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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the Fiscal Year Ended December 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ______ to ______.
Commission File No.: 0-20101
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WINNERS ALL INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3545304
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3475 Sheridan Street, Suite 301
Hollywood, Florida 33021
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (954) 964-5553
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $ .01
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The Registrant's revenues for the fiscal year ended December 31, 1997
were $ 25,000. As of April 30, 1998, 38,699,952 shares of Common Stock of the
Registrant were deemed outstanding, and the aggregate market value of the
Common Stock of the Registrant (based upon the average of the closing bid and
asked prices of the Common Stock at that date), excluding outstanding shares
beneficially owned by directors and executive officers, was approximately
$13,005,328.
DOCUMENTS INCORPORATED BY REFERENCE - None
PART I
FORWARD LOOKING STATEMENTS
This Form 10-KSB contains certain forward-looking statements. For this
purpose, any statements contained in this Form 10-KSB that are not statements
of historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "estimate" or "continue" or the negative or other variations
thereof or comparable terminology are intended to identify forward-looking
statements. These statements by their nature involve substantial risks and
uncertainties, and actual results may differ materially depending on a variety
of factors.
ITEM 1. DESCRIPTION OF BUSINESS
- --------------------------------
BUSINESS DEVELOPMENTS
Winners All International, Inc. ("Winners All" or the "Company") is
presently a holding company for two wholly-owned subsidiaries, Urecoats
International, Inc. ("Urecoats") and Designer Wear, Inc. ("Designer Wear" or
"DWI").
Through its Urecoats subsidiary, formed in January 1997, the Company is
in the business of developing, marketing and distributing sealant and coating
products containing recycled material. The Company acquired Urecoats in
January 1997, a development-stage company, formed for the purpose of
introducing a new line of sealant and coating products made partly with crumb
rubber from recycled tires. The Company believes there are emerging worldwide
markets for products containing or using recycled materials in their
composition.
Through its Designer Wear subsidiary, formed in August 1996, the Company
is in the business of acquiring license agreements for the design, contract
manufacturing, sale and worldwide distribution of branded merchandise
products. The Company acquired Designer Wear in July 1997, a development-stage
company focusing on sales, marketing and distribution of a line of socks,
using the name, likeness, signature, and image of the late American actor
"James Dean". The Company acquired ROK International, Inc. ("ROK"), through
its Designer Wear subsidiary, in October 1997, a development-stage business,
primarily involved in the promotion and sales of trademark properties, more
specifically in the area of apparel and accessories.
See Historical Information below for more information.
Page 2
PRODUCTS
Urecoats purchased two proprietary Polymer Roofing/Sealant Formulas/
Materials, and certain technologies for their manufacturing and application,
from Creative Chemical Company (3C), under a Purchase and Sale Agreement
dated October 30, 1997.
Urecoats completed construction of an initial demonstration size spray
application system required for application and testing of one of the two
roofing sealant products. A recent demonstration of the product proved
successful as applied through the spray application system. Urecoats is
presently constructing a field size spray application system.
The first product is named "URECOATS 100" (hereinafter sometimes referred
to as "Product") and made for the Roofing Industry. URECOATS 100 is black in
color, comprised of a proprietary formula and applied through a specially
designed application system. URECOATS 100 includes crumb rubber from recycled
used tires.
The URECOATS 100 roofing product is spray applied, using a plural heated
spray system installed in a self-contained mobile trailer, which application
is relatively easy as compared to other more labor intensive applications and
requires significantly less labor than other roofing product application
methods.
Urecoats has concentrated its initial marketing efforts in Mexico for the
Product.
Urecoats is presently negotiating a long term agreement with the inventor
of the two above referenced products, for the development of additional
products utilizing recycled materials in their composition.
With the purchase of the above referenced products and application
technologies, Urecoats ceased marketing and distribution activities of its
former licensed product from Ultimate Urethane Roofing, Inc. and manufacturing
plans and agreements in Georgia.
Designer Wear was formed for the purpose of acquiring brand name licenses
for manufacturing, marketing and sublicensing apparel and accessories.
Designer Wear presently holds a license agreement with the James Dean
Foundation Trust to use the name, likeness, signature and image of the late
American actor "James Dean" on socks.
Page 3
Designer Wear created a line of socks, established manufacturing
arrangements, developed an internet marketing site, and used its best efforts
to market the line, however, no sales resulted. Designer Wear also created a
sample line of denim clothing and entered negotiations with CMG Worldwide, the
licensing agent for the James Dean Foundation Trust for a Denim License in the
United States, however, resources were insufficient to support such the
continuation of such endeavor. Therefore, Designer Wear ceased marketing and
distribution activities under its License Agreement with the James Dean
Foundation Trust and ended negotiations for the Denim License.
Designer Wear closed an acquisition agreement with ROK International,
Inc. ("ROK"), as a wholly-owned subsidiary, on October 8, 1997, which holds a
worldwide trademark license agreement ("Trademark Agreement") for the use of
the trademark "Smith & Wesson" and other related Smith and Wesson Corporation
("Smith & Wesson") trademarks, on apparel and accessories. Winners All
received consent, as owner of the common stock of Designer Wear, from Smith &
Wesson, pursuant to a restrictive voting control transfer covenant in the
Trademark Agreement.
Designer Wear, through its subsidiary ROK, created a complete line of
apparel and accessories, established contract manufacturing contacts,
developed a marketing and licensing plan, negotiated a direct license
agreement between
Smith & Wesson and Multiplinvest, introduced a complete line of Smith & Wesson
branded apparel and accessories in Las Vegas, Nevada in 1998, and began
negotiations for several sublicenses under its Trademark Agreement and other
potential Smith & Wesson licenses. On May 2, 1998, Smith & Wesson notified
ROK that the Trademark Agreement was terminated for cause. DWI and ROK
responded immediately with a demand for retraction of the termination and
and threatened to institute a suit against Smith & Wesson. (See Item 3. Legal
Proceedings.)
MARKETS
Urecoats has identified the Roofing Industry for the introduction of its
first Product made with recycled material. Urecoats has primarily concentrated
marketing and distribution efforts on Mexico since its inception in January
1997.
Winners All has several consultants in Mexico, most notably Antonio
Domit, a distinguished businessman in Mexico, for support in marketing
URECOATS 100 in Mexico, Central America and South America.
Page 4
Although no assurances can be given, Management believes URECOATS 100,
which incorporates crumb rubber from recycled tires in its proprietary
formula, and its specially designed spray application system, will result in
future purchase orders from private and governmental sectors. Governments
around the world are searching for products made from recycled components to
support their existing or newly developing recycling programs. The private
sector is in need of new technologies and products that are easy to apply and
competitively priced. Additionally, Urecoats expects to form joint ventures
and/or licensing arrangements for its products and spray application systems
in the future.
Designer Wear, through its subsidiary ROK, expects to sell apparel,
accessories and sublicenses, under ROK's Trademark Agreement on a global
basis. Designer Wear's principle market for merchandising Smith & Wesson
product is expected to be North America. Furthermore, ROK's sublicensing
efforts for Smith & Wesson product is expected to expand to all international
markets.
On October 8, 1997, in cooperation with Smith & Wesson, ROK entered into
an agreement to receive a 50% share of revenues, flowing from a trademark
license agreement with minimum guaranteed royalties, between Smith & Wesson
and Multiplinvest srl ("Multiplinvest"), for the territory of Western Europe
and South America.
ROK is currently negotiating four further licenses, domestically and
abroad, totaling anticipated wholesale sales of $85 million. ROK anticipates
that these agreements will be completed by December 1998.
As the Trademark Agreement grants to ROK, the right to license and
sublicense, on a worldwide basis, ROK expects to execute a global licensing
strategy during the next 24 months. Since the inception of this program,
based upon available research, data indicated that minimum licensing sales
for Smith & Wesson apparel and accessories, on a worldwide basis, was expected
to exceed the $210 million level within a five year period.
MANUFACTURING, PACKAGING AND DISTRIBUTION
Urecoats plans to handle initial URECOATS 100 manufacturing, packaging
and distribution through contract manufacturers. These contract manufacturers
are expected to prepare the product, as specified by Urecoats, provide for
private label packaging and assist with shipping of product components to
Mexico, for distribution to the customer.
Page 5
Urecoats entered into a one year lease with Polymer Creation, Inc., for
a manufacturing, packaging and distribution plant in Roberta, Georgia,
commencing on August 15, 1997, which included an option to purchase for
$475,000. Urecoats chose this facility primarily based on its location, which
was directly across the street from Rubber Technology, Inc., a crumb rubber
tire recycling facility, that has since gone out of business. Urecoats also
entered into a purchase agreement for equipment necessary to begin product
development, testing and manufacturing operations at the Roberta facility,
with EnviroEngineering, LLC. Due to the length of time involved in the
development of the former licensed product, delays in financial resources and
other resource support, and the discontinuance of business operations of
Rubber Technology, Urecoats did not commence operations at the Roberta
facility or take actual possession of the equipment.
Urecoats is presently re-examining the equipment under the purchase and
sale agreement with EnviroEngineering, LLC, for possible inclusion in its
plans to create a Florida based product development, manufacturing, packaging
and distribution operation.
Designer Wear, Inc., through its subsidiary ROK, is presently preparing a
distribution network for its apparel and accessories. ROK is seeking to
establish a national sales force to effect this distribution. Introducing
Smith & Wesson apparel and accessories here in the United States will be
controlled and methodical. ROK will strive to protect the integrity of this
esteemed trademark, by selecting retail accounts that best fit the image of
Smith & Wesson.
Essentially, the image to be portrayed, using Smith & Wesson trademarks,
is that of "The Rugged Outdoor Look" with product depicting the genre of the
old American antiquity and the quality and tradition that Smith & Wesson
portrays in the mind of the consumer. The price points for apparel and
accessory products, will be in the medium to high end range.
The entire merchandising program is being directed to the use of the
following Smith & Wesson trademarks:
Smith & Wesson
Magnum by Smith & Wesson
Body Guard by Smith & Wesson
American Tradition
The Worlds Standard
The advantage of dealing with several sub brands of the Smith & Wesson
trademark, is that ROK will be able to segment the product lines and offer
them to different retailers at various price points.
Page 6
RESEARCH AND DEVELOPMENT
Urecoats presently conducts research and development activities primarily
related to products containing recycled materials and spray application
systems through outside consultants. As stated above, Urecoats is negotiating
a long term agreement with the inventor of the two products it purchased, for
the research and development of additional products which utilize recycled
materials in their composition.
Urecoats spent approximately $626,904 on research and development of its
products and spray application systems for the year ended December 31, 1997.
Designer Wear and ROK, during the fourth quarter of 1997, spent
approximately $41,589 on a line of apparel and related accessories.
ENVIRONMENTAL COMPLIANCE
The URECOATS 100 product contains urethanes, which are supplied by major
chemical manufacturers and/or suppliers and include directions and safety
precautions for handling. At present, Urecoats does not perform any
manufacturing operations and does not have any exposure to that end. Urecoats
is investigating the potential costs and impact of environmental compliance,
if any, with the use, handling and application of its products and application
systems.
EMPLOYEES AND CONSULTANTS
The Company and its subsidiaries presently have seven full time employees
and numerous consultants performing various necessary functions.
NEW PRODUCTS
Urecoats introduced its first product, URECOATS 100, and is presently
constructing a field size application system, described elsewhere in this
report.
Urecoats expects to launch a full scale marketing, sales and distribution
plan during 1998 for the Product.
Designer Wear, through its subsidiary ROK, has developed new product,
which was launched at the Magic Show in Las Vegas, Nevada, in February 1998.
According to the marketing plan and financial forecast, ROK expects to open
accounts with 25 retailers in North America with first year sales of $5
million. ROK continues to focus its efforts in sourcing and producing, new and
innovative product, that will enhance wholesale sales and generate new
sublicensing agreements.
Page 7
COMPETITIVE CONDITIONS
Urecoats recognizes the Roofing Industry as a billion plus market with
very competitive conditions and believes, due to the Product's uniqueness,
ease of application, costs savings, and environmental marketing component from
the incorporation of crumb rubber from recycled tires in its formula, as
described elsewhere in this report, that it can achieve a competitive niche in
that market.
Designer Wear's market, in and of itself, is highly competitive and only
prestigious and well known trademarks, such as Smith & Wesson, have the
capacity to competitively engage in the industry.
RAW MATERIALS
URECOATS 100 includes urethanes and a proprietary component incorporating
crumb rubber from recycled tires. The urethanes are readily available in the
marketplace, while the proprietary component must be specially formulated.
Urecoats does not foresee any substantial problems with the availability of
its raw material requirements at this time.
Designer Wear, through its subsidiary ROK, will be selling Smith & Wesson
apparel and accessories to retailers, accordingly, all product sold will be
sourced in its completed form, and therefore, it will not be necessary to
source raw materials.
PRINCIPAL SUPPLIERS
Urecoats is presently negotiating more competitive pricing with various
well known suppliers of the urethane components, and three suppliers for
another proprietary component, of the URECOATS 100 formula.
Designer Wear, through its subsidiary ROK, has the following principal
suppliers:
Milliken - Spartanburg, South Carolina
STS Corporation - Miami, Florida
Shanghai SFECO Trading Company - China
Grupo Caroche - Mexico City, Mexico
Three Amigos - Baltimore, Maryland
Page 8
MAJOR CUSTOMERS
Although no purchase orders have been finalized to date, Urecoats is
dependent at present on its customer in Mexico, Ipseal De Mexico, S.A. de C.V.
("Ipseal"), for sales of the Product. However, the Company and Urecoats are
in active discussions with another entity in Mexico, described elsewhere in
this report, for the potential marketing, distribution and licensing of
URECOATS 100 in Mexico, Central America and South America.
Designer Wear, through its subsidiary ROK, is not dependent on any one
major customer at this time.
PATENTS, TRADEMARKS AND LICENSES
Urecoats has submitted information on its proprietary formula,
preliminary in-house patent searches and specially designed spray application
system, to legal counsel for review and expects to have a patent application
or patent applications filed within the second quarter of 1998.
Urecoats performed in-house trademark research, which indicated that
URECOATS 100 was available for use as a trademark name, and is presently
marketing the Product under that trademark name. Urecoats expects to have its
trademark applications completed within the second quarter of 1998.
Designer Wear, through its subsidiary ROK, has a Trademark Agreement, as
described elsewhere in this report.
ROK is also involved in final negotiations for obtaining a master license
for Ralph Lauren, through a public company in South Africa.
GOVERNMENT APPROVALS
Urecoats is presently researching governmental approvals, if any,
required for its Product.
GOVERNMENTAL REGULATION
Urecoats is presently researching governmental regulations, if any,
applicable to the manufacture, sales, distribution and application, of its
Product.
Page 9
HISTORICAL INFORMATION
The Company was incorporated in the state of Delaware on October 20, 1989
as Natural Child Collection, Inc. and changed its name to Natural Child Care,
Inc. on January 14, 1991. The Company underwent a recapitalization, reverse
merger, discontinued its pre-merger operations, changed its name to Winners
All International, Inc., and began post-merger operations relating to a
surviving wholly-owned subsidiary, in 1993. On January 29, 1997, a Special
Meeting of the Board of Directors recognized and resolved, that as a result of
the permanent impairment of operational assets relating to its post-merger
business operations, a measurement date of January 29, 1997 was established to
abandon its operations effective for the year ended July 31, 1995. Since that
determination was made, the Company restructured its operations, began
transacting its present business operations, as described elsewhere in this
report, to rebuild shareholder value and continues to settle former
outstanding legal matters relating to the abandoned post-merger business
operations.
ITEM 2. PROPERTY
The Company does not own any real property. The Company currently leases
office space, indirectly through an affiliate in an arms length transaction,
at an annual rental of $45,800, (neither the affiliate or the affiliated
person to the Company derives any income from this transaction), at 3475
Sheridan Street, Suite 301, Hollywood, Florida 33021 and is actively seeking
to lease facilities for permanent office space.
Urecoats currently occupies office space at 3475 Sheridan Street, Suite
301, Hollywood, Florida 33021. Urecoats entered into a lease for a
manufacturing, packaging and distribution facility with Polymer Creation, Inc.
in Roberta, Georgia, however, it has no plans to commence operations at this
location. (See Item 1. Manufacturing, Packaging and Distribution). Urecoats
is actively seeking its own office space in South Florida, primarily for
research and development, product testing, marketing, packaging, and
distribution of its new and developing product plans.
Designer Wear and ROK currently occupy office space at 3475 Sheridan
Street, Suite 301, Hollywood, Florida 33021.
Page 10
ITEM 3. LEGAL PROCEEDINGS
The Company, on behalf of DWI and ROK, is preparing to sue Smith & Wesson
and its Director of Licensing and Merchandising, for breach of the implied
covenant of good faith and fair dealing in the Trademark Agreement (which
Smith & Wesson purported to terminate on May 2, 1998), promissory estoppel,
and tortious interference with the contractual relations between DWI and ROK.
A complaint seeking damages in the amount of $50,000,000, plus declaratory and
injunctive relief, has now been fully drafted, and management has authorized
the filing in the United States District Court for the Southern District of
Florida which should be accomplished in the few days.
It is the opinion of the Company's legal counsel that the agreement
between ROK and Smith & Wesson, under which ROK is entitled to a 50% share in
the royalties collected by Smith & Wesson from Multiplinvest (an Italian
company which entered into the Multiplinvest Agreement, after ROK agreed to
surrender its rights to certain territories), survives any termination of the
Trademark Agreement, and will not be affected by the litigation that is about
to be commenced.
On March 2, 1998, a Statement of Claim was filed against Millennium
Holdings Group, Inc. with the American Arbitration Association ("AAA"),
headquartered in New York City, New York. The Parties designate the Supreme
Court, New York County, as the Court in which any arbitratiuon award shall be
subject to confirmation, and will abide by such confirmation. The Company has
asserted claims against Millennium Holdings Group, Inc., for breach of a
consulting agreement, common law fraud and fraud in the purchase of
securities. The Statement of Claim seeks rescission of the consulting
agreement, restitution of stock shares issued and/or damages in the amount of
at least $200,000. An arbitrator has been appointed, but a date has not yet
been set for the hearing of the case. The outcome cannot be determined at the
present time.
On July 25, 1996, Stanley Farber, Plaintiff, filed a complaint in the
Circuit Court of the Seventeenth Judicial Circuit in and for Broward County,
Florida. Plaintiff sued the Company and Davidoff and Molito, former legal
counsel for the Company, for Breach of an executive employment contract. As a
result of absence of counsel on behalf of the Company, a final judgment of
$142,187 was awarded. In 1997, the Company retained Counsel to appeal the
final judgment, however, it was affirmed by the Appellate Court. A hearing is
presently pending for a determination of the Plaintiff's legal costs.
Management is in negotiations with Plaintiff's counsel regarding a settlement
on the payment of the judgment. The outcome of these negotiations cannot be
determined at this time.
Page 11
On March 22, 1996, Raymond Kalley, as trustee of the EB Trust and PB
Trust (Plaintiff), sued the following in the Southern District of Florida
(Miami Division), the Company, UC'NWIN Systems Corporation, a consultant to
UC'NWIN Systems Corporation and a beneficiary to the EB and PB Trusts. In
this five-count complaint, Plaintiff sued the Defendants for alleged
violations of Section 18 of the Securities Act of 1934. Plaintiff alleges that
the Defendants, singly and in concert, filed misleading reports under the
Securities Exchange Act of 1934, including without limitation, the filing of
Form 10K. A default judgment in the amount of $1,075,000 was entered on March
13, 1997. Counsel was retained to apply for the vacatur of the default
judgment on the grounds that the Company was not served with various motion
papers underlying the judgment. Management and Counsel are actively
negotiating a settlement, in the form of restricted common stock, but the
exact amount and terms are not yet known.
On April 17, 1995, AG Industries sued UC'NWIN Systems Corporation and the
Company and for a breach of contract and causes of action for unjust
enrichment and breach of implied contract. AG Industries seeks damages in
excess of $400,000. On August 22, 1995 the Company filed a Motion to Dismiss
and Alternative Motion for a Change of Venue. AG Industries has responded and
opposed the Defendants' motion. There has been no further discovery and the
outcome cannot be determined at the present time.
Other judgments against the Company total approximately $77,000, which
includes a $57,000 judgment in favor of attorneys Rudin, McClosky, Smith,
Schuster & Russell, P.A., for legal services provided. Management is seeking
settlements on the payment under these judgments. The outcome of these
negotiations cannot be determined at the present time.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Page 12
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET FOR COMMON EQUITY
The Company's common stock is traded over-the-counter on the NASDAQ
Bulletin Board primarily in the United States and Canada. The following table
sets forth the range of the high and low bid prices for the Company's common
stock and warrants (*) to purchase common stock for the five months ended
December 31, 1996 and four quarters for the year ended December 31, 1997. The
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
COMMON STOCK REDEEMABLE WARRANTS
------------------ -------------------
PERIOD HIGH LOW HIGH LOW
- ------------------------ -------- ------- -------- -------
August 1, 1996 - .06 .06 -- --
August 31, 1996 .04 .04 -- --
September 1, 1996 - .04 .04 -- --
September 30, 1996 .04 .04 -- --
October 1, 1996 - .02 .02 -- --
October 31, 1996 .02 .02 -- --
November 1, 1996 - .02 .02 -- --
November 30, 1996 .02 .02 -- --
December 1, 1996 - .02 .02 -- --
December 31, 1996 .06 .06 -- --
January 1, 1997 - -- -- -- --
March 31, 1997 .54 .46 -- --
April 1, 1997 - .60 .50 -- --
June 30, 1997 .51 .42 -- --
July 1, 1997 - .48 .47 -- --
September 30, 1997 .51 .38 -- --
October 1, 1997 - .51 .42 -- --
December 31, 1997 .32 .25 -- --
Page 13
As of the close of business on April 30, 1998, there were 261 holders of
record, respectively, of common stock. The Company believes it has over 300
beneficial owners of its common stock.
The Company has not paid any cash dividends on its common stock for the
last two fiscal years.
RELATED STOCKHOLDER MATTERS
The Company offered 3,000,000 shares of its unregistered, restricted
common stock ("Shares"), in a Private Placement dated August 1, 1997, pursuant
to the exemption under Rule 505 of the Securities Act of 1933, as amended (the
"Act"). The Shares were sold to "Accredited Investors", as defined in Section
501(a) of Regulation D under the Act. The offering terminated on September 30,
1997 with 2,211,919 Shares sold or subscribed for. The Shares have been
recorded at prices ranging from $.075 to $.15. The proceeds amounted to
$180,894. A breakdown of the cash and other consideration received are
described below.
Cash Proceeds $ 157,494
Conversion of Debt Proceeds $ 22,500
Conversion of Finder's Fee Proceeds $ 900
----------
Total Proceeds $ 180,894
==========
The Conversion of Debt proceeds were received from the cancellation of a
loan payable due and owing to a non-affiliated entity by the Company. The loan
payable was satisfied with the issuance of 300,000 Shares. The Finder's Fee
proceeds were received from the cancellation of a finder's fee of 10% due and
owing by the Company on the sale of 120,000 shares under the offering. The
finder's fee was satisfied with the issuance of 12,000 Shares.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
CURRENT OPERATIONS
The Company's expenditures in research and development, and acquisition
of Urecoats, have resulted in the development of "URECOATS 100". This Roofing
Industry product, with worldwide marketability, is the first product, in a
line of products utilizing recycled material, developed by Urecoats for the
sealant and coating industry.
Page 14
The Company expanded its branded merchandise business with the
acquisitions of Designer Wear and ROK.
Settlements of litigation and judgments arising from discontinued
operations were a focus of Management during 1997.
Although the outcome of the current dispute between Designer Wear, ROK
and Smith & Wesson is unknown at this time, Management expects to resolve this
dispute with favorable results.
RESULTS OF OPERATIONS
Revenues of $25,000 were from licensing agreements.
Operating expenses of $42,500 consisted of payments under guaranteed
minimum royalty agreements.
Selling, general and administrative costs, of $570,001, consisted of;
$355,696 for salaries, $60,490 for rent, $21,559 for telephone costs, $20,986
for shareholder communications and stock transfer costs, $23,210 for
insurance, $10,757 for computer services, and $77,303 for miscellaneous
expenses.
Included in research and development costs of $668,493 is a charge of
$515,000 arising from the initial search for the development of a product for
the sealant and coating industry. Other expenditures were for demonstration
of product costs and the production of samples for the Smith & Wesson branded
merchandise products.
The Company was operationally inactive from August 1, 1995 through
January 26, 1997. On January 29, 1997, a Special Meeting of the Board
of Directors was held. Discussions centered on reorganizing the affairs of the
Company, transacting business in an effort to rebuild shareholder value,
settle all outstanding matters, and to bring business records up to date.
During that same meeting, the Board of Directors recognized and resolved, that
as a result of the permanent impairment of former operational assets, a
measurement date of January 29, 1997 was established to abandon former
operations effective for the year ended July 31, 1995.
Page 15
LIQUIDITY AND CAPITAL RESOURCES
The Company expects to fund its anticipated cash requirements from
the private sale of additional shares of restricted stock. In 1998, the
Company has raised approximately $300,000 through the private sale of
additional shares of restricted common stock pursuant to a private placement.
The Company continues to anticipate further sources of financing from letters
of credit resulting from sales of product and minimum guaranteed royalties,
described elsewhere in this report. In addition, the Company intends to
reduce its debt and payables through the issuance of additional shares of
restricted common stock.
The Company received approximately $1,127,709 from the sales of common
stock and loans and expensed $147,274, net, on acquisition of intangibles,
$27,789, net, on property and equipment, and approximately $951,567, net, on
operating activities.
Page 16
ITEM 7. FINANCIAL STATEMENTS
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
PAGE
------
INDEPENDENT AUDITOR'S REPORT ................................ 18-19
CONSOLIDATED BALANCE SHEET .................................. 20
CONSOLIDATED STATEMENTS OF OPERATIONS ....................... 21
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY ............. 22
CONSOLIDATED STATEMENTS OF CASH FLOWS ....................... 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ................... 24-43
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are not applicable, and therefore have been
omitted.
Page 17
BAUM & COMPANY, P.A.
4310 SHERIDAN STREET, SUITE 202
HOLLYWOOD, FLORIDA 33021
INDEPENDENT AUDITOR'S REPORT
----------------------------
Board of Directors and Stockholders
Winners All International, Inc.
We have audited the accompanying consolidated balance sheet of Winners
All International, Inc. and Subsidiaries (a development-stage company) as of
December 31, 1997, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the year ended December 31, 1997 and
five months ended December 31, 1996. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated 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 consolidated financial
statements are free of material misstatements. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statements presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Winners All International, Inc. and Subsidiaries as of December 31, 1997
and the results of its consolidated operations and its consolidated cash flows
for the year ended December 31, 1997 and five months ended December 31, 1996,
in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As described in
Note 2 to the consolidated financial statements, the Company has suffered
recurring losses, has discontinued former operations, and is in the continuous
process of seeking additional capital, for the new business activities of the
Company, which outcome cannot currently be determined. These conditions
raise substantial doubt about its ability to continue as a going concern.
Management's plans regarding these matters are described in Note 2. The
accompanying consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Page 18
As described in Note 11, the Company is currently involved in a number of
lawsuits, many of which the outcome or final settlement cannot be reasonably
determined at the present time.
/s/ Joel Baum
- ----------------------------
Joel S. Baum, C.P.A
Baum & Company, P.A.
Certified Public Accountants
Hollywood, Florida
May 20, 1998
Page 19
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
ASSETS
------
Current Assets:
Cash $ 1,079
Prepaid Expenses 33,525
----------------
Total Current Assets 34,604
----------------
Property and Equipment, Net (Notes 1,4) 56,997
----------------
Other Assets:
Deposits 10,096
Intangibles, Net (Notes 1,6) 4,242,266
----------------
Total Other Assets 4,252,362
----------------
Total Assets $ 4,343,963
================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Notes Payable (Note 7) $ 85,000
Accounts Payable and Accrued Expense (Note 8) 790,231
Loans Payable (Note 9) 897,743
Due to Related Parties (Note 10) 35,329
----------------
Total Current Liabilities 1,808,303
----------------
Commitments and Contingencies (Note 11) 783,021
----------------
Stockholders' Equity:
Preferred Stock, $1.00 Par Value, 2,000,000 Shares
Authorized; Series A Convertible, 750,000 Shares
Authorized; Issued & Outstanding, 62,500 Shares
Unconverted (Less Offering Costs of $7,465) 55,035
Common Stock $.01 Par Value, 60,000,000 shares
Authorized; 30,034,679 Shares Issued & Outstanding 300,347
Additional Paid-In-Capital 12,963,253
Accumulated (Deficit) - Discontinued Operations (9,095,944)
Accumulated (Deficit) - Development Stage Operations (2,470,052)
----------------
Total Stockholders' Equity 1,752,639
----------------
Total Liabilities and Stockholders' Equity $ 4,343,963
================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Page 20
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
DEVELOPMENT STAGE DISCONTINUED
OPERATIONS OPERATIONS
(INCEPTION) FIVE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------ -----------------
Revenues $ 25,000 $ -0-
------------------ -----------------
Costs and Expenses:
Operating 42,500 ---
Selling, General and
Administrative 570,001 ---
Professional Fees 263,434 ---
Depreciation and Amortization 18,150 ---
Research and Development 668,493 ---
Consulting Fees 932,474 ---
------------------ -----------------
Total Costs and Expenses 2,495,052 -0-
------------------ -----------------
Net (Loss) $ (2,470,052) $ -0-
------------------ -----------------
Net (Loss) Per Common Share $ (0.111) $ -0-
------------------ -----------------
Weighted Average Shares Outstanding 22,339,736 14,471,756
------------------ -----------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Page 21
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS STOCKHOLDERS' EQUITY
DECEMBER 31, 1997
Preferred Stock Common Stock
Amount Amount
--------------- --------------------
Additional
PV PV Paid-In
Shares $1.00 Shares $.01 Capital
------ ------- ---------- -------- -----------
Balance at
December 31, 1996 62,500 $55,035 14,471,756 $144,715 $ 8,026,114
Issuance of Stock -- -- 15,562,923 $155,632 $ 4,937,139
Net(Loss)
for the Year -- -- -- -- --
------ ------- ---------- -------- -----------
Balance at
December 31, 1997 62,500 $55,035 30,034,679 $300,347 $12,963,253
Development
Discontinued Stage
Operations Operations Total
Accumulated Accumulated Stockholder's
(Deficit) (Deficit) Equity
------------ ----------- -------------
Balance at
December 31, 1996 $ (9,095,944) -- $ (870,080)
Issuance of Stock -- -- --
Net(Loss)
for the Year -- $(2,470,052) --
------------ ----------- -------------
Balance at
December 31, 1997 $ (9,095,944) $(2,470,052) $ 1,752,639
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Page 22
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
DEVELOPMENT STAGE DISCONTINUED
OPERATIONS OPERATIONS
(INCEPTION) FIVE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
Cash Flows from Operating Activities:
Net(Loss) $ (2,470,052) $ -0-
Adjustments to Reconcile Net(Loss)
to Net Cash (Required)by Operating
Activities:
Depreciation and Amortization 18,150 ---
Changes in Assets and Liabilities:
Prepaid Expenses (33,525) ---
Deposits (10,096) ---
Accounts Payable 703,174 ---
Due to Related Parties 35,329 ---
----------------- -----------------
Net Cash (Required) by
Operating Activities (1,757,020) -0-
----------------- -----------------
Cash Flows from Investing Activities:
Acquisition of Property
and Equipment (64,067) ---
Acquisition of Intangibles (4,253,346) ---
----------------- -----------------
Net Cash (Required) by
Investing Activities (4,317,413) -0-
----------------- -----------------
Cash Flows from Financing Activities:
Proceeds from Issuance of
Common Stock 5,092,769 ---
Proceeds from Issuance of Notes 85,000 ---
Proceeds from Loans 897,743 ---
----------------- -----------------
Net Cash Provided by
Financing Activities 6,075,512 -0-
----------------- -----------------
Net Increase in Cash $ 1,079 $ -0-
================= =================
Supplemental Disclosure of Cash Flow Information (Note 15)
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Page 23
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND FIVE MONTHS ENDED DECEMBER 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
This summary of significant accounting policies is presented to assist in
understanding these consolidated financial statements. The consolidated
financial statements and notes are representations of management who is
responsible for their integrity and objectivity. The accounting policies used
conform to generally accepted accounting principles and have been consistently
applied in the preparation of these consolidated financial statements.
ORGANIZATION
The Company was incorporated in October 1989 as Natural Child Collection,
Inc. and changed its name to Natural Child Care, Inc. ("NCC") in January 1991.
In September 1993, NCC purchased Winners All Limited ("WAL"), organized under
the laws of the Isle of Jersey, Channel Island, United Kingdom. This
acquisition was treated as a recapitalization. Following the recapitalization,
the shareholders of WAL obtained a majority of the voting rights in NCC and,
as a result, the recapitalization was accounted for as a reverse acquisition,
with WAL the surviving successor. On October 27, 1993, the legal name of the
Company was changed to Winners All International, Inc. The Company was
operationally inactive from August 1, 1995 through January 26, 1997. Pursuant
to a January 29, 1997 Board of Directors meeting, resolutions pertaining to
discontinuing all former operations, retroactive to the year ended July 31,
1995, were ratified. On February 17, 1997, the Company changed its former
fiscal year of July 31, to December 31. During 1997, the Company acquired all
of the issued and outstanding capital stock of Urecoats International, Inc.
("Urecoats") (formerly named Perma Seal International, Inc.) and Designer
Wear, Inc. ("DWI"). On October 8, 1997, DWI acquired all of the issued and
outstanding capital stock of ROK International, Inc. ("ROK").
BUSINESS
Urecoats, a wholly-owned subsidiary of the Company, is a development
stage enterprise, engaged in the acquisition, formulation, marketing and
distribution of sealant and coating products containing recycled materials.
DWI, a wholly-owned subsidiary of the Company, is a development stage
enterprise, engaged in the acquisition of license agreements for the design,
contract manufacturing, sale and worldwide distribution of branded merchandise
products.
Page 24
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND FIVE MONTHS ENDED DECEMBER 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
- -------------------------------------------------------------
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiaries. All material intercompany
items and transactions have been eliminated.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has adopted Statement of Financial Accounting Standards No.
107 "Disclosure About Fair Value of Financial Instruments", which requires the
disclosure of the fair value of off-and-on balance sheet financial
instruments. Unless otherwise indicated, the fair values of all reported
assets and liabilities, which represent financial instruments (none of which
are held for trading purposes), approximate the carrying values of such
amounts.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at historical cost. Depreciation of
property and equipment is provided on the straight-line method over the
estimated useful lives of the related assets. Maintenance and repairs are
charged to operations. Additions and betterments, which extend the useful
lives of the assets, are capitalized. Upon retirement or disposal of the
property and equipment, the cost and accumulated depreciation are eliminated
from the accounts, and, the resulting gain or loss is reflected in operations.
INTANGIBLE ASSETS
Intangible assets, which primarily consist of the cost of acquired
businesses in excess of the fair value of tangible assets and liabilities
acquired (License Agreements and Goodwill), are generally amortized,
commencing in the year of significant revenue recognition, by the straight-
line method over estimated useful lives of up to 40 years.
Page 25
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND FIVE MONTHS ENDED DECEMBER 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
- -------------------------------------------------------------
In 1997, the Company adopted Statement of Accounting Standards 121
("SFAS 121") "Accounting for the Impairment of Long-Lived Assets to be
Disposed of". SFAS 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by the Company be reviewed for
impairment whenever there is an indication that the carrying amount of the
asset may not be recoverable. Recoverability of these assets are
determined by comparing the forecasted undiscounted net cash flows of the
operation to which the assets relate to the carrying amount including
associated intangible assets of such operation. If the operation is
determined to be unable to recover the carrying amount of its assets, then
intangible assets are written down first, followed by the other long-lived
assets of the operation, to fair value. Measurement of an impairment loss is
based on the fair value of the underlying asset. Fair value is principally
determined by discounted cash flows, depending upon the nature of the assets.
The Company evaluates the amortization period of intangibles on an
ongoing basis in light of changes in any business conditions, events or
circumstances that may indicate the potential impairment of intangible assets.
The adoption of SFAS 121 and the evaluation by the Company did not have a
significant effect on the consolidated financial position or results of
operations.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", which
requires the establishment of a deferred tax asset or liability for the
recognition of future deductions or taxable amounts, and operating loss and
tax credit carryforwards. Deferred tax expense or benefit is recognized as a
result of the change in the deferred asset or liability during the year. If
necessary, the Company will establish a valuation allowance to reduce any
deferred tax asset to an amount which will, more likely than not, be realized.
OPTIONS
Options have been recorded at fair market value on the date of grant and
exercised in the applicable period.
Page 26
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND FIVE MONTHS ENDED DECEMBER 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
- -------------------------------------------------------------
NET EARNINGS PER COMMON SHARE
During February 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS 128, "Earnings per Share" ("SFAS 128"), which is effective for
financial statements for both interim and annual periods ending after
December 15, 1997. The Company adopted SFAS 128 in the fourth quarter of
1997. SFAS 128 replaces the presentation of primary and fully diluted
earnings per share with basic and diluted earnings per share. Basic
earnings per share is based upon the net earnings applicable to common shares
after preferred dividend requirements and upon the weighted average number of
common shares outstanding during the period. Diluted earnings per share
reflects the effect of the assumed conversions of convertible securities and
exercise of stock options only in the periods in which such effect would have
been dilutive.
RECENT PRONOUNCEMENTS
In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income"
("SFAS 130") effective for fiscal years beginning after December 15, 1997. The
new rules establish standards for the reporting of comprehensive income and
its components in financial statements. Comprehensive income consists of net
income and other gains and losses affecting shareholders' equity that, under
generally accepted accounting principles, are excluded from net income, such
as realized gains and losses on investments available for sale, foreign
currency translation gains and losses and minimum pension liability. The
Company will adopt SFAS in 1998 and does not expect that the adoption will
have a material effect on its financial statements.
In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"), effective for the fiscal
years beginning after December 15, 1997. The new rules establish revised
standards for public companies relating to the reporting of financial and
descriptive information about their operating segments in financial
statements. The Company continues to assess the impact these revised
standards will have on existing segment disclosures; however, it does not
expect that the adoption in 1998 will have a material effect on its financial
statements.
Page 27
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND FIVE MONTHS ENDED DECEMBER 31, 1996
NOTE 2 - GOING CONCERN
- ----------------------
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which considers
continuation of the Company as a going concern.
Going concern contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business over a reasonable length of
time. As shown in the consolidated financial statements, the Company has
suffered recurring losses from discontinued operations, resulting in an
accumulated deficit of $(9,095,944) and an accumulated deficit from
development stage operations of $(2,470,052). The Company must also obtain a
significant amount of capital for the future development of new activities.
These factors raise substantial doubt about the Company's ability to continue
as a going concern.
Management believes that the discontinuance of former operations was the
first step necessary in restructuring the Company towards future profitable
activities. In the opinion of management, the acquisition of Urecoats, DWI
and ROK, and other possible acquisitions of start-up companies, will generate
significant revenues in future years. The Company plans to raise significant
capital through the issuance of additional shares of stock, the outcome of
which cannot be determined at this time.
The consolidated financial statements do not include any adjustments that
might result from these uncertainties.
NOTE 3 - ACQUISITION OF COMPANIES
- ---------------------------------
On January 28, 1997, the Company, pursuant to an Acquisition Agreement,
accepted possession of 100% of the issued and outstanding capital stock of
Urecoats, in exchange for 2,100,000 shares of its unregistered, restricted
common stock. Urecoats was owned by officers of the Company. The acquisition
was accounted for as a purchase and was included in consolidated operations of
the Company from that date through December 31, 1997.
Page 28
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND FIVE MONTHS ENDED DECEMBER 31, 1996
NOTE 3 - ACQUISITION OF COMPANIES CONTINUED
- -------------------------------------------
On July 1, 1997, the Company, pursuant to an Acquisition Agreement dated
March 27, 1997, exchanged 5,376,000 shares of its unregistered, restricted
common stock, to acquire 100% of the issued and outstanding stock of DWI, of
which 33% was owned by officers of the Company and subsidiaries. Included in
the total number of shares exchanged 1,200,000 shares were advanced by the
Company, to DWI, to be held in escrow, pending the outcome of DWI's
negotiations to acquire ROK. The acquisition was accounted for as a purchase
and was included in consolidated operations of the Company from that date
through December 31, 1997.
On October 8, 1997, DWI exchanged 1,200,000 shares of the Company's
unregistered, restricted common stock, previously held in escrow, and cash of
$143,652, to acquire 100% of the issued and outstanding stock of ROK. The
acquisition was accounted for as a purchase and was included in the
consolidated operations of DWI from that date through December 31, 1997.
In accordance with Accounting Principle Board Opinion #16, the unaudited
pro forma consolidated results of operations of the Company are as follows:
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
"PRO FORMA"
(UNAUDITED)
YEAR ENDED FIVE MONTHS ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------ -----------------
Revenues $ 70,631 $ -0-
------------------ -----------------
Costs and Expenses $ 3,034,998 207,788
------------------ -----------------
Net (Loss) $ (2,964,367) $ (207,788)
------------------ -----------------
Net (Loss) per Common Share $ (0.133) $ (.01)
------------------ -----------------
Weighted Average Shares Outstanding 22,339,736 18,209,756
------------------ -----------------
Page 29
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND FIVE MONTHS ENDED DECEMBER 31, 1996
NOTE 4 - COMMON STOCK TRANSACTIONS
- ----------------------------------
In 1997, the Company issued 3,000,000 shares of common stock for
business, consulting and related services, under its "1997 Non-Statutory Stock
Option Plan" (the "Plan"), in which the underlying common stock for the Plan
was registered pursuant to a Form S-8 Registration Statement filed on February
20, 1997 with the Securities and Exchange Commission ("SEC"). The Company
adopted the Plan to aid in attracting and retaining persons to assist in the
development and success of the Company. The Plan provided for the issuance of
non-statutory stock options and was not intended to qualify as "Incentive
Stock Options" within the meaning of section 422 of the Internal Revenue Code.
The purchase price of each share of stock within this Plan was not less than
20% of the fair market value of such shares on the date the option was
granted. This transaction was valued at approximately $1,090,000, which
equals the value as established by the Plan.
In 1997, the Company issued 2,100,000 shares of unregistered, restricted
common stock, to acquire Urecoats. This transaction was valued at
approximately $913,500, which equals the common stock's mean bid price per
share and the Board of Director's estimate of the market value of the
acquisition.
In 1997, the Company issued 5,376,000 shares of unregistered, restricted
common stock, to acquire DWI and facilitate DWI's acquisition of ROK. This
transaction was valued at approximately $2,499,600, which equals the common
stock's mean bid price per share and the Board of Director's estimate of the
market value of the acquisition.
In 1997, pursuant to a Private Placement offering, the Company issued
2,211,919 shares of unregistered, restricted common stock, to various
investors. This transaction was valued at approximately $180,894, which
equals the value received under the offering.
During 1997, the Company issued 2,875,000 shares of unregistered,
restricted common stock to various individuals and entities, for business,
consulting and related services for the Company. These transactions were
valued at approximately $408,775, which equals 40% of the common stock's mean
bid price per share as established by the Board of Director's estimate of the
fair market value of the services.
Page 30
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND FIVE MONTHS ENDED DECEMBER 31, 1996
NOTE 5 - PROPERTY AND EQUIPMENT
- -------------------------------
A summary of property and equipment at December 31, 1997 is as follows:
Office Equipment $ 36,060
Machinery and Equipment 33,453
-------------
Total Property and Equipment 69,513
-------------
Less: Accumulated Depreciation (12,516)
-------------
Total Property and Equipment, Net $ 56,997
=============
NOTE 6 - INTANGIBLES
- --------------------
A summary of intangibles at December 31, 1997 is as follows:
Trademark Agreement $ 2,643,252
Goodwill 1,557,508
Deferred Charges 56,480
-------------
Total Intangibles 4,257,240
-------------
Less: Accumulated Amortization (14,974)
-------------
Total Intangibles, Net $ 4,242,266
=============
ROK, as licensee, and the Smith and Wesson Corporation
("Smith & Wesson"), as licensor, entered into an all inclusive Trademark
Licensing Agreement ("Trademark Agreement"), effective March 1, 1996, and an
amendment to the Trademark Agreement, effective August 23, 1996. The term of
this Trademark Agreement is for three years, nine months, commencing on March
1, 1996 and ending December 31, 1999. The Trademark Agreement will be
automatically extended for three years, provided that ROK meets its minimum
guaranteed royalty in the last year of the original term. The valuation of
this Trademark Agreement arises from the cost of the Company's acquisition of
DWI, in excess of the fair value of tangible assets and liabilities acquired.
Amortization is to commence upon the receipt of significant revenues.
Page 31
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND FIVE MONTHS ENDED DECEMBER 31, 1996
NOTE 6 - INTANGIBLES CONTINUED
- ------------------------------
On August 12, 1997, in an amendment to the Trademark Agreement, ROK
released rights to the territories of Western Europe and South America, back
to Smith and Wesson, in exchange for a 50% share of revenues from a new
exclusive trademark licensing agreement, between Smith & Wesson and
Multiplinvest ("Multiplinvest Agreement"), covering these territories.
Minimum guaranteed royalties, under the Multiplinvest Agreement, which is
comprised of two five year terms, are $11,076,000. In the fourth quarter of
1997, ROK received $25,000 under the terms of this amendment.
Pursuant to a May 2, 1998 letter, Smith & Wesson advised ROK that the
Trademark Agreement was terminated for cause. The Company's legal counsel are
prepared to immediately file a lawsuit for damages of $50 million. (See Note
11-Commitments and Contingencies -Litigation).
Goodwill arises from the cost of the Company's acquisitions of Urecoats
and DWI, in excess of fair value of tangible assets and liabilities acquired.
Amortization is to commence upon the receipt of significant revenues.
Deferred charges are amortized, under the straight-line method, over five
years.
The Company evaluates the amortization period of intangibles on an
ongoing basis, in light of any changes in business conditions, events or
circumstances, that may indicate the potential impairment of intangible
assets.
NOTE 7 - NOTES PAYABLE
- ----------------------
Notes payable in the amount of $85,000, payable on demand, bear interest
at the rate of 12% per annum.
Page 32
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND FIVE MONTHS ENDED DECEMBER 31, 1996
NOTE 8 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
- ----------------------------------------------
A summary of accounts payable and accrued expenses at December 31, 1997
is as follows:
Accounts Payable $ 514,284
Accrued Salaries 177,325
Accrued Payroll Taxes 93,546
Accrued Expenses 5,076
------------
Total Accounts Payable
and Accrued Expenses $ 790,231
============
NOTE 9 - LOANS PAYABLE
- ----------------------
A summary of loans payable at December 31, 1997 is as follows:
Van Der Molen and Estates
(loans assumed from ROK acquisition) $ 599,858
Various Individuals and Entities 297,885
------------
Total Loans Payable $ 897,743
============
These loans payable are non-interest bearing and payable on demand.
NOTE 10 - RELATED PARTY TRANSACTIONS
- ------------------------------------
As of December 31, 1997, the Company had the following related party
transactions:
Non-interest bearing loans, net of advances, from the officers and
directors of the Company, amounted to $35,329.
Page 33
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND FIVE MONTHS ENDED DECEMBER 31, 1996
NOTE 10 - RELATED PARTY TRANSACTIONS CONTINUED
- ----------------------------------------------
Accrued salaries of $177,325 to the officers of the Company, including,
by authorization of the Board of Directors, 850,000 shares of unregistered,
restricted common stock, valued at $ .05 - $ .15 per share, to be issued for
services rendered in 1997.
The Company subleases office space under a month-to-month operating lease
from United Manufacturing Associates, Inc., in which certain officers and
stockholders are officers and stockholders of the Company. Rent expense
through December 31, 1997 amounted to $39,226.
A promissory note of $23,456 from SBH Specialties, Inc., in which certain
officers and stockholders are officers and stockholders of the Company, was
deemed uncollectable and written off.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
- ---------------------------------------
LEASES
Urecoats entered into a one year operating lease, expiring July 31, 1998,
with monthly payments of $6,119, for a previously planned factory location in
Roberta, Georgia. Rent expense for the year ended December 31, 1997 is
$30,599.
INDEBTEDNESS
DWI, in connection with its acquisition of ROK, guaranteed ROK's
repayment of $599,858 of indebtedness, or loans payable, arising from advances
by the family of the former 50% stockholder of ROK. In a May 14, 1998
amendment to the acquisition agreement, the Company agreed to facilitate DWI's
guarantee and ROK's repayment of these advances, by agreeing to issue 600,000
shares of unregistered, restricted common stock, in exchange for the
forgiveness of the debt.
Page 34
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND FIVE MONTHS ENDED DECEMBER 31, 1996
NOTE 11 - COMMITMENTS AND CONTINGENCIES CONTINUED
- -------------------------------------------------
MINIMUM GUARANTEED ROYALTIES
Under the terms of Trademark Agreement, ROK is obligated to pay minimum
guaranteed royalties, in four equal installments on the dates on which each
royalty payment is due, totaling $250,000 and $350,000 for 1998 and 1999,
respectively. Should the Trademark Agreement be renewed for an additional
three years, minimum guaranteed royalties are due totaling $450,000, $550,000
and $650,000 for 2000, 2001 and 2002, respectively. (See Note 11 -
Commitments and Contingencies -Litigation).
LITIGATION
The Company, on behalf of DWI and ROK, is preparing to sue Smith & Wesson
and its Director of Licensing and Merchandising, for breach of the implied
covenant of good faith and fair dealing in the Trademark Agreement (which
Smith & Wesson purported to terminate on May 2, 1998), promissory estoppel,
and tortious interference with the contractual relations between DWI and ROK.
A complaint seeking damages in the amount of $50,000,000, plus declaratory and
injunctive relief, has now been fully drafted, and management has authorized
the filing in the United States District Court for the Southern District of
Florida which should be accomplished in the few days.
It is the opinion of the Company's legal counsel that the agreement
between ROK and Smith & Wesson, under which ROK is entitled to a 50% share in
the royalties collected by Smith & Wesson from Multiplinvest (an Italian
company which entered into the Multiplinvest Agreement, after ROK agreed to
surrender its rights to certain territories), survives any termination of the
Trademark Agreement, and will not be affected by the litigation that is about
to be commenced.
The Company has asserted claims against Millennium Holdings Group, Inc.,
for breach of a consulting agreement, common law fraud and fraud in the
purchase of securities. The Statement of Claim seeks rescission of the
consulting agreement, restitution of stock shares issued and/or damages in the
amount of at least $200,000. An arbitrator has been appointed, but a date has
not yet been set for the hearing of the case. The outcome cannot be
determined at the present time.
Page 35
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND FIVE MONTHS ENDED DECEMBER 31, 1996
NOTE 11 - COMMITMENTS AND CONTINGENCIES CONTINUED
- -------------------------------------------------
On March 22, 1996, Raymond Kalley, as trustee of the EB Trust and PB
Trust (Plaintiff), sued the following in the Southern District of Florida
(Miami Division), the Company, UC'NWIN Systems Corporation, a consultant to
UC'NWIN Systems Corporation and a beneficiary to the EB and PB Trusts. In
this five-count complaint, Plaintiff sued the Defendants for alleged
violations of Section 18 of the Securities Act of 1934. Plaintiff alleges
that the Defendants, singly and in concert, filed misleading reports under the
Securities Exchange Act of 1934, including without limitation, the filing of
Form 10K. A default judgment in the amount of $1,075,000 against the Company,
was entered on March 13, 1997. Counsel was retained to apply for the vacatur
of the default judgment on the grounds that the Company was not served with
various motion papers underlying the judgment. Management and Counsel are
actively negotiating a settlement, in the form of restricted stock, but the
exact amount and terms are not yet known.
Stanley Farber, Plaintiff, filed a complaint in the Circuit Court of the
Seventeenth Judicial Circuit in and for Broward County, Florida on July 25,
1996. Plaintiff is suing the Company and Davidoff and Molito, former legal
counsel for the Company, for breach of an executive employment contract. As a
result of absence of counsel on behalf of the Company, a final judgment of
$142,187 was awarded and subsequently affirmed by the Appellate Court.
Management is seeking settlement of this judgment. The outcome of these
negotiations cannot be determined at this time.
Several other judgments against the Company totaling approximately
$77,000, include a $57,000 judgment in favor of attorneys Rudin, McClosky,
Smith, Schuster & Russell, P.A., for legal services provided. Management is
seeking settlement of these judgments. The outcome of these negotiations
cannot be determined at the present time.
On April 17, 1995, AG Industries sued the Company and UC'NWIN Systems
Corporation for a breach of contract and causes of action for unjust
enrichment and breach of implied contract. AG Industries seeks damages in
excess of $400,000. On August 22, 1995 the Company filed a Motion to Dismiss
and Alternative Motion for a Change of Venue. AG Industries has responded and
opposed the Defendants' motion. There has been no further discovery and the
outcome cannot be determined at the present time.
As of December 31, 1997, the Company has established a reserve for
litigation of $783,021.
Page 36
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND FIVE MONTHS ENDED DECEMBER 31, 1996
NOTE 12 - STOCKHOLDERS' EQUITY
- ------------------------------
Preferred Stock - The Board of Directors reduced the number of authorized
shares of Series A, $1.00 par value preferred stock, from 2,000,000 share to
750,000 shares, leaving 1,250,000 shares to be designated a series of
distinction and issued by the Board. Each share of the Series A preferred
stock entities its holder to convert it into .36 shares of common stock, as
adjusted in the event of future dilution; to receive $1.000 per share in the
event of voluntary or involuntary liquidation, to have the same voting rights
as the common stock, and to share equally in payments of any dividends
declared by the Board of Directors.
The Company offered 3,000,000 shares of its unregistered, restricted
common stock ("Shares"), in a Private Placement dated August 1, 1997, pursuant
to the exemption under Rule 505 of the Securities Act of 1933, as amended (the
"Act"). The Shares were sold to "Accredited Investors", as defined in Section
501(a) of Regulation D under the Act. The offering terminated on September
30, 1997 with 2,211,919 Shares sold. The Shares have been recorded at prices
ranging from $.075 to $.15. The proceeds amounted to $180,894. A breakdown
of the cash and other consideration received are described below.
Cash Proceeds $ 157,494
Conversion of Debt Proceeds $ 22,500
Conversion of Finder's Fee Proceeds $ 900
------------
Total Proceeds $ 180,894
============
The Conversion of Debt proceeds were received from the cancellation of a
loan payable due and owing by the Company. The loan payable was satisfied
with the issuance of 300,000 Shares. The Finder's Fee proceeds were received
from the cancellation of a finder's fee of 10% due and owing by the Company on
the sale of 120,000 shares under the offering. The finder's fee was satisfied
with the issuance of 12,000 Shares.
Page 37
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND FIVE MONTHS ENDED DECEMBER 31, 1996
NOTE 13 - STOCK OPTIONS AND WARRANTS
- ------------------------------------
STOCK OPTION PLAN
On February 20, 1997, the Company adopted the "1997 Non-Statutory Stock
Option Plan" (the "Plan") to aid in attracting and retaining persons to assist
in the development and success of the Company. This Plan provided for the
issuance of non-statutory stock options and was not intended to qualify as
"Incentive Stock Options" within the meaning of section 422 of the Internal
Revenue Code. The purchase price of each share of stock within this Plan
shall not be less than 20% of the fair market value of such share on the date
the option is granted. The fair market value of a share on a particular date
shall be deemed to be the average of the high and low bid and asked price.
Pursuant to this Plan, the Company entered into an agreement with Stanley
Merdinger to perform business, consulting and related services for the
Company. In consideration for his services, he received one million shares of
stock at nine cents ($ .09) and exercised an option to purchase two million
additional shares at fifty cents ($ .50).
WARRANTS
In conjunction with the Company's initial public offering in April 1992,
redeemable warrants were issued to purchase 450,000 shares of common stock at
an exercise price of approximately $6.66 per share. These warrants were set to
expire on April 28, 1994. The warrants' expiration date was extended to
January 27, 1996.
Additionally, the 37,500 units, held by the underwriter to purchase
common stock and warrants, were renegotiated in September 1993 due to certain
anti-dilution provisions included in their unit agreement. The underwriters
had warrants to purchase up to 90,000 units, each unit consists of two shares
of common stock and a warrant to purchase one share of common stock, at an
exercise price of $14.52. Such warrants expiring April 27, 1997 are
exercisable at 6.66 per share.
The following table summarizes the change in options and the related
price ranges for shares of the Company's common stock: (including the stock-
option plan).
Page 38
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND FIVE MONTHS ENDED DECEMBER 31, 1996
NOTE 13 - STOCK OPTIONS AND WARRANTS CONTINUED
- ----------------------------------------------
STOCK OPTIONS
--------------------------
SHARES OPTION PRICE
------- ------------
Outstanding @ December 31, 1996 114,150 $ 3.32-$6.66
-------
Granted(Canceled) (114,150)
-------
Outstanding @ December 31, 1997 -0-
=======
NOTE 14 - INCOME TAXES
- ----------------------
The Company has net operating tax loss carryforwards of approximately
$9,300,000 in the United States and $1,500,000 in the United Kingdom, of such
loss carryforwards, approximately $3,000,000 represents carryforwards of a
predecessor, the utilization of which will be credited to additional paid-in
capital. The Company is not current with its corporate income tax filings.
NOTE 15 - SUPPLEMENTAL CASH FLOW DISCLOSURES
- --------------------------------------------
(A) Cash Paid During The Year
Year Ended Five Months Ended
December 31, 1997 December 31, 1996
----------------- -----------------
Interest Paid $ -0- $ -0-
Income Taxes Paid $ -0- $ -0-
----------------- -----------------
Page 39
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND FIVE MONTHS ENDED DECEMBER 31, 1996
NOTE 15 - SUPPLEMENTAL CASH FLOW DISCLOSURES CONTINUED
- ------------------------------------------------------
(B) Supplemental Schedule of Non-Cash Investing and Financing Activities
Five Months
Year Ended Ended
December 31, December 31
1997 1996
------------- ------------
Increase in Intangibles Included:
Acquisition of Trademark Agreement $ 2,499,600 $ -0-
Acquisition of Goodwill 1,557,508 -0-
Acquisition of Deferred Charges 48,964 -0-
Acquisition of Property & Equipment 36,278 -0-
Proceeds from Issuance of Shares Included:
Retainment of Consultants 491,066 -0-
Acquisitions of Companies 3,413,100 -0-
Proceeds from Loans Included:
Assumption of Debt in ROK Acquisition 599,858 -0-
------------- ------------
NOTE 16 - RESEARCH AND DEVELOPMENT
- ----------------------------------
On February 21, 1997, pursuant to a February 4, 1997 letter of intent,
Urecoats completed negotiations, which resulted in a stock purchase agreement
("SPA") with Envio Dynamics Corporation ("EDC"). Urecoats was to acquire a
75% stock interest, amounting to 3,750,000 shares, of the authorized common
voting stock of EDC in exchange for $750,000. On March 21, 1997, Urecoats
entered into a purchase and sale agreement with the Essex Chemical Corporation
("ESC") to acquire the land, building and equipment, located at 1521
Industrial Drive, Griffin, Georgia, for $375,000.
On June 13, 1997, Urecoats entered into a License and Option Agreement
with Ultimate Urethane Roofing, Inc. ("UUR").
Page 40
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND FIVE MONTHS ENDED DECEMBER 31, 1996
NOTE 16 - RESEARCH AND DEVELOPMENT CONTINUED
- --------------------------------------------
As a result of disputes on the validity of a sealant and coating product,
all agreements with EDC and ESC were canceled, and the agreement with UUR has
been effectively canceled between the parties. In June 1997, all disputes
from EDC were settled and Urecoats secured a promissory note from EDC for
reimbursement of advances made under the SPA, in the amount of $250,000. This
note receivable was deemed uncollectable and written off.
The Company took a charge to earnings of $515,000, which were classified
to research and development.
Urecoats signed a Purchase and Sale Agreement, on October 30, 1997, and
amended on April 8, 1998, ("Creative Agreement") with Creative Chemical
Company (3C), to acquire two proprietary polymer roofing/sealant
formulas/materials and certain technologies for their manufacturing and
application, for $80,000. Payments of approximately $25,000 were paid in 1997
and charged to Research and Development. The balance of $55,000 is to
be paid by the issuance of unregistered, restricted common stock of the
Company in 1998.
NOTE 17 - BUSINESS SEGMENTS
- ---------------------------
YEAR ENDED FIVE MONTHS ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------ -----------------
Revenues:
Branded Merchandise $ 25,000 $ -0-
Sealant and Coating Product -0- -0-
------------------ -----------------
Total Revenues $ 25,000 $ -0-
================== =================
Operating(Loss):
Branded Merchandise $ (425,127) $ -0-
Sealant and Coating Product (733,543) -0-
Corporate (1,311,382) -0-
------------------ -----------------
Total Operating(Loss) $ (2,470,052) $ -0-
================== =================
Page 41
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND FIVE MONTHS ENDED DECEMBER 31, 1996
NOTE 17 - BUSINESS SEGMENTS CONTINUED
- -------------------------------------
Depreciation and Amortization:
Branded Merchandise $ 14,924 $ -0-
Sealant and Coating Product 2,650 -0-
Corporate 576 -0-
------------------ -----------------
Total Deprec & Amort $ 18,150 $ -0-
================== =================
Indentifiable Assets at Year End:
Branded Merchandise $ 769,189 $ -0-
Sealant and Coating Product 32,627 -0-
Corporate 3,542,147 -0-
------------------ -----------------
Total Identifiable Assets $ 4,343,963 $ -0-
================== =================
NOTE 18 - SUBSEQUENT EVENTS
- ----------------------------
On May 2, 1998, Smith & Wesson advised ROK that the Trademark Agreement
was terminated for cause. (See Note 11 - Commitments and Contingencies -
Litigation).
Pursuant to an amendment to the Creative Agreement, the Company issued
404,412 shares of its unregistered, restricted common stock, to facilitate
Urecoats in the satisfaction of all remaining financial obligations.
The Company agreed to facilitate the satisfaction of ROK's obligation to,
and DWI's guarantee of, repayment of $599,858 of indebtedness in exchange for
600,000 shares of its unregistered, restricted common stock, pursuant to an
amendment to the acquisition agreement dated May 14, 1998.
The Company is offering 7,000,000 shares of its unregistered, restricted
common stock ("Shares"), in a Private Placement dated January 1, 1998,
pursuant to the exemption under Rule 505 of the Act. The Shares are being
offered to "Accredited Investors", as defined in Section 501(a) of Regulation
D under the Act.
Page 42
WINNERS ALL INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND FIVE MONTHS ENDED DECEMBER 31, 1996
NOTE 18 - SUBSEQUENT EVENTS CONTINUED
- -------------------------------------
On January 26, 1998, the Company adopted the "1998 Employee and
Consultant Stock Option Plan" (the "1998 Plan"), authorizing the issuance of
3,000,000 shares of registered, common stock, to afford certain of its key
employees, officers and consultants who are responsible for the continued
growth of the Company an opportunity to acquire a proprietary interest in the
Company, and thus to create in such individuals an increased in and greater
concern for the welfare of the Company and its subsidiaries. The Company, by
means of this 1998 Plan, seeks to retain the services of persons now holding
key positions and to secure the services of persons capable of filling such
positions. The stock options offered pursuant to the Plan are a matter of
separate inducement and are not in lieu of any salary or other compensation
for the services of any key employee or consultant. The stock options granted
under the Plan are intended to be either incentive stock options within the
meaning of Section 422 of the Internal Revenue code of 1986, as amended, or
options that do not meet the requirements for incentive stock options. Under
the 1998 Plan, the fair market value of a share is the closing "bid" price of
the Company's shares on the date in question as quoted on the Electronic
Bulletin Board of the National Association of Securities Dealers or its
Automated Quotation System ("NASDAQ") or any successor national stock exchange
on which the Common Stock is then successor national stock exchange on which
the Common Stock is then traded, provided, however, that if on the date in
question there is no public market for the Company's Shares and they are
neither quoted on "NASDAQ" nor traded on a national securities exchange, then
the Administrator of the 1998 Plan, in its sole discretion and best judgment,
is to determine the fair market value.
Page 43
PART III
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
In connection with the acquisition of Urecoats, Howard Weiser was
appointed as a director of the Company on January 28, 1997 and the Board of
Directors was composed of Charles Gargano, Edgar M. Reynolds, David M.
Goldblatt and Jeffrey Goldstein.
Edgar M. Reynolds was elected as a member of the Board of Directors and
President on August 22, 1995, and subsequently Secretary and Treasurer of the
Company. On April 4, 1997, Howard Weiser was appointed as Secretary and
Treasurer. On May 1, 1997, Harry W. Brooks, Jr. was ratified as a member of
the Board of Directors and subsequently resigned on October 16, 1997. Howard
Weiser was ratified as Chairman of the Board of Directors on July 29, 1997 and
was appointed as President and Chief Executive Officer of the Company on
September 23, 1997. On September 23, 1997, Edgar M. Reynolds became Vice
President and Treasurer. The Board acknowledged the resignation of Jeffrey
Goldstein as a director on December 10, 1997.
Each Director holds office until the next annual meeting of stockholders
and until his successor is duly elected and qualified, or until death,
resignation or removal. Officers serve at the discretion of the Board of
Directors.
In the April 24, 1998 Special Meeting of the Board of Directors, the
Company appointed Antonio Domit as a new member of the Board of Directors. The
Board of Directors accepted the resignation of Antonio Domit as a director of
the Company, in its April 30, 1998 Special Meeting, due to a potential
conflict of interest. Antonio Domit is a Director and President of a company
in Mexico, named Cosmo Seal, S.A. de C.V., which is presently in discussions
and talks with the Company for the establishment of mutually agreeable form of
business relationship, for the marketing, distribution, licensing, and/or
manufacturing of Urecoats' products to Mexico, Central America and South
America ("Area"). The Board of Directors created an Advisory Board
("Committee") for the purpose of overseeing the implementation of its
subsidiaries' operational plans domestically and internationally, and
appointed Antonio Domit as its Chairman, who was also recognized as a
consultant to the Company handling introductions and other matters for the
Area.
Page 44
Certain background information is set forth below with respect to the
current directors and officers, including information furnished by them,
certain other directorships held by them and their ages as of the filing of
this report.
NAME AGE POSITION(S)
- ------------------- ----- ---------------------------------------
Howard Weiser 58 Chairman, President, CEO, and Secretary
Edgar M. Reynolds 74 Vice President and Treasurer
Charles Gargano 59 Director
David M. Goldblatt 54 Director
Howard Weiser worked for Zales Jewelry Stores for more than 20 years, and
helped create its massive growth from 200 stores to over 1,800 stores. He was
involved in all facets of the business and rose to Executive Vice President.
He was also a Senior Vice President at Chock Full of Nuts and one of the top
executives leading to their growth. His experience, development of store
branches and travel all over the world, in addition to his long list of
influential friends and contacts, provides the know-how and drive for the
growth of the Company and its subsidiaries.
Edgar M. Reynolds attended Columbia University. Since 1973 until 1994,
he was in an Executive capacity with Digital Products Corporation, a public
company in the field of electronics, communications, and home monitoring. At
various times, he was the CEO and Director of Digital Products Corporation.
Prior thereto he managed a private consulting firm. Prior thereto for twelve
years, he was a financial officer and director of a public chain of a variety
of toy stores. During that period, he served as a director of two Florida
banks. He also served overseas in the United States Army Intelligence Service
to World War II and was employed for a worldwide import and export firm with
extended stays in foreign countries, and is conversant in five languages.
Charles Gargano is the Chairman of the Empire State Development
Corporation of New York State. Mr. Gargano also served as the Finance
Chairman of the New York Republic State Committee, from August 1988 to
August 1991. Mr. Gargano served as United States Ambassador to the Republic
of Trinidad and Tobago. A civil engineer, Mr. Gargano has been President of
G.M. Development, Inc. and actively serves on many boards and commissions as
Chairman or Director, including the Children's Developmental Center, Alpha
Hospitality Corp. And First Commercial Bank of Long Island.
Page 45
David M. Goldblatt has over 25 years of experience in trading, selling
and financing United States Government securities and money market
instruments. In 1970, Mr. Goldblatt traded short term U.S. government
securities at William E. Pollack and Co. In 1972, he was hired as Vice
President at Cantor Fitzgerald and Company, where he was required to sell and
finance the Firms trading and matched book positions. In 1976, Mr. Goldblatt
was employed by Loeb, Rhodes & Company, as a Senior Vice President. He was
responsible for hiring sales personnel for the money market department. In
addition, he was in charge of selling and financing the Firm's money market
and matched book positions. In 1980, Mr. Goldblatt was a partner in Resource
Management. The Firm specialized in trading U.S. government securities and
short term money market instruments. In 1992, Mr. Goldblatt initiated and
developed the fixed income department at Seaboard Securities. This division
specializes in U.S. government securities. Mr. Goldblatt earned his Master's
Degree from Hunter College in New York City.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16 (a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than 10%
of a registered class of the company's equity securities, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes of ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than 10% shareholders are required
by SEC regulation to furnish the Company with copies of all Section 16(a)
forms they file.
To the Company's knowledge, based solely on review of such reports
furnished to the Company and written representations that no other reports
were required, during the fiscal year ended December 31, 1997, all Section
16(a) filing requirements applicable to its officers, directors and greater
than 10% beneficial owners were complied with.
ITEM 10. EXECUTIVE COMPENSATION
The Company approved annual salaries of $ 120,000.00 and $ 50,000.00 for
Howard Weiser and Edgar M. Reynolds, respectively, beginning May 1, 1997. The
following table summarizes the salaries and other applicable remuneration of
the executive officers of the Company.
Page 46
SUMMARY COMPENSATION TABLE
Annual Compensation
-------------------------------------
(a) (b) (c) (d) (e)
Other
Annual
Name and Salary Bonus Compensation
Principal Position Year ($) ($) ($)
------------------------ ---- -------- ------- ------------
(1) Howard Weiser 1997 $120,000 -0- -0-
Chairman of the Board
President and CEO
(2) Edgar M. Reynolds 1997 $ 50,000 -0- -0-
Vice President and CFO
Long-Term Compensation
--------------------------
Awards Payouts
-------------------------- -------
(f) (g) (h) (i)
Restricted Securities
Stock Underlying All Other
Awards Options/SARs LTIP Compensation
($) ($) ($) ($)
---------- ------------ ------- ------------
(1) $ 25,000* -0- -0- -0-
(2) $ 5,000* -0- -0- -0-
*See Item 11. Security Ownership of Certain Beneficial Owners and Management
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides certain information based on the outstanding
securities of the Company as of December 31, 1998, with respect to each
director, officer, and known beneficial owners, if any, of more than 5% of
the Company's Common Stock and all corporate officers and directors as a
group:
Page 47
Description of Percent
Name or Party Beneficial Owner Amount of Class
----------------------- ------------------------ ---------- --------
Howard Weiser Chairman of the Board, 1,355,000(1) .05 %
8632 NW 54th Street President, and Secretary
Coral Springs, FL 33067
Edgar M Reynolds Director, Vice President 125,000(2) .0042 %
3671 East Citrus Trace and Treasurer
Davie, FL 33328
Charles Gargano Director 800,000 .0266 %
3 Lazare Lane
Islip, NY 11751
David M. Goldblatt Director 620,416 .0207 %
410 East 80th Street
New York, NY 10024
Cede & Co. Unknown 10,224,964 .0340 %
P O Box 20
Bowling Green Sta
New York, NY 10025
Officers and Directors as a Group 2,900,416 .0966 %
(1) Howard Weiser received 925,000 shares in connection with the acquisition
of Urecoats and 430,000 shares in connection with the acquisition of Designer
Wear, of unregistered, restricted common stock, which acquisitions are
described elsewhere in this report. The Board of Directors approved the
issuance of 500,000 shares of unregistered, restricted common stock and
affixed a value of $ .05 per share, as additional compensation for services
rendered to the Company during the 1997 year, in its December 10, 1997 Special
Meeting. The additional compensation shares were issued in 1998.
(2) The Board of Directors approved the issuance of 100,000 shares of
unregistered, restricted common stock and affixed a value of $ .05 per share,
as additional compensation for services rendered to the Company during the
1997 year, in its December 10, 1997 Special Meeting. The additional
compensation shares were issued in 1998.
(3) All of the above shares are owned of record and beneficially.
(4) None of the Officers and Directors owns Unit Warrants.
Page 48
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Howard Weiser was an officer, director and 44 % shareholder in Urecoats
and simultaneously became a Director in the Company in connection with its
acquisition by the Company, which acquisition is described elsewhere in this
report. Howard Weiser was an officer, director and 10% shareholder in
Designer Wear, prior to its acquisition by the Company, which acquisition is
described elsewhere in this report.
See Item 11 - Security Ownership of Certain Beneficial Owners and
Management
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
EXHIBITS
1. Acquisition Agreement between the Company and Urecoats - 1/28/97
2. Acquisition Agreement between the Company and Designer Wear - 5/27/97
3. Acquisition Agreement between Designer Wear and ROK - 7/18/97
4. Amendment to 3 - 9/5/97
5. Amendment to 3 - 10/8/97
6. Amendment to 3 - 5/14/98
7. Agreement between ROK and Smith & Wesson - 3/1/96
8. Amendment to 7 - 8/23/96
9. Agreement between Smith & Wesson and ROK (Multiplinvest) - 8/14/97
FINANCIAL STATEMENT SCHEDULES
Financial statements and schedules filed as a part of this report are
listed on the "Index to Financial Statements" page herein. All other
schedules are omitted because either (i) they are not required under the
instructions, (ii) they are inapplicable, or (iii) the information is included
in the financial statements.
REPORTS ON FORM 8-K
None
Page 49
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the
registrant caused this Year Ended December 31, 1997 Form 10-KSB Report to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Hollywood and State of Florida on May 21, 1998.
WINNERS ALL INTERNATIONAL, INC.
(Registrant)
/s/ Howard Weiser /s/ Edgar M. Reynolds
- ------------------------ ----------------------------
Howard Weiser Edgar M. Reynolds
President and Secretary Vice President and Treasurer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant, and in the capacities and
on the dates indicated:
Signature Date
----------- ------
/s/ Howard Weiser May 21, 1998
- ----------------------
Howard Weiser
Chairman of the Board
/s/ Edgar M. Reynolds May 21, 1998
- ----------------------
Edgar M. Reynolds
Director
/ / Charles Gargano May 21, 1998
- ----------------------
Charles Gargano
Director
/s/ David M. Goldblatt May 21, 1998
- ----------------------
David M. Goldblatt
Director
Page 50
EXHIBIT 1
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ACQUISITION AGREEMENT
Agreement and Plan of Reorganization, dated as of January 28, 1997,
between Winners All International, Inc., a Delaware corporation, hereinafter
called "Winners All;" and Perma Seal International, Inc., a Florida
corporation, hereinafter called "Perma Seal".
1. Plan Reorganization. All of the issued and outstanding capital stock
of Perma Seal shall be acquired by Winners All Corporation, consisting of
1,000 shares of common stock, with a par value of $.01 per share in exchange
solely for its voting stock having a par value.
2. Exchange of Shares. Winners All agrees that all of the outstanding
shares of Perma Seal shall be exchanged with Winners All for 2,100,000 shares
of common stock of Winners All.
Subject to approval of Perma Seal shareholders, such shares shall be
issued to the respective stockholders of Perma Seal or pursuant to their
instructions.
3. Delivery of Shares. Subject to the approval of the shareholders of
Perma Seal, on the closing date, the Perma Seal stockholders will deliver
certificates for the shares of Perma Seal duly endorsed with signatures
guaranteed so as to make Winners All the sole owner thereof, free and clear of
all claims and encumbrances; and on such closing date delivery of the Winners
All shares will be made to the Perma Seal stockholders as above set forth.
Delivery by the Perma Seal stockholders will be made to the agent
for Winners All at such place in or about Fort Lauderdale, Florida, or at such
other place as may be determined by the parties. Time is of the essence.
4. Representations of Stockholders. Perma Seal represents and warrants
as follows: That the shares shall be acquired by Perma Seal stockholders for
their own beneficial account and will hold such shares of common stock of
Winners All for Investment and not with a view to the unlawful distribution
thereof and acknowledges that the certificates for the shares shall contain a
restrictive legend thereon, restricting sale, transfer or hypothecation
thereof unless the shares are the subject of an effective registration
statement duly filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"), or the issuer is provided,
with an opinion of counsel, satisfactory to it, that registration is not
required under the Act.
(a) As of the closing date the Perma Seal stockholders will be
the sole owners of the shares of Perma Seal appearing of record in their
names; such shares will be free from claims, liens, or other encumbrances and
such shareholders will have the unqualified right to transfer such shares.
(b) The shares to be delivered by Perma Seal stockholders
constitute validly issued shares of Perma Seal, fully paid and nonassessable.
(c) Perma Seal is a start-up company with no substantial
liabilities , either fixed or contingent, other than contracts or obligations
in the usual course of business; and no such contracts or obligations in the
usual course of business or liens or other liabilities which, if disclosed,
would pose any substantial changes in the financial condition of Perma Seal.
(d) Perma Seal is not involved in any pending litigation or
governmental investigation or proceeding not reflected in such financial
statements or otherwise disclosed in writing to Winners All and, to the
knowledge of Perma Seal, no litigation or governmental investigation or
proceeding is threatened against Perma Seal.
(e) As of the closing date, Perma Seal will be in good
standing as a Florida corporation.
5. Representations of Acquiring Corporation. Winners All represents and
warrants as follows:
(a) As of the closing date, the Winners All shares to be delivered
to the Perma Seal stockholders will constitute the valid and legally issued
shares of Winners All, fully paid and nonassessable, and will be legally
equivalent in all respects to the common stock of Winners All issued and
outstanding as of date hereof.
(b) The officers of Winners All are duly authorized to execute
this agreement pursuant to authorization of its Board of Directors, a
certified copy of the resolution of which will be provided to Perma Seal at
closing.
(c) Winners All is a publicly traded company that filed its last
10K report on July 31, 1994. At this time, all of the back 10K and 10Q
reports are being prepared for filing by the accounting firm of Joel S. Baum,
C.P.A. Winners All represents that subject to its Board of Director's
approval, any and all of the Company's past operating history, including all
assets, will be written off and starting new operations.
(d) Winners All is not involved in any governmental investigation
or proceeding not disclosed in writing to the Stockholders.
(e) As of the closing date, Winners All will be in good standing
as a Delaware corporation.
(f) The shares of Perma Seal are being acquired by Winners All
for an investment, and there is no present intention on the part of Winners
All to dispose of such shares.
6. Conditions of Closing.
(a) The closing date herein referred to shall be on or prior to
January 28, 1997, or such other date as the parties hereto may mutually agree
upon;
(b) All representations and covenants herein made shall survive
the closing;
(c) At the closing the Perma Seal stockholders shall designate,
nominate, constitute, and appoint Michael T. Adams as their agent to accept
delivery of the certificates of Winners All stock to be issued in their
respective names, and to give a good and sufficient receipt and acquittance
for the same, and in connection therewith to make delivery of their stock in
Perma Seal to Winners All;
(d) The obligations of Winners All hereunder are not conditioned
upon its obtaining a permit from any regulatory authority for the issuance of
its common stock to Perma Seal stockholders as hereinabove provided;
(e) The obligations of both Perma Seal and Winners All are not
conditioned upon the receipt of a favorable tax ruling regarding the tax free
character of the reorganization under I.R.C. Section 368(a)(1)(B);
7. Prohibited Acts. Perma Seal agrees not to do any of the following
things prior to the closing date, and subject to their approval, will cause
the Perma Seal stockholders to agree that prior to the closing date they will
not request or to the extent practicable, permit Perma Seal to do any of the
following things:
(a) Declare or pay any dividends or other distributions on its
stock or purchase or redeem any of its stock;
(b) Issue any stock or other securities increasing the total
number of shares outstanding (in excess of 1,000 shares), including any right
or option to purchase or otherwise acquire any of its stock, or issue any
notes or other evidences of indebtedness not in the usual course of business;
(c) Make capital expenditures in excess of an aggregate of $25,000
except with the consent of Winners All.
8. Delivery of Records. The Stockholders agree that on or before the
closing date they will cause to be delivered to Winners All such corporate
records or other documents of Perma Seal as Winners All may reasonably
request.
9. Assignment. This agreement may not be assigned by any party without
the written consent of the other party hereto.
10. Notices. Any notice which any of the parties hereto may desire to
serve upon any of the other parties hereto shall be in writing and shall be
conclusively deemed to have been received by the party to whom addressed, if
mailed, postage prepaid, United States Registered Mail, to the following
addresses:
Winners All Corporation
Attention of Edgar M. Reynolds, President
600 N W 44th Street, #2H
Fort Lauderdale, Florida 33321
Perma Seal International, Inc.
Attention of Barry M. Weinberg, President
3320 Pinewalk Drive North, Suite #1717
Margate, Florida 33063
11. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties, their successors, and assigns.
Executed in multiple counterparts, each of which shall be deemed a
duplicate original, as of the date first above written.
WINNERS ALL CORPORATION
By /s/ Edgar M. Reynolds
- -------------------------------
Edgar M. Reynolds
President
PERMA SEAL INTERNATIONAL, INC.
By /s/ Howard Weiser
- -------------------------------
Howard Weiser
Executive Vice President
EXHIBIT 2
---------
ACQUISITION AGREEMENT
Agreement dated as of May 27, 1997, between Winners All International,
Inc., a Delaware corporation, hereinafter called "Winners," and Designer Wear,
Inc., a Florida Corporation, hereinafter called "Designer."
1. Plan Reorganization. All the issued and outstanding capital stock of
Designer, consisting of 2,150,000 shares of common stock, with a par value of
$.01 per share, shall be acquired by Winners in exchange soley for its voting
stock having a par value of $.01.
2. Exchange of Shares. Winners agrees that all of the outstanding shares
of Designer, 2,150,000 shares of common stock, shall be exchanged for
5,376,000 shares of common stock of Winners.
3. Delivery of Shares. Subject to the approval of the shareholders of
Designer, on the closing date, the Designer stockholders will deliver
certificates for the shares of Designer duly endorsed with signatures
guaranteed so as to make Winners the sole owner thereof, free and clear of all
claims and encumbrances; and on such closing date delivery of the Winners
shares will be made to the Designer stockholders as above set forth.
Delivery by the Designer stockholders will be made to the agent for
Winners at such place in or about Fort Lauderdale, Florida, or at such other
place as may be determined by the parties. Time is of the essence.
4. Representations of Designer Stockholders. Designer represents and
warrants as follows:
(a) As of the closing date the Designer stockholders will be the
sole owners of the shares of common stock of Winners for investment and not
with a view to the unlawful distribution thereof; and Designer acknowledges
that the certificates for the shares shall contain a restrictive legend
thereon, restricting sale, transfer or hypothecation thereof unless the
shares are the subject of an effective registration statement duly filed with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"), or the issuer is provided, with an opinion of counsel,
satisfactory to it, that registration is not required under the Act.
(b) As of the closing date the Designer stockholders will be the
sole owners of the shares of Designer appearing of record in their names;
such shares will be free from claims, liens, or other encumbrances and such
shareholders will have the unqualified right to transfer such shares.
(c) The shares to be delivered by Designer stockholders to Winners
Constitute validly issued shares of Designer, fully paid and nonassable.
(d) The audited financial statements of Designer, as of December 31,
1996, which will be delivered to Winners prior to the closing date, are true
and complete statements of the financial condition of Designer as of that
date; there are no substantial liabilities, either fixed or contingent, not
reflected in such financial statements other than contracts or obligations in
the usual course of business; and no such contracts or obligations in the
usual course of business or liens or other liabilities which, if disclosed,
would alter substantially the financial condition of Designer as reflected in
such financial statements.
(e) Since December 31, 1996, there have not been, and prior to the
closing date there will not be, any material changes in the financial position
of Designer as reflected in such financial statements.
(f) Designer is not involved in any pending litigation or
governmental investigation or proceeding not reflected in such financial
statements or otherwise disclosed in writing to Winners and, to the knowledge
of Designer, no litigation or governmental investigation or proceeding is
threatened against Designer.
(g) As of the closing date, Designer will be in good standing as a
Florida corporation.
(h) Pursuant to Joint Venture with ROK International, Inc., for the
promotion of certain licensing right granted to ROK International, Inc. by the
Smith and Wesson Corporation and subject to the Closing hereof, Designer has
the intent to acquire all of the outstanding shares of ROK International, Inc.
5. Representations of Acquiring Corporation. Winners represents and
warrants as follows:
(a) As of the closing date, the Winners shares to be delivered to
the Designer stockholders will constitute the valid and legally issued shares
of Winners, fully paid and nonassessable, and will be legally equivalent in
all respects to the common stock of Winners issued and outstanding of the date
hereof.
(b) The officers of Winners are duly authorized to execute this
agreement pursuant to authorization of its Board of Directors, a certified
copy of the resolution of which will be provided to Designer at closing.
(c) Since December 31, 1996, is a true and complete statement, as
of that date, of its financial condition, and its Statement of Earnings for
the period ending December 31, 1996, a copy of which has been provided to
Designer, fairly presents the results of its operations for such period;
there are no liabilities, either fixed or contingent, not reflected in such
financial statements and no liens or other liabilties which, if disclosed,
would alter substantially the financial condition of Winners as reflected in
such financial statements.
(d) Since December 31, 1996, there have not been, and prior to the
closing date there will not be, any material changes in the financial position
of Winners as reflected in such financial statements.
(e) Winners is not involved in any pending litigation or
governmental investigation of proceeding not reflected in such financial
statements or otherwise disclosed in writing to the Stockholders.
(f) As of the closing date, Winners will be in good standing as a
Delaware corporation.
(g) The shares of Designer are being acquired by Winners as an
investment.
6. Conditions of Closing.
(a) The closing date herein referred to shall be on or prior to
June 7, 1997, or such other date as the parties hereto may mutually agree
upon.
(b) All representations and covenants herein made shall survive the
closing.
(c) At the closing the Designer stockholders shall designate,
nominate, constitute, and appoint Samuel J. Simon and Alfred V. Greco, P.C.,
and each of them, as their agents and attorneys in fact to accept delivery of
the certificates of Winners stock to be issued in their respective names, and
to give a good and sufficient receipt and acquittance for the same, and in
connection therewith to make delivery of their stock in Designer to Winners.
(d) The obligations of Winners hereunder are not conditioned upon
its obtaining a permit from any regulatory authority for the issuance of its
common stock to Designer stockholders as hereinabove provided.
(e) The obligations of both Designer and Winners are not
conditioned upon the receipt of a favorable tax ruling regarding the tax free
character of the reorganization under I.R.C. section 368(a)(1)(B).
7. Prohibited Acts. Designer agrees not to do any of the following things
prior to the closing date, and subject to their approval. Will cause the
Designer stockholders to agree that prior to the closing date they will not
request or to the extent practicable, permit Designer to do any of the
following things:
(a) Declare or pay any dividends or other distributions on its
stock or purchase or redeem any of its stock.
(b) Issue any stock or other securities increasing the total number
of shares outstanding (in excess of 2,150,000 shares), including any right or
option to purchase or otherwise acquire any of its stock, or issue any notes
or other evidences of indebtedness not in the usual course of business;
(c) Make capital expenditures in excess of an aggregate of $25,000
except with the consent of Winners.
8. Delivery of Records. The Stockholders agree that on or before the
closing date they will cause to be delivered to Winners such corporate records
or other documents of Designer as Winners may reasonably request.
9. Assignment. This Agreement may not be assigned by any party without
the written consent of the other party hereto.
10. Notices. Any notice which any of the parties hereto may desire to
serve upon any of the other parties hereto shall be in writing and shall be
conclusively deemed to have been received by the party to whom addressed, if
mailed, postage prepaid, United States Registered Mail, to the following
addresses:
Winners All International, Inc. Designer Wear, Inc.
Attn: Edgar M. Reynolds - President Attn: Howard Weiser - President
600 NW 44th Street, #2H 3745 Sheridan Street, Suite 301
Fort Lauderdale, FL 33309 Hollywood, FL 33021
Executed in multiple counterparts, each of which shall be deemed a
duplicate original, as of the date first above written.
Corporate Seal WINNERS ALL INTERNATIONAL, INC.
Attest:
/s/ by /s/ Edgar M. Reynolds
- ------------------------ ------------------------
Witness: President
Corporate Seal DESIGNER WEAR, INC.
Attest:
/s/ by /s/ Howard Weiser
- ------------------------ ------------------------
Witness: President
EXHIBIT 3
---------
ACQUISITION AGREEMENT
Agreement dated a of July 18, 1997 between Designer Wear, Inc., a
Florida corporation ('DWI"), ROK International, Inc., a Florida corporation,
("ROK"), the Estate of Timothy Van Der Molen ("Estate"), Harold Van Der Molen
("HVM"), Laurence Sack ("Sack"), and Winners All International, Inc., a
Delaware corporation ("WINA").
RECITALS
A. DWI is desirous of acquiring ownership of ROK for the purpose
of facilitating the promotion, development, and marketing of Smith & Wesson
trademarks.
B. ROK has a certain Licensing Agreement dated March 1, 1996
("Licensing Agreement"), between ROK and Smith & Wesson Corporation ("Smith &
Wesson").
C. Sack and the Estate (jointly hereinafter referred to as ROK
Shareholders) desire to exchange their interests in ROK for shares of WINA.
D. The Smith and Wesson Corporation has consented to the deemed
transfer of the License Agreement which will occur upon the transfer of voting
control of ROK to DWI.
E. WINA, a publicly traded company, is the parent company of
DWI, owning 99.953% percent of DWI common stock, and WINA is desirous of
facilitating DWI's acquisition and ownership of ROK solely through the use of
its common stock.
The parties agree as follows:
1. Plan Reorganization. All of the issued and outstanding capital stock
of ROK, consisting of 400 shares of common stock, with a par value of $10.00
per share, shall be acquired by DWI in exchange solely for shares of WINA,
with a par value of $.01.
2. Exchange of Shares. DWI agrees that all of the outstanding shares of
ROK, shall be exchanged for 1,2000,000 shares of common stock of WINA. Subject
to approval of ROK shareholders and the opinion of counsel, such shares shall
be issued to the respective stockholders of ROK or pursuant to their
instructions at Closing.
3. Delivery of Shares. Subject to the approval of the ROK Shareholders,
on the closing date, the ROK stockholders will deliver or instruct the
appropriate escrow agent to deliver into escrow, certificates for the shares
of ROK Shareholders duly endorsed with signatures guaranteed so as to make
WINA the sole owner thereof, free and clear of all claims and encumbrances;
and on such Closing Date delivery by the ROK Shareholders will be made if
necessary to Clark and Scholnik for WINA or DWI at such place in or about
Fort Lauderdale, Florida, or at such other place as may be determined by the
parties.
4. Employment Agreement for Laurence Sack. DWI acknowledges that Sack
has an existing employment agreement with ROK dated March 15, 1996 and agrees
that the terms of said employment agreement shall remain in effect after the
Closing Date subject to the amendment of its terms and conditions as follows:
(a) Section 2(a)(4) is deleted in its entirety and any references
made to it in the remainder of the employment agreement are void.
(b) Section 2(a)(5), including its subparts, is deleted in its
entirety and any references made to it in the remainder of the employment
agreement are void.
(c) Section 2(h) is deleted in its entirety and any references
made to it in the remainder of the employment agreement are void.
(d) Section 3(a) is amended to permit Sack's "Base Salary" to be
$96,000 per annum payable on a semi-monthly basis.
(e) The last sentence in Section 3(a) is deleted in its entirety.
(f) Section 5 shall be deemed to apply to any stock which Sack
received in exchange for his shares in ROK pursuant to this Agreement and DWI
agrees to the purchase of Sack's shares pursuant thereto.
5. DWI Board of Directors. DWI agrees to undertake all appropriate action
so that persons designated by ROK shareholders shall occupy two (2) positions
on DWI's five (5) member Board of Directors, subject to approval of the
designees by the Board of Directors of DWI, which shall not be unreasonably
withheld. DWI hereby approves the nomination and appointment of Sack for one
of the two positions on its Board of Directors. DWI, ROK and Sack agree that
a person mutually agreed upon by the parties to this Agreement shall be hired
as Chief Executive Officer of DWI.
6. Loans. Upon the terms and conditions stated in this Section, DWI shall
contribute funds to ROK.
(a) Advances Prior to Acquisition Agreement. Prior to this
Agreement being executed, DWI advanced and ROK acknowledges receipt of, loans
amounting to two hundred and eighty thousand two hundred and ten dollars and
sixty two cents ($280,210.62).
(b) Advances Due and Agreed to Prior to Acquisition Agreement.
Prior to this Agreement being executed, DWI obligated itself to provide
advances for an additional one hundred and thirty one thousand one hundred and
three dollars and sixty five cents ($131,103.65), more or less to ROK for
ordinary operating expenses ("Advances"). DWI hereby agrees to make such
Advances to ROK in a timely manner in accordance with ROK's cash flow needs
represented by the Cash Requirements Report attached hereto as Schedule 1 and
incorporated herein in full by this reference. Payment of the Advances
described in Schedule 1 is a condition precedent to the Closing of this
Agreement.
(c) Additional Advances. After the Closing Date, DWI agrees to
advance an additional amount to ROK, not to exceed $750,000.00 ("Additional
Advances") in accordance with ROK's reasonable cash flow needs on a semi-
monthly basis submitted to DWI, subject to the following requirements:
(i) DWI agrees to advance three hundred thousand dollars
($300,000) within six (6) months after the Closing Date as a condition
subsequent ("Condition Subsequent").
(ii) In addition to the amount in Section 6(c) (i), DWI
agrees to advance an additional four hundred and fifty thousand dollars
($450,000) within twelve (12) months after the Closing Date.
These Additional Advances shall be made as necessary to
supplement ROK's cash flow from operations in order to provide adequate and
timely working capital for ROK's operations during the applicable period.
(d) Harold Van Der Molen. ROK shall pay to HVM, the sum of twenty
three thousand five hundred and sixty dollars ($23,560.00), prior to the
Closing Date of this Agreement from funds received from DWI.
7. Guarantees.
(a) The Estate of Timothy Van Der Molen. DWI acknowledges that
ROK owes the Estate of Timothy Van Der Molen ("Estate") five hundred and
seventy two thousand two hundred and forty eight dollars ($572,248) more
or less for funds advanced to ROK during its startup period. DWI agrees to
guarantee the payment and performance without the necessity of presentment or
demand by the Estate, or ROK's obligation to the Estate, which is agreed by
all parties to be as follows:
(i) Repayment of thirty four thousand dollars ($34,000) prior
to the Closing Date.
(ii) Payment of five hundred and thirty eight thousand two
hundred and forty eight dollars ($538,248) within twelve (12) months after the
Closing Date of the Agreement.
(b) Harold Van Der Molen. DWI acknowledges that ROK owes Harold Van
Der Molen one hundred and seventy dollars ($108,670) more or less. DWI agrees
to guarantee the payment and performance without the necessity of presentment
or demand by HVM, or ROK's obligation to HVM which is agreed by all parties to
be as follows: the repayment of twenty three thousand five hundred and sixty
dollars ($23,560) pursuant to Section 6(d) and eighty five thousand one
hundred and ten dollars ($85,110) within twelve (12) months after the Closing
Date of this Agreement.
8. Repayment of Advances. Should this Agreement not close or be terminated
from the nonfulfilment of a condition subsequent, ROK agrees to repay the
advances described in Sections 6 and 7, in the manner set forth below:
(a) Fixed Principal and Interest Payments. ROK agrees to repay any
and all advances in a three (3) year time period with a five (5) year
amortization rate, payment to commence upon the mutual agreement between the
parties.
(b) Interest Rate Calculation. The interest rate for advances shall
be Prime plus one percent (1%), where Prime means the prime rate of interest,
announced by Citicorp Bank, for loans to its commercial customers. The date
for calculation of the interest shall be the date of each advance made to or
on behalf of ROK.
(c) Contributions to ROK's Capital. Except as provided hereinabove,
after the Closing Date, as provided for herein, ROK shall have the obligation
and DWI shall release ROK from any obligation to repay fifty percent (50%) of
the advances described in Sections 6(a), 6(b), 6(d) and 7(a)(i). The fifty
percent shall be deemed as contributions to ROK's capital.
9. Representations of ROK Shareholders. ROK and the ROK Shareholders
represent and warrants as follows:
(a) That the shares shall be acquired by ROK stockholders for their
own beneficial account as an investment.
(b) As of the Closing Date the ROK Shareholders will be the sole
owners of the shares of ROK appearing of record in their names; such shares
will be free from claims, liens, or other encumbrances, except for the
provisions of the Escrow Agreement between DWI and the TOK Shareholders,
dated November 14, 1996.
(c) The shares to be delivered by the ROK Shareholders to DWI
constitute all the validly issued shares of ROK, fully paid and nonassessable.
(d) The unaudited financial statements of ROK, as of December 31,
1996, which will be delivered to DWI prior to the Closing Date, are true and
complete statements of the financial condition of ROK as reflected in such
financial statements.
(e) Since December 31, 1996 there have not been, and prior to the
Closing Date there will not be, any material changes in the financial position
of ROK as reflected in such financial statements.
(f) ROK is not involved in any pending litigation or governmental
investigation or proceeding not reflected in such financial statements or
otherwise disclosed in writing to DWI and to the knowledge of ROK, no
litigation or governmental investigation or proceeding is threatened against
ROK, except for a judgement payable to Spurlock, Inc. in the amount of twenty
four thousand dollars ($24,000.00) which judgement is to be paid by order of
the court in payments of eight thousand dollars ($8,000.00) each due on July
1, August 1, and September 1, 1997.
(g) As of the closing date, ROK will be in good standing as a Florida
corporation.
10. Representations of Acquiring Corporation. DWI, and WINA where
appropriate, represents and warrants as follows:
(a) As of the closing date, the WINA shares to be delivered to the
ROK Shareholders will constitute the valid and legally issued shares of WINA,
fully paid and a nonassessable, and will be legally equivalent in all respects
to the common stock of WINA issued and outstanding as of the date hereof.
(b) The officers of DWI and WINA are duly authorized to execute this
Agreement pursuant to authorization of their Boards of Directors, a certified
copy of the resolution of which will be provided to ROK and the ROK
Shareholders at Closing.
(c) DWI's audited balance sheet as of December 31, 1996, is a true
and complete statement, as of the date, of its financial condition, and its
Statement of Earnings for the period ending December 31, 1996, a copy of which
has been provided to ROK, fairly presents the results of its operation such
period; there are no liabilities, either fixed or contingent, not reflected in
such financial statements and no liens or other liabilities which, if
disclosed, would alter substantially the financial condition of DWI as
reflected in such financial statements.
(d) Since December 31, 1996, there have not been, and prior to the
closing date there will not be, any material changes in the financial position
of DWI, except changes arising in the ordinary course of business.
(e) DWI is not involved in any pending litigation or governmental
investigation or proceeding not reflected in such financial statements or
otherwise disclosed in writing to the ROK Shareholders involving federal
securities laws.
(f) WINA is not involved in any pending litigation or governmental
investigation or proceeding not reflected in its most recent public filings
involving federal securities laws.
(g) As of the closing date, DWI and WINA will be in good standing as
Florida and Delaware corporations respectively.
(h) The shares of ROK are being acquired by DWI as an investment.
11. Conditions of Closing.
(a) The Closing Date herein referred to shall be on or prior to
August 15, 1997, or such other date as the parties hereto may mutually agree
upon.
(b) All representations and covenants herein made shall survive the
Closing.
(c) Closing of Escrow.
(i) At the Closing, the ROK Shareholders shall designate,
nominate, constitute, and instruct the Escrow Agent under that certain Escrow
Agreement between DWI, ROK AND Clark & Scholnik date November 14, 1996
including any amendments thereto, to exchange and release the escrow property
the subject matter thereof in accordance with the instructions of DWI and the
ROK Shareholders set forth below. The escrow property consists of two
certificates for 1,200,0000 shares of common stock of WINA, with one share
certificate for 600,000 shares made out to the Estate of Timothy L. Van Der
Molen, and four certificates totaling 400 shares of common stock of ROK with
200 shares in the name of Laurence Sack and 200 shares in the name of Tim Van
Der Molen.
(ii) The Escrow Agent shall be instructed to retain
possession of the Escrow Property pursuant to satisfaction of the Condition
Subsequent in Section 6(c)(i). After the Closing, the ROK Shareholders shall
be deemed owners of the WINA shares held in escrow and, furthermore, WINA
shall be deemed the owners of ROK's shares held in escrow.
(iii) Upon DWI's satisfaction of Section 6(c)(i), DWI and
ROK shall instruct the Escrow Agent to exchange the Escrow Property, whereas
DWI will take possession of the four certificates amounting to 400 shares of
common stock of ROK, and Laurence Sack and the Estate of Timothy L. Van Der
Molen, respectfully, will take possession of the two certificates amounting to
1,200,000 shares of common stock of WINA, and close the escrow.
(d) The payment by DWI as original obligor or guarantor of the sums
in Sections 6(b), 6(d) and 7(a)(i) is a condition precedent to the Closing of
this Agreement.
(e) The obligations of DWI hereunder are not conditioned upon its
obtaining a permit from any regulatory authority for the issuance of its
common stock to ROK stockholders as hereinabove provided.
(f) The parties intend for this transaction to be a tax free
reorganization under I.R.C. section 368(a)(1)B. However, the obligations of
both ROK and DWI are not conditioned upon the receipt of a favorable tax ruling
regarding the tax free character of the reorganization under I.R.C.
section 368(a)(1)B.
12. Prohibited Acts. ROK agrees not to do any of the following things
prior to the Closing Date, and subject to their approval, will cause the ROK
Shareholders to agree that prior to the Closing Date they will not request or
to the extent practicable, permit ROK to do any of the following thing:
(a) Declare or pay any dividends or other distributions on its stock
or purchase or redeem any of it stock; or purchase or redeem any of its
stock;
(b) Issue any stock or other securities increasing the total number
of shares outstanding (in excess of 400 shares), including any right or option
to purchase or otherwise acquire any of its stock, or issue any notes or other
evidences of indebtedness not in the usual course of business;
(c) Make capital expenditures or other commitments in excess of an
aggregate of twenty five thousand dollars ($25,000) except with the consent of
DWI.
14. Termination of Agreement.
(a) Prior to Closing. If any duties, obligations, covenants,
agreements or conditions of the parties hereto, which are of material
significance and contemplated by this Agreement to occur or to be performed
before the Closing Date, shall have not taken place before that date, or if
the conditions precedent, contemplated by this Agreement to be satisfied
before the Closing Date, shall not have been satisfied or waived by the proper
party before that date, this Agreement shall be terminated and of no further
force or effect, and the parties shall be relieved of all obligations under
the terms of this Agreement.
(b) After the Closing Date. If DWI's obligation under Section
6(c)(i) is not timely performed or satisfied in accordance with that Section
6(c)(i), or waived by the proper party, this Agreement shall be terminated and
of no further force or effect, and the parties shall be relieved of all
further obligations under the terms of this Agreement.
(c) Return of Documents Upon Termination. In the event of the
termination of this Agreement, the parties shall bear their own expenses
incurred pursuant to this Agreement, and each of the parties shall return all
documents, instruments, and commercial paper transferred pursuant to the terms
of this Agreement, unless otherwise provided in this Agreement or as mutually
agreed between the respective parties to this Agreement, to the owner of, or
the party who originally submitted, such documents, instruments, or commercial
paper.
15. Post Closing Corporate Structure. The parties agree that ROK shall be
maintained as and operated as a wholly owned subsidiary of DWI for a thirteen
month period following the Closing of this Agreement, and that no action shall
be taken to merge, consolidate, liquidate, dissolve or in any other manner,
transfer any of ROK's business assets and operations, including but not
limited to the License Agreement to any other entity or person, or to
terminate ROK's charter as a separate legal entity, unless mutually agreed by
the parties.
16. Delivery of Records. The Stockholders agree that on or before the
Closing Date they will cause to be delivered to DWI such corporate records or
other documents of ROK as DWI may reasonably request.
17. Assignment. This Agreement may not be assigned by any party without
the written consents of the other party hereto.
18. Notices. Any notice which any of the parties hereto may desire to
serve upon any of the other parties hereto shall be deemed duly made if in
writing and delivered in person, by facsimile or regular mail, postage prepaid
to the following addresses or such other address which is provided to the
parties hereto in accordance with this paragraph.
Designer Wear, Inc. ROK International, Inc.
Michael T. Adams, Vice President Laurence Sack-President
3745 Sheridan Street, Suite 301 600 NW 44th Street. #2H
Hollywood, FL 33021 Fort Lauderdale, Florida 33309
Estate of Timothy Van Der Molen Harold Van Der Molen
121 West Farnham 121 West Farnham
Wheaton, Illinois 60187 Wheaton, Illinois 60187
Laurence Sack Winners All International, Inc.
1761 NW 97th Avenue Edgar M. Reynolds - President
Plantation, FL 33322 3475 Sheridan Street, Suite 301
Hollywood, FL 33021
19. Law Governing. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
20. Entire Agreement. This Agreement contains the entire understanding
between and among the parties hereto and specifically supersedes the Restated
Letter of Intent dated December 20, 1996, Escrow Agreement dated November 14,
1996 and Joint Venture Financing Agreement dated December 20, 1996 and any
prior understandings and agreements among them respecting the subject matter
of this Agreement.
21. Captions. The headings of the Sections of this Agreement are for
reference only and shall not constitute a part hereof.
22. Savings Clause. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
23. Attorney Fees. In the event a suit or action is brought by any party
under this Agreement to enforce any of its terms, or in any appeal therefrom,
it is agreed that the prevailing party shall be entitled to reasonable
attorney's fees to be fixed by the trial court, and /or appellate court.
24. Time is of the Essence. Time is of the essence with regard to each
party's performance of their obligations and duties under this Agreement.
25. Waiver as Effecting Future Performance. No waiver of any breach of
this Agreement shall be held to be a waiver of any other or subsequent breach.
All remedies afforded in this Agreement shall be taken and construed as
cumulative, that is, in addition to every other remedy provided herein or by
law.
26. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties their successors, and assigns.
27. Arbitration. Any disputes or controversies arising under this
Agreement shall be determined by a board or arbitration composed of qualified
arbitrators sitting in Broward County, Florida, selected as mutually agreed by
the parties to this Agreement, and such dispute or controversy shall be judged
pursuant to the rules and procedures of the arbitration board of the American
Association of Arbitrators, and the findings of such board shall be final and
binding on all parties to this Agreement. The arbitrators sitting in any
arbitration arising under and pursuant to this Agreement shall not have the
authority or power to modify or alter any express condition or provision of
this Agreement or to render an award that by its terms has the effect of
altering or modifying any express condition provision of this Agreement.
28. Facsimile Signature. A facsimile signature shall be treated as an
original signature and is valid and binding under the law.
Executed in multiple counterparts, each of which shall be deemed a
duplicate original, as of the date first above written.
Attest: DESIGNER WEAR, INC.
/s/ Doris Nigro by /s/ Michael T. Adams
- ------------------------ --------------------------
Witness: Michael T. Adams, Vice President
Attest: ROK INTERNATIONAL, INC.
/s/ Doris Nigro by /s/ Laurence Sack
- ------------------------ ----------------------------
Witness: Laurence Sack, President
Attest: ESTATE OF TIMOTHY VAN DER MOLEN
/s/ Harold Van Der Molen by /s/ Eunice Van Der Molen
- ------------------------ ----------------------------
Witness: Eunice Van Der Molen, Executrix
Attest: HAROLD VAN DER MOLEN
/s/ Eunice Van Der Molen by /s/ Harold Van Der Molen
- ------------------------ ----------------------------
Witness: Harold Van Der Molen
Attest: LAURENCE SACK
/s/ Doris Nigro by /s/ Laurence Sack
- ------------------------ ----------------------------
Witness: Laurence Sack
Attest: WINNERS ALL INTERNATIONAL, INC.
/s/ Doris Nigro by /s/ Edgar M. Reynolds
- ------------------------ ----------------------------
Witness: Edgar M. Reynolds, President
SCHEDULE 1
(Listing of Bills Owed - Omitted for Immateriality Reasons)
EXHIBIT 4
---------
AMENDMENT TO THE
ACQUISITION AGREEMENT
DATED JULY 18, 1997
THIS AMENDMENT, by and between Designer Wear, Inc. ("DWI"), ROK
International, Inc. ("ROK"), the Estate of Timothy Van Der Molen ("Estate"),
Harold Van Der Molen ("HVM"), Laurence Sack ("Sack"), and Winners All
International, Inc. ("WINA"), shall be as follows:
1. Section 4(g) is hereby added to this Agreement thereby creating
Section 3 b) (1) in the Employment Agreement of Sack whereby:
"(i) Employee shall receive a bonus for license and/or
sublicense agreements negotiated and executed for or on behalf of ROK by
Employee. The bonus shall be one half percent (1/2 %) of the net proceeds
received from royalties, fees, and/or commissions."
2. Section 6(b) is amended, in its entirety, whereby:
"(b) Advances Due. Prior to this Agreement being executed, DWI
was obligated to provide advances for an additional one hundred and thirty-one
thousand, one hundred and three dollars and sixty-five cents ($131,103.65),
more or less, to ROK for ordinary operating expenses, and subsequently became
obligated to provide advances for an additional eighteen thousand eight
hundred and ninety six dollars and thirty five cents ($18,896.35)
("Advances"). DWI hereby agrees to make such advances according to the
following payment schedule listed below to ROK:
(i) Payment of fifty thousand dollars ($50,000) on or
before September 12, 1997;
(ii) Payment of twenty five thousand dollars ($25,000) on
or before September 19, 1997; and
(iii) Payment of seventy five thousand dollars ($75,000)
on or before October 20, 1997."
3. Section 6(c)(i) is amended, in its entirety, whereby:
"(i) DWI agrees to advance three hundred thousand dollars
($300,000) by December 31, 1997 as a condition subsequent ("condition
Subsequent"). The closing of the escrow shall take place upon the
satisfaction of this Condition Subsequent pursuant to Section 11(c)(iii)."
4. Section 6(d) is amended, in its entirety, whereby:
"(d) Harold Van Der Molen. ROK shall pay to HVM, one hundred
and fifteen thousand dollars ($115,000) more or less, from the funds received
from DWI under Section (6)(c)(i), as amended."
5. Section 6(e) is hereby added whereby:
"(e) The Estate of Timothy Van Der Molen. ROK shall pay to
the Estate, thirty four thousand six hundred and fifty dollars ($34,650) from
the funds received from DWI under Section 6, as amended."
6. Section 7(a)(i) is amended, in its entirety, whereby:
"(i) Repayment of thirty four thousand six hundred and fifty
dollars ($34,650) pursuant to Section 6(e) of this Amendment."
7. Section 8(a)(ii) is amended, in its entirety, whereby:
"(ii) Payment of five hundred thirty seven thousand five
hundred and ninety eight dollars ($537,598) within twelve months after the
Closing Date of this Agreement."
8. Section 7(b) is amended, in its entirety, whereby:
"(b) DWI acknowledges that ROK owes Harold Van Der Molen one
hundred and fifteen thousand dollars ($115,000), more or less. DWI agrees to
guarantee the payment and performance without the necessity of presentment or
demand by HVM, of ROK's obligation to HVM, pursuant to Section 6(d), as
amended."
9. Section 11(a) is amended, in its entirety, whereby:
"(a) The Closing Date hereby referred to shall be on or prior
to October 20, 1997, or such other date as the parties hereto may mutually
agree upon."
10. If any provision of this Agreement, or the application of such
provision to any person or circumstance, shall be held invalid, the remainder
of this Amendment, or the application of such provision to persons or
circumstances other than those as to which it is held invalid, shall not be
affected thereby.
11. A facsimile signature shall be treated as an original signature
and is valid and binding under the law.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
the day and year first written above.
Attest: DESIGNER WEAR, INC.
/s/ Samuel J. Simon By /s/ Michael T. Adams
- ------------------------ --------------------------
Witness: Michael T. Adams, Vice President
Attest: ROK INTERNATIONAL, INC.
/s/ Samuel J. Simon By /s/ Laurence Sack
- ------------------------ ----------------------------
Witness: Laurence Sack, President
Attest: ESTATE OF TIMOTHY VAN DER MOLEN
/s/ Everat Van Der Molen By /s/ Eunice Van Der Molen
- ------------------------ ----------------------------
Witness: Eunice Van Der Molen, Executrix
Attest: HAROLD VAN DER MOLEN
/s/ Everat Van Der Molen By /s/ Harold Van Der Molen
- ------------------------ ----------------------------
Witness: Harold Van Der Molen
Attest: LAURENCE SACK
/s/ Samuel J. Simon By /s/ Laurence Sack
- ------------------------ ----------------------------
Witness: Laurence Sack
Attest: WINNERS ALL INTERNATIONAL, INC.
/s/ Michael T. Adams By /s/ Edgar M. Reynolds
- ------------------------ ----------------------------
Witness: Edgar M. Reynolds, President
EXHIBIT 5
---------
SECOND AMENDMENT TO THE
ACQUISITION AGREEMENT
DATED JULY 18, 1997
THIS SECOND AMENDMENT, by and between Designer Wear, Inc. ("DWI"), ROK
International, Inc. ("ROK"), the Estate of Timothy Van Der Molen ("Estate"),
the Estate of Harold Van Der Molen ("HVM"), Laurence Sack ("Sack"), and
Winners All International, Inc. ("WINA"), shall be as follows:
1. Section 4(g) is hereby added to this Agreement thereby creating
Section 3 b) (1) in the Employment Agreement of Sack whereby:
"(i) Employee shall receive a bonus for license and/or
sublicense agreement negotiated and executed for or on behalf of ROK by
Employee. The bonus shall be one half percent (1/2 %) of the net proceeds
received from royalties, fees, and/or commissions."
2. Section 6(a) is amended to reflect advances of three hundred and
forty three thousand eight hundred and one dollars and thirteen cents
($343,801.13).
3. Section 6(b) is amended, in its entirety, whereby:
"(b) After the Closing Date, DWI agrees to advance an additional
amount to ROK, not to exceed eight hundred and seventy seven thousand six
hundred and fifty four dollars and seventy seven cents ($877,654.77)
("Additional Advances") in accordance with ROK's reasonable cash flow needs on
a semi-monthly basis submitted to DWI, subject to the following requirements:
(i) DWI agrees to advance eighty thousand dollars
($80,000.00) to ROK no later than October 22, 1997, as a condition subsequent
("condition Subsequent").
(ii) DWI agrees to advance three hundred and forty
seventh thousand six hundred and fifty four dollars and seventy seven cents
($347,654.77) to ROK no later than December 31, 1997, as a Condition
Subsequent.
(iii) In addition to the amounts set forth above in
sections 6(b)(i) and (ii), DWI agrees to advance an additional four hundred
and fifty thousand dollars (450,000.00) to ROK within twelve months after the
Closing Date."
4. Section 6(c) is amended, in its entirety, whereby:
"(c) The Estate of Harold Van Der Molen. ROK shall pay to
HVM, one hundred and fifteen thousand dollars ($115,000.00) more or less, from
the funds received from DWI under Section 6, as amended."
5. Section 6(d) is amended, in its entirety, whereby:
"(d) The Estate of Timothy Van Der Molen. ROK shall pay to
the Estate, thirty four thousand six hundred and fifty dollars ($34,650.00)
from the funds received from DWI under Section 6, as amended."
6. Section 6(e), as amended, is hereby deleted in its entirety.
7. Section 7(a)(i) is amended, in its entirety, whereby:
"(i) Repayment of thirty four thousand six hundred and fifty
dollars ($34,650.00) pursuant to Section 6(d) of this Amendment."
8. Section 7(a)(ii) is amended, in its entirety, whereby:
"(ii) Payment of five hundred thirty seven thousand five
hundred and ninety eight dollars ($537,598.00) within twelve months after the
Closing Date of this Agreement."
9. Section 7 (b) is amended, in its entirety, whereby:
"(b) DWI acknowledges that ROK owes Harold Van Der Molen one
hundred and fifteen thousand \dollars ($ll5,000.00), more or less. DWI agrees
to guarantee the payment and performance without the necessity of presentment
or demand by HVM, of ROK's obligation to HVM, pursuant to Section 6(c), as
amended."
10. Section 11(a) is amended, in its entirety, whereby:
"(a) The Closing Date hereby referred to shall be on or prior
to October 8, 1997, or such other date as the parties hereto may mutually
agree upon."
11. Section 11(c)(ii) is amended, in its entirety, whereby:
"(c)(ii) Upon the Closing of this Agreement, the Escrow Agent
shall be instructed by DWI and ROK to exchange the Escrow Property, whereas
DWI will be the beneficial owner of the four certificates amounting to 400
shares of common stock of ROK, and Laurence Sack and the Estate of Timothy L.
Van Der Molen, respectfully, will be the beneficial owners of the two
certificates amounting to 1,200,000 shares of common stock of WINA. Upon
satisfaction of the Conditions Subsequent of this Agreement, as amended, the
Escrow Agent will be instructed to deliver the shares to the respective
parties and close the escrow."
12. Section 11(d) is hereby deleted in its entirety.
13. Section 14(b) is amended, in its entirety, whereby:
"(b) Condition Subsequent. If DWI's obligations under
Sections 6(b)(i) and 6(b)(ii) are not timely performed or satisfied in
accordance with their express terms, or modified or waived by the property
party, this Agreement shall be terminated and of no further force or effect,
and the parties shall be relieved of all further obligations under the terms
of this Agreement."
14. Section 14(c) is amended, in its entirety, whereby:
"(c) Procedure Upon Termination. Upon termination of this
Agreement, amended, the parties shall bear their own expenses incurred
pursuant to this Agreement, and each of the parties shall take whatever
further actions are required to effect such termination, including, but not
limited to, instructing the Escrow Agent to return the shares in escrow to
each of the respective parties, and returning all documents, instruments, and
commercial paper transferred pursuant to the terms of this Agreement, unless
otherwise provided in this Agreement or as mutually agreed between the
respective parties to this Agreement, to the owner of, or the party who
originally submitted, such documents, instruments, or commercial paper."
15. Separability. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Amendment, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
16. Facsimile Signature. A facsimile signature shall be treated as
an original for the purposes of execution of this Agreement and is valid and
binding under the law.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
the day and year first written above.
Attest: DESIGNER WEAR, INC.
/ / By /s/ Michael T. Adams
- ------------------------ --------------------------
Witness: Michael T. Adams, Vice President
Attest: ROK INTERNATIONAL, INC.
/ / By /s/ Laurence Sack
- ------------------------ ----------------------------
Witness: Laurence Sack, President
Attest: ESTATE OF TIMOTHY VAN DER MOLEN
/ / By /s/ Eunice Van Der Molen
- ------------------------ ----------------------------
Witness: Eunice Van Der Molen, Executrix
Attest: ESTATE OF HAROLD VAN DER MOLEN
/ / By /s/ Eunice Van Der Molen
- ------------------------ ----------------------------
Witness: Eunice Van Der Molen, Nominated Executrix
Attest: LAURENCE SACK
/ / By /s/ Laurence Sack
- ------------------------ ----------------------------
Witness: Laurence Sack
Attest: WINNERS ALL INTERNATIONAL, INC.
/ / By /s/ Howard Weiser
- ------------------------ ----------------------------
Witness: Howard Weiser, President
EXHIBIT 6
---------
THIRD AMENDMENT TO THE
ACQUISITION AGREEMENT
DATED JULY 18, 1997
THIS THIRD AMENDMENT, by and between Designer Wear, Inc. ("DWI"), ROK
International, Inc. ("ROK"), the Estate of Timothy Van Der Molen ("Estate"),
THE Estate of Harold Van Der Molen ("HVM"), Eunice Van Der Molen ("EVM"),
Laurence Sack ("Sack"), and Winners All International, Inc. ("WINA"), shall be
as follows:
PREAMBLE
WHEREAS, the undersigned parties and represenative of parties entered into
an Acquisition Agreement, dated July 18, 1997 ("Agreement"), pursuant to
which DWI was to acquire ROK as its wholly-owned subsidiary, and amended such
Agreement in written amendments on September 5, 1997 and October 7, 1997, and
WHEREAS, the Closing Date under such Agreement, as amended, was October
8, 1997, and
WHEREAS, all parties acknowledge that the closing was deemed by them to
have occurred on October 8, 1997, and that the conditions subsequent to the
closing, as specified in the Agreement, as amended, have now been fully
satisfied; and
WHEREAS, the parties desire to amend such portions of the Agreement as
survived the closing and have continuing force and effect, and to make
provision for release of the stock shares held in escrow in accordance with
the terms of the Agreement, as amended; it is hereby
AGREED AND STIPULATED, by and between the undersigned, as follows:
1. The parties acknowledge a scriverner's error in the drafting of
Section 3 of the Agreement, as supported by the terms set forth in Recitals A,
D and E, Sections 1, 10(h), 11(c)(iii), and 11(f), and therefore, the parties
hereby agree to substitute "DWI": in place of "WINA" in the first sentence of
Section 3 and to take such further actions as necessary to effectuate said
correction, including but not limited to notification to the escrow agent,
prior to the certificates of the ROK shareholders being held in escrow being
released pursuant to Section 11(e)(ii) of this Amendment.
2. Section 4(d) is hereby amended, in its entirety, and shall read as
follows:
"Section 3(a) is amended to permit SACK's "Base Salary" to be
$80,000.00 per annum, effective January 1, 1998 and subject to review at the
end of the 1998 calendar year, payable on a semi-monthly basis."
3. Section 6 is hereby amended, in its entirety, and shall read as
follows:
"6. Financial Requirements. Upon the terms and conditions
described in this section, DWI and ROK agree as hereinafter provided.
(a) Working Capital. DWI agrees to use its best
efforts in supporting ROK's minimum operating capital needs, as necessary, for
a period of one year ROK acknowledges that no other financial obligations are
required by DWI, except as provided in this Section 6(a).
(b) Loans. As of the date of this Amendment, DWI
advanced and ROK acknowledges receipt of, loans amounting to four hundred
seventy nine thousand three hundred and ten dollars and ninety eight cents
($479,310.98), which ROK is obligated to repay to DWI, subject to and in
accordance with the provisions of Section 6.
(c) Capital Contributions. DWI agrees to make a
capital contribution to ROK by canceling and releasing ROK from any further
obligation of repayment for one hundred and forty three thousand six hundred
and fifty two dollars ($143,652.00) of the Loans advanced to ROK under Section
6(b).
(d) Repayment of Loans. ROK agrees to repay the Loans
advanced under Section 6(a) and any and all future loans from DWI, in a five
(5) year period with a five year amortization rate, with payment to commence
upon the mutual agreement of the parties.
(e) Interest Rate Calculation. The interest rate for
advances shall be rime plus one percent (1%), where Prime means the prime rate
of interest, announced by Citicorp Bank, for loans to its commercial
customers. The date for calculation of the interest shall be the date of each
advance made to or on behalf of ROK."
4. Section 7 is hereby amended, in its entirety, and shall read as
follows.
"7. Conversion of Debt for Equity. Upon the terms and
conditions described in this section, the parties agree as hereinafter
provided.
(a) The Estate of Timothy Van Der Molen. As of the
date of this Amendment, DWI acknowledges that ROK owes TVM four hundred
seventy two thousand two hundred and forty seven dollars and fifty seven cents
($472,274.57) more or less for funds advanced to ROK during its start-up
period. Further, DWI acknowledges that ROK is obligated to repay said amount
to TVM and DWI is a guarantor of ROK's obligation under this Agreement.
(b) The Estate of Harold Van Der Molen. As of the
date of this Amendment, DWI acknowledges that ROK owes HVM one Hundred fifteen
Thousand five hundred and eight dollars ($115,580.00) more or less for funds
advanced to ROK. Further, DWI acknowledges that ROK is obligated to repay
said amount to HVM and DWI is a guarantor of ROK's obligation under this
Agreement.
(c) Eunice Van Der Molen. As of the date of this
Amendment, DWI acknowledges that ROK owes EVM twenty thousand and thirty
dollars ($20,030.00) more or less for funds advanced to ROK. Further, DWI
acknowledges that ROK is obligated to repay said amount to HVM and DWI is a
guarantor of ROK's obligation under this Agreement.
(d) Conversion of Debt. TVM, HVM and EVM agree to
cancel repayment of the amounts owed in Sections 7(a), 7(b) and 7(c) by ROK
and release DWI as guarantor under Sections 7(a) and 7(b), in exchange for six
hundred thousand (600,000) shares of restriced common stock ("Securities") of
WINA. The Securities in this provision are separate, apart and additional to
the escrow property described in Section 11(c)(i).
(e) Acknowledgement. TVM, HVM and EVM have had access
to information concerning WINA in order to make a proper evaluation of this
investment. In making the decision to purchase the Securities pursuant to
Section 7(d), TVM, HVM and EVM and their advisors, if any, have relied solely
upon their own independent investigations, and fully understand that there are
no guarantees, assurances or promises in connection with any investment
hereunder and understand that the particular tax consequences arising from
this investment in WINA will depend upon the individual circumstances. TVM,
HVM and EVM further understand that no opinion is being given as to any
securities matters involved in this transaction.
(f) Securities. TVM, HVM and EVM understand and agree
that stop transfer instructions relating to the Securities will be placed in
WINA's stock transfer ledger, and that the certificates evidencing the
securities sold will bear legends in substantially the following form:
"The securities represented by this Certificate have
not been registered under the Securities Act of 1933
(the "Act"), as amended, and are "restricted securities"
as that term is defined in Rule 144, section (a)(3)
under the Act. The securities may not be offered for
sale, sold or otherwise transferred except pursuant to
an effective registration statement under the Act or
pursuant to an exemption from registration under the Act,
the availability of which is to be established to the
satisfaction of the Issuer."
(g) Distribution of Shares. The Securities in Section
7(d) shall be distributed on a proportionate basis in relation to the
individual debt of each respective party pursuant to Sections 7(a), 7(b) and
7(c). The Securities shall be issued within thirty (30) days from the date of
execution of this Amendment."
5. Section 8 is hereby deleted in its entirety.
6. Section 9(h) is hereby added and shall read as follows:
"(h) As of the execution of this Amendment, ROK, SACK,
TVM, and HVM acknowledge waiving the Section 14(b) requirement and any notice
provided to DWI pursuant to Section 14(b), was of no force or effect and
rescinded."
7. Section 11(c)(ii) is hereby amended, in its entirety, and shall
read as follows:
"(ii) Instructions to Escrow Agent. Upon the
execution of this Amendment, the Escrow Agent shall be instructed by DWI and
ROK to release the Escrow Property to each respective party and close the
escrow."
8. Section 14(b) is hereby waived by ROK, SACK, TVM, and HVM.
All other provisions of the Agreement, as amended, not amended herein,
remain in full force and effect.
If any provision of this Agreement, or the application of such provision
to any person or circumstance, shall be held invalid, the remainder of this
Amendment, or the application of such provision to persons or circumstances
other than those as to which it is held invalid, shall not be affected
thereby.
DESIGNER WEAR, INC. ROK INTERNATIONAL, INC.
By /s/ Samuel J. Simon By /s/ Laurence Sack
---------------------------- -------------------------------
Samuel J. Simon, President Laurence Sack, President
ESTATE OF TIMOTHY VAN DER MOLEN ESTATE OF HAROLD VAN DER MOLEN
By /s/ Eunice Van Der Molen By /s/ Eunice Van Der Molen
------------------------------- -------------------------------
Eunice Van Der Molen, Executrix Eunice Van Der Molen, Executrix
EUNICE VAN DER MOLEN LAURENCE SACK
By /s/ Eunice Van Der Molen By /s/ Laurence Sack
------------------------------- ----------------------------
Eunice Van Der Molen Laurence Sack
WINNERS ALL INTERNATIONAL, INC.
By /s/ Howard Weiser
- ----------------------------------
Howard Weiser, President
EXHIBIT 7
---------
SMITH & WESSON CORP.
TRADEMARK LICENSE AGREEMENT
This Agreement is effective as of March 1, 1996, by and between SMITH &
WESSON CORPORAITON, a Delaware Corporation with its principal office at 2100
Roosevelt Avenue, Springfield, Massachusetts 01102-2208 (hereinafter called
"Licensor"), and ROK INTERNATIONAL, INC., a Corporation, having its principal
office at 600 N W 44th Street, Suite 2H, Fort Lauderdale, Florida 33309
(hereinafter called "Licensee"). In consideration of the mutual promises
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Licensor and Licensee, the
parties agree as follows:
1. Definitions: As used in this Agreement, the following terms shall have
the following meanings.
a. "Marks" shall mean those trademarks and service marks
identified in Exhibit A, attached hereto, and all of Licensor's rights in such
Marks including, without limitation, common law rights, and registrations and
applications for registration of any such Marks in any state, federal, or
other jurisdiction.
b. "Licensed Articles" shall mean the articles of merchandise
listed in Exhibit B, attached hereto, and marked with one or more of the
Marks.
c. "Net Sales Price" shall be the invoiced price at which
Licensed Articles are sold by Licensee, less any sales tax, and less any
credits for returns actually made or allowed, provided that such returns
relate to sales which were previously included in royalty calculations under
this Agreement. The Net Sales Price on account of sales, giveaways,
promotions, or other transactions, without charge or at discounted prices, and
sales to any person directly or indirectly related to or affiliated with
Licensee shall be computed based on regular selling prices to the trade. There
shall be no deduction from the Net Sales Price on which royalties are due
hereunder for uncollectable accounts, advertising expenses, or other expenses
of any kind except those specifically identified in this Section.
d. "Territory" is the geographic area identified in Section 2(a)
of this Agreement.
e. "Minimum Guaranteed Royalties" shall have the meaning set
forth in Section 3(d) of this Agreement.
f. "Contract Year" and "First Contract Year" shall have the
meanings given those respective terms set for in Section 2(b) of this
Agreement.
2. Grant of License, Term Licensee's Duties
a. The Licensor hereby grants to Licensee the rights to license
the Marks for the manufacture, importation, and distribution of product
described in Exhibit B, on a worldwide basis. Licensee shall not use, or
permit the use of, the Marks on any other product or for any service, except
as specifically provided in this Agreement. Licensee shall take all steps and
timely notify Licensor of all steps as shall be necessary to protect
Licensor's trademark rights in such marks, and assure Licensor's exclusive
ownership, in such jurisdiction.
b. The term of this Agreement shall be for 3 years, 9 months,
commencing March 1, 1996, and ending December 31, 2000, at midnight Eastern
Standard Time, unless sooner terminated. Each period from January 1,
through December 31 during the term hereof is hereinafter referred to as a
"Contract Year", with the exception of the "First Contract Year", which shall
be for the period from the date hereof through December 31, 1996. This
Agreement shall be automatically extended for successive one-year periods
unless Licensor or Licensee gives the other party written notice of its
intention not to extend this Agreement, at least 90 days prior to the
expiration date of the Agreement or any extension thereof. A party's
determination not to extend this Agreement may only be effected with good
cause.
c. Licensee shall use its best efforts to promote the sale of
Licensed Articles in the Territory and shall maintain facilities and trained
personnel sufficient and adequate to accomplish Licensee'' obligations
hereunder.
d. Except as may be specifically provided in this Agreement,
nothing in this Agreement shall be construed to prevent Licensor from using,
or granting exclusive or nonexclusive licenses to any other persons to use,
any of the Marks, in connection with any goods or services.
3. Royalties and Payment Minimum Guaranteed Royalties, Reporting.
a. Licensee shall pay Licensor a royalty equal to 5% percent of
the Net Sales Price of all Licensed Articles sold or otherwise distributed by
Licensee during or after the term of this Agreement. Licensee shall pay
licensor a royalty equal to (50%) fifty percent of gross royalty proceeds from
sublicensing agreements entered into with the consent of licensor.
b. On or before the fifteenth day of the first month of each
calendar quarter, Licensee shall furnish to Licensor full and accurate
statements, certified by the Chief Financial Officer of Licensee, showing the
number, description and total Net Sales Prices of the Licensed Articles sold
or otherwise distributed by Licensee during the preceding calendar quarter.
Licensee shall, simultaneously with such statements, pay to Licensor the
royalties due thereon. On or before the fifteenth day of the third month
following the end of each Contract Year, Licensee shall furnish to Licensor a
statement certified by the Chief Financial Officer of Licensee showing total
sales of Licensed Articles, royalties due and royalties paid, for the
preceding Contract Year. If such statement discloses that the amount of
royalties paid during any period to which such statement relates were less
than the amount required to be paid, Licensee shall pay such deficiency
concurrently with the delivery of the statement.
c. For purposes of this Agreement, a Licensed Article shall be
considered sold when such Article has been shipped, distributed, paid for,
billed or invoiced, whichever first occurs.
d. The Minimum Guaranteed Royalty of the first contract year
will be waived. Thereafter for each Contract Year during which this Agreement
is in effect, the Minimum Guaranteed Royalty for such Contract Year Shall be
negotiated based on the previous year's performance.
e. Any delinquent amounts under this Agreement shall bear simple
interest at the rate of 1.5 percent per month, or if lower, the highest rate
permitted by law, from the due date thereof until paid.
4. Protection of Marks
a. Licensee acknowledges Licensor's exclusive right, title and
interest in and to the Marks, both at common law and under other applicable
laws, and will not, either directly or indirectly, at any time, do anything to
discredit any part of such right, title, or interest or challenge the validity
of this License. Licensee agrees that its use of the Marks will inure
entirely to the benefit of Licensor. Licensee shall assist Licensor, to the
extent necessary, upon request by Licensor, in the procurement of any
protection of Licensor's rights in the Marks. Upon Licensor's request from
time to time, Licensee shall provide Licensor with six specimen's of any Mark
used on Licensed Articles and whatever other documentation or information may
be requested by Licensor for the registration of any Mark in any category into
which the Licensed Articles fall.
b. Licensee shall use the Marks only in the form and manner and
with appropriate legends as prescribed from time to time by Licensor, and
shall not use any other trademark or service mark in combination with any Mark
without prior written approval of Licensor. In any written materials, such as
the packaging, advertising materials, catalogs, brochures, and the like
associated with the Licensed Articles, in addition to the "R" or "tm" symbol
displayed adjacent to the Mark, as appropriate, Licensee shall use the
following notice at least once in each such document: "Licensed Trademark of
Smith & Wesson Corp."
c. Licensee recognizes that the SMITH & WESSON name and
associated marks are world famous and that, even if not registered in any
country, the unauthorized use thereof would seriously dilute the
distinctiveness of such name and the Marks.
d. Licensee shall immediately notify Licensor in writing of any
infringements or imitations by other persons of any Mark, of which Licensee
becomes aware. Licensor shall have the sole right to determine whether or not
any action shall be taken on account of such infringements or imitations.
Licensee shall not institute any suit or take any action on account of any
such infringements or imitations without first obtaining the written consent
of Licensor to do so.
5. Assignment of Marks
If Licensee shall acquire any rights in the marks in any country,
Licensee shall notify Licensor and immediately assign such right to Licensor.
Licensee shall not permit any other person to sue any of the Marks without
Licensor's prior written consent, and shall cause any manufacturer or other
person involved in the production, promotion or sale of Licensed Articles to
agree to assign to Licensor any rights in any Mark acquired by such
manufacturer or other person.
6. Indemnification
a. Licensee shall at all times, and to the fullest extent
permitted by law, indemnify and hold harmless Licensor and its successors,
assigns, franchisees, subsidiaries, affiliates, licensing agents and
distributors, and the directors, officers, agents, and employees of each of
the foregoing entities, from and against any and all damages, demands, claims,
suits, actions, investigations, charges, costs and expenses including, without
limitation, attorneys' fees and court costs, settlement amounts, judgments,
compensation for damage to Licensor's reputation, and any losses of any
nature, which arise out of or are based upon any of the following:
(1) Any actual or alleged design defect, manufacturing
defect, failure to warn or instruct, breach of warranty, negligence, strict
liability in tort or any other product liability legal theory associated with
the Licensed Articles;
(2) The infringement, alleged infringement or any other
violation or alleged violation of any patent, trademark or copy right rights
or other proprietary rights owned or controlled by third parties by reason of
the manufacture, use, advertising, sale or distribution of the Licensed
Articles except for trademark actions arising out of Licensee's approved use
of the Marks;
(3) The violation, or alleged violation, of any federal,
state or local law, regulation, ruling, standard or directive or of any
industry standard with respect to the Licensed Articles;
(4) Licensee's breach of any warranty, representation,
agreement or obligation hereunder; or,
(5) Any other acts or omissions of Licensee, or its
agents, servants or contractors with respect to the manufacture, promotion or
sale of Licensed Articles.
b. Licensee shall promptly give Licensor notice of any action,
suit, proceeding, claim demand, inquire or investigation relating to the Marks
or the Licensed Articles. Licensor may at its sole option, elect to undertake
the defense of any such action, suit, proceeding, claim, demand, inquiry or
investigation, provided that such an undertaking by Licensor shall not
diminish Licensee's obligation hereunder to indemnify Licensor and to hold it
harmless. Licensor may, at any time and without notice, order or consent to a
recall, the making of refunds or settlements, or the giving of notice to
consumers or similar remedies with respect to the Licensed Articles. All
losses and expenses incurred under this Section shall be chargeable to
Licensee pursuant to its obligations of indemnity under this Section,
regardless of any actions, activity or defense undertaken by Licensor or
Licensee or the subsequent success or failure of such actions, activity or
defense.
c. Licensor assumes no liability whatsoever for the acts and
omissions of Licensee, or any of those with whom Licensee may contract for the
manufacture, distribution or sale of Licensed Articles, notwithstanding any
prior consent by Licensor to such contract.
7. Insurance
Licensee shall maintain, throughout the term of this Agreement, at
its own expense, liability insurance, from an insurance company, with such
liability coverage's and limits, as are acceptable to Licensor. Such policies
shall name Licensor as an additional insured and shall provide that Licensor
shall receive at least 30 days prior written notice of intent to cancel, alter
or amend such policy. Licensee shall provide Licensor upon execution of this
Agreement and upon Licensor's request from time to time thereafter, with
certificates or other evidence of insurance required by this Section.
Licensee shall keep all insurance coverage's required by this Agreement in
full force and effect for a period of three years after the termination of
this Agreement.
8. Quality of Licensed Articles
a. Licensee agrees, and represents and warrants to Licensor,
that all Licensed Articles shall be state-of-the-art, of high safety and
structural standards, of such style, appearance, quality and consistency as
shall be suitable for distribution and satisfactory for consumer usage, and
otherwise merchantable and fit for the purposes for which they are intended to
be used. At least 30 days before manufacturing, and again before distributing
or selling any licensed Article, and upon Licensor's request from time to
time, Licensee shall submit to Licensor, for its written approval of the Mark
usage, samples of each Licensed Article is to be marketed or sold. The number
of samples to be furnished by Licensee shall be such reasonable number as
Licensor may from time to time request. All samples shall be provided without
charge to Licensor. No Licensed Article shall be distributed or sold pursuant
to this Agreement until Licensee has obtained Licensor's written approval of
the samples submitted.
b. All Licensed Articles shall be of the same quality and
workmanship as the approved sample, and in the manufacture thereof, Licensee
shall cause to be used state-of-the-art manufacturing processes, techniques
and quality control procedures in order to ensure that the Licensed Articles
will consistently comply with the highest product quality standards. Under no
circumstances shall Licensee sell, distribute, give away or otherwise deal in
Licensed Articles that are seconds, that bear a distortion of the Marks or
that do not comply with this Agreement.
c. Licensor has a clear policy of meeting our customers' needs
and expectations. We must insist that this policy be exposed by any Smith &
Wesson licensee, as to act otherwise would undermine the Licensor's corporate
commitment to customer satisfaction. Any licensee must provide Licensor with
a reasonable and refillable supply of no-charge merchandise for us to quickly
initiate exchanges when necessary. We also will when required refund the
purchase price of a product deemed unacceptable by the user/consumer and
expect to be reimbursed for any such costs by the product's supplier.
Licensor will supply a quarterly accounting of any and all transactions
relating to customer satisfaction with the specific supplier.
d. Licensee shall consistently distinguish the Licensed Articles
from other products manufactured and sold by Licensee and shall avoid
confusing similarity between such other products and the Licensed Articles.
Licensee shall take such actions as are necessary to maintain the Licensed
Articles as separate and distinct lines of styling, design and merchandising
from any other product manufactured or sold by Licensee.
e. Licensee shall, no later than 180 days before the expiration
of any original or extended term of this Agreement, furnish Licensor a
statement showing the number and description of Licensed Articles in inventory
and in process.
9. Compliance with Government Standards and Product Testing
a. Licensee agrees that the manufacture, distribution and sale of
the Licensed Articles will conform at all times to all applicable federal,
state and local laws, regulations, industry standards, ordinances and other
enactment's, including, without limitation, those relating to product safety.
10. Promotional Material
Licensee shall not use the Marks or any reproduction thereof in any
advertising, promotional or display material without Licensor's prior written
approval. Under no circumstances will promotional materials or programs
be used by Licensee that reflect unfavorably on the Marks. All advertising,
display or promotional copy utilizing or in any way connected with the Marks,
shall carry a notice that the Marks are the property of licensor, and at least
six copies of such advertising, display, or promotional copy shall be
submitted to Licensor for prior written approval at least 30 days in advance
of production and upon Licensor's request from time to time thereafter. Any
approval granted by licensor under this Section will extend only to Licensee's
use of the Marks. Licensor shall not be liable for content or accuracy of
such advertising, promotional or display material nor for infringement of
patents, copyrights, trademarks, or any other proprietary rights owned, used,
or controlled by third parties, by reason of Licensee's promotional
activities.
11. Records
a. Licensee shall keep accurate books of account and records
covering all transactions relating to the license herein granted. Licensor
and its duly authorized independent accountants or other representatives shall
have the right at reasonable times, upon Licensor's request from time to time,
to examine such books of account and records and all other documents and
material in Licensee'' possession or under its control with respect to
Licensee's activities in connection with this Agreement, and such persons
shall have free and full access for such purposes and may make copies thereof
or extracts therefrom. Licensee shall keep all such records available to
Licensor for at least three years after expiration or termination of this
Agreement. Licensee will designate a symbol or number which will be used
exclusively in connection with the Licensed Articles and with no other
articles which Licensee may manufacture, sell or distribute, and that
duplicates of all billings by Licensee to its customers with respect to
Licensed Articles shall be kept by Licensee for inspection as is herein
provided.
b. If any audit by Licensor shall reveal a shortfall of
royalties paid by Licensee against royalties actually due in accordance with
this Agreement, Licensee shall immediately, upon demand by Licensor, make
payment to Licensor of such shortfall, plus simple interest at the rate of 1.5
percent per month or if lower, the highest rate permitted by law, for the
period such shortfall. In addition, if such audit shall reveal a shortfall of
more than five percent of royalty due, Licensee shall reimburse Licensor for
the services of its accountant and for any other expenses of Licensor incident
thereto including, without limitation, any attorneys' fees and costs of
collection.
12. Termination
In addition to any other rights which Licensor may otherwise have,
Licensor may terminate this Agreement at any time, immediately upon written
notice:
a. If within three months from the date of this Agreement,
Licensee shall not have begun the bona fide production, distribution and sale
of the Licensed Articles; or,
b. If Licensee shall thereafter fail for a consecutive period in
excess of three months to continue the bona fide distribution and sale of the
Licensed Articles; or
c. If Licensee shall fail to make any payment due hereunder or
to deliver any of the statements required hereunder, and if such default shall
continue for a period of 15 days after notice of such default by Licensor to
Licensee or if such a failure shall occur twice in any consecutive 12 month
period even if both failures are corrected as provided hereunder; or,
d. If Licensee or its property, where appropriate:
(1) Becomes subject to a receiver or trustee; or
(2) Becomes insolvent; or
(3) Becomes subject to an involuntary or voluntary
petition under the United States Bankruptcy laws, as amended; or
(4) Makes an assignment for the benefit of its creditors;
or
e. If there is any deliberate deficiency in the Licensee's
reporting which affects royalties payable or any other aspect of this
Agreement; or
f. If any warranty, representation, or covenant made by Licensee
hereunder, or any information as to product quality or safety provided by
Licensee hereunder, is false or misleading; or
g. If Licensee fails to comply with any term or condition of
this Agreement, other than those specifically set forth in clauses (a) through
(f) above, and such non-compliance continues for a period of 15 days after
notice thereof is given by the Licensor.
Any termination by Licensor shall be without prejudice to any of
Licensor's other rights or remedies.
13. Effect of Termination
a. After expiration or other termination of this Agreement,
Licensee shall have no further right to manufacture, distribute, sell,
exploit or otherwise deal in any Licensed Articles which utilize the Marks
except that Licensee may dispose of Licensed Articles which are on hand or in
process at the time of expiration or termination so long as (1) Licensee
reports in writing to Licensor, no later than 30 days after termination of
this Agreement, the total number of Licensed Articles which will be disposed
of, (2) the sale thereof is completed within six months, (3) all payments when
due are made to Licensor, (4) such disposal of Licensed Articles shall be in
accordance with Section 3. Notwithstanding the foregoing, in the event this
Agreement is terminated pursuant to Sections 12(c), 12(d), , 12(e), 12(f), or
12(g), Licensee shall not dispose of any Licensed Articles which are on hand
or in process at the time of termination, but shall instead immediately
deliver and turn over such Licensed Articles to Licensor. A final statement
and payment shall be made by Licensee within 15 days after the end of such
six-month period. Upon expiration of such six-month period herein, any
remaining inventory of Licensed Articles and all molds, plates, prints and
other materials used to reproduce the Marks for the manufacture of the
Licensed Articles shall be destroyed and evidence of such destruction shall be
given to the Licensor.
b. In the event this Agreement expires or is otherwise
terminated for any reason, Licensee shall, and hereby does, assign to Licensor
any and all rights of Licensee in the Marks, including associated goodwill,
and the designs and styles of the Licensed Articles to the extent such design
or styles contain or employ any of the Marks, and shall not thereafter
manufacture or sell any such designs or styles or use the Marks in any manner.
c. Except as provided in subsection (a), upon the expiration or
termination of this Agreement, Licensee shall immediately cease all further
use of the Marks and any names, trademarks, characters, symbols, designs,
likenesses, or visual representations as might be likely to cause confusion or
deceive purchasers or prospective purchasers or dilute any trade name,
trademark or service mark of Licensor including, without limitation,
Licensor's corporate and private names, other trademarks, symbols
designations, indices, slogans and other means of identifying products or
services of Licensor, whether or not identified herein as a Mark.
d. Licensee agrees that the Marks are distinctive and possess
special, unique and extraordinary characteristics which make difficult the
assessment of the monetary damages that Licensor would sustain by
unauthorized use. Licensee recognizes that irreparable injury would be caused
to Licensor by unauthorized use of the Marks and agrees that injunctive and
other equitable relief would be appropriate in the event of a breach of this
Agreement by Licensee, provided, however, that such remedy shall not be
exclusive of other legal remedies otherwise available.
e. Licensee's obligations and agreements set forth in Sections 3
through 11, 13, 14, 17, 19, and 20 survive any termination or expiration of
this Agreement.
14. Notices
All notices and statements to be given hereunder shall be in
writing, and any such notice or statement shall be deemed duly given if mailed
by certified mail, return receipt requested, if to Licensor, at:
Smith & Wesson Corp.
Roosevelt Avenue
PO Box 2208
Springfield, MA 01102-2208
Attention: Jack Sweeney
Director of Licensing
And if to Licensee, at:
ROK International, Inc.
600 NW 44th Street - Suite 2H
Fort Lauderdale, Florida 33309
Attention: Laurence Sack
Vice President
15. No Joint Venture
Nothing in this Agreement shall be construed to place the parties in
the relationship of partners or joint ventures, and Licensee shall have no
power to bind Licensor in any manner whatsoever.
16. Cancellation
Licensee acknowledges that Licensor and its subsidiaries, affiliates
and franchisees use the Marks to advance and promote Licensor's business, and
that Licensor has a paramount obligation to preserve its ability to so use
such Marks. Should the use by Licensee of any Mark on Licensed Articles be
deemed by Licensor to be in violation of any federal, state or local law or to
adversely affect the reputation of Licensor or affect the validity,
enforceability or distinctiveness of the Mark as a designation of origin for
Licensor's own products, then Licensor may terminate this Agreement on 15
days' notice to Licensee.
17. Assignments, Transfers and Sublicenses
Without the prior written consent of Licensor, which may be withheld
in Licensor's sole discretion, a) Licensee shall not voluntarily or by
operation of law, assign or transfer this Agreement or any of Licensee's
rights or duties hereunder or any interest of Licensee herein, nor shall
Licensee enter into any sublicense for use of the Marks by other persons;
b) Licensee shall not sell or otherwise transmit or transfer to any party
engaged in the design or manufacture of items similar to any of the Licensed
Articles, any design, style, know-how, technology or other item or knowledge
of a technical or competitive nature, furnished to Licensee by or through
Licensor. Any transfer of any interest in Licensee to any entity in which the
present controlling shareholders of Licensee do not have voting control shall
be deemed an assignment prohibited hereunder. The consent of Licensor to one
assignment, transfer or sublicense shall not be deemed to be consent to any
subsequent assignment, transfer or sublicense. Nothing provided herein shall
limit Licensor's right to transfer and assign any of its rights hereunder.
18. Scope and Modification
This Agreement sets forth the entire agreement between the parties,
and supersedes all prior agreements and understandings between the parties,
relating to the subject matter hereof. None of the terms of this Agreement
may be waived or modified except as expressly agreed in writing by both
parties.
19. Severability
Should any provision of this Agreement be declared void or
unenforceable, the validity of the remaining provisions shall not be affected
thereby.
20. Governing Laws
This Agreement shall be interpreted in accordance with and governed
by the laws of the Commonwealth of Massachusetts.
The parties hereto have executed this Agreement as of the date at
the beginning hereof.
Licensor:
Witnessed By: SMITH & WESSON CORP.
/s/ Peggy M. Cowell /s/ Bob Scott
- ------------------- --------------------
By: Bob Scott
Title: Vice President Sales & Marketing
Licensee:
ROK INTERNATIONAL, INC.
/s/ Nancy Babit /s/ Laurence Sack
- ------------------- --------------------
By: Laurence Sack
Title: Vice President
EXHIBIT A - Licensed Marks
Smith & Wesson
Magnum
Magnum
Ladysmith
Airweight
Kit Gun
Chiefs Special
Combat Magnum
Magnum
Service Kit Gun
Target Kit Gun
Combat Magnum
Distinguished Combat Magnum
Distinguished Service Magnum
EXHIBIT B - Licensed Articles
GENERAL APPAREL AND SPORTSWEAR
JEANSWEAR
WOVEN SPORTSWEAR
SHIRTS
JACKETS
OUTERWEAR
ACCESSORIES
HATS
KNOTTED TOPS
BOXERS
TIES
T-SHIRTS
LEATHER ACCESSORIES
BELTS
WALLETS
MOVIE PLACEMENT RIGHTS
(On a case by case basis) With full disclosure and right of refusal on
the sole discretion of the Licensor.
EXHIBIT 8
---------
SMITH & WESSON CORP.
AMENDMENT TO TRADEMARK LICENSE AGREEMENT
This Amendment ("Amendment"), effective as of August 23, 1996, to
the Agreement of March 1, 1996, by and between SMITH & WESSON CORP., a
Delaware Corporation with its principal office at 2100 Roosevelt Avenue
Springfield, Massachusetts 01102-2208, (hereinafter called Licensor"), and ROK
INTERNATIONAL, INC., a corporation, having its principal office at 600 N W
44th Street Suite 2H, Fort Lauderdale, Florida 33309, (hereinafter called
"Licensee"). In consideration of the mutual promises herein contained and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged by Licensor and Licensee, the parties agree to amend
the Agreement as follows:
1. Section 2.b. is replaced in its entirety by the following new
Section 2.b.:
"The term of this Agreement shall be for 3 years, 9 months,
commencing on March 1, 1996 and ending December 31, 1999, at midnight Eastern
Standard Time, unless sooner terminated. Each period from January 1, through
December 31, during the term hereof is hereinafter referred to as a "Contract
Year", with the exception of the "First Contract Year" which shall be for the
period from the date hereof through Dece4mber 31, 1996. Provided that
Licensor attains at least a Minimum Guaranteed Royalty for the Fourth Contract
Year, as specified in Section 3, then the Agreement shall be automatically
extended for three (3) Contract Years unless a party gives the other party
written notice of its intention not to extend this Agreement at least ninety
(90) days prior to the expiration of a Contract Year. A party's determination
not to extend this Agreement may only be effected with good cause. In no
event may the Agreement be extended beyond December 31, 2002, unless the
parties agree to such extension in a separate, written agreement."
2. Section 3.a. is replaced in its entirety by the following new
Section 3.a.:
"Licensee shall pay Licensor a royalty equal to the greater
of (1) the Minimum Guaranteed Royalty, as set forth hereinafter, or (2) five
percent (5%) of the Net Sales Price of all Licensed Articles sold or otherwise
distributed by Licensee during or after the term of this Agreement, and fifty
percent (50%) of gross royalty proceeds from sublicensing agreements entered
into with the consent of Licensor".
3. The second sentence of Section 3.d. is deleted, and the
following paragraph is added in its place:
"After the First Contract Year, for each Contract Year during
which this Agreement shall be in effect, the Minimum Guaranteed Royalty shall
be paid in four equal installments on the dates on which each royalty payment
is due, pursuant to Section 3 of this Agreement. The minimum Guaranteed
Royalties for Contract Years after the First Contract Year are as follows:
Contract Year Minimum Guaranteed Royalty
---------------------- --------------------------
Year 2-1/1/97-12/31/97 $150,000
Year 3-1/1/98-12/31/98 $250,000
Year 4-1/1/99-12/31/99 $350,000
Should this Agreement be renewed for an additional three (3)
year term, the Minimum Guaranteed Royalty shall be as follows:
Contract Year Minimum Guaranteed Royalty
---------------------- --------------------------
Year 5-1/1/00-12/31/00 $450,000
Year 6-1/1/01-12/31/01 $550,000
Year 7-1/1/02-12/31/02 $650,000 OR,
An Alternative Minimum Guaranteed Royalty for the equal to
75% of the total royalties paid in the fourth Contract year, increased by 10%
for each additional Contract Year beyond the fifth Contract Year, whichever
royalty amount for that Contract Year is greater.
The Following language is added to the end of Section 17:
"If Licensee shall enter into any sublicense agreement
pursuant to the authority granted in this Agreement, then
(1) the sublicense shall contain a provision in which
the sublicensee agrees to be bound by the terms and conditions of the
Agreement and all Amendments thereto;
(2) Licensee shall be jointly and severally liable
with such sublicensee to indemnify Licensor in accordance with the terms of
this Agreement (regardless of whether or not such sublicensee is legally
determined to have direct liability to Licensor hereunder) with respect to any
actions by such sublicensee or any party acting through such sublicensee which
would give rise to an indemnification obligation of Licensee under this
Agreement were such actions taken by Licensee itself;
(3) Licensee shall be fully liable to Licensor for the
payment of any costs and expenses which are incurred as the result of the
exercise of any rights hereunder by Licensee or its sublicensees under this
Agreement where this Agreement provides that such costs and expenses shall be
for the account of Licensee or its sublicensees; and
(4) All Licensed Articles sold, distributed, rendered
or otherwise provided under any sublicense granted pursuant to this Agreement
shall be subject to the royalty and revenue provisions in this Agreement as
though sold, distributed or otherwise provided by Licensee; and Licensee
guarantees the payment of any and all royalties due to Licensor under any
sublicense, and agrees to monitor all of its sublicensees to ensure the
accurate and prompt payment of all royalties accruing under such sublicenses."
The Agreement and this Amendment set forth the complete agreement
between the parties, and supersede all prior agreements and understandings
between the parties relating to the subject matter hereof. In the event of
any conflict as to the meaning of a term used in this Amendment and in the
Agreement, then the term in this Amendment shall control, but only to the
extent that the term relates to the subject matter of this Amendment. None of
the terms of the Agreement or this Amendment may be waived or modified except
as expressly agreed in writing by both parties.
Licensor:
Witnessed By: SMITH & WESSON CORP.
/s/ illegible /s/ Bob Scott
- ------------------- --------------------
By: Bob Scott
Title: Vice President Sales & Marketing
Date: 8-26-96
Licensee:
ROK INTERNATIONAL, INC.
/s/ Lisa Palmer /s/ Laurence Sack
- ------------------- --------------------
By: Laurence Sack
Title: Vice President
Date: 8-23-96
EXHIBIT 9
---------
(SMITH & WESSON LETTERHEAD)
August 12, 1997
Mr. Laurence Sack, President
ROK International, Inc.
600 N W 44th Street Suite 2H
Fort Lauderdale, Florida 33309
Dear Laurence:
This letter will serve as a modification of our existing license agreement.
In consideration of the terms and conditions herein and intending to amend the
Agreement between the parties evidenced by the License Agreement of March 1,
1996, and the Amendment to the License Agreement of August 23, 1996, the
parties further agree as follows:
A. Smith & Wesson agrees in principle to grant to Multiplinvest, Monza MI.
Italy an exclusive license with the right to sublicense in the territories of
Western Europe and South America. Subject to Smith & Wesson and Multiplinvest
signing a Definitive Licensing Agreement, ROK International, Inc. shall
receive revenues from the said agreement as described in Paragraph B, Point 2
hereunder.
B. Contingent upon the execution of the aforementioned agreement between
Multiplinvest and Smith & Wesson.
1) ROK International, Inc. shall release all its rights back to
Smith & Wesson for the Territories of Western Europe and South America as
granted by the License Agreement dated March 1, 1996, and the Amendment to the
License Agreement of August 23, 1996. All of the foregoing rights shall
revert back to Smith & Wesson upon signature by Multiplinvest and Smith &
Wesson for the License Agreement described in Paragraph A above.
2) Smith & Wesson shall distribute revenue it receives directly
from the foregoing Multiplinvest Agreement as follows: Fifty percent (50%) to
ROK International, Inc. - Fifty percent (50%) to Smith & Wesson, with the
exception of the following licensed Articles:
Backpacks/Sportbags
Perfume/Cologne
Writing Products
Revenue from the above Licensed Articles will be distributed
twenty-five percent (25%) ROK International, Inc. - Seventy-five percent (75%)
to Smith & Wesson.
3) The fifty percent (50%) share of revenues received by Smith &
Wesson from Multiplinvest shall be distributed to ROK International, Inc.
after receipt of funds by Smith & Wesson. All revenue received by Smith &
Wesson and distributed to ROK International pursuant to the Paragraph above,
will be applied to the Minimum Guaranteed Royalty owed by ROK International,
Inc. for the year in which it was received.
C. If, in the future, Multiplinvest and Smith & Wesson enter into a
trademark licensing agreement other than that of Paragraph A for Licensed
Articles other than those set forth in the Trademark Licensing Agreement of
Paragraph A, ROK International, Inc. shall receive thirty percent (30%) of the
revenue therefrom.
D. This Amendment, the License Agreement of March 1, 1996, and the
Amendment to the License Agreement of August 23, 1996, constitute the complete
understanding of the Parties as to the subject matter hereof. The meaning
and definitions of the terms and conditions as used therein are as defined in
the License Agreement of March 1, 1996, and the Amendment to the License
Agreement of August 23, 1996. Any discrepancies or conflicts between this
Amendment, the License Agreement of March 1, 1996, and the Amendment to the
License Agreement of August 23, 1996, shall be resolved in favor of the
earlier document.
As always, if you should have any questions, please do not hesitate to
contact me.
AGREED: AGREED:
/s/ Laurence Sack /s/ John Steele
- ------------------ ------------------
Laurence Sack John Steele
President Director/Licensing and Merchandising
ROK International, Inc. Smith & Wesson