [SIG] ------------------------------- Edward L. Magdycz, Secretary 8 EX-3.1 6 AMENDED & RESTATED BYLAWS 1 Exhibit 3.1 AMENDED AND RESTATED BYLAWS OF CUIDAO HOLDING CORP (A Florida Corporation) ARTICLE I OFFICES SECTION 1. Principal Office. The principal executive office of the Corporation shall be at such place as the Board of Directors may from time to time determine, but until a change is effected such principal office shall be at: 3201 West Griffin Road, Suite 204, Ft. Lauderdale, Florida 33312. SECTION 2. Other Offices. The Corporation may also have other offices at such places, within or without the State of Florida, as the Board of Directors may from time to time determine or as the business of the Corporation may require. ARTICLE II MEETING OF STOCKHOLDERS SECTION 1. Time and Place of Meetings. A meeting of stockholders for any purpose may be held at such time and place, within or without the State of Florida, as shall be stated on the notice thereof or in a duly executed waiver of notice thereof. 1 2 SECTION 2. Annual Meeting. The annual meeting of the stockholders of the Corporation shall be held on the tenth day of May in each year if not a legal holiday, and if a legal holiday, at such place, either within or without the State of Florida, and at such time as set forth in the notice of the meeting or in a duly executed waiver of notice thereof, for the election of the Board of Directors and for the transaction of such other business as may properly be brought before the meeting. In the event the annual meeting is not held on the date above provided, the Board of Directors shall cause the meeting to be held as soon thereafter as may be convenient. Such subsequent meeting shall be called in the same manner as hereinafter provided for special meetings of stockholders. SECTION 3. Special Meetings. Special meetings of the stockholders, unless otherwise prescribed by statute, may be called at any time for any purpose or purposes by the Board of Directors or the holders of not less than 10 percent of all the shares entitled to be cast in any issue proposed to be considered at the proposed special meeting; provided that said persons sign, date and deliver to the Corporation one or more written demands for the meeting describing the proposal for which it is to be held, and shall be held at such place, either within or without the State of Florida, and at such hour as may be designated by the Board of Directors in the notice of the meeting; provided, however, that the time so fixed shall permit the giving of notice as provided in 2 3 Section 4 of this Article II, unless such notice is waived as provided by law or by these Bylaws. At a special meeting only such matters as may be specified in the notice thereof shall be considered. Special meetings shall also be called and held in such cases and in such manner as may be specifically required by law or by the Articles of Incorporation. SECTION 4. Notice of Meetings. Written notice of each meeting of the stockholders, which shall state the place, date and hour of the meeting and, in the case of a special meeting or where otherwise required by law, the purpose or purposes for which it is called, shall be given, unless a different period is required by law, not less than ten (10) nor more than sixty (60) days before the date of such meeting, by or at the direction of the person calling the meeting. If mailed, the notice of a meeting of stockholders shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. No business other than that stated in the notice shall be transacted at any meeting without the unanimous consent of all the stockholders entitled to vote thereat. Any such notice for any meeting other than the annual meeting shall, if issued at the direction of the Board of Directors, so indicate. When a meeting is adjourned to another time or place, notice need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken. At such an adjourned meeting, any 3 4 business may be transacted that might have been transacted on the original date of the meeting. If the adjournment is for more than thirty days after the date of the original meeting, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. SECTION 5. Quorum. Except as otherwise required by law, the Articles of Incorporation or these Bylaws, at all meetings of the stockholders, the holders of a majority of the shares issued and outstanding and entitled to vote shall be present in person or represented by proxy in order to constitute a quorum for the transaction of any business. The holders of a majority of the shares present in person or represented by proxy and entitled to vote thereat, whether or not a quorum shall be present, may adjourn the meeting from time to time, to a specified date or place. At any such adjourned meeting at which a quorum may be present, the Corporation may transact any business which might have been transacted at the original meeting. As to any matter with respect to which a separate class vote is required by the Articles of Incorporation, the holders of a majority of the shares of such class which are then outstanding and entitled to vote shall be present in person or represented by proxy in order to constitute a quorum for the purpose of any separate vote required by such class. 4 5 The absence from any meeting of the number of shares required by law, the Articles of Incorporation or these Bylaws for action upon one matter shall not prevent action at such meeting upon any other matter or matters which may properly come before the meeting, if the number of shares required in respect of such other matters shall be present. SECTION 6. Organization. At each meeting of the stockholders, the Chairman of the Board or, in his absence or inability to act, the Vice-Chairman or, in his absence or inability to act, the President or, in his absence or inability to act, a Vice President or, in his absence or inability to act any person as may be designated by the Board of Directors or, in the absence of such person or if there shall be no such designation, a chairman present in person or represented by proxy shall act as chairman of the meeting. The Secretary or, in his absence or inability to act, an Assistant Secretary, or in his absence or inability to act, any person as may be designated from time to time by the Board of Directors shall act as secretary of each meeting of stockholders and keep the minutes thereof; if no such person is present or has been chosen, the holders of record of a majority of shares of stock present in person or represented by proxy and entitled to vote at the meeting shall choose any person present to act as secretary of the meeting. 5 6 SECTION 7. Order of Business. The order of business at all meetings of the stockholders shall be as determined by the chairman of the meeting. SECTION 8. Voting and Required Vote. At each meeting of stockholders, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder except as otherwise provided in the Articles of Incorporation. Except as otherwise provided in the Articles of Incorporation, and subject to statute, at each meeting of stockholders if there shall be a quorum, the affirmative vote of the holders of a majority of shares present in person or represented by proxy and entitled to vote thereat, shall decide all matters brought before such meeting. SECTION 9. Proxies. Each stockholder entitled to vote at any meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by proxy. Any such proxy shall be delivered to the secretary of such meeting at or prior to the time designated in the order of business for so delivering such proxies. Each such proxy shall be in writing and executed by the stockholder or his duly authorized attorney-in-fact, but no such proxy shall be voted after eleven (11) months from its date unless such proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to 6 7 support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally. SECTION 10. List of Stockholders. A complete list of the stockholders entitled to vote at any annual or special meeting, arranged in alphabetical order, with the address of each, and the number of shares held by each, shall be prepared, or shall be caused to be prepared, by the Secretary and shall be open to examination by any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city in which the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to the stockholders entitled to examine the stock ledger, the list required by these Bylaws or the books of the Corporation, or to vote in person or by proxy at any meeting of the stockholders. SECTION 11. Voting by Fiduciary, Fiduciary, and Joint Owners. Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held. Persons whose stock is 7 8 pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the corporation he has expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon. If the shares or other securities having voting power stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants-in common, tenants by the entirety or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (a) if only one votes, his act binds all; (b) if more than one votes, the act of the majority so voting binds all; (c) if more than one votes, but the vote is evenly split on any particular matter, each fraction may vote the securities in question proportionally, or any person voting the shares, or a beneficiary, if any, may apply to the Circuit Court or such other court as may have jurisdiction to appoint an additional person to act with the persons so voting the shares, which shall then be voted as determined by a majority of such persons and the person 8 9 appointed by the court. If the instrument so filed shows that any such tenancy is held in unequal interest, a majority or even-split for the purpose of this paragraph shall be a majority or even-split in interest. SECTION 12. Consent of Stockholders in Lieu of Meeting. Unless otherwise provided by the Articles of Incorporation, any action required or permitted to be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock of each voting group entitled to vote thereon having not less than the minimum number of votes with respect to each voting group that would be necessary to authorize or take such action at a meeting at which all voting groups and shares entitled to vote thereon were present and voted, as provided by law. Within ten (10) days after obtaining such authorization by written consent, notice shall be given to those shareholders who have not consented in writing or who are not entitled to vote, said notice shall fairly summarize the material features of the authorized action and if the action requires the providing of dissenters' rights, said notice shall comply with the disclosure requirements pertaining to dissenters' rights of Florida law. 9 10 ARTICLE III BOARD OF DIRECTORS SECTION 1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors, which may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not by statute, by the Articles of Incorporation or by these Bylaws directed or required to be exercised or done by the stockholders or such other persons as provided therein. SECTION 2. Qualification. Directors must be natural persons of 18 years of age or older but need not be residents of the State of Florida and need not be shareholders of the Corporation. SECTION 3. Number of Directors. The Corporation shall have no fewer than three (3) nor more than seven (7) directors; the exact number to be determined from time to time by resolution adopted by approval of the outstanding shares or by the affirmative vote of a majority of the whole Board of Directors, and such exact number shall be three (3) until otherwise determined. SECTION 4. Presumption of Assent. A director of the Corporation who is present at a meeting of the Board of Directors at which an action on any corporate matter is taken will be presumed to have assented to the action unless such director votes 10 11 against such action or abstains from voting in respect thereto because of an asserted conflict of interest. SECTION 5. Resignations. Any director may resign at any time upon written notice to the Board of Directors, the Chairman or the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt thereof by the Board of Directors or by any such officer. If the resignation is made effective at a date later than the date of receipt of the written resignation by the Board of Directors or an authorized officer, then the Board of Directors may fill the pending vacancy before the effective date if the Board of Directors provides that the successor does not take office until the effective date. SECTION 6. Annual Meetings. The annual meeting of the Board of Directors for the purpose of organizing the Board, appointing officers and members of committees and transacting other business, shall be held immediately following the annual meeting of the stockholders at the same place where such meeting of stockholders shall be held. No notice shall be required for any such meeting if held immediately after the adjournment, and at the site, of the meeting of the stockholders. If not so held, notice shall be given in the same manner as required for special meetings of the Board of Directors. 11 12 SECTION 7. Regular Meetings. Additional regular meetings of the Board of Directors may be held without notice at such times and places (within or without the State of Florida) as shall have been approved and agreed to at any prior meeting of the Board of Directors. SECTION 8. Special Meetings. A special meeting of the Board of Directors may be called at any time by the Chairman of the Board, the Vice Chairman, the President or any Vice President or by two or more directors and shall be held at such time and place (within or without the State of Florida) as may be fixed by the person or persons calling the meeting; provided, however, that the time so fixed shall permit the giving of notice as provided in Section 9 of this Article III. SECTION 9. Notice of Special Meeting. Written notice of the time and place of each special meeting of the Board of Directors shall be delivered at least five (5) business days before the day on which such meeting is to be held to each director personally, or by certified, registered or express mail, postage prepaid, or telegram or cablegram or nationwide overnight courier service addressed to such director at his address as it appears on the records of the Corporation, confirmed on the same day by telegraph, telex, cable, facsimile, wireless or telephone, and the method used for notice of such special meeting need not be the same 12 13 for each director being notified except as otherwise required by law, the Articles of Incorporation or these Bylaws. SECTION 10. Organization. The Chairman of the Board shall preside over all meetings of the Board of Directors at which he is present. In his absence or inability to act, the Vice Chairman shall preside. In the absence or inability to act of the Chairman and Vice Chairman, the Board of Directors shall select a chairman of the meeting from among the directors present. The Secretary or, in his absence or inability to act, an Assistant Secretary, or in his absence or inability to act, another director selected by the Board of Directors shall act as secretary of the meeting and keep the minutes thereof. SECTION 11. Quorum. A majority of the number of directors fixed by these Bylaws shall constitute a quorum for the transaction of business. The act of a majority of the directors present at a meeting at which a quorum is present will be the act of the Board of Directors. At any meeting of the Board of Directors, no action shall be taken (except adjournment, in the manner provided below) until after a quorum has been established, except as otherwise provided by law, the Articles of Incorporation or these Bylaws. Except as otherwise provided by law, the Articles of Incorporation or these Bylaws, the act of a majority of directors who are present at a regular meeting at which a quorum previously 13 14 has been established (or at any adjournment of such meeting, provided that a quorum shall have previously been established at such adjourned meeting) shall be the act of the Board of Directors, regardless of whether or not a quorum is present at the time such action is taken. In determining the number of directors who are present at the time any such action is taken, any director who is in attendance at such meeting but who, for just cause, is disqualified to vote on such matter, shall not be considered as being present at the time of such action for the purpose of establishing the number of votes required to take action on any matter submitted to the Board of Directors, but shall be considered as being present for purposes of determining the existence of a quorum. In the event a quorum cannot be established at the beginning of a meeting, a majority of the directors present at the meeting, or the Secretary of the Corporation, if there be no director present, may adjourn the meeting from time to time until a quorum be present. Only such notice of such adjournment need be given as the Board of Directors may from time to time prescribe. SECTION 12. Regulations. The Board of Directors may adopt such rules and regulations for the conduct of its meetings and for the management of the business and affairs of the Corporation as it may deem proper and not inconsistent with law, the Articles of Incorporation and these Bylaws. 14 15 SECTION 13. Written Consent in Lieu of Meetings. Any action required to be taken at a meeting of the Board of Directors, or any action which may be taken at a meeting of the Board of Directors or a committee thereof, may be taken without a meeting if a consent in writing, setting forth the action to be so taken, signed by all the directors, or all the members of the committee, as the case may be, is filed in the minutes of the proceedings of the board or of the committee. Such consent will have the same effect as a unanimous vote. SECTION 14. Telephonic Participation. Any and all members of the Board of Directors may participate in a meeting of the Board of Directors by means of a conference telephone or similar communications equipment by means of which all persons participating in such meeting can hear each other. Participation in a meeting pursuant to this Section shall constitute presence in person at such meeting. SECTION 15. Compensation. Directors shall be entitled to such compensation for their services as directors and to such reimbursement for any reasonable expenses incurred in attending meetings of the Board of Directors as may from time to time be fixed by the Board of Directors. The compensation of directors may be on such basis as is determined by the Board of Directors. Any director may waive compensation for any meeting. Any director receiving compensation under these provisions shall not be barred 15 16 from serving the Corporation in any other capacity and receiving compensation and reimbursement for reasonable expenses for such other services. ARTICLE IV COMMITTEES SECTION 1. Executive Committee. The Board of Directors, by resolution adopted by a majority of the total number of directors constituting the entire Board, whether then in office or not, may appoint an Executive Committee consisting of one or more directors, one of whom shall be designated as Chairman of the Executive Committee. Each member of the Executive Committee shall continue as a member thereof until the expiration of his term as a director or his earlier resignation or removal as a member of the Executive Committee or as a director or until his death. SECTION 2. Powers. The Executive Committee shall have and may exercise those rights, powers and authority of the Board of Directors to the extent permitted by law, and may authorize the seal of the Corporation to be affixed to all papers that may require it, but shall not have the power or authority with respect to approving or recommending to shareholders actions or proposals required by law to be approved by shareholders, filling vacancies on the Board of Directors or any committee thereof, adopting, amending or repealing these Bylaws, authorizing or approving the reacquisition of shares unless pursuant to a general formula or 16 17 method specified by the Board of Directors and authorizing or approving the issuance or sale or contract for the sale of shares, or determine the designation and relative rights, preferences, and limitations of a voting group except that the Board of Directors may authorize the Executive Committee to do so within limits specifically prescribed by the Board of Directors. SECTION 3. Procedure and Meetings. The Executive Committee shall fix its own rules of procedure and shall meet at such times and at such place or places as may be provided by such rules or as the members of the Executive Committee shall fix. The Executive Committee shall keep minutes of its meetings, which it shall deliver to the Board of Directors from time to time. The Chairman of the Executive Committee or, in his absence, a member of the Executive Committee chosen by a majority of the members present shall preside at meetings of the Executive Committee, and the Secretary, or in his absence, an Assistant Secretary, or in his absence another member of the Executive Committee chosen by the Executive Committee, shall act as secretary of the Executive Committee. SECTION 4. Quorum. All of the members of the Executive Committee must be present in person or by electronic means for the transaction of business, and the affirmative vote of all of the members shall be required for any action of the Executive Committee. 17 18 SECTION 5. Other Committees. The Board of Directors, by resolutions adopted by a majority of the total number of directors constituting the entire Board, whether then in office or not, shall establish an audit committee and a compensation committee and may appoint such other committee or committees as it shall deem advisable and with such rights, powers, and authority as it shall prescribe. Each such committee shall consist of one or more directors. Unless otherwise provided by the Board of Directors, a majority of the members of each such other committee shall constitute a quorum, and the acts of a majority of the members present at a meeting at which a quorum is present shall be the act of such committee. SECTION 6. Vacancies; Committee Changes. In the absence or disqualification of a member of any committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. The Board of Directors shall have the power at any time to fill vacancies in, to change the membership of, and to discharge, any committee or any member of any committee. SECTION 7. Compensation. Members of the committee shall be entitled to such compensation for their services as members of 18 19 the committee and to such reimbursement for any reasonable expenses incurred in attending committee meetings as may from time to time be fixed by the Board of Directors. Any committee member receiving compensation under these provisions shall not be barred from serving the Corporation in any other capacity and from receiving compensation and reimbursement of reasonable expenses for such other services. SECTION 8. Telephonic Participation. Any and all members of the committee designated by the Board of Directors may participate in a meeting of such committee by means of conference telephone or similar communications equipment by means of which all persons participating in such meeting can hear each other, and participation in such a meeting pursuant to this Section shall constitute presence in person at such meeting. SECTION 9. Action by Consent. Any action required or permitted to be taken at any meeting of any committee of the Board of Directors may be taken without a meeting if a written consent thereto shall be signed by all members of the committee then in office, provided that the number of such members is sufficient to constitute a quorum for such action, if any, and such written consent is filed with the minutes of its proceedings. 19 20 ARTICLE V NOTICES SECTION 1. Waiver of Notice. Whenever any notice is required to be given by law, the Articles of Incorporation or these Bylaws, a written waiver thereof, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to such notice. Neither the business to be transacted at, nor the purpose of any regular or special meeting of stockholders, any meeting of other security-holders, the Board of Directors, or any committee of the Board of Directors need be specified in any written waiver of notice unless so required by law, the Articles of Incorporation or these Bylaws. SECTION 2. Attendance at Meeting. Attendance of a person at any meeting, whether of stockholders or other security-holders (in person or by proxy), or the Board of Directors or any committee of the Board of Directors, shall constitute a waiver of notice of such meeting, except when such person attends such meeting for the express purpose of objecting, and objects, at the beginning of the meeting, to the transaction of any business on the ground that the meeting is not legally called or convened. ARTICLE VI OFFICERS SECTION 1. Number and Qualifications. The officers of the Corporation shall include the Chairman, the Vice Chairman, the 20 21 President, one or more Vice Presidents, a Treasurer, and a Secretary and such other officers as may elected or appointed in accordance with the provisions of Section 2 of this Article VI. Any number of offices may be held by the same person. The Board of Directors shall determine who shall be the chief executive officer of the Company. SECTION 2. Selection, Term of Office and Qualification. The officers shall be elected from time to time by the Board of Directors at its first regular meeting after each annual meeting of stockholders. Each officer shall hold his office until his successor is elected and qualified or until he shall resign in the manner provided in Section 3 of this Article VI, or until he shall have been removed in the manner provided in Section 4 of this Article VI, or until his death. Other officers, including without limitation one or more Assistant Treasurers and one or more Assistant Secretaries shall be chosen in such manner, hold office for such period, have such authority, perform such duties and be subject to removal as may be prescribed by the Board of Directors. SECTION 3. Resignations. Any officer may resign at any time upon written notice to the Board of Directors, the President or the Secretary. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt thereof by the Board of Directors or any such officer. 21 22 SECTION 4. Removal. Any officer may be removed at any time, either with or without cause, by the Board of Directors; and any officer not elected by the Board of Directors may be removed in such manner as may be determined by the Board of Directors. Removal from office however, shall not prejudice the contract rights, if any, of the person removed except as provided in such contract. SECTION 5. Vacancies. Any vacancy occurring in any office of the Corporation which is required by Section 2 of this Article VI to be elected by the Board of Directors, whether by death, resignation, removal or otherwise, shall be filled for the unexpired portion of the term by the Board of Directors. A vacancy in any other office shall be filled in such manner as may be determined by the Board of Directors. SECTION 6. Chairman. The Chairman may be the chief executive officer of the Corporation if the Board of Directors shall so determine and, in such case and subject to the direction of the Board of Directors, shall have general charge of the business, affairs and property of the Corporation, shall have general supervision over its other officers and agents and shall see that all orders and resolutions of the Board of Directors are carried into effect. 22 23 SECTION 7. Vice Chairman. The Vice Chairman shall have such powers and perform such duties as may from time to time be assigned to him by the Board of Directors and shall report to the Chairman, subject to the control of the Board of Directors. SECTION 8. The President. The President shall have, subject to the control of the Chairman, if the Chairman is designated as the chief executive officer of the Corporation and the Board of Directors, general and active management of the business of the Corporation and general and active supervision and direction over the business operations and affairs of the Corporation and over its several officers, agents and employees. He shall be an ex officio member of all committees of the Board. In general, he shall have such other powers and shall perform such other duties as usually pertain to the office of the President or as from time to time may be assigned to him by the Board or these Bylaws. The President may be the chief executive officer of the Corporation if the Board of Directors shall so determine and, in such case and subject to the direction of the Board of Directors, shall have general charge of the business, affairs and property of the Corporation, shall have general supervision over its other officers and agents and shall see that all orders and resolutions of the Board of Directors are carried into effect. SECTION 9. Vice President. The Vice President or, in the event there be more than one, the Vice Presidents in the order 23 24 designated, or in the absence of any designation, in the order of their seniority, shall have such powers and perform such duties as from time to time may be assigned to them by the Board of Directors. SECTION 10. The Treasurer and Assistant Treasurers. The Treasurer shall: (a) have charge and custody of, and be responsible for, all the funds and securities of the Corporation; (b) keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation; (c) cause all moneys and other valuables to be deposited to the credit of the Corporation in such depositories as may be designated by the Board of Directors; (d) receive moneys due and payable to the Corporation from any source whatsoever and give receipts for moneys so paid; (e) disburse the funds of the Corporation and supervise the investment of its funds as ordered or authorized by the Board of Directors, taking proper vouchers therefor; (f) render to the President and the Board of Directors at the regular meetings of the Board, or whenever they may request it, an account of all his trans- 24 25 actions as Treasurer and of the financial condition of the Corporation; and (g) in general, have all the powers and perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board of Directors or the President. The Assistant Treasurer or Assistant Treasurers, if any, shall in the absence or disability of the Treasurer or at his request, perform his duties and exercise his powers and authority as may be assigned to him by the Board of Directors or the President. SECTION 11. The Secretary and Assistant Secretaries. The Secretary shall: (a) attend all meetings of the Board of Directors, any committee of the Board of Directors, stockholders and other security-holders and record all votes and the proceedings of such meetings in minute books to be kept by him for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws and as required by law; (c) be custodian of the records and the seal of the Corporation and affix and attest the seal to all stock certificates of the Corporation (unless the seal of the Corporation on such certificates shall be a facsimile, as hereinafter provided) and affix 25 26 and attest the seal to all other documents to be executed on behalf of the Corporation under its seal; (d) see that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; and (e) in general, have all the powers and perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board of Directors or the President. The Assistant Secretary or Assistant Secretaries, if any, shall, in the absence or disability of the Secretary or at his request, perform his duties and exercise his powers and authority as may be assigned to him by the Board of Directors or the President. SECTION 12. Compensation. The compensation of all officers of the Corporation shall be fixed from time to time by the Board of Directors; no officer of the Corporation shall be prevented from receiving compensation because he is also a director of the Corporation. ARTICLE VII CAPITAL STOCK AND DIVIDENDS SECTION 1. Stock Certificates for Shares. Every holder of shares of capital stock of the Corporation will be entitled to 26 27 have a certificate representing all shares to which he is a holder. No certificate representing shares will be issued until such shares are fully paid. Certificates for shares of the capital stock of the Corporation shall be in such form, not inconsistent with the Articles of Incorporation, as shall be approved by the Board of Directors and shall be signed by or in the name of the corporation by the Chairman or Vice-Chairman or by the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, provided that the signatures of any such officers thereon may be facsimiles. The seal of the Corporation shall be impressed, by original or by facsimile, printed or engraved, on all such certificates. A certificate may also be signed by the transfer agent and a registrar as the Board of Directors may determine, and in such case the signature of the transfer agent or the registrar may also be facsimile, engraved or printed. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may nevertheless be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. SECTION 2. Stock Records. The Corporation shall keep at such place or places, within or without the State of Florida, as the Board of Directors may from time to time determine, the stock record books in which shall be recorded the number of shares 27 28 issued, the names of the owners of the shares, the number of shares owned by them respectively, and the transfer of such shares with the date of transfer. Blank stock certificate books shall be kept by the Secretary or by any officer or agent designated by the Board of Directors. SECTION 3. Registration of Transfers. Registration of transfer of certificates representing shares of stock of the Corporation shall be effected only on the books of the Corporation only upon authorization by the registered holder thereof, or by his attorney duly executed and filed with the Secretary or with a designated transfer agent or transfer clerk, and upon surrender to the Corporation or any transfer agent of the Corporation of the certificate or certificates being transferred, which certificate or certificates shall be properly endorsed or accompanied by a duly executed stock transfer power and the payment of all taxes thereon. Whenever a certificate is endorsed by or accompanied by a stock power executed by someone other than the person or persons named in the certificate, evidence of authority to transfer shall also be submitted with the certificate. Whenever any transfers of shares shall be made for collateral security and not absolutely, and both the transferor and transferee request the Corporation to do so, such fact shall be stated in the entry of the transfer. SECTION 4. Determination of Stockholders. Except as otherwise provided by law, the Corporation shall be entitled to 28 29 recognize the exclusive right of a person in whose name any share or shares stand on the record of stockholders as the owner of such share or shares for all purposes, including, without limitation, the right to receive dividends or other distributions, and to vote as such owner. The Corporation may hold any such stockholder of record liable for calls and assessments and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in any such share or shares on the part of any other person whether or not it shall have express or other notice thereof. SECTION 5. Regulations Governing Issuance and Transfer of Shares. The Board of Directors shall have the power and authority to make all such rules and regulations, not inconsistent with these Bylaws, as it may deem expedient concerning the issue, transfer and registration of certificates for shares of stock of the Corporation. It may appoint, or authorize any officer or officers to appoint, one or more transfer agents or one or more transfer clerks and one or more registrars and may require all certificates for shares of stock to bear the signature or signatures of any of them. SECTION 6. Fixing of Record Date. In order that the Corporation may determine the stockholders of record entitled to notice of, or to vote at, any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate 29 30 action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. Except as otherwise provided by law, the Articles of Incorporation, these Bylaws or by resolution of the Board of Directors: (1) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (2) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed; and (3) The record date for determining stockholders for any other purpose shall be at the close of business 30 31 on the day on which the Board adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may affix a new record date for the adjourned meeting. SECTION 7. Lost, Stolen or Destroyed Stock Certificates. The holder of any certificates representing shares of stock of the Corporation shall immediately notify the Corporation of any loss, theft, destruction or mutilation of such certificate, and the Board of Directors may authorize the issuance of a new certificate of stock in lieu thereof upon satisfactory proof of such loss, theft or destruction upon the giving of an open penalty bond with surety satisfactory to the Treasurer and the Corporation's counsel, to protect the Corporation or any person injured on account of the alleged loss, theft or destruction of any such certificate or the issuance of a new certificate from any liability or expense which it or they may incur by reason of the original certificates remaining outstanding and upon payment of the Corporation's reasonable costs incident thereto. SECTION 8. Dividends and Reserves. Subject to the provisions of law or of the Articles of Incorporation, the Board of Directors may, out of funds available therefor at any regular or special meeting, declare dividends upon the capital stock of the 31 32 Corporation as and when they deem expedient. Before declaring any dividend there may be set apart out of any funds of the Corporation available for dividends, such sum or sums as the Board of Directors may from time to time in their discretion deem proper as a reserve fund for working capital, to meet contingencies, or for equalizing dividends, or for the purpose of repairing, maintaining or increasing the property or business of the Corporation, or for such other purposes as the Board of Directors shall deem to be in the best interests of the Corporation. The Board of Directors may, in its discretion, modify or abolish any such reserve at any time. ARTICLE VIII BOOKS AND RECORDS SECTION 1. Books and Records. The Corporation shall keep as permanent records minutes of all meetings of its shareholders and Board of Directors, a record of all actions taken by the shareholders or Board of Directors without a meeting, and a record of all actions taken by a committee of the Board of Directors in place of the Board of Directors on behalf of the Corporation. Furthermore, the Corporation shall maintain accurate accounting records. Furthermore, the corporation shall maintain the following: (i) A record of its shareholders in a form that permits preparation of a list of the names and addresses of all shareholders in alphabetical order by class of shares showing the number and series of shares held by each; 32 33 (ii) The Corporation's Articles or Restated Articles of Incorporation and all amendments thereto currently in effect; (iii) The Corporation's Bylaws (or Restated Bylaws and all amendments thereto currently in effect; (iv) Resolutions adopted by the Board of Directors creating one or more classes or series of shares and fixing their relative rights, preferences and limitations if shares issued pursuant to those resolutions are outstanding; (v) The minutes of all shareholders' meeting and records of all actions taken by shareholders without a meeting for the past three years; (vi) Written communications to all shareholders generally or all shareholders of a class or series within the past three years including the financial statements furnished for the past three years to shareholders as may be required under Florida law; (vii) A list of the names and business street addresses of the corporation's current directors and officers; and (viii) A copy of the Corporation's most recent annual report delivered to the Department of State. Any books, records and minutes may be in written form or in any other form capable of being converted into written form. SECTION 2. Shareholder's Inspection Rights. A shareholder of the Corporation (including a beneficial owner whose shares are held in a voting trust or a nominee on behalf of a beneficial owner) may inspect and copy, during regular business 33 34 hours at the Corporation's principal office, any of the corporate records required to be kept pursuant to Section 1 of this Article of these Bylaws, if said shareholder gives the Corporation written notice of such demand at least five business days before the date on which the shareholder wishes to inspect and copy. The foregoing right of inspection is subject however to such other restrictions as are applicable under Florida law, including, but not limited to, the inspection of certain records being permitted only if the demand for inspection is made in good faith and for a proper purpose (as well as the shareholder describing with reasonable particularity the purpose and records desired to be inspected and such records are directly connected with the purpose). SECTION 3. Financial Information. Unless modified by resolution of the shareholders within 120 days of the close of each fiscal year, the Corporation shall furnish the shareholders annual financial statements which may be consolidated or combined statements of the Corporation and one or more if its subsidiaries as appropriate, that include a balance sheet as of the end of the fiscal year, an income statement for that year, and a statement of cash flow for that year. If financial statements are prepared on the basis of generally accepted accounting principles, the annual financial statements must also be prepared on that basis. If the annual financial statements are reported on by a public accountant, said accountant's report shall accompany said statements. If said annual financial statements are not reported on by a public 34 35 accountant, then the statements shall be accompanied by a statement of the Chairman or the person responsible for the Corporation's accounting records (a) stating his reasonable belief whether the statements were prepared on the basis of generally accepted accounting principles and if not, describing the basis of preparation; and (b) describing any respects in which the statements were not prepared on a basis of accounting consistent with the statements prepared for the preceding year. The annual financial statements shall be mailed to each shareholder of the Corporation within 120 days after the close of each fiscal year or within such additional time as is reasonably necessary to enable the Corporation to prepare same, if, for reasons beyond the Corporation's control, said annual financial statement cannot be prepared within the prescribed period. SECTION 4. Other Reports to Shareholders. The Corporation shall report any indemnification or advanced expenses to any director, officer, employee, or agent (for indemnification relating to litigation or threatened litigation) in writing to the shareholders with or before the notice of the next shareholders' meeting, or prior to such meeting if the indemnification or advance occurs after the giving of such notice but prior to the time such meeting is held, which report shall include a statement specifying the persons paid, the amounts paid, and the nature and status, at the time of such payment, of the litigation or threatened litigation. 35 36 Additionally, if the Corporation issues or authorizes the issuance of shares for promises to render services in the future, the Corporation shall report in writing to the shareholders the number of shares authorized or issued and the consideration received by the Corporation, with or before the notice of the next shareholders' meeting. ARTICLE IX CORPORATE INDEMNIFICATION The Corporation shall indemnify any person: (1) Who was or is a party, or is threatened to be made a party, to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by, or in the right of, the Corporation) by reason of the fact that he is or was a director, officer, employee, or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another Corporation, partnership, joint venture, trust, or other enterprise against such costs and expenses, and to the extent and in the manner provided under Florida law. (2) Who was or is a party, or is threatened to be made a party, to any threatened, pending, or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee, or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, or 36 37 agent of another corporation, partnership, joint venture, trust, or other enterprise against such costs and expenses, and to the extent and in the manner provided under Florida law. The extent, amount, and eligibility for the indemnification provided herein will be made by the Board of Directors. Said determinations will be made by a majority vote to a quorum consisting of directors who were not parties to such action, suit, or proceeding or by the shareholders by a majority vote of a quorum consisting of shareholders who were not parties to such action suit or proceeding. The corporation will have the power to make further indemnification as provided under Florida law except to indemnify any person against gross negligence or willful misconduct. The Corporation is further authorized to purchase and maintain insurance for indemnification of any person as provided herein and to the extent provided under Florida law. ARTICLE X GENERAL PROVISIONS SECTION 1. Execution of Contracts, Papers and Documents. Except as otherwise required by law, the Articles of Incorporation or these Bylaws, any contract or other instrument may be executed and delivered in the name and on behalf of the Corporation by such officers or employees of the Corporation as the Board of Directors may from time to time determine, or in the absence of such determination, by the Chairman or the President. Such authority 37 38 may be general or confined to specific instances as the Board of Directors may determine. Unless authorized by the Board of Directors or expressly permitted by these Bylaws, no officer or agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to incur a pecuniary liability for any purpose. SECTION 2. Voting Shares in Other Corporations. The Corporation may vote any and all shares of stock and other securities having voting rights which may at any time and from time to time be held by it in any other corporation or corporations and such vote may be cast either in person or by proxy by such officer of the Corporation as the Board of Directors may appoint or, in the absence of such appointment, by the Chairman or President. SECTION 3. Checks, Drafts, etc. All checks, drafts, bills of exchange or other orders for the payment of money out of the funds of the Corporation, and all notes or other evidences of indebtedness of the Corporation, shall be signed in the name and on behalf of the Corporation by such persons and in such manner as shall from time to time be authorized by the Board. SECTION 4. Corporate Seal. The Board of Directors shall provide a suitable seal which shall bear the name of the Corporation, the year of incorporation and shall include the words "Corporate Seal, Florida." Said seal shall be in the custody of 38 39 the Secretary of the Corporation, and the Board of Directors may prescribe that one or more duplicates thereof be kept in the custody of such other officer or officers of the Corporation. SECTION 5. Fiscal Year. The fiscal year of the Corporation shall be a period of either fifty-two (52) or fifty-three (53) weeks as may be determined by the Board of Directors from time to time. ARTICLE XI TRANSACTIONS WITH DIRECTORS AND OFFICERS SECTION 1. Affiliated Transactions. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers or have a financial interest, shall be valid unless, at the time of the contract or transaction, the Board of Directors consists of at least two (2) independent directors, and a majority of such independent directors, after having access, at the Corporation's expense, to the Corporation's or independent legal counsel, approve such contract or transaction. For purposes of this Section 1 of this Article XI of the Bylaws, an independent director shall be a member of the Board of Directors who is not an officer or employee of the Corporation, its subsidiaries or 39 40 affiliates, a promoter or does not have a material business or professional relationship with the Corporation. SECTION 2. Determining Quorum. Interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee thereof which authorized an affiliated contract or transaction. ARTICLE XII AMENDMENT The power to adopt, amend or repeal these Bylaws shall be in the stockholders entitled to vote and may be exercised by the affirmative vote of a majority of the stock issued and outstanding and entitled to vote thereat at any annual meeting of the stockholders or at any special meeting thereof if notice of the proposed amendment or repeal be contained in the notice of such special meeting. Such power shall also be conferred upon the directors and may be exercised by the affirmative vote of a majority of the Board of Directors at any regular meeting of the Board of Directors or at any special meeting of the Board of Directors if notice of the proposed amendment or repeal be contained in the notice of such special meeting, but the fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal the Bylaws. 40 41 THIS IS TO CERTIFY: That I am the duly elected, qualified and acting Secretary of Cuidao Holding Corp., a Florida corporation (the "Corporation"), and that the foregoing Amended and Restated Bylaws were adopted as the Bylaws of the Company on October 30, 1997, by the duly elected directors of the Company. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate seal the 30th day of October, 1997. [SIG] ------------------------------- Edward L. Magdycz, Secretary 41 EX-4 7 SPECIMEN STOCK CERTIFICATES 1 EXHIBIT 4.0 - -------------------------------------------------------------------------------- - ----------- ----------- NUMBER SHARES - ----------- ----------- ***000*** ***000*** - ----------- ----------- CUIDAO HOLDING CORP. - -------------------------------------------------------------------------------- ORGANIZED UNDER THE LAWS OF THE STATE OF FLORIDA 100,000,000 Common Stock Shares $.001 par value - -------------------------------------------------------------------------------- THIS CERTIFIES THAT ______________ is the registered holder of _________ shares transferable only on the books of the Corporation by the holder hereof in person or by Attorney upon surrender of this Certificate properly endorsed. THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE CORPORATION WILL NOT TRANSFER THIS CERTIFICATE UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION COVERING THE SHARES REPRESENTED BY THIS CERTIFICATE UNDER THE SECURITIES ACT OF 1933 AND ALL APPLICABLE STATE SECURITIES LAWS, (ii) IT FIRST RECEIVES A LETTER OF OPINION FROM AN ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OR ITS AGENTS, STATING THAT IN THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND UNDER ALL APPLICABLE STATE SECURITIES LAWS, (iii) THE TRANSFER IS MADE PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OF 1933. IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be signed by its duly authorized officers and its Corporate Seal to be hereunto affixed this ___ day of ___________, 19__, A.D. ________________________ _____________________ President Secretary - -------------------------------------------------------------------------------- AmeriLawyer(R) (800) 603-3900 EX-5 8 OPINION OF LAW OFFICES OF JOHN W. MARTIN /LEGALITY 1 EXHIBIT 5.0 [JOHN W. MARTIN LAW OFFICE LETTERHEAD] December 18, 1997 Cuidao Holding Corp. 3201 West Griffin Road, Suite 204 Ft. Lauderdale, Florida 33312-6900 Gentlemen: At your request, we have examined the Registration Statement on Form SB-2 that you have filed with the Securities and Exchange Commission in connection with the registration under the Securities Act of 1933, as amended, of up to 260,000 Units, each Unit consisting of one share of the common stock, $.0001 par value of Cuidao Holding Corp. (the "Common Stock") and one Common Stock purchase warrant (the "Warrant"). We are familiar with the proceedings taken and to be taken by you in connection with the authorization, issuance and sale of the Units. Based upon the foregoing, it is our opinion that the Units, as well as the Common Stock and Warrants comprising the Units, upon the issuance or transfer and sale thereof in the manner referred to in said Registration Statement, will constitute legally and validly issued and outstanding securities of Cuidao Holding Corp., fully paid and nonassessable. We consent to the use of this opinion as an exhibit to said Registration Statement and to the use of our name in said Registration Statement and to references to our firm in the prospectus incorporated therein Very truly yours, LAW OFFICES OF JOHN W. MARTIN By: /s/ JOHN W. MARTIN ----------------------------------- John W. Martin EX-10 9 1997 INCENTIVE STOCK OPTION PLAN 1 EXHIBIT 10 CUIDAO HOLDING CORP. 1997 INCENTIVE STOCK OPTION PLAN As adopted by the Board of Directors in October 1997 1. Purposes of the Plan. The purposes of this Stock Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees and Consultants of the Company and its Subsidiaries and to promote the success of the Company's business. Options granted under the Plan may be incentive stock options (as defined under Section 422 of the Code) or non-statutory stock options, as determined by the Administrator at the time of grant of an option and subject to the applicable provisions of section 422 of the Code, as amended, and the regulations promulgated thereunder. 2. Definitions. As used herein, the following definitions shall apply: (a) "Administrator" means the Board or any of its Committees appointed pursuant to Section 4 of the Plan. (b) "Applicable Laws" means the meaning set forth in Section 4(a) below. (c) "Board" means the Board of Directors of the Company. (d) "Code" means the Internal Revenue Code of 1986, as amended. (e) "Committee" means a Committee appointed by the Board of Directors in accordance with Section 4 of the Plan. (f) "Common Stock" means the Common Stock of the Company. (g) "Company" means Cuidao Holding Corp., a Florida corporation. (h) "Consultant" means any person, including an advisor, who is engaged by the Company or any Parent or Subsidiary to render services and is compensated for such services, and any director of the Company whether compensated for such services or not; provided that the term Consultant shall not include directors who are not compensated for their services or are paid only a director's fee by the Company. (i) "Continuous Status as an Employee or Consultant" means that the employment or consulting relationship is not interrupted or terminated by the Company, any Parent or 2 Subsidiary. Continuous Status as an Employee or Consultant shall not be considered interrupted in the case of: (i) any leave of absence approved by the Board, including sick leave, military leave, or any other personal leave; provided, however, that for purposes of Incentive Stock Options, any such leave may not exceed ninety (90) days, unless reemployment upon the expiration of such leave is guaranteed by contract (including certain Company policies) or statute; or (ii) transfers between locations of the Company or between the Company, its Parent, its Subsidiaries or its successors. (j) "Employee" means any person, including officers and directors, employed by the Company or any Parent or Subsidiary of the Company. The payment of a director's fee by the Company shall not be sufficient to constitute "employment" by the Company. (k) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (l) "Fair Market Value" means, as of any date, the value of Common Stock determined as follows: (i) If the Common Stock is listed on any established stock exchange or a national market system including without limitation the National Market System of the National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales price for such stock(or the closing bid, if no sales were reported, as quoted on such exchange or system for the last market trading day prior to the time of determination) as reported in The Wall Street Journal or such other source as the Administrator deems reliable; (ii) If the Common Stock is quoted on the NASDAQ System (but not on the National Market System thereof) or regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for the Common Stock or; (iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator. (m) "Incentive Stock Option" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code, as designated in the applicable option agreement. (n) "Named Executive" shall mean any individual who, on the last day of the Company's fiscal year, is the chief executive officer of the Company (or is acting in such capacity) or among the three highest compensated officers of the Company 2 3 (other than the chief executive officer). Such officer status shall be determined pursuant to the executive compensation disclosure rules under the Exchange Act. (o) "Nonstatutory Stock Option" means an Option not intended to qualify as an Incentive Stock Option, as designated in the applicable option agreement. (p) "Option" means a stock option granted pursuant to the Plan. (q) "Optioned Stock" means the Common Stock subject to an Option. (r) "Optionee" means an Employee or Consultant who receives an Option. (s) "Parent" means a "parent corporation", whether now or hereafter existing, as defined in section 424(e) of the Code. (t) "Plan" means this 1996 Incentive Stock Option Plan. (u) "Share" means a share of the Common Stock, as adjusted in accordance with Section 14 below. (v) "Subsidiary" means a "subsidiary corporation", whether now or hereafter existing, as defined in Section 424(f) of the Code. 3. Stock Subject to the Plan. Subject to the provisions of Section 14 of the Plan, the maximum aggregate number of shares which may be optioned and sold under the Plan is 750,000 shares of Common Stock. If an Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for future grant under the Plan. 4. Administration of the Plan. (a) Composition of Administrator. (i) Multiple Administrative Bodies. If permitted by Rule 16b-3, and by the legal requirements relating to the administration of incentive stock option plans, if any, of applicable securities laws and the Code (collectively, the "Applicable Laws"), the Plan may (but need not) be administered by different administrative bodies with respect to Directors, Officers who are not directors and Employees who are neither 3 4 Directors nor Officers. (ii) Administration with respect to Directors and Officers. With respect to grants of Options to Employees or Consultants who are also Officers or Directors of the Company, the Plan shall be administered by (A) the Board, if the Board may administer the Plan in compliance with Rule 16b-3 as it applies to a plan intended to qualify thereunder as a discretionary plan and Section 162(m)of the Code as it applies so as to qualify grants of Options to Named Executives as performance-based compensation, or (B) a Committee designated by the Board to administer the Plan, which Committee shall be constituted in such a manner as to permit the Plan to comply with Rule 16b-3 as it applies to a plan intended to qualify thereunder as a discretionary plan, to qualify grants of Options to Named Executives as performance-based compensation under Section 162(m) of the Code and otherwise so as to satisfy the Applicable Laws. (iii) Administration with respect to Other Persons. With respect to grants of Options to Employees or Consultants who are neither Directors nor Officers of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws. (iv) General. If a Committee has been appointed pursuant to subsection (ii) or (iii) of this Section 4(a), such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of any Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies (however caused) and remove all members of a committee and thereafter directly administer the Plan, all to the extent permitted by the Applicable Laws and, in the case of a Committee appointed under subsection (ii), to the extent permitted by Rule 16b-3 as it applies to a plan intended to qualify thereunder as a discretionary plan, and to the extent required under Section 162(m) of the Code to qualify grants of Options to Named Executives as performance-based compensation. (b) Powers of the Administrator. Subject to the provisions of the Plan and in the case of a Committee, the specific duties delegated by the Board to such Committee, and subject to the approval of any relevant authorities, including the approval, if required, of any stock exchange upon which the Common Stock is listed, the Administrator shall have the authority, in its discretion: 4 5 (i) to determine the Fair Market Value of the Common Stock, in accordance with Section 2(k) of the Plan; (ii) to select the Consultants and Employees to whom Options may from time to time be granted hereunder; (iii) to determine whether and to what extent Options are granted hereunder; (iv) to determine the number of shares of Common Stock to be covered by each such award granted hereunder; (v) to approve forms of agreement for use under the Plan; (vi) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder; (vii) to determine whether and under what circumstances an Option may be settled in cash under subsection 9(f) instead of Common Stock; and (viii) to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option shall have declined since the date the Option was granted. (c) Effect of Administrator's Decision. All decisions, determinations and interpretations of the Administrator shall be final and binding on all Optionees and any other holders of any Options. 5. Eligibility. (a) Nonstatutory Stock Options may be granted to Employees and Consultants. Incentive Stock Options may be granted only to Employees. An Employee or Consultant who has been granted an Option may, if otherwise eligible, be granted additional Options. (b) Each Option shall be designated in a written option agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designations, to the extent that the aggregate Fair Market Value of the Shares with respect to which Options designated as Incentive Stock Options are exercisable for the first time by any Optionee during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options shall be treated as Nonstatutory Stock Options. 5 6 (c) For purposes of Section 5(b), Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market value of the Shares shall be determined as of the time the Option with respect to such Shares is granted. (d) The Plan shall not confer upon any Optionee any right with respect to continuation of employment or consulting relationship with the Company, nor shall it interfere in any way with his or her right or the Company's right to terminate his or her employment or consulting relationship at any time, with or without cause. 6. Term of Plan. The Plan shall become effective upon the earlier to occur of its adoption by the Board of Directors or its approval by the shareholders of the Company as described in Section 20 of the Plan. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 16 of the Plan. 7. Term of Option. The term of each Option shall be the term stated in the Option Agreement; provided, however, that the term shall be no more than ten (10) years from the date of grant thereof. However, in the case of an Incentive Stock Option granted to an Optionee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Option Agreement. 8. Limitation on Grant to Employees. Subject to adjustment as provided in this Plan, the maximum number of Shares which may be subject to options granted to any one Employee under this Plan for any fiscal year of the Company shall be 500,000. 9. Option Exercise Price and Consideration. (a) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be such price as is determined by the Board, but shall be subject to the following: (i) In the case of an Incentive Stock Option (A) granted to an Employee who, at the time of the grant of such Incentive Stock Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant. 6 7 (B) granted to any other Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. (ii) In the case of a Nonstatutory Stock Option (A) granted to a person who, at the time of the grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of the grant. (B) granted to a person who, at the time of grant of such Option, is a Named Executive of the Company, the per share Exercise Price shall be no less than 100% of the Fair Market Value on the date of grant; and (C) granted to any person other than a Named Executive, the per Share exercise price shall be no less than 85% of the Fair Market Value per Share on the date of grant. (b) Permissible Consideration. The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant) and may consist entirely of (1) cash,(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares acquired upon exercise of an Option either have been owned by the Optionee for more than six months on the date of surrender or were not acquired, directly or indirectly, from the Company, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised (5) delivery of a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay the exercise price, or (6) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Board shall consider if acceptance of such consideration may be reasonably expected to benefit the Company. 10. Exercise of Option. (a) Procedure for Exercise; Rights as a Shareholder. Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Board, including performance criteria with respect to the Company and/or the Optionee, and as shall be permissible under the terms of the Plan. 7 8 An Option may not be exercised for a fraction of a Share. An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may, as authorized by the Board, consist of any consideration and method of payment allowable under Section 9(b) of the Plan. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificates promptly upon exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 14 of the Plan. Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. (b) Termination of Employment. In the event of termination of an Optionee's Continuous Status as an Employee or Consultant with the Company, such Optionee may, but only within such period of time as is determined by the Administrator, of at least thirty (30) days, with such determination in the case of an Incentive Stock Option not exceeding three (3) months after the date of such termination (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise his or her Option to the extent that Optionee was entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise the Option at the date of such termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. (c) Disability of Optionee. Notwithstanding the provisions of Section 10(b) above, in the event of termination of an Optionee's Continuous Status as an Employee or Consultant as a result of his total and permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months from the date of such termination (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise the Option to the extent otherwise entitled to exercise it at the date of such 8 9 termination. To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. (d) Death of Optionee. In the event of termination of an Optionee's Continuous Status as an Employee or Consultant as a result of the death of an Optionee, the Option may be exercised, at any time within twelve (12) months following the date of death (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), by the Optionees' estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent the Optionee was entitled to exercise the Option at the date of death. To the extent that Optionee was not entitled to exercise the Option at the date of death, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. (e) Rule 16b-3. Options granted to persons subject to Section 16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such additional conditions or restrictions as may be required thereunder to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions. (f) Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares, an Option previously granted, based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made. 11. Withholding Taxes. As a condition to the exercise of Options granted hereunder, the Optionee shall make such arrangements as the Administrator may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with the exercise, receipt or vesting of such Option. The Company shall not be required to issue any Shares under the Plan until such obligations are satisfied. 12. Stock Withholding to Satisfy Withholding Tax Obligations. At the discretion of the Administrator, Optionees may satisfy withholding obligations as provided in this paragraph. When an Optionee incurs tax liability in connection with an Option which tax liability is subject to tax withholding under applicable tax laws, and the Optionee is obligated to pay the Company an amount required to be withheld under applicable tax laws, the Optionee may satisfy the withholding tax obligation by one or some combination of the following methods: (a) by cash payment, or (b) out of Optionee's current compensation, (c) if permitted by the Administrator, in its discretion, by 9 10 surrendering to the Company Shares that (i) in the case of Shares previously acquired from the Company, have been owned by the Optionee for more than six months on the date of surrender, and (ii) have a fair market value on the date of surrender equal to or less than Optionee's marginal tax rate times the ordinary income recognized, or (d) by electing to have the Company withhold from the Shares to be issued upon exercise of the Option that number of Shares having a fair market value equal to the amount required to be withheld. For this purpose, the fair market value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined (the "Tax Date"). Any surrender by an Officer or Director of previously owned Shares to satisfy tax withholding obligations arising upon exercise of this Option must comply with the applicable provisions of Rule 16b-3 and shall be subject to such additional conditions or restrictions as may be required thereunder to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions. All elections by an Optionee to have Shares withheld to satisfy tax withholding obligations shall be made in writing in a form acceptable to the Administrator and shall be subject to the following restrictions: (a) the election must be made on or prior to the applicable Tax Date; (b) once made, the election shall be irrevocable as to the particular Shares of the Option as to which the election is made; (c) all elections shall be subject to the consent or disapproval of the Administrator; (d) if the Optionee is an Officer or Director, the election must comply with the applicable provisions of Rule 16b-3 and shall be subject to such additional conditions or restrictions as may be required thereunder to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions. In the event the election to have Shares withheld is made by an Optionee and the Tax Date is deferred under Section 83 of the Code because no election is filed under Section 83(b) of the Code, the Optionee shall receive the full number of Shares with respect to which the Option is exercised but such Optionee shall be unconditionally obligated to tender back to the Company the proper number of Shares on the Tax Date. 10 11 13. Non-Transferability of Options. Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. 14. Adjustments Upon Changes in Capitalization; Corporate Transactions. (a) Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, the maximum number of Shares of Common Stock for which Options may be granted to any Employee under Section 8 of the Plan and the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option. (b) Corporate Transactions. In the event of the proposed dissolution or liquidation of the Company, the Option will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Administrator. The Administrator may, in the exercise of its sole discretion in such instances, declare that any Option shall terminate as of a date fixed by the Administrator and give each Optionee the right to exercise his or her Option as to all or any part of the Optioned Stock, including Shares as to which the Option would not otherwise be exercisable. In the event of a proposed sale of all or substantially of the assets of the Company, or the merger of the Company with or into another corporation, the Option shall be assumed or an equivalent option shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation, unless the Administrator determines, in the exercise of its sole discretion and in lieu of such assumption or 11 12 substitution, that the Optionee shall have the right to exercise the Option as to some or all of the Optioned Stock, including Shares as to which the Option would not otherwise be exercisable. If the Administrator makes an Option exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee that the Option shall be exercisable for a period of thirty (30) days from the date of such notice, and the Option will terminate upon the expiration of such period. 15. Time of Granting Options. The date of grant of an Option shall, for all purposes, be the date on which the Administrator makes the determination granting such Option, or such other date as is determined by the Board. Notice of the determination shall given to each Employee or Consultant to whom an Option is so granted within a reasonable time after the date of such grant. 16. Amendment and Termination of the Plan. (a) Amendment and Termination. The Board may amend or terminate the Plan from time to time in such respects as the Board may deem advisable, provided that, the following revisions or amendments shall require approval of the shareholders of the Company in the manner described in Section 20 of the Plan. (i) any increase in the number of Shares subject to the Plan, other than an adjustment under Section 14 of the Plan; (ii) any change in the designation of the class of persons eligible to be granted Options; (iii) any change in the limitation on grants to employees as described in Section 8 of the Plan or other changes which would require shareholder approval to qualify options granted hereunder as performance-based compensation under Section 162(m) of the Code; or (iv) any revision or amendment requiring shareholder approval in order to preserve the qualification of the Plan under Rule 16b-3. (b) Shareholder Approval. If any amendment requiring shareholder approval under Section 16(a) of the Plan is made subsequent to the first registration of any class of equity securities by the Company under Section 12 of the Exchange Act, such shareholder approval shall be solicited as described in Section 20 of the Plan. 12 13 (c) Effect of Amendment or Termination. Any such amendment or termination of the Plan shall not affect Options already granted and such Options shall remain in full force and effect as if this Plan had not been amended or terminated, unless mutually agreed otherwise between the Optionee and the Board, which agreement must be in writing and signed by the Optionee and the Company. 17. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law. 18. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 19. Agreements. Options shall be evidenced by written agreements in such form as the Board shall approve from time to time. 20. Shareholder Approval. (a) Continuance of the Plan shall be subject to approval by the shareholders of the Company within twelve (12) months before or after the date of the Plan is adopted. Such shareholder approval shall be obtained in the manner and to the degree required under applicable federal and state law and the rules of any stock exchange upon which the Shares are listed. 13 14 (b) In the event that the Company registers any class of equity securities pursuant to Section 12 of the Exchange Act, any required approval of the shareholders of the Company obtained after such registration shall be solicited substantially in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder. (c) If any required approval by the shareholders of the Plan itself or of any amendment thereto is solicited at any time otherwise than in the manner described in Section 20(b) hereof, then the Company shall, at or prior to the first annual meeting of shareholders held subsequent to the later of (1) the first registration of any class of equity securities of the Company under Section 12 of the Exchange Act or (2) the granting of an Option hereunder to an officer or director after such registration, do the following: (i) furnish in writing to the holders entitled to vote for the Plan substantially the same information that would be required (if proxies to be voted with respect to approval or disapproval of the Plan or amendment were then being solicited) by the rules and regulations in effect under Section 14(a) of the Exchange Act at the time such information is furnished; and (ii) file with, or mail for filing to, the Securities and Exchange Commission four copies of the written information referred to in subsection (i) hereof not later than the date on which such information is first sent or given to shareholders. 21. Information to Optionees. The Company shall provide to each Optionee, during the period for which such Optionee has one or more Options outstanding, copies of all annual reports and other information which are provided to all shareholders of the Company. 14 EX-10.1 10 1997 DIRECTORS' STOCK OPTION PLAN 1 EXHIBIT 10.1 CUIDAO HOLDING CORP. 1997 DIRECTORS' STOCK OPTION PLAN 1. Purposes of the Plan. The purposes of this Directors' Stock Option Plan are to attract and retain the best available personnel for service as Directors of the Company, to provide additional incentive to the Outside Directors of the Company to serve as Directors, and to encourage their continued service on the Board. All options granted hereunder shall be "nonstatutory stock options". 2. Definitions. As used herein, the following definitions shall apply: (a) "Board" means the Board of Directors of the Company. (b) "Code" means the Internal Revenue Code of 1986, as amended. (c) "Common Stock" means the Common Stock of the Company. (d) "Company" means Cuidao Holding Corp., a Florida corporation. (e) "Continuous Status as a Director" means the absence of any interruption or termination of service as a Director. (f) "Director" means a member of the Board. (g) "Employee" means any person, including officers and directors, employed by the Company or any Parent or Subsidiary of the Company. The payment of a director's fee by the Company shall not be sufficient to constitute "employment" by the Company. (h) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (i) "Option" means a stock option granted pursuant to the Plan. All options shall be nonstatutory stock options (i.e., options that are not intended to qualify as incentive stock options under Section 422 of the Code). (j) "Optioned Stock" means the Common Stock subject to an Option. 2 (k) "Optionee" means an Outside Director who receives an Option. (l) "Outside Director" means a Director who is not an Employee. (m) "Parent" means a "parent corporation", whether now or hereafter existing, as defined in Section 424(e) of the Code. (n) "Plan" means this 1997 Directors' Stock Option Plan. (o) "Share" means a share of the Common Stock, as adjusted in accordance with Section 11 of the Plan. (p) "Subsidiary" means a "subsidiary corporation", whether now or hereafter existing, as defined in Section 424(f) of the Code. 3. Stock Subject to the Plan. Subject to the provisions of Section 11 of the Plan, the maximum aggregate number of shares which may be optioned and sold under the Plan is 250,000 shares (the "Pool") of Common Stock. If an Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for future grant under the Plan. If Shares which were acquired upon exercise of an Option are subsequently repurchased by the Company, such Shares shall not in any event be returned to the Plan and shall not become available for future grant under the Plan. 4. Administration of and Grants of Options under the Plan. (a) Administrator. Except as otherwise required herein, the Plan shall be administered by the Board. (b) Procedure for Grants. All grants of Options hereunder shall be automatic and nondiscretionary and shall be made strictly in accordance with the following provisions: (i) No person shall have any discretion to select which Outside Directors shall be granted Options or to determine the number of Shares to be covered by Options granted to Outside Directors. (ii) Each Outside Director shall be automatically granted an Option to purchase Shares (the "First Option") as follows: (A) with respect to persons who are Outside Directors on the effective date of this Plan, as determined in accordance with Section 6 hereof, 1,000 shares on such effective date, and (B) with respect to any other person, 500 shares on the date on which such person first becomes an Outside Director, 2 3 whether through election by the shareholders of the Company or appointment by the Board of Directors to fill a vacancy. (iii) After the First Option has been granted to an Outside Director, such Outside Director shall thereafter be automatically granted an Option to purchase 500 Shares (a "Subsequent Option") on January 1 of each year, with the first such grant being made on January 1, 1998, provided that, on such date, he or she shall have served on the Board for at least six (6) months prior to the grant of such Subsequent Option. (iv) Notwithstanding the provisions of subsections (ii) and (iii) hereof, in the event that a grant would cause the number of Shares subject to outstanding Options plus the number of Shares previously purchased upon exercise of Options to exceed the Pool, then each such automatic grant shall be for that number of Shares determined by dividing the total number of Shares remaining available for grant by the number of Outside Directors receiving an Option on such date on the automatic grant date. Any further grants shall then be deferred until such time, if any, as additional Shares become available for grant under the Plan through action of the shareholders to increase the number of Shares which may be issued under the Plan or through cancellation or expiration of Options previously granted hereunder. (v) Notwithstanding the provisions of subsections (ii) and (iii) hereof, any grant of an Option made before the Company has obtained shareholder approval of the Plan in accordance with Section 17 hereof shall be conditioned upon obtaining such shareholder approval of the Plan in accordance with Section 17 hereof. (vi) The terms of each First Option granted hereunder shall be as follows: (1) the First Option shall be exercisable only while the Outside Directors remains a Director of the Company, except as set forth in Section 9 hereof. (2) the exercise price per Share shall be 100% of the fair market value per Share on the date of grant of the First Option, determined in accordance with Section 8 hereof. (3) the First Option shall become exercisable in installments cumulatively as to 25% of the Shares subject to the First Option on each of the first, second, third and fourth anniversaries of the date of grant of the Option. (vii) The terms of each Subsequent Option granted hereunder shall be as follows: 3 4 (1) the Subsequent Option shall be exercisable only while the Outside Director remains a Director of the Company, except as set forth in Section 9 hereof. (2) the exercise price per Share shall be 100% of the fair market value per Share on the date of grant of the Subsequent Option on the first anniversary of the date of grant of the Subsequent Option. (c) Powers of the Board. Subject to the provisions and restrictions of the Plan, the Board shall have the authority in its discretion: (i) to determine, upon review of relevant information and in accordance with Section 8(b) of the Plan, the fair market value of the Common Stock;(ii) to determine the exercise price per share of Options to be granted, which exercise price shall be determined in accordance with Section 8(a) of the Plan; (iii) to interpret the Plan; (iv) to prescribe, amend and rescind rules and regulations relating to the Plan; (v) to authorize any person to execute on behalf of the Company any instrument required to effectuate the grant of an Option previously granted hereunder; and (vi) to make all other determinations deemed necessary or advisable for the administration of the Plan. (d) Effect of Board's Decision. All decisions, determinations and interpretations of the Board shall be final and binding on all Optionees and any other holders of any Options granted under the Plan. (e) Suspension or Termination of Option. If the President or his or her designee reasonably believes that an Optionee has committed an act of misconduct, the President may suspend the Optionee's right to exercise any option pending a determination by the Board of Directors (excluding the Outside Director accused of such misconduct). If the Board of Directors (excluding the Outside Director accused of such misconduct) determines an Optionee has committed an act of embezzlement, fraud, dishonesty, nonpayment of an obligation owed to the Company, breach of fiduciary duty or deliberate disregard of the Company rules resulting in loss, damage or injury to the Company, or if an Optionee makes an unauthorized disclosure of any Company trade secret or confidential information, engages in any conduct constituting unfair competition, induces any Company customer to breach a contract with the Company or induces any principal for whom the Company acts as agent to terminate such agency relationship, neither the Optionee nor his or her estate shall be entitled to exercise any option whatsoever. In making such determination, the Board of Directors (excluding the Outside Director accused of such misconduct) shall act fairly and shall give the Optionee an opportunity to appear and present evidence on Optionee's behalf at a hearing before the Board or a committee of the Board. 4 5 5. Eligibility. Options may be granted only to Outside Directors. All Options shall be automatically granted in accordance with the terms set forth in Section 4(b) hereof. An Outside Director who has been granted an Option may, if he or she is otherwise eligible, be granted an additional Option in accordance with such provisions. The Plan shall not confer upon any Optionee any right with respect to continuation of service as a Director or nomination to serve as a Director, nor shall it interfere in any way with any rights which the Director or the Company may have to terminate his or her directorship any time. 6. Term of Plan; Effective Date. The Plan shall become effective upon the earlier to occur of its adoption by the Board of Directors or its approval by the shareholders of the Company as described in Section 17 of the Plan. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 13 of the Plan. 7. Term of Options. The term of each Option shall be ten (10) years from the date of grant thereof. 8. Exercise Price and Consideration. (a) Exercise Price. The per Share exercise price for the Shares to be issued pursuant to exercise of an Option shall be 100% of the fair market value per Share on the date of grant of the Option. (b) Fair Market Value. The fair market value shall be determined by the Board; provided, however, that where there is a public market for the Common Stock, the fair market value per Share shall be the mean of the bid and asked prices of the Common Stock in the over-the-counter market on the date of grant, as reported in The Wall Street Journal (or, if not so reported, or otherwise reported by the National Association of Securities Dealers Automated Quotation System ("Nasdaq Stock Market")) or, in the event the Common Stock is traded on the Nasdaq National Market or listed on a stock exchange, the fair market value per Share shall be the closing price on such system or exchange on the date of grant of the Option, as reported in The Wall Street Journal. (b) Form of Consideration. The consideration to be paid for the Shares to be issued upon exercise of an Option shall consist entirely of cash, check, other shares of Common Stock having a fair market value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised (which, if acquired from the Company, shall have been held for at least six months), or any combination of 5 6 such methods of payment and/or any other consideration or method of payment as shall be permitted under applicable corporate law. 9. Exercise of Option. (a) Procedure for Exercise; Rights as a Shareholder. Any Option granted hereunder shall be exercisable at such times as are set forth in Section 4(b) hereof; provided, however, that no Options shall be exercisable prior to shareholder approval of the Plan in accordance with Section 17 hereof has been obtained. An Option may not be exercised for a fraction of a Share. An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may consist of any consideration and method of payment allowable under Section 8(C) of the Plan. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificates promptly upon exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 11 of the Plan. Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. (b) Termination of Status as a Director. If an Outside Director ceases to serve as a Director, he or she may, but only within ninety (90) days after the date he or she ceases to be a Director of the Company, exercise his or her Option to the extent that he or she was entitled to exercise it at the date of such termination. Notwithstanding the foregoing, in no event may the Option be exercised after its term set forth in Section 7 has expired. To the extent that such Outside Director was not entitled to exercise an Option at the date of such termination, or does not exercise such Option (which he or she was entitled to exercise) within the time specified herein, the Option shall terminate. 6 7 (c) Disability of Optionee. Notwithstanding the provisions of Section 9(b) above, in the event a Director is unable to continue his or her service as a Director with the Company as a result of his or her total and permanent disability (as defined in Section 22(e)(3) of the Code), he or she may, but only within six (6) months (or such other period of time not exceeding twelve (12) months as is determined by the Board)from the date of such termination exercise his or her Option to the extent he or she was entitled to exercise it at the date of such termination. Notwithstanding the foregoing, in no event may the Option be exercised after its term set forth in Section 7 has expired. To the extent that he or she was not entitled to exercise the Option at the date of termination, or if he or she does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. (d) Death of Optionee. In the event of the death of an Optionee: (i) the Option may be exercised, at any time within six (6) months following the date of death (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), by the Optionees' estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent the Optionee was entitled to exercise the Option at the date of death. To the extent that Optionee was not entitled to exercise the Option at the date of death, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. (ii) Within three (3) months after the termination of Continuous Status as a Director, the Option may be exercised, at any time within six (6) months following the date of death, by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent of the right to exercise that had accrued at the date of termination. Notwithstanding the foregoing, in no event may the option be exercised after its term set forth in Section 7 has expired. 10. Non-Transferability of Options. Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution or pursuant to a qualified domestic relations order (as defined by the Code or the rules thereunder). The designation of a beneficiary by an Optionee does not constitute a transfer. An Option may be exercised during the lifetime of an Optionee only by the Optionee or a transferee permitted by this Section. 7 8 11. Adjustments Upon Changes in Capitalization; Corporate Transactions. (a) Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option. (b) Corporate Transactions. In the event of (i) a dissolution or liquidation of the Company, (ii) a sale of all or substantially all of the Company's assets, (iii) a merger or consolidation in which the Company is not the surviving corporation or (iv) any other capital reorganization in which more than fifty percent (50%) of the shares of the Company entitled to vote are exchanged, the Company shall give to the Eligible Director, at the time of adoption of the plan for liquidation, dissolution, sale, merger, consolidation or reorganization, either a reasonable time thereafter within which to exercise the Option, including Shares as to which the Option would not be otherwise exercisable, prior to the effectiveness of such liquidation, dissolution, sale, merger, consolidation or reorganization, at the end of which time the Option shall terminate, or the right to exercise the Option, including Shares as to which the Option would not be otherwise exercisable (or receive a substitute option with comparable terms), as to an equivalent number of shares of stock of the corporation succeeding the Company acquiring its business by reason of such liquidation, dissolution, sale, merger, consolidation or reorganization. 8 9 12. Time of Granting Options. The date of grant of an Option shall, for all purposes, be the date determined in accordance with Section 4(b) hereof. Notice of the determination shall be given to each Outside Director to whom an Option is so granted within a reasonable time after the date of such grant. 13. Amendment and Termination of the Plan. (a) Amendment and Termination. The Board may amend or terminate the Plan from time to time in such respects as the Board may deem advisable, provided that, to the extent necessary and desirable to comply with rule 16b-3 under the Exchange Act (or any other applicable law or regulation), the Company shall obtain approval of the shareholders of the Company to Plan amendments to the extent and in the manner required by such law or regulation. Notwithstanding the foregoing, the provisions set forth in Section 4 of this Plan (and any other Sections of this Plan that affect the formula award terms required to be specified in this Plan by Rule 16b-3) shall not be amended more than once every six (6) months, other than to comport with changes in the Code, the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder. (b) Effect of Amendment or Termination. Any such amendment or termination of the Plan that would impair the rights of any Optionee shall not affect Options already granted to such Optionee and such Options shall remain in full force and effect as if this Plan had not been amended or terminated, unless mutually agreed otherwise between the Optionee and the Board, which agreement must be in writing and signed by the Optionee and the Company. 14. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, state securities laws, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law. 9 10 15. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 16. Option Agreement. Options shall be evidenced by written agreements in such form as the Board shall approve from time to time. 17. Shareholder Approval. Continuance of the Plan shall be subject to approval by the shareholders of the Company at or prior to the first annual meeting of shareholders held subsequent to the granting of an Option hereunder. If such shareholder approval is obtained at a duly held shareholders' meeting, it may be obtained by the affirmative vote of the holders of a majority of the outstanding shares of the Company present or represented and entitled to vote thereon. If such shareholder approval is obtained by written consent, it may be obtained by the written consent of the holders of a majority of the outstanding shares of the Company. Options may be granted, but not exercised, before such shareholder approval. 10 EX-10.2 11 DISTRIBUTION AGREEMENT 1 EXHIBIT 10.2 DISTRIBUTION AGREEMENT This Agreement is made and entered into this 24th day of November, 1997, by and between the People's Republic of China, TSINGTAO BREWERY NO.3 CO.,LTD.("BREWER") and CUIDAO (USA) IMPORT CO., INC., a subsidiary of CUIDAO HOLDING CORP., a Florida U. S. A. corporation, with its principal place of business at 3120 West Griffin Road, Suite #204, Ft. Lauderdale, Florida 33312-6900, U.S.A ("DISTRIBUTOR"). RECITALS WHEREAS, BREWER is engaged in the brewing, production and sale of beer and wishes to expand the distribution of such product by having DISTRIBUTOR sell such product in the territory described in Paragraph 3 hereof; and WHEREAS, DISTRIBUTOR desires to market the beer products brewed by BREWER, and to be designated as the exclusive distributor of BREWER for the purposes of selling such products in the territory assigned to it. NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged by each party, the parties hereto agree as follows: 1. Appointment. a) BREWER HEREBY APPOINTS DISTRIBUTOR as its exclusive distributor for the sale and promotion of the Products described in Paragraph 2 below in the Territory described in Paragraph 3 below and agrees not to appoint other distributors in the Territory. -1- 2 BREWER agrees that while this Agreement is in effect, it will not sell Products to persons other than DISTRIBUTOR in the Territory or to persons, other than DISTRIBUTOR, who BREWER has reason to believe will resell Products in the Territory. (b) DISTRIBUTOR hereby accepts such appointment subject to the terms and conditions of this Agreement and agrees that it shall use its best efforts to promote demand for and sale of the Products in the Territory and that in the sale and promotion of the Products it shall at all times carry out to the best of its ability a merchandising policy designed to promote and maintain the excellence of quality and to preserve the goodwill which is associated with the name and reputation of BREWER and its products. (c) Notwithstanding the foregoing, should DISTRIBUTOR, commencing with the 2000 calendar year, fail to meet the minimum annual purchase requirements set forth in Section 4(c) of this Agreement, the DISTRIBUTOR shall become a non-exclusive distributor of the Products. 2. Products. The term "Products" as used in this Agreement shall mean any and all beers and beer styles and types brewed and produced by BREWER. BREWER shall have the right to stop brewing and selling any of the Products without incurring any obligation or liability to DISTRIBUTOR. 3. Territory. The term "Territory" as used in this Agreement shall mean the Continent of North America. The Territory may be subsequently enlarged, reduced or otherwise changed by agreement in writing of - 2- 3 the parties hereto 4. Sales Activities DISTRIBUTOR shall conduct the sales activities contemplated under this Agreement by purchasing Products from BREWER for resale to DISTRIBUTOR's customers within the Territory. DISTRIBUTOR shall conduct its sales activities in a lawful manner consistent with the highest standards of fair trade, fair competition, and business ethics; shall cause all of its employees to do the same and use its best efforts to ensure that its agents will do the same; and in addition shall be bound by the following duties and obligations: (a) Advertising. DISTRIBUTOR may undertake, at its own expense, such advertising and promotional efforts as it may deem necessary to achieve a proper recognition of the products in the Territory. DISTRIBUTOR shall have the right to use the name "CUIDAO" or any derivation thereof, or any other name or mark associated with BREWER. (b) Inventory. DISTRIBUTOR agrees to maintain at all times an inventory of the products sufficient to fill reasonably anticipated orders from its customers and to deliver promptly all such orders. (c) Minimum Purchases. During the calendar year beginning January 1, 1998 DISTRIBUTOR shall make a minimum annual total purchase of products having a net plant net volume of 21357 cases per year. Commencing with the calendar year beginning January 1, 1999, DISTRIBUTOR shall make a minimum annual total purchase of Products having a net plant volume of 27,000 cases. Commencing with the calendar year beginning January 1, 2000, DISTRIBUTOR shall make a minimum annual total purchase of Products having a net volume of 106,000 cases. (d) Orders. DISTRIBUTOR shall in submitting orders describe the Products in a clear and unambiguous manner and shall include precise instructions for packaging, invoicing. and shipping. Overall purchase order for each consecutive year needs to be provided to the Brewery in the month of December preceding said year, with price -3- 4 to be agreed on. (e) Resale Prices. DISTRIBUTOR shall distribute the Products through all available means, including restaurant accounts, store and market retail accounts, or otherwise, which may be commensurate with good development of the Territory. DISTRIBUTOR shall set resale prices for the Products at its own discretion. 5 Payments. (a) All terms of this agreement, (including but not limited to "cost", "payments", "amounts", "value", "discounts", "price", "credits", "set-off", "dollars", or "$") shall be calculated and construed in terms of currency of the United States of America. (b) In order to secure DISTRIBUTOR's obligation to accept and purchase any Products ordered under the terms of this Agreement, DISTRIBUTOR shall establish a confirmed, irrevocable and transferable letter of credit in favor of BREWER or an affiliate of BREWER at a bank within the United States of America acceptable to BREWER or the BREWER's bank in China; and the conditions for payment thereunder shall be satisfied upon the delivery by BREWER of the usual shipping documents. 6 Confidential Information. DISTRIBUTOR and BREWER shall not use of disclose to third parties any confidential information concerning the business, affairs, or the products of the other party which it may acquire in the course of its activities under this Agreement and shall take all necessary precautions to prevent any such disclosure by any of its employees, officers or affiliated persons and entities. For purposes of this Article, confidential information shall include trade secrets and other unpatentable information. 7 Sub-Distributors. DISTRIBUTOR shall have the right to appoint sub-distributors for -4- 5 the sale and promotion of the products in the Territory, Additionally, DISTRIBUTOR shall have the right to enter into alliances and cooperative arrangements for the sale, promotion and distribution of the product in the Territory. 8 Product warranty. BREWER warrants to DISTRIBUTOR that Products shall be of merchantable quality at the time title thereto passes to DISTRIBUTOR in accordance with this Agreement. BREWER, at its option, shall replace any products which fail to comply with such warranty or shall refund the purchase price paid by DISTRIBUTOR for any claims for liabilities made against DISTRIBUTOR arising out of personal injuries or death or damage to property caused by defective products, unless such defect is created by DISTRIBUTOR's handling of the products. The DISTRIBUTOR should have insurance against the liability Insurance on behalf of the BREWER 9 Relationship Between Parties. (a) DISTRIBUTOR agrees that in all matters relating to this Agreement it is and shall be acting as an independent contractor and shall bear all of its expenses in connection with this Agreement. It shall not have any authority to assume or create any obligation, express or implied, on behalf of BREWER. DISTRIBUTOR shall not make quotations or write letters in the name of BREWER but in every instance shall use its own name. (b) At such time, as Distributor ceases to operate as a Distributor for Brewery herein, distributor shall assign rights of "CUIDAO" to Brewery herein. 10. Effective Date and Duration (a) This Agreement shall take effect as of the date first above written. This Agreement shall be effective for five (5) years from the effective date, unless sooner terminated as hereinafter provided. This Agreement shall be automatically renewed for additional terms -5- 6 of five (5) years each, unless not less than nine(9) months prior to the end of the initial or any renewal term either party shall give the other written notice of non-renewal. (b) This Agreement may be terminated prior to the expiration of the initial term of this Agreement, or any renewals thereof, by either party if the other party: (i) breaches any material provision of this agreement, and breach is not cured within ninety (90)days written notice thereof; (ii) insolvency or bankruptcy of either party under applicable law, and/or the appointment of a trustee or receiver for either party; or (iii) any inability or prospective failure of either party to perform its obligations hereunder. 11. Rights and obligations Upon Termination. Upon expiration or termination of this Agreement for any reason, all orders received from DISTRIBUTOR but not shipped by BREWER prior to the effective date of termination shall be shipped by BREWER, and DISTRIBUTOR agrees to accept shipment of and make payment for any such orders shipped by BREWER. 12. No Assignment. This Agreement shall not be assigned by either party, either by operation of law or by contract, without the prior written consent of the other party hereto, and any attempt to assign without such consent shall be null and void. Nothing herein contained, however, shall prevent DISTRIBUTOR from assigning this Agreement to any subsidiary, an affiliate, sister, or parent corporation of DISTRIBUTOR. 13. Government Regulation. -6- 7 (a)DISTRIBUTOR agrees to obtain at its own expense any import license, foreign exchange permit, or other permit or approval it may need for the performance of its obligations under this Agreement, and in essence, to comply at its own expense with all applicable laws, regulations, and orders of the government(s) of the Territory, the United States or any instrumentality thereof. (b)DISTRIBUTOR agrees to furnish to BREWER, by affidavit or other reasonable means from time to time at BREWER'S request, and to the reasonable satisfaction of BREWER, assurances that the appointment of DISTRIBUTOR hereunder, its activities under this Agreement and the payment to BREWER of any monies or consideration contemplated hereunder are proper and lawful under the law in force in the Territory and in the United States of America. DISTRIBUTOR further represents that no person employed by it is an official of any government agency or a corporation owned by the government(s) of the Territory, the United States of America, or any state thereof and that no part of any monies or consideration paid hereunder shall accrue for the benefit of any such official. 14. Force Majeure This Agreement and BREWER'S and DISTRIBUTOR'S performances hereunder are subject to all contingencies beyond their reasonable control, including but not limited to force majeure; strikes; lockouts; labor disputes; floods; civil commotion; riot; acts of God; rules; laws; orders; restrictions; embargoes; quotas or actions of any government; foreign or domestic or any agency or subdivision thereof; casualties; fires; accidents; shortages of transportation facilities; detention of the products by custom authorities; or losses of the products in public or private warehouses. In any such event, the party not subject to force majeure shall have the right, in its sole discretion and without any liability to the other party, -7- 8 to (a) cancel all or any portion of this Agreement, of (b) require performance of this Agreement within a reasonable time after the causes for nonperformance or delay have terminated. 15. Separability. If any provision of this Agreement is found by any court of competent jurisdiction to be invalid or unenforceable, the invalidity of such provision shall not affect the other provisions of this Agreement and all provisions not affected by such invalidity or unenforceability shall remain in full force and effect. 16. Waiver. The waiver by either party hereto of a breach or default in any of the provisions of this Agreement by the other party shall not be construed as a waiver of any succeeding breach of the same or other provisions; nor shall any delay or omission on the part of either party to exercise or avail itself of any right, power, or privilege that it has or may have hereunder operate as a waiver of any breach or default by the other party. 17. Language. This Agreement is written in Chinese and English in two counterparts in each language. One copy of each language text shall be retained by each party. Chinese and English texts shall have equal validity and legal effect. 18. Notices. (a)Unless otherwise specifically provided, all notices, demands, or requests required or permitted by this Agreement shall be in writing and in English and sent in a letter form or by telex, -8- 9 facsimile (facsimile to be accompanied by a telex notice requesting confirmation of receipt), telegram or cable to the address of the parties first set forth hereinabove, or to such other address as may from time to time be designated by any party through notification to the other party at its address as in effect from time to time. The dates on which notices shall be deemed to have been effectively given shall be determined as follows: (a) Notices given by personal delivery shall be deemed effectively give on the date of personal delivery; (b) Notices given in letter form shall be deemed effectively give on the tenth day after the date mailed (as indicated by the postmark) by registered airmail; postage prepaid, or the fourth day after delivery to an internationally recognized courier service; (e) Notices given by telex, telegram or cable shall be deemed effectively given on the second business day following the date of transmission, as indicated on the document in question; and (d) Notices given by facsimile shall be deemed effectively give on the first business day following the date of transmission of a telex notice requesting confirmation of receipt as indicated on the telex in question. Nothing contained herein shall justify or excuse failure to give oral notice for the purpose of informing the other party thereof when notification is appropriate, but such oral notice shall not satisfy the requirement of written notice. 19. Governing Law. The formation, validity, execution, amendment and termination of this Agreement shall be governed by the United Nation's convention on contracts for the Internation Sale of Goods and other concerning international legal principles and practices. 20. Resolution of Disputes. (a) Any dispute, controversy or claim arising out of or relating -9- 10 to this Agreement, or the interpretation, breach, termination or validity hereof, shall be resolved through friendly consultation. Such consultation shall begin immediately after one party has delivered to the other party a written request for such consultation. If within thirty (30) days following the date on which such notice is given, the dispute cannot be resolved, the dispute shall he submitted to arbitration upon the request of one party with notice to the other party. (b) Any arbitration to be conducted pursuant to the terms of this Agreement shall be conducted in Stockholm, Sweden under the auspices of the Arbitration Institute of the Stockholm Chamber of Commerce (the "Institute"). There shall be three arbitrators. Each party shall select on arbitrator within thirty (30) days after giving or receiving the demand for arbitration. Such limited in their selection to any prescribed list. The President of the Institute shall select the third arbitrator. If the other party does not appoint and arbitrator who has consented to participate within thirty (30) days after the selection of the first arbitrator, the relevant appointment shall be made by the President of the Institute. (e) The arbitration proceedings shall be conducted in English. The arbitration tribunal shall apply the Arbitration Rules of the United Nations Commission on International Trade Law in effect at the time of arbitration. However, if such rules are in conflict with the provisions of this Section 23, including the provisions concerning the appointment of arbitrators, the provisions of this Section 23 shall prevail. (d) Each party shall cooperate with the other in making full disclosure of and providing complete access to all information and documents requested by the other party in connection with such proceeding, subject only to any confidentiality obligations binding on such party. -10- 11 The award of the arbitration tribunal shall be final and binding upon the parties, and either party may apply to a court of competent jurisdiction for enforcement of such award. 21. Entire Agreement; Modifications and Waivers. This Agreement is the entire agreement of the parties with respect to the subject matter described in this Agreement and all oral and written prior negotiations and agreements and any conflicting prior course of dealing or trade usage are superseded hereby. The parties hereto agree that no representations have been made or relied upon except as specifically stated in this Agreement. This Agreement may be modified only by a writing signed by both parties. IN WITNESS WHEREOF, and intending to be legally bound hereby, DISTRIBUTOR and BREWER have each caused this Agreement to be delivered and executed by their proper and duly authorized officers on this 24th day of November, 1997. This agreement supersedes the previous agreement between the parties hereunder date on August 9th, 1996. BREWER : [SIG] ------------------------------- ------------------------------- TISNGTAO BREWERY NO. 3, LTD Date DISTRIBUTOR [SIG] ------------------------------- ------------------------------- CUIDAO HOLDING CORP. Date BY: C. MICHAEL FISHER, PRESIDENT -11- EX-10.3 12 IMPORT AND DISTRIBUTION AGREEMENT 1 EXHIBIT 10.3 IMPORT AND DISTRIBUTION AGREEMENT This Agreement is made and entered into this 13th day of December, 1996, by and between the Cave du Vignoble Gursonnais, with its principal place of business at 24610 Carsac de Gurson, France ("Winery") and, R&R (Bordeaux) Imports, Inc. (or Assigns) a Florida, U.S.A. corporation, with its principal place of business at 3201 West Griffin Road, Suite #204, Ft. Lauderdale, Florida 33312- 6900, U.S.A. ("Distributor"). RECITALS WHEREAS, WINERY is engaged in the production and sale of wine and wishes to expand the distribution of such product by having DISTRIBUTOR sell such product in the territory described in Paragraph 3 hereof; and WHEREAS, DISTRIBUTOR desires to market the wine products produced by WINERY and the be designated as the exclusive distributor of WINERY for the purposed of selling such products in the territory assigned to it. NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged by each party, the parties hereto agree as follows: 2 1. APPOINTMENT. (a) WINERY hereby appoints DISTRIBUTOR as its exclusive distributor for the sale and promotion of the Products described in Paragraph 2 below in the Territory described in Paragraph 3 below and agrees not to appoint other distributors in the Territory. WINERY agrees that while this Agreement is in effect, it will not sell Products to persons other than DISTRIBUTOR in the Territory or to persons, other than DISTRIBUTOR, who WINERY has reason to believe will resell the Products in the Territory. (b) DISTRIBUTOR hereby accepts such appointment subject to the terms and conditions of this Agreement and agrees that it shall use its best efforts to promote demand for and sale of the Products in the Territory and that in the sale and promotion of the Products it shall at all times carry out to the best of its ability a merchandising policy designed to promote and maintain the excellence of quality and to preserve the goodwill which is associated with the name and reputation of WINERY and its products. (c) Notwithstanding the foregoing, should DISTRIBUTOR, commencing with the 1999 calendar year, fail to meet the minimum annual purchase requirements set forth in Section 4 (c) of this Agreement, then DISTRIBUTOR shall become at non-exclusive distributor of the Products. 2 3 2. PRODUCTS. The term "Products" as used in this Agreement shall mean any and all WINE and CHAMPAGNE styles and any other types brewed and produced by WINERY. WINERY shall have the right to stop producing and selling any of the Products without incurring any obligation or liability to Distributor. 3. TERRITORY. The term "Territory" as used in this Agreement shall mean the Continent of North America, and the Caribbean Islands. The Territory may be subsequently enlarged, reduced or otherwise changed by agreement in writing of the parties hereto. 4. SALES ACTIVITIES. DISTRIBUTOR shall conduct the sales activities contemplated under this Agreement by purchasing Products from WINERY for resale to DISTRIBUTOR'S customers within the Territory. DISTRIBUTOR shall conduct its sales activities in a lawful manner consistent with the highest standards of fair trade, fair competition, and business ethics; shall cause all of its employees to do the same and use its best efforts to ensure that its agents will do the same; and in addition shall be bound by the following duties and obligations: 3 4 (a) Advertising. DISTRIBUTOR may undertake, at its own expense, such advertising and promotional efforts as it may deem necessary to achieve a proper recognition of the Products in the Territory. DISTRIBUTOR shall have the right to use the names or any derivation thereof, or any other name or mark associated with WINERY. (b) Inventory. DISTRIBUTOR agrees to maintain at all times an inventory of the Products sufficient to fill reasonably anticipated orders from its customers and to deliver promptly all such orders. (c) Minimum Purchases. During the calendar year beginning January 1, 1997, DISTRIBUTOR shall make a minimum annual total purchase of Products having a net plant invoice value of $100,000 U.S. Commencing with the calendar year beginning January 1, 1998, DISTRIBUTOR shall make a minimum annual total purchase of Products having a net plant invoice value of $150,000 U.S. Commencing with the calendar year beginning January 1, 1999, DISTRIBUTOR shall make a minimum annual total purchase of Products having a net plant invoice value of $400,000 U.S. (d) Orders. DISTRIBUTOR shall in submitting orders describe the Products in a clear and unambiguous manner and shall include precise instructions for packaging, invoicing, and shipping. (e) Resale Prices. DISTRIBUTOR shall distribute the Products through all available means, including restaurant accounts, store and market retail accounts, or otherwise, which may 4 5 be commensurate with good development of the Territory. DISTRIBUTOR shall set resale prices for the Products at its own discretion. 5. LIST PRICES. (a) The prices to be paid by DISTRIBUTOR to WINERY for each order of Products shall be WINERY'S prices in effect on the date said order for Products from time to time on thirty (30) days' written notice to DISTRIBUTOR to compensate for increases in its cost of manufacturing Products due to changes in currency exchange rates or increases in energy, labor, raw materials or transportation costs or in duties or other governmental charges, impositions or assessments. No price increase shall effect the prices of Products sold to DISTRIBUTOR pursuant to orders placed by DISTRIBUTOR and accepted by WINERY prior to the effective date of such price increase. (b) Any and all taxes assessed to WINERY by federal, state, or local governments on sales of WINERY'S Products to DISTRIBUTOR shall be included on invoices rendered by WINERY to DISTRIBUTOR. 5 6 6. PLACEMENT OF ORDERS AND SHIPMENT. (a) Upon the placing of a written order for Products to WINERY by DISTRIBUTOR, a binding agreement will be created whereby WINERY will agree to sell and ship, and DISTRIBUTOR will agree to purchase and pay for, the Products ordered under the terms of this Agreement. (b) Any terms or conditions stated in DISTRIBUTOR'S order inconsistent with this Agreement shall be null and void. (c) WINERY shall ship the Products to DISTRIBUTOR within a reasonable time after receipt of any order. Shipping dates shall be approximate and shall be computed from the date of receipt of the order by WINERY. Weights given shall be estimated weights. All typographical and clerical errors shall be subject to correction. (d) WINERY shall in no event be obligated to make any such shipment if such shipment would, at the time thereof, constitute a violation of any laws, regulations, or policies of the Territory or of the United States of America or France. (e) WINERY's obligation to effect shipment of the Products shall be fully discharged; and ownership, legal title, and all risk of loss or damage shall pass to DISTRIBUTOR when the Products have been delivered to the carrier at WINERY's place of business or any other place designated by WINERY. 6 7 (f) DISTRIBUTOR shall be entitled to conduct a reasonable investigation of the Products upon receipt thereof. All claims for defects in the Products or shortages shall be made in writing by DISTRIBUTOR within twenty (20) days of the receipt of the Products. Acceptance of the Products by DISTRIBUTOR shall constitute a waiver of all claims by DISTRIBUTOR for loss or damage due to defects or shortages in the Products, or to delay in delivery of the Products. (g) No Products shall be returned for credit without first obtaining the written permission of WINERY to return such Products. In the event WINERY does agree to accept goods and all such returned Products must be received by WINERY in an unused condition and in condition for resale as new merchandise. 7. PAYMENTS. (a) All terms of this Agreement, (including but not limited to "cost", "payments", "amounts", "value", "discounts", "price", "credits" "set-off", "dollars" or "$") shall be calculated and constructed in terms of currency of the United States of America. (b) In order to secure DISTRIBUTOR's obligation to accept and purchase any Products ordered under the terms of this 7 8 Agreement, DISTRIBUTOR shall establish a confirmed, irrevocable and transferrable letter of credit in favor of WINERY, or an assignee of WINERY or an affiliate of WINERY at a bank within the United States of America acceptable to WINERY; and the conditions for payment thereunder shall be satisfied upon the delivery by WINERY of the usual shipping documents. 8. Confidential Information. DISTRIBUTOR and WINERY shall not use or disclose to third parties any confidential information concerning the business, affairs, or the products of the other party which it may acquire in the course of its activities under this Agreement and shall take all necessary precautions to prevent any such disclosure by any of its employees, officers, or affiliated persons and entities. For purposes of this Article, confidential information shall include trade secrets and other unpatentable information. 9. Sub-Distributors. DISTRIBUTOR shall have the right to appoint sub-distributors for the sale and promotion of the Products in the Territory. Additionally DISTRIBUTOR shall have the right to enter into alliances and cooperative arrangements for the sale, promotion and distribution of the Product in the Territory. 8 9 10. CONSEQUENTIAL DAMAGES - INDEMNITY. (a) The parties hereto acknowledge that the ability of WINERY to comply with the terms of this Agreement is of the utmost importance to the business operations of DISTRIBUTOR. As a result, the parties understand that should WINERY breach any provision of this Agreement, that is shall be liable to DISTRIBUTOR for all damages which consequentially occur as a result of said breach including, but hot limited to, lost goodwill, lost resale profits, and lost customers of DISTRIBUTOR. (b) DISTRIBUTOR shall indemnify WINERY and hold it harmless from any claims, demands, liabilities, suits, or expenses of any kind arising out of DISTRIBUTOR'S business, and these provisions shall survive the termination of this Agreement. 11. PRODUCT WARRANTY. WINERY warrants to DISTRIBUTOR that Products shall be of merchantable quality at the time title there passes to DISTRIBUTOR in accordance with this Agreement. WINERY at is option, shall replace any Products which fail to comply with such warranty or shall refund the purchase price paid by DISTRIBUTOR therefor. Further, WINERY hereby agrees to indemnify DISTRIBUTOR for any claims for liabilities made against DISTRIBUTOR arising out of personal injuries or death or damage to property caused by 9 10 defective Products, unless such defect is created by DISTRIBUTOR'S handling of the Products. 12. RELATIONSHIP BETWEEN PARTIES. DISTRIBUTOR agrees that in all matters relating to this Agreement it is and shall be acting as an independent contractor and shall bear all of its expenses in connection with this Agreement. It shall not have any authority to assume or create any obligation, express or implied, on behalf of WINERY. DISTRIBUTOR shall not make quotations or write letters in the name of WINERY but in every instance shall use its own name. 13. EFFECTIVE DATE AND DURATION. (a) This Agreement shall be effective for three (3) years from the effective date, unless sooner terminated as hereinafter provided. This Agreement shall be automatically renewed for additional terms of ten (10) years each, unless not less than nine (9) months prior to the end of the initial or any renewal term either party shall give the other written notice of non-renewal. (b) This Agreement may be terminated prior to the expiration of the initial term of this Agreement, or any renewals thereof, by either party if the other party; 10 11 (i) breaches any material provision of this Agreement, and such breach is not cured within ninety (90) days written notice thereof; (ii) insolvency or bankruptcy of either party under applicable law, and/or the appointment of a trustee or receiver for either party; or (iii) any inability or prospective failure of either party to perform its obligations hereunder. 14. RIGHTS AND OBLIGATIONS UPON TERMINATION. Upon expiration or termination of this Agreement for any reason, all orders received from DISTRIBUTOR but not shipped by WINERY prior to the effective date of termination shall be shipped by WINERY, and DISTRIBUTOR agrees to accept shipment of and make payment for any such orders shipped by WINERY. 15. NO ASSIGNMENT. This Agreement shall not be assigned by either party, either by operation of law or by contract, without the prior written consent of the other party hereto, and any attempt to assign without such consent shall be null and void. Nothing herein contained, however, shall prevent DISTRIBUTOR from assigning this Agreement to any subsidiary, an affiliate, sister, or parent corporation of DISTRIBUTOR. 11 12 16. GOVERNMENT REGULATION. (a) DISTRIBUTOR agrees to obtain at its own expense import license, foreign exchange permit, or other permit or approval it may need for the performance of its obligations under this Agreement, and in essence, to comply at its own expense with all applicable laws, regulations, and orders of the government(s) of the Territory, the United States or any instrumentality thereof. (b) DISTRIBUTOR agrees to furnish to WINERY, by affidavit or other reasonable means from time to time at WINERY'S request, and the reasonable satisfaction of WINERY, assurances that the appointment of DISTRIBUTOR hereunder, its activities under this Agreement, and the payment to WINERY of any monies or consideration contemplated hereunder ARE PROPER AND LAWFUL under the law in force in the Territory and in the United States of America. DISTRIBUTOR further represents that no person employed by it is an official of any government agency or a corporation owned by the government(s) of the Territory, the United States of America, or any State thereof and that no part of any monies or considerations paid hereunder shall accrue for the benefit of any such official. 17. FORCE MAJEURE. This agreement and WINERY'S and DISTRIBUTOR'S performance hereunder are subject to all contingencies beyond their reasonable control, including but not limited to force majeure; strikes; 12 13 lockouts; labor disputes; floods; civil commotion; riot; acts of God; rules; laws; orders; restrictions; embargoes; quotas or actions of any government; foreign or domestic or any agency or subdivision thereof; casualties; fires; accidents; shortages of transportation facilities; detention of the Products by custom authorities; or losses of the Products in public or private warehouses. In any such event, the party not subject to force majeure shall have the right, in its sole discretion and without any liability to the other party, to (a) cancel all or any portion of this Agreement, or (b) require performance of this Agreement within a reasonable time after the causes for nonperformance or delay have terminated. 18. SEPARABILITY. If any provision of this Agreement is found by any court of competent jurisdiction to be invalid or unenforceable, the invalidity of such provision shall not affect the other provisions of this Agreement and all provisions not affected by such invalidity or unenforceability shall remain in full force and effect. 19. WAIVER. The waiver by either party hereto of a breach or default in any of the provisions of this Agreement by the other party 13 14 not be construed as a waiver of any succeeding breach of the same or other provisions; nor shall any delay or omission on the part of either party to exercise or avail itself of any right, power, or privilege that it has or may have hereunder operate as a waiver of any breach or default by the other party. 20. LANGUAGE. This Agreement is written in French and English in two counterparts in each language. One copy of each language text shall be retained by each party. French and English texts shall have equal validity and legal effect, provided however that in case of disagreement, the English language text shall prevail. 21. NOTICES. (a) Unless otherwise specifically provided, all notices, demands, or requests required or permitted by this Agreement shall be in writing and in English and sent in a letter form or by telex, facsimile (facsimile to be accompanied by a telex notice requesting confirmation of receipt), telegraph or cable to the address of the parties first set forth hereinabove, or to such other address as may from time to time be designated by any party through notification to the other party at its address as in effect from time to time. 14 15 The dates on which notices shall be deemed to have been effectively given shall be determined as follows: (a) Notices given by personal delivery shall be deemed effectively given on the date of personal delivery; (b) Notices given in letter form shall be deemed effectively given on the tenth day after the date mailed (as indicated by the postmark) by registered airmail; postage prepaid, or the fourth day after delivery to an internationally recognized courier service; (c) Notices given by telex, telegram or cable shall be deemed effectively given on the second business day following the date of transmissions as indicated on the document in question; and (d) Notices given by facsimile shall be deemed effectively given on the first business day following the date of transmission of a telex notice requesting confirmation of receipt as indicated on the telex in question. Nothing contained herein shall justify or excuse failure to give oral notice for the purpose of informing the other party thereof when notification is appropriate, by such oral notice shall not satisfy the requirement of written notice. 22. GOVERNING LAW. The formation, validity, execution, amendment and termination of this Agreement shall be governed by the applicable laws of the 15 16 State of Florida, U.S.A. and international legal principles and practices. 23. Resolution of Disputes. (a) Any dispute, controversy or claim arising out of or relating to this Agreement, or the interpretation, breach, termination or validity hereof, shall be resolved through friendly consultation. Such consultation shall begin immediately after one party has delivered to the other party a written request for such consultation. If within thirty (30) days following the date on which such notice is given, the dispute cannot be resolved, one dispute shall be submitted to arbitration upon the request of one party with notice to the other party. (b) Any arbitration to be conducted pursuant to the terms of this Agreement shall be conducted in Stockholm, Sweden under the auspices of the Arbitration Institute of the Stockholm Chamber of Commerce (the "Institute"). There shall be three arbitrators. Each party shall select one arbitrator within thirty (30) days after giving or receiving the demand for arbitration. Such arbitrators shall be freely selected, and the parties shall not be limited in their selection to any prescribed list. The President of the Institute shall select the third arbitrator. If the other party does not appoint an arbitrator who has consented to 16 17 participate within thirty (30) days after the selection of the first arbitrator, the relevant appointment shall be made by the President of the Institute. (c) The arbitration proceedings shall be conducted in English. The arbitration tribunal shall apply the Arbitration Rules of the United Nations Commission on International Trade Law in effect at the time of arbitration. However, if such rules are in conflict with the provisions of this Section 23, including the provisions concerning the appointment of arbitrators, the provisions of this Section 23 shall prevail. (d) Each party shall cooperate with the other in making full disclosure of and providing complete access to all information and documents requested by the other party in connection with such proceeding, subject only to any confidentiality obligations binding on such party. (e) The award of the arbitration tribunal shall be final and binding upon the parties, and either party, may apply to a court of competent jurisdiction for enforcement of such award. 24. Entire Agreement; Modifications and Waivers. This Agreement is the entire agreement of the parties with respect to the subject matter described in this Agreement and all oral and written prior negotiations and agreements and any conflicting prior course of dealing or trade usage are superseded hereby. The parties hereto agree that no representations have been 17 18 made or relied upon, except as specifically stated in this Agreement. This Agreement may be modified only, by a writing signed by both parties. IN WITNESS WHEREOF, and intending to be legally bound hereby, DISTRIBUTOR and WINERY have each caused this Agreement to be delivered and executed by their proper and duly authorized officers on this _____ day of December, 1996. WINERY: Cave du Vignoble Gursonnais - ------------------------------- ------------------------------- By: DATE DISTRIBUTOR: R & R (Bordeaux) Imports, Inc. - ------------------------------- ------------------------------- By: Robert K. Walker, President DATE 18 EX-10.4 13 IMPORT AND DISTRIBUTION AGREEMENT 1 EXHIBIT 10.4 IMPORT AND DISTRIBUTION AGREEMENT This Agreement is made and entered into this 07TH, day of March _, 1997, by and between the ARMADIS - P.O. BOX 8 - 40190 VILLENEUVE DE MARSAN (FRANCE) and, R & R (Bordeaux) Imports, Inc. a Florida, U.S.A. corporation, with its principal place of business, at 3201 West Griffin Road, Suite #204, Ft. Lauderdale, Florida 33312-6900, U.S.A, ("Distributor"). RECITALS WHEREAS, WINERY is engaged in the production and sale of wine and wishes to expand the distribution of such product by having DISTRIBUTOR sell such product in the territory described in Paragraph 3 hereof; and WHEREAS, DISTRIBUTOR desires to market the wine products produced by WINERY and the be designated as the exclusive distributor of WINERY for the purposed of selling such products in the territory assigned to it. NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged by each party, the parties hereto agree as follows: 2 1. APPOINTMENT. (a) WINERY hereby appoints DISTRIBUTOR as its exclusive distributor for the sale and promotion of the Products described in Paragraph 2 below in the Territory described in Paragraph 3 below and agrees not to appoint other distributors in the Territory. WINERY agrees that while this Agreement is in effect, it will not sell Products to persons other than DISTRIBUTOR in the Territory or to persons, other than DISTRIBUTOR, who WINERY has reason to believe will resell the Products in the Territory. (b) DISTRIBUTOR hereby accepts such appointment subject to the terms and conditions of this Agreement and agrees that it shall use its best efforts to promote demand for and sale of the Products in the Territory and that in the sale and promotion of the Products it shall at all times carry out to the best of its ability a merchandising policy designed to promote and maintain the excellence of quality and to preserve the goodwill which is associated with the name and reputation of WINERY and its products. (c) Notwithstanding the foregoing, should DISTRIBUTOR, commencing with the 1999 calendar year, fail to meet the minimum annual purchase requirements set forth in Section 4(c) of this Agreement, then DISTRIBUTOR shall become a non-exclusive distributor of the Products. 2 3 2. PRODUCTS. The term "Products" as used in this Agreement shall mean any and all WINE and CHAMPAGNE styles and any other types brewed and produced by WINERY. WINERY shall have the right to stop brewing and selling any of the Products without incurring any obligation or liability to Distributor. 3. TERRITORY. The term "Territory" as used in this Agreement shall mean the Continent of North America, and the Caribbean Islands. The Territory may be subsequently enlarged, reduced or otherwise changed by agreement in writing of the parties hereto. 4. SALES ACTIVITIES. DISTRIBUTOR shall conduct the sales activities contemplated under this Agreement by purchasing Products from WINERY for resale to DISTRIBUTOR'S customers within the Territory. DISTRIBUTOR shall conduct its sales activities in a lawful manner consistent with the highest standards of fair trade, fair competition, and business ethics; shall cause all of its employees to do the same and use its best efforts to ensure that its agents will do the same; and in addition shall be bound by the following duties and obligations: 3 4 (a) Advertising. DISTRIBUTOR may undertake, at its own expense, such advertising and promotional efforts as it may deem necessary to achieve a proper recognition of the Products in the Territory. DISTRIBUTOR shall have the right to use the names or any derivation thereof, or any other name or mark associated with WINERY. (b) Inventory. DISTRIBUTOR agrees to maintain at all times an inventory of the Products sufficient to fill reasonably anticipated orders from its customers and to deliver promptly all such orders. (c) Minimum Purchases. During the calendar year beginning January 1, 1997, DISTRIBUTOR shall make a minimum annual total purchase of Products having a net plant invoice value of $300,000 U.S. Commencing with the calendar year beginning January 1, 1998, DISTRIBUTOR shall make a minimum annual total purchase of Products having a net plant invoice value of $500,000 U.S. Commencing with the calendar year beginning January 1, 1999, DISTRIBUTOR shall make a minimum annual total purchase of Products having a net plant invoice value of $1,000,000 U.S. (d) Orders. DISTRIBUTOR shall in submitting orders describe the Products in a clear and unambiguous manner and shall include precise instructions for packaging, invoicing, and shipping. (e) Resale Prices. DISTRIBUTOR shall distribute the Products through all available means, including restaurant accounts, store and market retail accounts, or otherwise, which may 4 5 be commensurate with good development of the Territory. DISTRIBUTOR shall set resale prices for the Products at its own discretion. 5. LIST PRICES. (a) The prices to be paid by DISTRIBUTOR to WINERY for each order of Products shall be WINERY'S prices in effect on the date said order for Products from time to time on thirty (30) days' written notice to DISTRIBUTOR to compensate for increases in its cost of manufacturing Products due to changes in currency exchange rates or increases in energy, labor, raw materials or transportation costs or in duties or other governmental charges, impositions or assessments. No price increase shall effect the prices of Products sold to DISTRIBUTOR pursuant to orders placed by DISTRIBUTOR and accepted by WINERY prior to the effective date of such price increase. (b) Any and all taxes assessed to WINERY by federal, state, or local governments on sales of WINERY'S Products to DISTRIBUTOR shall be included on invoices rendered by WINERY to DISTRIBUTOR. 5 6 6. PLACEMENT OF ORDERS AND SHIPMENT. (a) Upon the placing of a written order for Products to WINERY by DISTRIBUTOR, a binding agreement will be created whereby WINERY will agree to sell and ship, and DISTRIBUTOR will agree to purchase and pay for, the Products ordered under the terms of this Agreement. (b) Any terms or conditions stated in DISTRIBUTOR'S order inconsistent with this Agreement shall be null and void. (c) WINERY shall ship the Products to DISTRIBUTOR within a reasonable time after receipt of any order. Shipping dates shall be approximate and shall be computed from the date of receipt of the order by WINERY. Weights given shall be estimated weights. All typographical and clerical errors shall be subject to correction. (d) WINERY shall in no event be obligated to make any such shipment if such shipment would, at the time thereof, constitute a violation of any laws, regulations, or policies of the Territory or of the United States of America or France. (e) WINERY'S obligation to effect shipment of the Products shall be fully discharged; and ownership, legal title, and all risk of loss or damage shall pass to DISTRIBUTOR when the Products have been delivered to the carrier at WINERY'S place of business or any other place designated by WINERY. 6 7 (f) DISTRIBUTOR shall be entitled to conduct a reasonable investigation of the Products upon receipt thereof. All claims for defects in the Products or shortages shall be made in writing by DISTRIBUTOR within ten (10) days of the receipt of the Products. Acceptance of the Products by DISTRIBUTOR shall constitute a waiver of all claims by DISTRIBUTOR for loss or damage due to defects or shortages in the Products, or to delay in delivery of the Products. (g) No Products shall be returned for credit without first obtaining the written permission of WINERY to return such Products. In the event WINERY does agree to accept goods, a minimum of two percent (2%) of the invoice price plus any other expenses WINERY may have incurred in packing, shipping, transportation, or otherwise shall be returned at the expense of DISTRIBUTOR, and all such returned Products must be received by WINERY in an unused condition and in condition for resale as new merchandise. 7. PAYMENTS. (a) All terms of this Agreement, (including but not limited to "cost", "payments", "amounts", "value", "discounts", "price", "credits", "set-off", "dollars" or "$" shall be calculated and constructed in terms of currency of the United States of America. (b) In order to secure DISTRIBUTOR's obligation to accept and purchase any Products ordered under the terms of this 7 8 Agreement, DISTRIBUTOR shall establish a confirmed, irrevocable and transferrable letter of credit in favor of WINERY, or ARMADIS or an assignee of WINERY or an affiliate of WINERY at a bank within the United States of America acceptable to WINERY, and the conditions for payment thereunder shall be satisfied upon the delivery by WINERY of the usual shipping documents. 9. CONFIDENTIAL INFORMATION. DISTRIBUTOR and WINERY shall not use of disclose to third parties any confidential information concerning the business, affairs, or the products of the other party which it may acquire in the course of its activities under this Agreement and shall take all necessary precautions to prevent any such disclosure by any of its employees, officers, or affiliated persons and entities. For purposes of this Article, confidential information shall include trade secrets and other unpatentable information. 9. SUB-DISTRIBUTORS. DISTRIBUTOR shall have the right to appoint sub-distributors for the sale and promotion of the Products in the Territory. Additionally, DISTRIBUTOR shall have the right to enter into alliances and cooperative arrangements for the sale, promotion and distribution of the Product in the Territory. 8 9 10. CONSEQUENTIAL DAMAGES - INDEMNITY. (a) The parties hereto acknowledge that the ability of WINERY to comply with the terms of this Agreement is of the utmost importance to the business operations of DISTRIBUTOR. As a result, the parties understand that should WINERY breach any provision of this Agreement, that is shall be liable to DISTRIBUTOR for all damages which consequentially occur as a result of said breach including, but not limited to, lost goodwill, lost resale profits, and lost customers of DISTRIBUTOR. (b) DISTRIBUTOR shall indemnify WINERY and hold it harmless from any claims, demands, liabilities, suits, or expenses of any kind arising out of DISTRIBUTOR'S business, and these provisions shall survive the termination of this Agreement. 11. PRODUCT WARRANTY. WINERY warrants to DISTRIBUTOR that Products shall be of merchantable quality at the time title there passes to DISTRIBUTOR in accordance with this Agreement. WINERY at is option, shall replace any Products which fail to comply with such warranty or shall refund the purchase price paid by DISTRIBUTOR therefor. Further, WINERY hereby agrees to indemnify DISTRIBUTOR for any claims for liabilities made against DISTRIBUTOR arising out of personal injuries or death or damage to property caused by 9 10 defective Products, unless such defect is created by DISTRIBUTOR'S handling of the Products. 12. RELATIONSHIP BETWEEN PARTIES. DISTRIBUTOR agrees that in all matters relating to this Agreement it is and shall be acting as an independent contractor and shall bear all of its expenses in connection with this Agreement. It shall not have any authority to assume or create any obligation, express or implied, on behalf of WINERY. DISTRIBUTOR shall not make quotations or write letters in the name of WINERY but in every instance shall use its own name. 13. EFFECTIVE DATE AND DURATION. (a) This Agreement shall be effective for thirty (30) years from the effective date, unless sooner terminated as hereinafter provided. This Agreement shall be automatically renewed for additional terms of ten (10) years each, unless not less than nine (9) months prior to the end of the initial or any renewal term either party shall give the other written notice of non-renewal. (b) This Agreement may be terminated prior to the expiration of the initial term of this Agreement, or any renewals thereof, by either party if the other party; 10 11 (i) breaches any material provision of this Agreement, and such breach is not cured within ninety (90) days written notice thereof; (ii) insolvency or bankruptcy of either party under applicable law, and/or the appointment of a trustee or receiver for either party; or (iii)any inability or prospective failure of either party to perform its obligations hereunder. 14. RIGHTS AND OBLIGATIONS UPON TERMINATION. Upon expiration or termination of this Agreement for any reason, all orders received from DISTRIBUTOR but not shipped by WINERY prior to the effective date of termination shall be shipped by WINERY, and DISTRIBUTOR agrees to accept shipment of and make payment for any such orders shipped by WINERY. 15. NO ASSIGNMENT. This Agreement shall not be assigned by either party, either by operation of law or by contract, without the prior written consent of the other party hereto, and any attempt to assign without such consent shall be null and void. Nothing herein contained, however, shall prevent DISTRIBUTOR from assigning this Agreement to any subsidiary, an affiliate, sister, or parent corporation of DISTRIBUTOR. 11 12 16. GOVERNMENT REGULATION. (a) DISTRIBUTOR agrees to obtain at its own expense import license, foreign exchange permit, or other permit or approval it may need for the performance of its obligations under this Agreement, and in essence, to comply at its own expense with all applicable laws, regulations, and orders of the government(s) of the Territory, the United States or any instrumentality thereof. (b) DISTRIBUTOR agrees to furnish to WINERY, by affidavit or other reasonable means from time to time at WINERY'S request, and the reasonable satisfaction of WINERY, assurances that the appointment of DISTRIBUTOR hereunder, its activities under this Agreement, and the payment to WINERY of any monies or consideration contemplated hereunder are proper and lawful under the law in force in the Territory and in the United States of America. DISTRIBUTOR further represents that no person employed by it is an official of any government agency or a corporation owned by the government(s) of the Territory, the United States of America, or any State thereof and that no part of any monies or considerations paid hereunder shall accrue for the benefit of any such official. 17. FORCE MAJEURE. This agreement and WINERY'S and DISTRIBUTOR'S performance hereunder are subject to all contingencies beyond their reasonable control, including but not limited to force majeure; strikes; 12 13 lockouts; labor disputes; floods; civil commotion; riot; acts of God; rules, laws, orders, restrictions, embargoes, quotas or actions of any government, foreign or domestic or any agency or subdivision thereof; casualties; fires; accidents; shortages of transportation facilities; detention of the Products by custom authorities; or losses of the Products in public or private warehouses. In any such event, the party not subject to force majeure shall have the right, in its sole discretion and without any liability to the other party, to (a) cancel all or any portion of this Agreement, or (b) require performance of this Agreement within a reasonable time after the causes for nonperformance or delay have terminated. 18. SEPARABILITY. If any provision of this Agreement is found by any court of competent jurisdiction to be invalid or unenforceable, the invalidity of such provision shall not affect the other provisions of this Agreement and all provisions not affected by such invalidity or unenforceability shall remain in full force and effect. 19. WAIVER. The waiver by either party hereto of a breach or default in any of the provisions of this Agreement by the other party 13 14 not be construed as a waiver of any succeeding breach of the same or other provisions; nor shall any delay or omission on the part of either party to exercise or avail itself of any right, power, or privilege that it has or may have hereunder operate as a waiver of any breach or default by the other party. 20. LANGUAGES This Agreement is written in French and English in two counterparts in each language. One copy of each language text shall be retained by each party. French and English texts shall have equal validity and legal effect, provided however that in case of disagreement, the English language text shall prevail. 21. NOTICES. (a) Unless otherwise specifically provided, all notices, demands, or requests required or permitted by this Agreement shall be in writing and in English and sent in a letter form or by telex, facsimile (facsimile to be accompanied by a telex notice requesting confirmation of receipt), telegraph or cable to the address of the parties first set forth hereinabove, or to such other address as may from time to time be designated by any party through notification to the other party at its address as in effect from time to time. 14 15 The dates on which notices shall be deemed to have been effectively given shall be determined as follows: (a) Notices given by personal delivery shall be deemed effectively given on the date of personal delivery; (b) Notices given in letter form shall be deemed effectively given on the tenth day after the date mailed (as indicated by the postmark) by registered airmail; postage prepaid, or the fourth day after delivery to an internationally recognized courier service; (c) Notices given by telex, telegram or cable shall be deemed effectively given on the second business day following the date of transmission, as indicated on the document in question; and (d) Notices given by facsimile shall be deemed effectively given on the first business day following the date of transmission of a telex notice requesting confirmation of receipt as indicated on the telex in question. Nothing contained herein shall justify or excuse failure to give oral notice for the purpose of informing the other party thereof when notification is appropriate, by such oral notice shall not satisfy the requirement of written notice. 22. GOVERNING LAW. The formation, validity, execution, amendment and termination of this Agreement shall be governed by the applicable laws of the 15 16 State of Florida, U.S.A. and international legal principles and practices. 23. RESOLUTION OF DISPUTES. (a) Any dispute, controversy or claim arising out of or relating to this Agreement, or the interpretation, breach, termination or validity hereof, shall be resolved through friendly consultation. Such consultation shall begin immediately after one party has delivered to the other party a written request for such consultation. If within thirty (30) days following the date on which such notice is given, the dispute cannot be resolved, one dispute shall be submitted to arbitration upon the request of one party with notice to the other party. (b) Any arbitration to be conducted pursuant to the terms of this Agreement shall be conducted in Stockholm, Sweden under the auspices of the Arbitration Institute of the Stockholm Chamber of Commerce (the "Institute"). There shall be three arbitrators. Each party shall select one arbitrator within thirty (30) days after giving or receiving the demand for arbitration. Such arbitrators shall be freely selected, and the parties shall not be limited in their selection to any prescribed list. The President of the Institute shall select the third arbitrator. If the other party does not appoint an arbitrator who has consented to 16 17 participate within thirty (30) days after the selection of the first arbitrator, the relevant appointment shall be made by the President of the Institute. (c) The arbitration proceedings shall be conducted in English. The arbitration tribunal shall apply the Arbitration Rules of the United Nations Commission on International Trade Law in effect at the time of arbitration. However, if such rules are in conflict with the provisions of this Section 23, including the provisions concerning the appointment of arbitrators, the provisions of this Section 23 shall prevail. (d) Each party shall cooperate with the other in making full disclosure of and providing complete access to all information and documents requested by the other party in connection with such proceeding, subject only to any confidentiality obligations binding on such party. (e) The award of the arbitration tribunal shall be final and binding upon the parties, and either party may apply to a court of competent jurisdiction for enforcement of such award. 24. ENTIRE AGREEMENT; MODIFICATIONS AND WAIVERS. This Agreement is the entire agreement of the parties with respect to the subject matter described in this Agreement and all oral and written prior negotiations and agreements and any conflicting prior course of dealing or trade usage are superseded hereby. The parties hereto agree that no representations have been 17 18 made or relied upon, except as specifically stated in this Agreement. This Agreement may be modified only by a writing signed by both parties. IN WITNESS WHEREOF, and intending to be legally bound hereby, DISTRIBUTOR and WINERY have each caused this Agreement to be delivered and executed by their proper and duly authorized officers on this 07TH day of March, 1997. WINERY: ARMADIS ARMADIS 40190 VILLENEUVE de MARSAN ALAIN LOUBERE, GENERAL DIRECTOR MARCH 07, 1997 - ------------------------------- ------------------------------------ DATE DISTRIBUTOR: R & R (Bordeaux) Imports, Inc. [SIG] MARCH 07, 1997 - ------------------------------- ------------------------------------ By: Robert K. Walker, President DATE WITNESS [SIG] MARCH 07, 1997. ------------------------- WITNESS [SIG] MARCH 07, 1997. ------------------------ EX-10.5 14 IMPORT AND DISTRIBUTION AGREEMENT 1 EXHIBIT 10.5 IMPORT AND DISTRIBUTION AGREEMENT This Agreement is made and entered into this 11th day of March, 1997 by and between the SICA "les Chais du Prevot" 33670 Creon (Gironde - France) and, R & R (Bordeaux) Imports, Inc. (or Assignees) a Florida, U.S.A. corporation, with its principal place of business at 3201 West Griffin Road, Suite #201, Ft. Lauderdale, Florida 33312-6900, U.S.A. ("Distributor"). RECITALS WHEREAS, WINERY is engaged in the production and sale of wine and wishes to expand the distribution of such product by having DISTRIBUTOR sell such product in the territory described in Paragraph 3 hereof; and WHEREAS, DISTRIBUTOR desires to market the wine products produced by WINERY and be designated as the exclusive distributor of WINERY for the purpose of selling such products in the territory assigned to it. NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged by each party, the parties hereto agree as follows: 2 1. APPOINTMENT. (a) WINERY hereby appoints DISTRIBUTOR as its exclusive distributor for the sale and promotion of the Products described in Paragraph 2 below in the Territory described in Paragraph 3 below and agrees not to appoint other distributors in the Territory. WINERY accepts that while this Agreement is in effect, it will not sell Products to persons other that DISTRIBUTOR, who WINERY has reason to believe will resell the Products in the Territory. (b) DISTRIBUTOR hereby accepts such appointment subject to the terms and conditions of this Agreement and agrees that it shall use its best efforts to promote demand for and sale of the Products in the Territory and that in the sale and promotion of the Products it shall at all times carry out to the best of its ability a merchandising policy designed to promote and maintain the excellence of quality and to preserve the goodwill which is associated with the name and reputation of WINERY and its products. (c) Notwithstanding the foregoing, should DISTRIBUTOR, commencing with the 1999 calendar year, fail to meet the minimum annual purchase requirements set forth in Section 4(c) of this Agreement, then DISTRIBUTOR shall become a non-exclusive distributor of the Products. 2 3 2. PRODUCTS. The term "Products" as used in this Agreement shall mean any and all wine styles and any other types brewed and produced by WINERY. WINERY shall have the right to stop producing and selling any of the Products without incurring any obligation or liability to Distributor. 3. TERRITORY. The term "Territory" as used in this Agreement shall mean the Continent of North America, and the Caribbean Islands. The Territory may be subsequently enlarged, reduced or otherwise changed by agreement in writing of the parties hereto. 4. SALES ACTIVITIES. DISTRIBUTOR shall conduct the sales activities contemplated under this Agreement by purchasing Products from WINERY for resale to DISTRIBUTOR'S customers within the Territory. DISTRIBUTOR shall conduct its sales activities in a lawful manner consistent with the highest standards of fair trade, fair competition, and business ethics; shall cause all of its employee to do the same and use its best efforts to ensure that its agents do the same; and in addition shall be bound by the following duties and obligations: 3 4 (a) Advertising. DISTRIBUTOR may undertake, at its own expense, such advertising and promotional efforts as it may deem necessary to achieve a proper recognition of the Products in the Territory. DISTRIBUTOR shall have the right to use the names or any derivation thereof, or any other name or mark associated with WINERY. (b) Inventory. DISTRIBUTOR agrees to maintain at all times an inventory of the Products sufficient to fill reasonably anticipated orders from its customers and to deliver promptly all such orders. (c) Minimum Purchases. During the calendar year beginning January 1, 1997, DISTRIBUTOR shall make a minimum annual total purchase of Products having a net plant invoice value of $100,000 U.S. Commencing with calendar year beginning January 1, 1998, DISTRIBUTOR shall make a minimum annual total purchase of Products having a net plant invoice value of $150,000 U.S. Commencing with calendar year beginning January 1, 1999, DISTRIBUTOR shall make a minimum annual total purchase of Products having a net plant invoice value of $400,000 U.S. For the following calendar years, DISTRIBUTOR shall maintain a minimum annual total purchase of Products having at least the same net plant invoice value as the 1999 calendar year and will aim if possible to increase it. (d) Orders. DISTRIBUTOR shall in submitting orders describe the Products in a clear and unambiguous manner and shall include precise instructions for packaging, invoicing, and shipping. 4 5 (e) Resale Prices. DISTRIBUTOR shall distribute the Products through all available means, including restaurant accounts, store and market retail accounts, or otherwise, which may be commensurate with good development of the Territory. DISTRIBUTOR shall set resale prices for the Products at its own discretion. 5. LIST PRICES. (a) The prices to be paid by DISTRIBUTOR to WINERY for each order of Products shall be WINERY's prices in effect on the date said order for Products from time to time on thirty (30) days' written notice to DISTRIBUTOR to compensate for increases in its cost of manufacturing Products due to changes in currency exchange rates or increases in energy, labor, raw materials or transportation costs or in duties or other French governmental charges, impositions or assessments. No price increase shall effect the prices of Product sold to DISTRIBUTOR pursuant to orders placed by DISTRIBUTOR and accepted by WINERY prior to the effective date of such price increase. (b) The prices will be reevaluated and DISTRIBUTOR will be notified in writing annually thirty (30) days prior anniversary date (date of signature agreement) by WINERY. 5 6 6. PLACEMENT OF ORDERS AND SHIPMENT. (a) Upon the placing of a written order for Products to WINERY by DISTRIBUTOR, a binding agreement will be created whereby WINERY will agree to sell and ship, and DISTRIBUTOR will agree to purchase and pay for, the Products ordered under the terms of this Agreement. (b) Any terms or conditions stated in DISTRIBUTOR'S order inconsistent with this Agreement shall be null and void. (c) WINERY shall ship the Products to DISTRIBUTOR in a 30 day period, time necessary to obtain COFACE's preliminary agreement and prepare the order. Shipping dates shall be approximate and shall be computed from the date of receipt of the order by WINERY. Weights given shall be estimated weights. All typographical and clerical errors shall be subject to correction. (d) WINERY shall in no event be obligated to make any such shipment if such shipment would, at the time thereof, constitute a violation of any laws, regulations, or policies of the Territory or of the United States of America or France. (e) WINERY shall be fully obligated to maintain in its storehouses Products available to the Carrier, named by DISTRIBUTOR, or shall forward such Products to DISTRIBUTOR's designated place for a transportation cost; and ownership, legal title, and all risk of loss or damage shall pass to DISTRIBUTOR when the Products have been delivered to the carrier at WINERY'S place of business. 6 7 (f) DISTRIBUTOR shall be entitled to conduct a reasonable investigation of the Products upon receipt thereof. All claims for defects in the Products or shortages shall be made in writing by DISTRIBUTOR within twenty (20) days of the receipt of the Products. Acceptance of the Products by DISTRIBUTOR for loss or damage due to defects or shortages in the Products, or to delay in delivery of Products. (g) No Products shall be returned for credit without first obtaining the written permission of WINERY to return such Products. In the event WINERY does agree to accept goods and all such returned Products must be received by WINERY in an unused condition for resale as new merchandise. 7. PAYMENTS. (a) All terms of this Agreement, (including but not limited to "cost", "payments", "amounts", "value", "discounts", "price", "credits", "set-off", "dollars" or "$", shall be calculated and constructed in terms of currency of the United States of America. (b) In order to secure DISTRIBUTOR's obligation to accept and purchase any Products ordered under the terms of this Agreement, upon order DISTRIBUTOR shall effect a "SWIFT" transfer in the name of WINERY for an amount corresponding to this order with a 2% discount. 7 8 8. CONFIDENTIAL INFORMATION. DISTRIBUTOR and WINERY shall not use or disclose to third party any confidential information concerning the business, affairs, or the products of the other party which it may acquire in the course of its activities under this Agreement and shall take all necessary precautions to prevent any such disclosure by any of its employees, officers, or affiliated persons and entities. For purposes of this Article, confidential information shall include trade secrets and other unpatentable information. 9. SUB-DISTRIBUTORS. DISTRIBUTORS shall have the right to appoint sub-distributors for the sale and promotion of the Products in the Territory. Additionally, DISTRIBUTOR shall have the right to enter into alliances and cooperative arrangements for the sale, promotion and distribution of the Product in the Territory. 8 9 10. CONSEQUENTIAL DAMAGES INDEMNITY. (a) The parties hereto acknowledge that the ability of WINERY to comply with the terms of this Agreement is of the utmost importance to the business operations of DISTRIBUTOR. As a result, the parties understand that should WINERY breach any provision of this Agreement (except if mandatory French law overrules), that it shall be liable to DISTRIBUTOR for all damages which consequentially occur as a result of said breach including, but not limited to, lost goodwill, lost resale profits, and lost customers of DISTRIBUTOR. (b) DISTRIBUTOR shall indemnify WINERY and hold it harmless from any claims, demands, liabilities, suits, or expenses of any kind arising out of DISTRIBUTOR's business, and these provisions shall survive the termination of this Agreement. 11. PRODUCT WARRANTY. WINERY warrants to DISTRIBUTOR that shall be of merchantable quality at the time title there passes to DISTRIBUTOR in accordance with this Agreement. WINERY at its option, shall replace any which fail to comply with such warranty or shall refund the purchase price paid by DISTRIBUTOR therefor. Further, WINERY hereby agrees to indemnify DISTRIBUTOR for any claims for liabilities made against DISTRIBUTOR arising out of personal injuries or death or damage 9 10 to property caused by defective , unless such defect is created by DISTRIBUTOR's handling the . 12. RELATIONSHIP BETWEEN PARTIES. DISTRIBUTOR agrees that in all matters relating to this Agreement it is and shall be acting as an independent contractor and shall bear all of its expenses in connection with this Agreement. It shall not have any authority to assume or create any obligation, express or implied, on behalf of WINERY. DISTRIBUTOR shall not make quotations or write letters in the name of WINERY but in every instance shall use its own name. 13. EFFECTIVE DATE AND DURATION. (a) This Agreement shall and will remain effective for three (3) years from the effective date, and shall be automatically renewed, unless written notice of non-renewal by either party is given nine (9) months prior to the end of the initial or any renewal term. (b) This Agreement may be terminated prior to the expiration of the initial term of this Agreement, or any renewals thereof, by either party if the other party: 10 11 (i) breaches any material provision of this Agreement, and such breach is not cured within ninety (90) days written notice thereof; (ii) insolvency or bankruptcy of either party under applicable law, and/or the appointment of a trustee or receiver for either party; or (iii) any inability or prospective failure of either party to perform its obligations hereunder. 14. SUSPENSION CLAUSE. Enforcement of this Agreement between DISTRIBUTOR and WINERY shall only be effective after COFACE's agreement. 15. RIGHTS AND OBLIGATIONS UPON TERMINATION. Upon expiration or termination of this Agreement for any reason, all orders received from DISTRIBUTOR but not shipped by WINERY prior to the effective date of termination shall be shipped by WINERY, and DISTRIBUTOR agrees to accept shipment of and make payment for any such orders shipped by WINERY. 16. NO ASSIGNMENT. This Agreement shall not be assigned by either party, either by operation of law or by contract, without the prior written consent of the other party hereto, and any attempt to assign without such consent shall be null and void. Nothing herein contained, however, shall prevent DISTRIBUTOR from assigning this Agreement to any subsidiary, an affiliate, sister, or parent corporation of DISTRIBUTOR. 11 12 17. GOVERNMENT REGULATION. (a) DISTRIBUTION agrees to obtain at its own expense import license, foreign exchange permit, or other permit or approval it may need for the performance of its obligations under this Agreement, and in essence, to comply at its own expense with all applicable laws, regulations, and orders of the government(s) of the Territory, the United States or any instrumentality thereof. (b) DISTRIBUTOR agrees to furnish annually to WINERY, by affidavit or other reasonable means at WINERY's request, and the reasonable satisfaction of WINERY, assurances that the appointment of DISTRIBUTOR hereunder, its activities under this Agreement, and the payment to WINERY of any monies or consideration contemplated hereunder are proper and lawful under the law in force in the Territory and in the United States of America. DISTRIBUTOR further represents that no person employed by it is an official of any government agency or a corporation owned by the governments of the Territory, the United States of America, or any State thereof and that no part of any monies or considerations paid hereunder shall accrue for the benefit of any such official. 18. FORCE MAJEURE. This Agreement and WINERY's and DISTRIBUTOR's performance hereunder are subject to all contingencies beyond their reasonable control, including but not limited to force majeure, 12 13 strikes; lockouts; labor disputes; flood; civil commotion; riot; acts of God; rules, laws, orders, restrictions, embargoes, quotas or actions of any government, foreign or domestic or any agency or subdivision thereof; casualties; fires; accidents; shortages of transportation facilities; detention of the by custom authorities; or losses of the Products in public or private warehouses. In any such event, the party not subject to force majeure shall have the right, in its sole discretion and without any liability to the other party, to (a) cancel all or any portion of this Agreement, or (b) require performance of this Agreement within a reasonable time after the causes for nonperformance or delay have terminated. 19. SEPARABILITY. If any provision to this Agreement is found by any court of competent jurisdiction to be invalid or unenforceable, the invalidity of such provision shall not affect the other provisions of this Agreement and all provisions not affected by such invalidity or unenforceability shall remain in full force and effect. 20. WAIVER. The waiver by either party hereto of a breach or default in any of the provisions of this Agreement by the other party not be 13 14 construed as a waiver of any succeeding breach of the same or other provisions; nor shall any delay or omission on the part of either party to exercise or avail itself of any right, power, or privilege that it has or may have hereunder operate as a waiver of any breach of default by the other party. 21. LANGUAGE. This Agreement is written in French and English in two counterparts in each language. One copy of each language text shall be retained by each party. French and English texts shall have equal validity and legal effect, provided however that in case of disagreement, the English language text shall prevail. 22. NOTICES. (a) Unless otherwise specifically provided, all notices, demands, or requests required or permitted by this Agreement shall be in writing and in French and sent a letter form or by telex, facsimile (facsimile to be accompanied by a telex notice requesting confirmation of receipt), telegraph or cable to the address of the parties first set forth hereinabove, or to such other address as may from time to time be designated by any party through notification to the other party at its address as in effect from time to time. 14 15 The dates on which notices shall be deemed to have been effectively given shall be determined as follows: (a) Notices given by personal delivery shall be deemed effectively given on the date of personal delivery; (b) Notices given in letter form shall be deemed effectively given on the tenth day after the date mailed (as indicated by the postmark) by registered airmail; postage prepaid, or the fourth day after delivery to an internationally recognized courier service; (c) Notices given by telex, telegraph or cable shall be deemed effectively given on the second business day following the date of transmission, as indicated on the document in question; and (d) Notices given by facsimile shall be deemed effectively given on the first business day following the date of transmission of a telex notice requesting confirmation of receipt as indicated on the telex in question. Nothing contained herein shall justify or excuse failure to give oral notice for the purpose of informing the other party thereof when notification is appropriate, by such oral notice shall not satisfy the requirement of written notice. 15 16 23. GOVERNING LAW. The formation, validity, execution, amendment and termination of this Agreement shall be governed by international judicial laws, principles and practices. 24. RESOLUTION OF DISPUTES. (a) Any dispute, controversy or claim arising out of or relating to this Agreement, or the interpretation, breach, termination or validity hereof, shall be resolved through friendly consultation. Such consultation shall begin immediately after one party has delivered to the other party a written request for such consultation. If within thirty (30) days following the date on which such notice is given the dispute cannot be resolved, one dispute shall be submitted to arbitration upon the request of one party with notice to the other party. (b) Any arbitration to be conducted pursuant to the terms of this Agreement shall be conducted in Stockholm, Sweden under the auspices of the Arbitration Institute of the Stockholm Chamber of Commerce (the "Institute"). There shall be three arbitrators. Each party shall select one arbitrator within thirty (30) days after giving or receiving the demand for arbitration. Such arbitrators shall be freely selected, and the parties shall not be limited in their selection to any prescribed 16 17 list. The President of the Institute shall select the third arbitrator. If the other party does not appoint an arbitrator who has consented to participate within thirty (30) days after the selection of the first arbitrator, the relevant appointment shall be made by the President of the Institute. (c) The arbitration proceedings shall be conducted in English. The arbitration tribunal shall apply the Arbitration Rules of the United Nations Commission on International Trade Law in effect at the time of arbitration. However, if such rules are in conflict with the provisions of this Section 23, including the provisions concerning the appointment of arbitrators, the provisions of this Section 23 shall prevail. (d) Each party shall cooperate with the other in making full disclosure of and providing complete access to all information and documents requested by the other party in connection with such proceeding, subject only to any confidentiality obligations binding on such party. (e) The award of the arbitration tribunal shall be final and binding upon the parties, and either party may apply to a court of competent jurisdiction for enforcement of such award. 25. ENTIRE AGREEMENT; MODIFICATIONS AND WAIVERS. This Agreement is the entire agreement of the parties with respect to the subject matter described in this Agreement and all oral and written prior negotiations and agreements and any conflicting prior course of dealing or trade usage are superseded 17 18 hereby. The parties hereto agree that no other representations have been made, and that this Agreement does not rely upon any representations, except as specifically stated in this Agreement. This Agreement may be modified only by a document signed by both parties. IN WITNESS WHEREOF, and intending to be legally bound hereby, DISTRIBUTOR and WINERY have each caused this Agreement to be delivered and executed by their proper and duly authorized officers on this 11th day of March, 1997. WINERY agrees to sign the exact copy of this Agreement in English within 10 days after receiving it, failing to do so will render this Agreement null and void. WINERY: LES CHAIS DU PREVOT S.I.C.A. (stampl) 33670 CREON March 11, 1997 - ---------------------------------- ----------------------------------- By: Dominique Porcher, DATE Managing Director DISTRIBUTOR: R & R (Bordeaux) Imports, Inc. ROBERT K. WALKER 3/11/97 - ---------------------------------- ------------------------------------ By: Robert K. Walker, President DATE 18 EX-10.6 15 IMPORT AND DISTRIBUTION AGREEMENT 1 EXHIBIT 10.6 IMPORT AND DISTRIBUTION AGREEMENT This Agreement is made and entered into this 16th day of April, 1997, by and between the VIGNERONS DE BUZET - B.P. 17 F 47160 BUZET SUR BAISE, "WINERY" and, R & R (BORDEAUX) IMPORTS, Inc., a Florida, U.S.A. corporation, with its principal place of business at 3201 West Griffin Road, Suite 204, Ft. Lauderdale, Florida 33312-6900, U.S.A. ("Distributor"). RECITALS WHEREAS, WINERY is engaged in the production and sale of wine and wishes to expand the distribution of such product by having DISTRIBUTOR sell such product in the territory described in Paragraph 3 hereof; and WHEREAS, DISTRIBUTOR desires to market wines assigned in the limited list of wines described in the section 2 and the DISTRIBUTOR is designated as a exclusive DISTRIBUTOR of WINERY for this list described in section 2 for the purposed of selling such product in the territory assigned to it, see section 3. NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged by each party, the parties hereto agree as follows: 2 1. APPOINTMENT. (a) WINERY hereby appoints DISTRIBUTOR as its exclusive distributor for the sale and promotion of the Products described in Paragraph 2 below in the Territory described in Paragraph 3. WINERY agrees that while this Agreement is in effect, it will not sell the mentioned products in the section 2 to persons other than DISTRIBUTOR in the Territory or to persons, other than DISTRIBUTOR, who WINERY has reason to believe will resell the Products in the Territory. (b) DISTRIBUTOR hereby accepts such appointment subject to the terms and conditions of this Agreement and agrees that it shall use its best efforts to promote demand for and sale of the Products in the Territory and that in the sale and promotion of the Products it shall at all times carry out to the best of its ability a merchandising policy designed to promote and maintain the excellence of quality and to preserve the goodwill which is associated with the name and reputation of WINERY and its products. (c) Notwithstanding the foregoing, should DISTRIBUTOR, commencing with the 2000 calendar year, fail to meet the minimum annual purchase requirements set forth in Section 4 (c) of this Agreement, then DISTRIBUTOR shall become a non-exclusive distributor of the Products. 2 3 2. PRODUCTS. The terms "Products" as used in this Agreement shall mean the following wine list : o AC BUZET WHITE SPECIAL SEAFOOD N/V o AC BUZET RED GOLD HERALDRY o AC BUZET RED RENAISSANCE o AC BUZET WHITE RENAISSANCE o AC BUZET ROSE RENAISSANCE o AC BUZET RED L'EXCELLENCE o AC BUZET WHITE L'EXCELLENCE o AC BUZET ROSE L'EXCELLENCE o AC BUZET RED INSTANT NATURE WINERY shall have the right to stop selling any of the over-mentioned Products without incurring any obligation or liability to Distributor. 3. TERRITORY. The term "Territory" as used in this Agreement shall mean the United States of America (excluding the State of New York), and the Caribbean Islands. The Territory may be subsequently enlarged, reduced or otherwise changed by agreement in writing of the parties hereto. 4. SALES ACTIVITIES. DISTRIBUTOR shall conduct the sales activities contemplated under this Agreement by purchasing Products selected in section 2 from WINERY for resale to DISTRIBUTOR'S customers within the Territory assigned in section 3. DISTRIBUTOR shall conduct its sales activities in a lawful manner consistent with the highest standards of fair trade, fair competition, and business ethics; shall cause all of its employees to do the same and use its best efforts to ensure that its agents will do the same; and in addition shall be bound by the following duties and obligations: 3 4 (a) Advertising. DISTRIBUTOR may undertake, at its own expense, such advertising and promotional efforts as it may deem necessary to achieve a proper recognition of the Products in the Territory assigned in section 3. DISTRIBUTOR shall have the right to use the names or any derivation thereof, or any other name or mark associated with brands assigned by WINERY, see section 2. (b) Inventory. DISTRIBUTOR agrees to maintain at all times an inventory of the Products sufficient to fill reasonably anticipated orders from its customers and to deliver promptly all such orders. (c) Minimum Purchases. During the calendar year beginning January 1, 1997, DISTRIBUTOR shall make a minimum annual total purchase of Products having an ex-cellar free of charges invoice value of 275,000 FF. Commencing with the calendar year beginning January 1, 1998, DISTRIBUTOR shall make a minimum annual total purchase of Products having an ex-cellar free of charges invoice value of 825,000 FF. Commencing with the calendar year beginning January 1, 1999, and January 1, 2000 and the following years, DISTRIBUTOR shall make a minimum annual total purchase of Products having an ex-cellar free of charges invoice value of 2 200 000 FF. (d) Orders. DISTRIBUTOR shall in submitting orders describe the Products in a clear and unambiguous manner and shall include precise instructions for packaging, invoicing, and shipping. (e) Resale Prices. DISTRIBUTOR shall distribute the Products through all available means, including restaurant accounts, store and market retail accounts, or otherwise, which may be commensurate with good development of the Territory. DISTRIBUTOR shall set resale prices for the products at its own discretion. 4 5 5. LIST PRICES. (a) The prices to be paid by DISTRIBUTOR to WINERY for each order of Products shall be WINERY'S prices in effect on the date said order for Products from time to time on thirty (30) days' written notice to DISTRIBUTOR to compensate for increase in its cost of manufacturing Products due to changes in currency exchange rates or increases in energy, labor, raw materials or transportation costs or in duties or other governmental charges, impositions or assessments. No price increase shall effect the prices of Products sold to DISTRIBUTOR pursuant to orders places by DISTRIBUTOR and accepted by WINERY prior to the effective date of such price increase. (b) The WINERY'S prices are ex-cellar, free of charges, in FF, per bottle and will be invoiced only under these conditions. 6. PLACEMENT OF ORDERS AND SHIPMENT. (a) Upon the placing of a written order for Products to WINERY by DISTRIBUTOR, a binding agreement will be created whereby WINERY will agree to sell and ship, and DISTRIBUTOR will agree to purchase and pay for, the Products ordered under the terms of this Agreement. (b) Any terms or conditions stated in DISTRIBUTORS order inconsistent with this Agreement shall be null and void. 5 6 (c) WINERY shall ship the products to DISTRIBUTOR within a reasonable time after receipt of any order, a minimum time of 3 weeks is asked for the preparation of the goods and this, after receipt of the order. Shipping dates shall be approximated and shall be computed from the date of receipt of the order by WINERY. Weights given shall be estimated weights. All typographical and clerical errors shall be subject to correction. (d) WINERY shall in no event be obligated to make any such shipment if such shipment would, at the time thereof, constitute a violation of any laws, regulations, or policies of the Territory or of the United States of America or France. (e) All risk of loss or damage shall pass to DISTRIBUTOR when the Products have been collected by the WINERY'S place of business or any other place designated by WINERY. DISTRIBUTOR agrees to take possession in its responsibility ex-cellar. (f) DISTRIBUTOR shall be entitled to conduct a reasonable investigation of the Products upon receipt thereof. All claims for defects in the Products or shortages shall be made in writing by DISTRIBUTOR within twenty (20) days of the receipt of the Products. Acceptance of the Products by DISTRIBUTOR shall constitute a waiver of all claims by DISTRIBUTOR for loss or damage due to defects or shortages in the Products, or to delay in delivery of the Products. 6 7 (g) No products shall be returned for credit without first obtaining the written permission of WINERY to return such Products. In the event, WINERY does agree to accept goods, a minimum of two percent (2%) of the invoice price plus any other expenses WINERY may have incurred in packing, shipping, transportation, or otherwise shall be returned at the expense of DISTRIBUTOR, and all such returned Products must be received by WINERY in an unused condition and in condition for resale as new merchandise. 7. PAYMENTS. (a) All terms of this Agreement, including but not limited to "cost", "payments", "amounts", "value", "discounts", "price", "credits", "set-off", "F.F.", shall be calculated and constructed in terms of currency of France. (b) In order to secure DISTRIBUTOR's obligation to accept and purchase any Products ordered under the terms of this Agreement, DISTRIBUTOR shall establish a confirmed, irrevocable and transferrable letter of credit in favor of WINERY, transferred in a bank accepted by the WINERY, or with a pre-payment through SWIFT Transfer with 2% discount, delivery of goods after creditation of the WINERY'S account. 8. CONFIDENTIAL INFORMATION. DISTRIBUTOR and WINERY shall not use of disclose to third parties any confidential information concerning the business, affairs, or the products of the other party which it may acquire in the course of its activities under this Agreement and shall take all necessary precautions to prevent any such disclosure by any of its employees, officers, or affiliated persons and entities. For purposes of this Article, confidential information shall include trade secrets and other unpatentable information. 7 8 9. SUB-DISTRIBUTORS. DISTRIBUTOR shall have the right to appoint sub-distributors for the sale and promotion of the Products in the Territory. Additionally, DISTRIBUTOR shall have the right to enter into alliances and cooperative arrangements for the sale, promotion and distribution of the Product in the Territory. 10. CONSEQUENTIAL DAMAGES - INDEMNITY (a) The parties hereto acknowledge that the ability of WINERY to comply with the terms of this Agreement is of the utmost importance to the business operations of DISTRIBUTOR. As a result, the parties understand that should WINERY breach the provision of exclusivity of the wine list mentioned in section 2, that is shall be liable to DISTRIBUTOR for all damages which consequentially occur as a result of said breach including, but not limited to, lost goodwill, lost resale profits, and lost customers of DISTRIBUTOR. (b) DISTRIBUTOR shall indemnify WINERY and hold it harmless from any claims, demands, liabilities, suits, or expenses of any kind arising out of DISTRIBUTOR's business, and these provisions shall survive the termination of this Agreement. 11. PRODUCT WARRANTY WINERY warrants to DISTRIBUTOR that Products shall be of merchantable quality as per samples previously delivered and accepted by DISTRIBUTOR at the time title there passes to DISTRIBUTOR in accordance with this agreement. WINERY at is option, shall replace any Products which fail to comply with such warranty or shall refund the purchase price paid by DISTRIBUTOR therefor. Further, WINERY hereby agrees to indemnify DISTRIBUTOR for any claims for liabilities made against DISTRIBUTOR arising out of personal injuries or death or damage to property caused by defective products, unless such defect is created by DISTRIBUTOR's handling of the Products. 8 9 12. RELATIONSHIP BETWEEN PARTIES DISTRIBUTOR agrees that in all matters relating to this Agreement it is and shall be acting as an independent contractor and shall bear all of its expenses in connection with this Agreement. It shall not have any authority to assume or create any obligation, express or implied, on behalf of WINERY. DISTRIBUTOR shall not make quotations or write letters in the name of WINERY but in every instance shall use its own name. 13. EFFECTIVE DATE AND DURATION (a) This Agreement shall be effective for ten (10) years from the effective date, unless sooner terminated as hereinafter provided. This agreement shall be automatically renewed for additional terms of five (5) years each, unless not less than nine (9) months prior to the end of the initial or any renewal term either party shall give the other written notice of non-renewal. (b) This Agreement may be terminated prior to the expiration of the initial term of this Agreement, or any renewals thereof, by either party if the other party ; (i) breaches any material provision of this Agreement, and such breach is not cured within ninety (90) days written notice thereof; (ii) insolvency or bankruptcy of either party under applicable law, and/or the appointment of a trustee or receiver for either party; or (iii) any inability or prospective failure of either party to perform its obligations hereunder. 9 10 14. RIGHTS AND OBLIGATIONS UPON TERMINATION. Upon expiration or termination of this Agreement for any reason, all orders received from DISTRIBUTOR but not shipped by WINERY prior to the effective date of termination shall be shipped by WINERY, and DISTRIBUTOR agrees to accept shipment of and make payment for any such orders shipped by WINERY. 15. NO ASSIGNMENT. This agreement shall not be assigned by either party, either by operation of law or by contract, without the prior written consent of the order party hereto, and any attempt to assign with out such consent shall be null and void. Nothing herein contained, however, shall prevent DISTRIBUTOR from assigning this Agreement to any subsidiary, an affiliate, sister, or parent corporation of DISTRIBUTOR. 16. GOVERNMENT REGULATION (a) DISTRIBUTOR agrees to obtain at its own expense import license, foreign exchange permit, or other permit or approval it may need for the performance of its obligations under this Agreement, and in essence, to comply at its own expense with all applicable laws, regulations, and orders of the governments of the Territory, the United States or any instrumentality thereof. (b) DISTRIBUTOR agrees to furnish to WINERY, by affidavit or other reasonable means from time to time at WINERY'S request, and the reasonable satisfaction of WINERY, assurances that the appointment of DISTRIBUTOR hereunder, its activities under this Agreement, and the payment to WINERY for any monies or consideration contemplated hereunder are proper and lawful under the law in force in the Territory and in the United States of America. 10 11 DISTRIBUTOR further represents that no person employed by it is an official of any government agency or a corporation owned by the government(s) of the Territory, the United States of America, or any State thereof and that no part of any monies or consideration paid hereunder shall accrue for the benefit of any such official. 17. FORCE MAJEURE This agreement and WINERY'S and DISTRIBUTOR'S performance hereunder are subject to all contingencies beyond their reasonable control, including but not limited to force majeure; strikes; lockouts; labor disputes; floods; civil commotion; riot; acts of God; rules; laws; orders; restrictions embargoes, quotas or actions of any government, foreign or domestic or any agency or subdivision thereof; casualties; fires; accidents; shortages of transportation facilities ; detention of the Products by custom authorities, or losses of the Products in public or private warehouses. In any such event, the party not subject to force majeure shall have the right, in its sole discretion and without any liability to the other party, to (a) cancel all or any portion, or (b) require performance of this Agreement within a reasonable time after the causes for nonperformance or delay have terminated. 18. SEPARABILITY If any provision of this Agreement is found by any court of competent jurisdiction to be invalid or unenforceable, the invalidity of such provision shall not affect the other provisions of this Agreement and all provision is not affected by such invalidity or unenforceability shall remain in full force and effect. 11 12 19. WAIVER. The waiver by either party hereto of a breach or default in any of the provisions of this Agreement by the other party not be construed as a waiver of any succeeding breach of the same or other provisions; nor shall any delay or omission on the part of either party to exercise or avail itself on any right, power, or privilege that it has or may have hereunder operate as a waiver of any breach or default by the other party. 20. LANGUAGE This agreement is written in French and English in two counterparts in each language. One copy of each language text shall be retained by each party. French and English texts shall have equal validity and legal effect. 21. NOTICES. (a) Unless otherwise specifically provided, all notices, demands, or requests required or permitted by this Agreement shall be in writing and in English and French and sent in a letter form or by telex, facsimile (facsimile to be accompanied by a telex notice requesting confirmation of receipt), telegraph or cable to the address of the parties first set forth hereinabove, or to such other address as may from time to time be designated by any party through notification to the other party at its address as in effect from time to time. The dates on which notices shall be deemed to have been effectively given shall be determined as follows: (a) Notices given by personal delivery shall be deemed effectively given on the date of personal delivery; 12 13 (b) Notices given in letter form shall be deemed effectively given on the tenth day after the date mailed (as indicated by the postmark) by registered airmail, postage prepaid, or the fourth day after delivery to an internationally recognized courier service. (c) Notices given by telex, telegram or cable shall be deemed effectively given on the second business day following the date of transmission, as indicated on the document in question; and (d) Notices given by facsimile shall be deemed effectively given on the first business day following the date of transmission of a telex notice requesting confirmation of receipt as indicated on the telex in question. Nothing contained herein shall justify or excuse failure to give oral notice for the purpose of informing the other party thereof when notification is appropriate, by such oral notice shall not satisfy the requirement of written notice. 22. GOVERNING LAW The formation, validity, execution, amendment and termination of this Agreement shall be governed by the applicable laws of the international legal principles and practices. 23. RESOLUTION OF DISPUTES (a) Any dispute, controversy or claim arising out of or relating to this Agreement, or the interpretation, breach, termination or validity hereof, shall be resolved through friendly consultation. Such consultation shall begin immediately after one party has delivered to the other party a written request for such consultation. 13 14 If within thirty (30) days following the date on which such notice is given, the dispute cannot be resolved, one dispute shall be submitted to arbitration upon the request of one party with notice to the other party. (b) Any arbitration to be conducted pursuant to the terms of this Agreement shall be conducted in Geneva Switzerland under the auspices of the International Chamber of Commerce in Paris. (c) The arbitration proceedings shall be conducted in English and French. (d) Each party shall cooperate with the other in making full disclosure of and providing complete access to all information and documents requested by the other party in connection with such proceeding, subject only to any confidentiality obligations binding on such party. 24. ENTIRE AGREEMENT, MODIFICATIONS AND WAIVERS. This Agreement is the entire agreement of the parties with respect to the subject matter described in this Agreement and all oral and written prior negotiations and agreements and any conflicting prior course of dealing or trade usage are superseded hereby. The parties hereto agree that no representations have been made or relied upon, except as specifically stated in this Agreement. This Agreement may be modified only by a writing signed by both parties. 14 15 IN WITNESS WHEREOF, and intending to be legally bound hereby, DISTRIBUTOR and WINERY have each caused this Agreement to be delivered and executed by their proper and duly authorized officers on this 16th day of April, 1997. WINERY: DATE LES VIGNERONS DE BUZET 16/04/1997 B.P. 17 47160 BUZET SUR BAISE (FRANCE) /s/ JEAN-MICHEL RENAUD - ---------------------------------- Mr Jean-Michel RENAUD, Managing Director. DISTRIBUTOR: DATE 4/16/97 R&R (BORDEAUX) IMPORTS Inc. /s/ ROBERT K. WALKER - ---------------------------------- By Robert K. Walker, Managing Director 15 EX-10.7 16 IMPORT AND DISTRIBUTION AGREEMENT 1 EXHIBIT 10.7 IMPORT AND DISTRIBUTION AGREEMENT This agreement is made and entered into this 29th day of September 1997 by and between the Cognac Godet Freres, 1 rue du Duc B.P., 17003 La Rochelle Cedex, France, and R & R (Bordeaux) Imports, Inc., a FLORIDA, USA CORPORATION, with its principal place of business at 3201 West Griffin Road, Suite # 204, Ft. Lauderdale, Florida 33312-6900, USA Distributor). RECITALS *** WHEREAS, GODET FRERES is engaged in the production and sale of Champagne Maxime Godet to expand the distribution of such product by having DISTRIBUTOR sell such product in the territory described in paragraph 3 hereof; and WHEREAS, DISTRIBUTOR desires to market the wine products produced by GODET FRERES and be designated as the exclusive distributor of champagne Maxime Godet for the purposed of selling such products in the territory assigned to it. NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged by each party, the parties hereto agree as follows: 1 2 1. APPOINTMENT (a) GODET FRERES hereby appoints DISTRIBUTOR as its exclusive distributor for the sale and promotion of the products described in Paragraph 2 below in the territory described in paragraph 3 below and agrees not to appoint other distributors in the Territory. GODET FRERES agrees that while this Agreement is in effect, it will not sell products to persons other than DISTRIBUTOR in the Territory or to persons, other than DISTRIBUTOR, who GODET FRERES has reason to believe will resell the products in the Territory. (b) DISTRIBUTOR hereby accepts such appointment subject to the terms and conditions of this agreement and agrees that it shall use it best efforts to promote demand for and sale of the products in the Territory and that in the sale and promotion of the products it shall at all times carry out to the best of its ability a merchandising policy designed to promote and maintain the excellence of quality and to preserve the goodwill which is associated with the name and reputation of GODET FRERES and its products. (c) Notwithstanding the foregoing, should DISTRIBUTOR, commencing with the 1998 calendar year, fail to meet the minimum annual purchase requirements set forth in Section 4 (c) of this Agreement, then DISTRIBUTOR shall become a non exclusive distributor of the products. 2. PRODUCTS The term "Products" as used in this Agreement shall mean Champagne produced by GODET FRERES and selling any of the products without incurring any obligation or liability to Distributor. 3. TERRITORY The term "Territory" as used in this Agreement shall mean the Continent of North America, and the Carribean Islands. The Territory may be subsequently enlarged, reduced or otherwhise changed by agreement in writing of the parties hereto. 4. SALES ACTIVITIES DISTRIBUTOR shall conduct the sales activities cotemplated under this agreement by purchasing Products from GODET FRERES for resale to DISTRIBUTOR'S customers within the Territory. DISTRIBUTOR shall conduct its sales activities in a lawful manner consistent with the highest standards of fair trade, fair competition, and business ethics; shall cause all its employees to do the same; and in addition shall be bound by the following duties and obligations: 2 3 (a) Advertising. DISTRIBUTOR may undertake, at its own expense, such advertising and promotional efforts as it may deem necessary to achieve a proper recognition of the Products in the Territory. DISTRIBUTOR shall have the right to use the names or any derivation thereof, or any other name or mark associated with GODET FRERES. (b) Inventory. DISTRIBUTOR agrees to maintain at all times an inventory of the products sufficient to fill reasonably anticipated orders from its customers and to deliver promptly all such orders. (c) Minimum Purchases. During the calendar year beginning 1997, DISTRIBUTOR shall make a minimum annual total purchase of 400 cases 12 bottles. Commencing with the calendar year beginning just after receiving the label approuval by the B.A.T.F. Year 2: 600 cases, Year 3: 800 cases. Year 4: 1000 cases. (d) Orders. DISTRIBUTOR shall in submitting orders describe the products in a clear and unambiguous manner and shall include precise instructions for packaging, invoicing, and shipping. (e) Resale Prices. DISTRIBUTOR shall distribute the products through all available means, including restaurant accounts, store and market retail accounts, or otherwise, which may be commensurate with good development of the Territory. DISTRIBUTOR shall set resale prices for the Products at its own discretion. 5. LIST PRICES (a) The prices to be paid by DISTRIBUTOR to GODET FRERES for each order of products shall be GODET FRERES's prices in effect on the date said order for products from time to time on thirty (30) days' written notice to DISTRIBUTOR to compensate for increases in its cost of manufacturing Products due to changes in currency exchange rates or increases in energy, labor, raw materials or transportation costs or in duties or other governmental charges, impositions or assessments. No price increase shall effect the prices of products sold to DISTRIBUTOR and accepted by GODET FRERES prior to the effective date of such price increase. (b) Any and all taxes assessed to GODET FRERES by federal, state, or local governments on sales of GODET FRERES's products to DISTRIBUTOR shall be included on invoices rendered by GODET FRERES to DISTRIBUTOR. 3 4 6. PLACEMENT OF ORDERS AND SHIPMENT (a) Upon the placing of a written order for products to GODET FRERES by DISTRIBUTOR, a binding agreement will be created whereby GODET FRERES will agree to sell and ship, and distributor will agree to purchase and pay for, the products ordered under the terms of this agreement. (b) Any terms or conditions stated in DISTRIBUTOR'S order inconsistent with this agreement shall be null and void. (c) GODET FRERES shall ship the products to DISTRIBUTOR within a reasonable time after receipt of any order. Shipping dates shall be approximate and shall be computed from the date of receipt by GODET FRERES. Weights given shall be estimated weights. All typographical and clerical errors shall be subject to correction. (d) GODET FRERES shall in no event be obligated to make any such shipment would, at the time thereof, constitute a violation of any laws, regulations, of United States of America or France. (e) GODET FRERES'S obligation to effect shipment of the products shall be fully discharged, and ownership, legal title, and all risk of loss or damage shall pass to DISTRIBUTOR when the products have been delivered to the carrier at GODET FRERES's place of business or any other place designated by GODET FRERES. (f) DISTRIBUTOR shall be entitled to conduct a reasonable investigation of the products upon receipt thereof. All claims for defects in the products or shortages shall be made in writing by DISTRIBUTOR within ten (10)days of the receipt of the products. Acceptance of the products by DISTRIBUTOR for loss or damage due to defects or shortages in the products, or to delay in delivery of the products. (g) No products shall be returned for credit without first obtaining the written permission of GODET FRERES to return such products. 7. PAYMENTS (a) All terms of this Agreement are in French Francs. (b) In order to secure DISTRIBUTOR'S obligation to accept and purchase any products ordered under the terms of this Agreement, DISTRIBUTOR shall establish a confirmed, irrevocable and transferable letter of credit in favor of GODET FRERES, or an assignee of GODET FRERES or an affiliate of GODET FRERES at a bank within the United States of America acceptable to GODET FRERES; and the conditions for payment thereunder shall be satisfied upon the delivery by GODET FRERES of the usual shipping documents. 4 5 8. CONFIDENTIAL INFORMATION DISTRIBUTOR and GODET FRERES shall not use or disclose to third parties any confidential information concerning the business, affairs, or the products of the order party which it may acquire in the course of its activities under this Agreement and shall take all necessary precautions to prevent any such disclosure by any of its employees, officers, or affiliated persons and entities. For purposes of this Article, confidential information shall include trade secrets and other unpatentable information. 9. SUB-DISTRIBUTORS DISTRIBUTOR shall have the right to appoint sub-distributors for the sale and promotion of the products in the territory. Additionally, DISTRIBUTOR shall have the right to enter into alliances and cooperative arrangements for the sale, promotion and distribution of the product in the Territory. 10. CONSEQUENTIAL DAMAGES - INDEMNITY (a) The parties hereto acknowledge that the ability of GODET FRERES to comply with the terms of this agreement is of the utmost importance to the business operations of DISTRIBUTOR. As a result, the parties understand that should GODET FRERES breach any provision of this agreement, that is shall be liable to DISTRIBUTOR for all damages which consequentially occur as a result of said breach including, but not limited to, lost goodwill, lost resale profits, and lost customers of DISTRIBUTOR. (b) DISTRIBUTOR shall indemnity GODET FRERES and hold it harmless from any claims, demands, liabilities, suits, or expenses of any kind arising out of DISTRIBUTOR'S business, and these provisions shall survive the termination of this Agreement. 11. RELATIONSHIP BETWEEN PARTIES DISTRIBUTOR agrees that in all matters relating to this Agreement it is and shall be acting as an independent contractor and shall bear all of its expenses in connection with this Agreement. It shall not have any authority to assume or create any obligation, express or implied, on behalf of GODET FRERES. DISTRIBUTOR shall not make quotations or write letters in the name of GODET FRERES but in every instance shall use its own name. 12. EFFECTIVE DATE AND DURATION (a) This agreement shall be effective for five (5) years from the effective date, unless sooner terminated as hereinafter provided. This agreement shall be automatically renewed for additional terms of five (5) years each, no less than three (3) months prior to the end of the initial or any renewal term either party shall give the other written notice of nonrenewal. 5 6 (b) This agreement may be terminated prior to the expiration of the initial term of this agreement, or any renewals thereof, by either party if the other party; 1- breaches any material provision of this agreement, and such breach is not cured within ninety (90) days written notice thereof; 2- insolvency or bankruptcy of either party under applicable law, and/or the appointment of a trustee or receiver for either party; or 3- any inability or prospective failure of either party to perform its obligations hereunder. 4- Not to achieve the minimum quantity per year mentioned in the paragraph 4 (c). 13. RIGHTS AND OBLIGATIONS UPON TERMINATION Upon expiration or termination of this agreement for any reason, all orders received from DISTRIBUTOR but not shipped by GODET FRERES prior to the effective date of termination shall be shipped by GODET FRERES, and DISTRIBUTOR agrees to accept shipment of and make payment for any such orders shipped by GODET FRERES. 14. NO ASSIGNMENT This agreement shall not be assigned by either party, either by operation of law or by contract, without the prior written consent shall be null and void. Nothing herein contained, however, shall prevent DISTRIBUTOR from assigning this agreement to any subsidiary, an affiliate, sister, or parent corporation of DISTRIBUTION. 15. GOVERNMENT REGULATION (a) DISTRIBUTOR agrees to obtain at its own expense import license, forein exchange permit or other permit or approval it may need for the performance of its obligations under this agreement, and in essence, to comply at its own expense with all applicable laws, regulations, and orders of the government(s) of the territory, the United States or any instrumentality thereof. (b) DISTRIBUTOR agrees to furnish to GODET FRERES, by affidavit or other reasonable means from time to time at GODET FRERES' request, and the reasonable satisfaction of GODET FRERES, assurances that the appointment of DISTRIBUTOR hereunder, its activities under this agreement, and the payment to GODET FRERES of any monies or consideration contemplated hereunder are proper and lawful under the law in force in the territorry and in the United States of America. 6 7 DISTRIBUTOR further represents that no person employed by it is an official of any government agency or a corporation owned by the government(s) of the territory, the United States of America or in a state thereof and that no part of any monies or considerations paid hereunder shall accrue for the benefit of any such official. 16. FORCE MAJEURE This agreement and GODET FRERES and DISTRIBUTOR's performance hereunder are subject to all contingencies beyond their reasonable control, including but not limited to force majeure; strikes; lockouts; labor disputes; floods; civil commotion; riot; acts of God; rules; laws orders, restrictions, embargoes, quotas or actions of any government, foreign or domestic or any agency or subdivision thereof; casualties; fires; accidents; shortages of transportation facilities, detention of the products by custom authorities, or losses of the products in public or private warehouses. In any such event, the party not subject to force majeure shall have the right, in its sole discretion and without any liability to the other party, to cancel all or any portion of this agreement within a reasonable time after the causes for nonperformance or delay have terminated. 17. SEPARABILITY If any provision of this agreement is found by any court of competent jurisdiction to be invalid or unenforceable, the invalidity of such provision shall not affect the other provisions of this agreement and all provisions not affected by such invalidity or unenforceability shall remain in full force and effect. 18. WAIVER The waiver by either party hereto of a breach or default in any of the provisions of this agreement by the other party not be construed as a waiver of any succeeding breach of the same or other provisions; nor shall any delay or omission on the part of either party to exercise or avail itself of any right, power or privilege that it has or may have hereunder operate as a waiver of any breach or default by the other party. 19. LANGUAGE This agreement is written in French and English in two counterparts in each language. French and English texts shall have equal validity and legal effect, provided however that in case of disagreement, the English language text shall prevail. 20. NOTICES (a) Unless otherwise specifically provided, all notices, demands, or requests required or permitted by this agreement shall be in writing and in English and sent in a letter form or by telex, facsimile (facsimile to be accompanied by a telex notice requesting confirmation of receipt), telegraph 7 8 or cable to the address of the parties first set forth hereinabove, or to such other address as may from time to time be designated by any party through notification to the other party at its address as in effect from time to time. The dates on which notices shall be deemed to have been effectively given shall be determined as follows: (a) Notices given by personal delivery shall be deemed effectively given on the date of personal delivery. (b) Notices given in letter form shall be deemed effectively given on the tenth day after the date mailed (as indicated by the postmark) by registered airmail; postage prepaid, or the fourth day after delivery to an internationally recognized courier service; (c) Notices given by facsimile shall be deemed effectively given on the first business day following the date of transmission of a telex notice requesting confirmation of receipt as indicated on the telex in question. Nothing contained herein shall justify or excuse failure to give oral notice for the purpose of informing the other party thereof when notification is appropriate, by such oral notice shall not satisfy the requirement of written notice. 21. GOVERNING LAW The formation, validity, execution, amendment and termination of this agreement shall be governed by the applicable laws of the State of Florida, USA and international legal principles and practices. 22. RESOLUTION OF DISPUTES (a) Any dispute, controversy or claim arising out of or relating to this agreement, or the interpretation, breach, termination or validity hereof, shall be resolved through friendly consultation. Such consultation shall begin immediately after one party has delivered to the other party. If within thirty (30) days following the date on which such notice is given, the dispute shall be submitted to arbitration upon the request of one party with notice to the other party. (b) Any arbitration to be conducted pursuant to the terms of this agreement shall be conducted in Paris France under the auspices of the Arbitration Institute of the Paris Chamber of Commerce (the institute). There shall be three arbitrators. Each party shall select one arbitrator within thirty (30) days after giving or receiving the demand for arbitration. Such arbitrators shall be freely selected, and the parties shall not be limited in their selection to any prescribed list. The President of the Institute shall select the third arbitrator. If the other party does not appoint an arbitrator who has consented to participate within thirty (30) days after the selection of the first arbitrator, the relevant appointment shall be made by the President of the Institute. 8 9 (c) The arbitration proceedings shall be conducted in English and French. The arbitration tribunal shall apply the Arbitration Rules of the United Nations Commission on International Trade Law in effect at the time of arbitration. However, if such rules are in conflict with the provisions concerning the appointment of arbitrators, the provisions of this section 23 shall prevail. (d) Each party shall cooperate with the other in making full disclosure of and providing complete access to all information and documents requested by the other party in connection with such proceeding, subject only to any confidentiality obligations binding on such party. (e) The award of the arbitration tribunal shall be final and binding upon the parties, and either party may apply to a court of competent jurisdiction for enforcement of such award. 23. ENTIRE AGREEMENT; MODIFICATIONS AND WAIVERS This agreement is the entire agreement of the parties with respect to the subject matter described in this agreement and all oral and written prior negotiations and agreements and any conflicting prior course of dealing or trade usage are superseded hereby. The parties hereto agree that no representations have been made or relied upon, except as specifically stated in this agreement. This agreement may be modified only by a writing signed by both parties. IN WITNESS WHEREOF, and intending to be legally bound hereby, DISTRIBUTOR and GODET FRERES have each caused this agreement to be delivered and executed by their proper and duly authorized officers on this 29th of September 1997. GODET FRERES Date: 9/29/97 [SIG] - ------------------------------ DISTRIBUTOR - - R & R (Bordeaux) Imports, Inc. Date: 9/29/97 [SIG] - ------------------------------- President [SIG] - ------------------------ Managing Director EX-10.8 17 FORM OF LOCK-UP AGREEMENT 1 EXHIBIT 10.8 December __, 1997 West America Securities Corp. 4510 E. Thousand Oaks Boulevard Suite 100 Westlake Village, California 91362 Dear Sirs: The undersigned understands that you, as Placement Agent, propose to enter into a Placement Agent Agreement with Cuidao Holding Corp., a Florida corporation (the "Company") providing for the public offering by you of Units, consisting of one share of the Company's common stock, $.0001 par value (the "Common Stock") and one Common Stock Purchase Warrant (the "Warrant"), to be offered by the Company. In consideration of the Placement Agent Agreement to make a public offering of the Units, and for other good and valuable consideration, receipt of which is hereby acknowledged, the undersigned agrees that he/she will not offer to sell, sell or otherwise dispose of any shares of Common Stock beneficially owned by the undersigned during a period of thirty (30) months after the date of the Placement Agent Agreement without your prior written consent. However, notwithstanding the foregoing, you acknowledge that the undersigned will be able to offer to sell, sell or otherwise dispose of any shares of Common Stock beneficially owned by the undersigned if at any time any of the following conditions occur: 1. The Company has had annual gross revenues according to generally accepted accounting principles ("GAAP") equal to $10,000,000; or 2. The Company has had annual net earnings per share according to generally accepted accounting principles ("GAAP") equal to, or greater than, ten percent (10%) of the public offering price of the Units after taxes and excluding extraordinary items; or 2 3. The Company's shares of Common Stock have traded in a reliable public market, e.g., either the New York Stock Exchange, the American Stock Exchange or the Nasdaq Stock Market (including the Nasdaq SmallCap Market), at a price of at least one hundred fifty percent (150%) of the initial public offering price of the Units for at least ninety (90) consecutive trading days after at least six (6) months from the date of the Placement Agent Agreement. The undersigned further understands that stop transfer orders with respect to any and all stock certificates which represent the shares of Common Stock beneficially owned by the undersigned may be placed into effect with the Company's transfer agent during said 30-month period, and that such stock certificates may bear the following restrictive legend: "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS, AND IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER THEM, OR ANY INTEREST THEREIN, OR RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF CUIDAO HOLDING CORP. AND WEST AMERICA SECURITIES CORP. Very truly yours, _________________________________ Print Name:__________________________ Accepted as of the date first set forth above By West America Securities Corp. By:_____________________________ 2 EX-10.9 18 FORM OF PROMOTIONAL SHARE LOCK-IN AGREEMENT 1 EXHIBIT 10.9 PROMOTIONAL SHARES LOCK-IN AGREEMENT 1. This Promotional Shares Lock-In Agreement ("Agreement"), which was entered into on the______________ day of______________, 1997, by and between Cuidao Holding Corp., a Florida corporation ("Issuer"), whose principal place of business is located at 3201 West Griffin Road, Suite 204, Ft. Lauderdale, Florida 33312-6900, and ______________________________ ("Security Holder") witnesses that: A. The Issuer has filed an application with the Securities Administrators of the States set forth in Exhibit "A" hereto ("Administrators") to register 260,000 of its units ("Units"), each Unit consisting of one share of the Company's $.0001 par value common stock ("Common Stock") and one Common Stock Purchase Warrant ("Warrant"), for sale to public investors who are residents of those states ("Registration"). B. The Security Holder is the owner of _______ shares of Common Stock which are deemed to be "Promotional Shares" as defined in the North American Securities Administrators Association ("NASAA") Statement of Policy on Promotional Shares (the "Promotional Shares"). C. As a condition to Registration, the Issuer and Security Holder ("Signatories") agree to be bound by the terms of this Agreement. II. The Security Holder agrees not to sell, pledge, hypothecate, assign, grant any option for the sale of, or otherwise transfer or dispose of, whether or not for consideration, directly or indirectly, the Promotional Shares while the Promotional Shares are subject to this Agreement. III. The term of this Agreement shall commence on the date first set forth hereinabove, and shall terminate on the ninth anniversary of this Agreement, unless terminated earlier with respect to some or all of the Promotional Shares in accordance with the provisions of Paragraph IV of this Agreement. IV. The restrictions on the transferability or disposition of the Promotional Shares set forth in Paragraph II of this Agreement may be terminated as follows: A. With respect to twenty-five percent (25%) of the Promotional Shares on the sixth, seventh, eighth and ninth anniversary dates of this Agreement; or B. With respect to one hundred percent (100%) of the Promotional Shares after the Issuer has had annual net earnings per share equal to, or greater than, five percent (5%) of the public offering price of the Units (the "Initial Public Offering Price"), according to generally accepted accounting principles 2 ("GAAP"), after taxes and excluding extraordinary items, for any two consecutive fiscal years after the date of effectiveness of the Registration Statement; or C. With respect to one hundred percent (100%) of the Promotional Shares after the Issuer has had average annual net earnings per share equal to, or greater than, five percent (5%) of the Initial Public Offering Price, according to GAAP, after taxes and excluding extraordinary items, for any five consecutive fiscal year period after the date of effectiveness of the Registration Statement; or D. With respect to one hundred percent (100%) of the Promotional Shares on the date the securities subject to this Agreement become "Covered Securities" as defined under the National Securities Markets Improvement Act of 1996; or E. With respect to one hundred percent (100%) of the Promotional Shares on the date the Registration of the Units has been terminated if no Units were sold pursuant thereto. V. The signatories to this Agreement agree and will cause the following: A. So long as the Promotional Shares are restricted from transfer pursuant to the terms of this Agreement, Security Holder shall waive all of his/her/its rights, title and interests to receive cash or property dividends with respect to any Promotional Shares which are restricted from transfer hereunder. B. So long as the Promotional Shares are restricted from transfer pursuant to the terms of this Agreement, Security Holder shall waive all of his/her/its rights, title and interests and participations in the assets of the Issuer with respect to the dissolution, liquidation, merger, consolidation, sale of assets, exchange, or any transaction or proceeding that results in the distribution of the assets of the Issuer. C. Promotional Shares may be transferred by will, the laws of descent and distribution, the operation of law, or by order of any court of competent jurisdiction and proper venue. D. Promotional Shares of a deceased Security Holder may be hypothecated to pay the expenses of the deceased Security Holder's estate. The hypothecated Promotional Shares shall remain subject to the terms of this Agreement. Promotional Shares may not be pledged to secure any other debt. 2 3 E. Promotional Shares may be transferred by gift to the Security Holder's family members, provided that the Promotional Shares shall remain subject to the terms of this Agreement. F. A notice shall be placed on the face of each stock certificate of the Promotional Shares covered by the terms of the Agreement stating that the transfer of the stock evidenced by the certificate is restricted in accordance with the conditions set forth on the reverse side of the certificate, and a typed legend shall be placed on the reverse side of each stock certificate of the Promotional Shares representing stock covered by the Agreement which states that the sale or transfer of the shares evidenced by the certificate is subject to certain restrictions on transferability pursuant to an agreement between the Security Holder (whether beneficial or of record) and the Issuer, which agreement is on file with the Issuer and the stock transfer agent from which a copy is available upon request and without charge. G. While this Agreement remains in effect, the Issuer shall not increase the compensation and benefits to its officers and directors beyond that which is reasonable and customary for the industry in which the Issuer operates. H. While this Agreement remains in effect, loans to the Issuer's officers, directors and employees shall comply in all respects with the NASAA Statement of Policy Regarding Affiliated Transactions. VI. A summary of the terms of this Agreement shall be included in any and all offering documents related to the public offer and sale of the Units and in subsequent annual reports of the Issuer. VII. THEREFORE, the Issuer will cause the following: A. A manually signed copy of this Agreement signed by the Signatories to be filed with the Administrators prior to the effective date of the Registration; B. Copies of this Agreement and a statement of the per share Initial Public Offering Price to be provided to the Issuer's stock transfer agent; C. Appropriate stock transfer orders to be placed with the Issuer's stock transfer agent against the sale or transfer of the shares covered by this Agreement prior to its expiration, except as may otherwise be provided in this Agreement; D. The above stock restriction legends to be placed on the periodic statement sent to the registered owner if the securities subject to this Agreement are uncertificated securities. 3 4 Pursuant to the requirements of this Agreement, the Signatories have entered into this Agreement, which may be written in multiple counterparts and each of which shall be considered an original. The Signatories have signed the Agreement in the capacities, and on the dates, indicated. IN WITNESS WHEREOF, the Signatories have executed this Agreement. CUIDAO HOLDING CORP. By:____________________________________________ C. Michael Fisher, President _______________________________________________ Signature _______________________________________________ Printed Name of Security Holder _______________________________________________ Title, if applicable 4 EX-24 19 CONSENT OF BAUM & COMPANY, INDEPENDENT CPAS 1 EXHIBIT 24 BAUM & COMPANY, P. A. Certified Public Accountants 1515 University Drive, Suite 209 Coral Springs, Florida 33071 (954) 752-1712 Cuidao Holding Corp. 3201 West Griffin Road, Suite 204 Fort Lauderdale, Florida 33312-6900 RE: CUIDAO HOLDING CORP. Dear Sir or Madam: We hereby consent to the use in the Prospectus constituting a part of this Registration Statement on Form SB-2 of our report dated July 15, 1997, relating to the financial statements of Cuidao Holding Corp. which are contained in this Prospectus. We also consent to the reference to us under the captions "Selected Financial Data" and "Experts" in the Prospectus. BAUM & COMPANY, P.A. Coral Springs, Florida December 18,1997 EX-27 20 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE INTERIM UNAUDITED FINANCIAL STATEMENTS OF CUIDAO HOLDING CORP. FOR THE TEN MONTH PERIOD ENDED OCTOBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS. 10-MOS DEC-31-1997 JAN-01-1997 OCT-31-1997 39,044 0 0 0 0 59,828 10,326 1,842 95,736 793 0 0 4 223 210,254 95,736 0 149 0 0 94,164 0 0 0 0 (94,015) 0 0 0 (94,015) (.046) (.046)
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