-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RDfQXroYx5ppLe0pm4Be44zfdSobmgc57rK+XH24GaKXVeREvhPtYPFmGRuIlk+l n/gfYRI6ti7HsMzzWS612A== 0000950144-00-005638.txt : 20000501 0000950144-00-005638.hdr.sgml : 20000501 ACCESSION NUMBER: 0000950144-00-005638 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20000129 FILED AS OF DATE: 20000428 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENVISION DEVELOPMENT CORP /FL/ CENTRAL INDEX KEY: 0001087782 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DRUG STORES AND PROPRIETARY STORES [5912] IRS NUMBER: 650981457 STATE OF INCORPORATION: FL FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-15311 FILM NUMBER: 613583 BUSINESS ADDRESS: STREET 1: 11701 NW 101ST RD CITY: MIAMI STATE: FL ZIP: 33178 BUSINESS PHONE: 3058891600 MAIL ADDRESS: STREET 1: 11701 NW 101ST RD CITY: MIAMI STATE: FL ZIP: 33178 FORMER COMPANY: FORMER CONFORMED NAME: PERFUMANIA COM INC DATE OF NAME CHANGE: 19990602 10-K 1 ENVISION DEVELOPMENT 10-K FOR 1/29/00 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 29, 2000 COMMISSION FILE NUMBER 001-15311 ENVISION DEVELOPMENT CORPORATION (SUCCESSOR TO PERFUMANIA.COM, INC.) (Exact name of registrant as specified in its charter) FLORIDA 65-0981457 (State or other jurisdiction of incorporation (I.R.S. Employer Identification or organization) No.)
4 MOUNT ROYAL AVENUE, MARLBORO, MA 01752 (508)481-8303 (Address of principal executive offices) (Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED - --------------------------------------------- ----------------------------------- COMMON STOCK, $0.01 PAR VALUE AMERICAN STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE 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 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-K or any amendment to this Form 10-K. [ ] The number of shares of Common Stock outstanding as of April 27, 2000 was 8,992,500. The aggregate market value of the voting stock held by non-affiliates of the registrant based on the $64.75 closing price for the registrant's Common Stock on the American Stock Exchange on April 27, 2000 was approximately $242,354,912. Directors, executive officers and 10% or greater shareholders are considered affiliates for purposes of this calculation but should not necessarily be deemed affiliates for any other purpose. DOCUMENTS INCORPORATED BY REFERENCE PART III OF THIS REPORT INCORPORATES BY REFERENCE CERTAIN PORTIONS OF THE REGISTRANT'S PROXY STATEMENT FOR ITS 2000 ANNUAL MEETING OF SHAREHOLDERS TO BE FILED WITH THE COMMISSION NO LATER THAN 120 DAYS AFTER THE END OF THE FISCAL YEAR COVERED BY THIS REPORT. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 FORWARD LOOKING STATEMENTS Certain statements within this Form 10-K constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Envision Development Corporation or its industry to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on our current expectations and are subject to a number of risks, uncertainties and assumptions relating to our operations, financial condition and results of operations, including, among others, rapid technological and regulatory changes in the industries we serve, the financial resources of our customers, our numerous competitors and the few barriers to entry for potential competitors, the short-term nature of many of our contracts, the seasonality and quarterly variations we experience in our revenue, our uncertain revenue growth, our ability to attract and retain qualified personnel, our ability to expand our infrastructure and manage our growth, and our ability to identify, finance and integrate acquisitions, among others. If any of these risks or uncertainties materialize, or if any of the underlying assumptions prove incorrect, actual results may differ significantly from results expressed or implied in any forward-looking statements made by us. These and other risks are detailed in this Annual Report on Form 10-K and in other documents filed by us with the Securities and Exchange Commission. Envision undertakes no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future. 1 3 BUSINESS GENERAL Envision Development Corporation ("Envision" or the "Company") is the successor to perfumania.com. Envision is attempting to position itself as a next generation eBusiness professional services firm delivering innovative products and services for a wide range of eCommerce applications. Envision was created on February 10, 2000 through a plan of merger among perfumania.com, inc. ("perfumania.com"), the Company and EDC Sub Inc., a Florida corporation and wholly owned subsidiary of the Company (see description of reorganization below). The Company performed the reorganization to demonstrate its new mission to provide breakthrough technologies through its delivery platform as an eBusiness professional services firm. On January 7, 1999, perfumania.com was created as a wholly-owned subsidiary of Perfumania, Inc. (former parent company of perfumania.com prior to the reorganization). Perfumania, Inc. is a wholly-owned subsidiary of E Com Ventures, Inc. Since its inception, perfumania.com has operated an online store that specializes in the sale of fragrances, fragrance related products and bath and body products on a retail and wholesale basis. perfumania.com offers retail customers over 1,700 products at price discounts, including hard-to-find and discontinued brands. The business-to-business component of the online store offers products on a wholesale basis to the largely underserved market of smaller specialty retailers. Users can easily browse and locate products using perfumania.com's search engines. The online store offers personalized customer service, secure ordering, numerous shipping options and fast delivery. On September 29, 1999, perfumania.com completed its initial public offering and received proceeds of approximately $16,100,000, net of $1,400,000 in underwriting discounts and commissions, from the sale of 2,500,000 shares of its common stock. perfumania.com used approximately $3,344,000 of the proceeds to repay advances from Perfumania, Inc. Additionally, perfumania.com incurred approximately $496,000 in other costs in connection with the offering. On January 11, 2000, a change in control of perfumania.com (before the reorganization described below) occurred when Alta Limited exercised an option to purchase from Perfumania, Inc., 2,000,000 shares of common stock of perfumania.com at a price of $6.00 per share pursuant to an Option Agreement, dated December 10, 1999, among Perfumania, Inc., Alta Limited and the optionees who are signatories thereto. In connection with such exercise, Alta nominated two directors to the Board of Directors of perfumania.com (before the reorganization) and an additional four directors were added by the Board of Directors effective upon the expiration of the waiting requirements of Rule 14f-1 under the Securities Exchange Act of 1934, as amended. Under the Option Agreement, Alta has a second option to purchase 500,000 shares of common stock of Envision at a price of $8.00 per share on or prior to the earlier to occur of December 31, 2000 or various other events, as defined in the Agreement. On February 10, 2000, perfumania.com, consummated a reorganization through a plan of merger among the combination of perfumania.com, the Company and EDC Sub, Inc., a Florida corporation and wholly-owned subsidiary of the Company. The plan of merger provided for, among other things, the merger of EDC Sub, Inc. with perfumania.com, with perfumania.com as the surviving corporation. As a result, perfumania.com became a direct wholly-owned subsidiary of Envision. In addition, each share of common stock, par value $0.01 per share, of perfumania.com issued and outstanding before the reorganization was converted into and exchanged for one share of common stock, par value $0.01 per share, of Envision. Consequently, shareholders of perfumania.com became shareholders of Envision and ceased to be shareholders of perfumania.com. Pursuant to Florida Statutes, shareholder approval of this reorganization was not required, and the reorganization was tax free for federal income tax purposes to perfumania.com's shareholders. In connection with the aforementioned reorganization of Envision on February 14, 2000, perfumania.com common stock ceased to be publicly traded, and instead, Envision common stock began trading on the American Stock Exchange, Inc. under the new ticker symbol "EDV." In accordance with Florida law, 2 4 certificates representing shares of Envision common stock were exchanged for certificates of perfumania.com common stock soon thereafter. On March 10, 2000, Envision signed a First Amended and Restated Agreement and Plan of Merger among Envision, Envision Acquisition Corporation, a Massachusetts corporation that is a wholly-owned subsidiary of Envision, perfumania.com, Envision Development Corporation, a Massachusetts corporation ("Envision Mass") and certain stockholders of Envision Mass to acquire all of the outstanding stock of Envision Mass. This transaction is subject to approval by shareholders of Envision. On April 7, 2000, Envision acquired approximately 80% of the voting stock of Qui Vive, Inc. ("Qui Vive"), a Delaware corporation, pursuant to an Amended and Restated Stock Acquisition Agreement (the "Stock Acquisition Agreement"), dated March 31, 2000, among Envision, QV Acquisition Corporation, a Delaware corporation that is a wholly-owned subsidiary of Envision, Sundog Technologies, Inc., a Delaware corporation, and RockMountain Ventures Fund, LP, a Delaware limited partnership. Pursuant to this Stock Acquisition Agreement, on April 7, 2000, Envision issued shares of its common stock in order to acquire shares of Series A Preferred Stock and Series B Preferred Stock of Qui Vive. Envision will issue additional shares of its common stock to complete the acquisition of the 80% of the voting stock of Qui Vive subject to Envision's shareholder approval. Qui Vive, which does business as QVtech, has no significant operations except for the development of its proprietary "Interosa" technology. This technology provides security features to e-mail communications. On April 10, 2000, Envision entered into an Amended and Restated Stock Purchase Agreement with VP IP, a Delaware corporation. Pursuant to the terms of this agreement, Envision acquired the software and URL of VP IP. In exchange, Envision issued 200,000 shares of its common stock to the owners of VP IP which included William Patch, Chairman and Chief Executive Officer of Envision, and his immediate family and Alex Adamopoulos, an officer of Envision. Envision does not presently have any significant operations itself or through any other subsidiary, except for the operations of perfumania.com. The principal executive offices of Envision are 4 Mount Royal Avenue, Malboro, Massachusetts 01752. The telephone number is (508) 481-8303. BUSINESS OF ENVISION Envision was formed in February 2000 pursuant to the reorganization previously described. Since its inception, Envision has sought to deliver innovative, transactive eBusiness solutions so that customers can achieve transformational breakthroughs into the Internet economy. Envision's customer value proposition encompasses extending marketing reach, automating sales and support functions, automating the supply chain, and enhancing overall business activities. Envision seeks to deliver these benefits with a services/products spectrum including eBusiness Consulting, eBusiness System Development, eMarketing, Application Licensing and through its IsoStructuretm platform. In conjunction with these services and products, Envision is currently seeking to be a leader in transactive technologies that protect, secure and manage Internet document exchange as a part of the eBusiness solution. MARKET OPPORTUNITY Envision participates in one of the fastest growing categories of eBusiness, the eBusiness Solution Provider sector. This sector is responding to the growth in the Internet's Business-to-Business ("B2B") market, which is expected to reach $2.7 trillion by 2004, according to a leading technology industry research firm. The Internet presents opportunities to transform businesses and entire industries and has allowed businesses to identify new product and service offerings which extend and complement their core markets. As a result, these opportunities are creating a significant and growing demand for Internet services as organizations are investing in Internet solutions to transform their core business and technology strategies. Envision believes that as businesses race to achieve the transcendent opportunities and increased operating efficiencies made possible by Internet technology, they will increasingly seek to outsource their eBusiness 3 5 activities to eBusiness solution providers that not only offer expertise, but even more importantly, the speed to help them win in their industry. For this reason, Envision believes there is strong demand for professional services to assist companies in developing eBusiness strategies and to design and implement innovative eBusiness solutions that transform key business processes and provide competitive advantages. The Company further believes that few companies today have the combination of expertise in eBusiness strategy development, market reach and automation of sales and support functions and the supply chain required for the development and implementation of such solutions. Strategy Envision's strategy is formulated on the premise that organizations wishing to participate in the Internet economy are increasingly turning to eBusiness experts. These organizations wish not only to tap into the expertise and innovative skills that are needed to create and deploy competitive and timely eBusiness systems, but even more importantly, the eBusiness and eMarketing savvy to make their companies successful in the Internet economy. Envision's strategy in response to this need is to develop core competencies in eBusiness Consulting/Development, Application Licensing and the IsoStructure(TM) platform. Productization would simplify the delivery of eBusiness features while increasing Envision's gross margin and erecting a competitive barrier to other eBusiness competitors. The three core eBusiness competencies which Envision believes are critical to becoming a leader in eBusiness are: eBusiness Consulting/Development -- Services include eBusiness Strategy Definition and Planning, Peer Web Audits, Internet Advisory Services. These services assist companies in understanding where eBusiness opportunities exist and helps them develop a roadmap for eBusiness implementation. The Development services include front-end website design for a high-performance website. While the website's front is visible to the user, the back-end services are what really powers a highly functional eBusiness website. Back-end services include database and transaction support. Application Service Provider (ASP) -- The Application Service Provider sector is an explosive marketplace enabling companies to leverage software applications rapidly and at a very competitive cost. Envision's approach to this segment is to provide both productized and customized applications to the client that meet their requirements, deliver value and allow for a competitive advantage. IsoStructure(TM) -- Envision's vision is to bring together breakthrough technologies it incubates and deliver them within a unified platform that can be entirely leveraged by its clients. IsoStructure(TM) would represent such a platform and transforms the manner in which customers interact with web applications today by providing a breakthrough combination of technologies within a single, secure and unified platform. Products If Envision succeeds in its acquisition of Envision Mass, it will acquire the following trademarked terms which will be used to describe the various modules of our web development strategy. InternetPowered(TM) products -- Specific productization opportunities emerge in the designing and implementing of a variety of Internet business solutions across diverse industries. Envision believes that a company's website does not have to be a completely custom implementation. For example, many companies want their website to include, among other things, press releases, trade show calendars, news articles, job postings and fresh content on the home page. Envision also believes that it is in the best interests of its customers to be able to easily update website content so as to create reasons for visitors to return to the website. With these goals in mind, Envision, if it is successful in its acquisition of Envision Mass, plans to develop a series of website plug-in modules, collectively known as InternetPowered(TM) products. The use of the products and trademarks stated above is contingent upon the acquisition of Envision Mass. 4 6 InternetPowered(TM) products would simplify the website sales-cycle by providing predefined modules of website functionality at published prices. These products include: - InternetPowered(TM) PressRoom - InternetPowered(TM) Events - InternetPowered(TM) Employment Recruitment - InternetPowered(TM) Collaborative Forum - InternetPowered(TM) Articles - InternetPowered(TM) HomePage - InternetPowered(TM) Content Administrator IsoStructure(TM) -- IsoStructure(TM) is an information exchange platform that allows clients focused on business-to-business services to rapidly implement a set of transactive technologies. IsoStructure(TM) leverages today's approved industry standards and emerging ones, such as XML (Extensible Markup Language), XFDL (Extensible Forms Data Language), HDML (Handheld Device Markup Language) and WAP (Wireless Application Protocol). These platform capabilities represent a breakthrough in traditional exchange applications through the incorporation of major industry advancements in technology. These advancements represent the secure architectures represented by legally binding documentation, policy-based email management, operating system level security to strengthen the transaction layer and the extended information platform to a wireless device utilizing SSL to secure the transmission. Presently these technologies are all stand alone applications that the market is demanding. Envision's IsoStructure(TM) is expected to bring these advancements together with a competitive advantage to the market. Interosa technology -- Envision, through its subsidiary Qui Vive, developer of the proprietary "Interosa" technology for secure e-mail communications, will complement its product line by providing secure encrypted e-mails. Interosa would assist senders in keeping e-mails in context by allowing senders to apply policies which determine the behavior of a message. Policies can determine who can open an e-mail, when they can open it, and what they can do with it. Messages are encrypted at all times, and can only be decrypted when their policies are satisfied. Unlike encrypted delivery systems, in which protection ends when the document arrives, Interosa policies protect not only the transport of the message, but also its use, for the entire life of the message. Senders may choose policies when they compose a message. When the message is sent, Interosa encrypts the policies together with the message and sends it as a standard MIME e-mail. Interosa policies make e-mail safe for business communication. Interosa assists any company in ensuring that internal corporate dialogs remain internal. E-mail protection facilitates strategic partnerships in which high value information must be exchanged between companies. Interosa also promotes effective brainstorming, by assuring participants that off-the-cuff ideas won't be archived. Interosa speeds the exchange of ideas because senders do not have to compose messages that are understandable outside the intended context. Policies in Interosa's first release will enable a sender to: - Password protect messages so they can only be opened with the required password, - Expire messages so they cannot be decrypted after a specified date and time, - Keep internal e-mail internal, by preventing decryption outside the sender's domain, - Prevent unencrypted forwarding outside the recipient's company for messages exchanged between Interosa-enabled businesses, - Prevent e-mail contents from being copied or pasted, - Prevent messages from being printed, and 5 7 - Ensure messages are stored encrypted at all times and that a decrypted view only occurs when the policies allow. Partnerships Envision's partnership strategy leverages its sales and marketing reach through mutually beneficial partnerships with other companies. Partnerships multiply our sales force reach through the efforts of partner sales personnel. Simply stated, the goal is to funnel in highly qualified leads for Envision to turn into revenue. A secondary benefit is increased market credibility for Envision by virtue of the association with market leading companies. Competition Competitors are organized into five categories -- (1) eBusiness Solution Providers, (2) web design shops, (3) system integrators, (4) major consulting firms and (5) advertising firms. Risk Factors -- Related to Envision's Business Limited Operating History. perfumania.com was founded in January 1999 to sell fragrance and cosmetics online, and, in September 1999, had its initial public offering. On February 10, 2000, perfumania.com reorganized into a holding company structure whereby perfumania.com is now the wholly-owned subsidiary of Envision. Envision currently has limited operations other than perfumania.com. Accordingly, Envision has no operating history upon which to evaluate its performance. Envision has not been in its currently contemplated business long enough to enable a stockholder to make a reasonable judgment as to its future performance. The likelihood of its success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with a developing business and the competitive environment in which Envision will operate. Many of these risks are described in more detail in this section. Envision may not successfully address these risks. If they do not successfully address these risks, the business will be seriously harmed. Envision Business Model is Unproven. Envision's strategy is based on an unproven business model. Its business model depends on the acceptance of the Internet for business-to-business transactions and the ability of Envision's technology to continue evolving and gain wide spread acceptance. Expansion through Acquisitions of Other Businesses and Technologies. The acquisitions described in this Annual Report on Form 10-K involve a number of special problems including: difficulty assessing technologies; operations and personnel; diversion of management attention in connection with both the negotiation of the investments and possible integration of the assets; strain on the managerial and operational resources as management tries to oversee larger operations; dilution of currently outstanding securities; and the amortization of goodwill and other intangible assets. Envision's future operating results will depend significantly on its ability to manage growth and integrate acquisitions. Envision may not be able to address these problems successfully. Expenses may also increase due to the potential effect of goodwill amortization and other charges resulting from acquisitions described herein and in the future. If any of these and other expenses are not accompanied by increased revenue, our losses will be greater than anticipated. No Assurance of Availability of Personnel. Envision has not hired all of the personnel necessary to implement our business plan. Envision is dependent upon its ability to attract and retain qualified personnel. There is intense competition for qualified personnel in its business. Although Envision believes that such personnel will be available and attainable at reasonable compensation levels, no assurance can be given that Envision will be able to attract and retain the qualified personnel necessary for the development of our business. 6 8 Risk Factors-Related to the Internet Industry Business-to-Business E-commerce. Envision relies on the Internet for the success of its businesses. The development of the e-commerce market is in its early stages. If widespread commercial use of the Internet does not develop, or if the Internet does not develop as an effective medium for providing products and services, Envision will not succeed. Competition. Competition for Internet products and services is intense. As the market for business-to-business e-commerce grows, Envision expects that competition will intensify. Barriers to entry are minimal, and competitors can offer products and services at a relatively low cost. Some companies may have access to greater resources than Envision. Future Government Regulations Affecting the Internet. With the exception of regulations applicable to businesses generally, Envision is not currently subject to direct regulation by any government agency. Due to increasing popularity and use of the Internet, however, it is possible that a number of laws may be adopted with respect to the Internet in the future, covering issues such as user privacy, pricing of goods and services, and types of products and services offered. An example of the kind of laws which may be adopted to cover the use of the Internet is the Telecommunications Act of 1996. The Telecommunications Act prohibited the transmission over the Internet of certain types of information. Although certain provisions of the Telecommunications Act were held unconstitutional, similar laws may be enacted in the future. Other nations, including Germany, have taken similar actions to restrict the free flow of information deemed to be objectionable on the Internet. Additionally, certain telecommunications carriers continue to advocate that telecommunications over the Internet should be regulated by the Federal Communications Commission in the same manner as other telecommunications services. These telecommunications carriers want to see the government eliminate the current exemption from payment of telecommunications access charges for Internet service providers. If the government adopts any additional laws or regulations covering the use of the Internet, such actions could decrease the growth of the Internet. Any such reduction in the growth of the Internet may cause the value of our equity holdings to decrease and may negatively affect the companies which use our services. This could cause the demand for our services to be significantly reduced and raise the cost to us in providing those services. The cost to us of providing our services also may be increased if existing U.S. state and federal laws and foreign laws governing issues such as commerce, taxation, property ownership, defamation and personal privacy are increasingly applied to the Internet. Rapid Change in Technology and Distribution Channels Related to the Internet. The market for Envision's Internet products and services are characterized by rapidly changing technology, evolving industry standards, frequent new product and service introductions, shifting distribution channels, and changing customer demands. Envision's future success will depend on its ability to adapt to this rapidly changing marketplace. Envision may not be able to adequately adapt products and services or acquire new products and services that can compete successfully. Envision may not be able to establish and maintain effective distribution channels for its services. Failure to maintain competitive product and service offerings or effective distribution channels could have an adverse effect on Envision's business, results of operations and financial condition. To respond to the rapid technological changes occurring in Internet services, Envision may have to spend substantial amounts of money, and there is no guarantee that such expenditures will yield a positive investment return. Internet Security Risks. The secure transmission of confidential information over public telecommunications facilities is a significant barrier to electronic commerce and communications on the Internet. Many factors may cause compromises or breaches of security systems used by us and other Internet sites to protect proprietary information. A compromise of security on the Internet would materially negatively affect the use of the Internet for commerce and communications. This in turn would negatively affect our business. Circumvention of Envision's security measures could result in misappropriation of our proprietary information or cause interruptions of Envision's operations. Protecting against the threat of such security breaches may require us to expend significant amounts of capital and other resources. There can be no assurance that Envision's security measures will prevent security breaches. 7 9 Infrastructure of the Internet. The success of commercial use of the Internet depends in large part upon the development and maintenance of the Internet's infrastructure, including the development of complementary products such as various broadband technologies. The number of users of the Internet and the amount of traffic on the Internet has grown significantly and is expected to continue to grow. To the extent the number of users of the Internet and the amount of traffic on the Internet continue to increase there will be greater demands placed on the Internet's infrastructure. The Internet infrastructure may not be able to support the demands placed on it by this continued growth without the performance or reliability of the Internet being decreased. Any outages or delays in services could lower the level of Internet usage. In addition, the infrastructure and complementary products and services necessary to make the Internet a viable commercial marketplace may not develop. If usage of the Internet is curtailed due to infrastructure constraints or lack of complementary products, Envision expects an adverse impact on our business and revenues. Even if such infrastructure and complimentary products and services do develop, there can be no guarantee that the Internet will become a viable commercial marketplace for products and services such as those offered by Envision. Risk Factors -- Related to Control of Envision Stockholders of Envision. Upon completion of the contemplated acquisitions, the ownership interest of Envision's current shareholders will be diluted. While certain shareholders will continue to beneficially own or control a large amount of the outstanding shares of our common stock, one shareholder of Envision Mass and a former shareholder of Qui Vive will become holders of more than 5% of Envision common stock. Board of Directors of Envision. ZERO.NET, Inc., ("ZERO.NET") a busines-to-business internet holding company is the largest stockholder of the Company with 35.9% of the Envision's shares of common stock. BUSINESS OF perfumania.com As a subsidiary of Envision, perfumania.com operates an online store that specializes in the sale of fragrances, fragrance related products and bath and body products on a retail and wholesale basis. perfumania.com launched its online store in February 1999 and offers retail customers over 1,700 products at significant price discounts, including hard-to-find and discontinued brands. The business-to-business component of the online store offers products on a wholesale basis to the largely underserved market of smaller specialty retailers. Users can easily browse and locate products using perfumania.com's search engines. The online store offers personalized customer service, secure ordering, numerous shipping options and fast delivery. One of Envision's shareholders is Perfumania, Inc., a leading discount fragrance retailer that operates a chain of approximately 280 specialty fragrance stores. Envision's relationship with Perfumania, Inc. provides perfumania.com with the following advantages: - exclusive online use of the highly recognized Perfumania brand name, - cross marketing our online store with Perfumania, Inc., - access to Perfumania, Inc.'s extensive supply relationships, and - Perfumania, Inc.'s considerable fragrance industry experience and expertise. Industry Background Growth of the Internet and E-Commerce. The Internet has emerged as a global medium, enabling millions of people to share information, communicate and conduct business electronically. A leading technology research firm estimates that the number of worldwide Web users will grow to approximately 320 million by the end of 2002. This rapid growth represents a significant opportunity for businesses to advertise and sell products online to both consumers and businesses. Business-to-consumer online transactions were approximately $8.0 billion in 1998 and it is anticipated that online consumer transactions will increase to approximately $60.2 billion by 2003. A leading technology 8 10 research firm estimates that businesses bought and sold approximately $145.0 billion in goods over the Internet in 1999 and predicts that business-to-business e-commerce will grow to approximately $3.95 trillion by 2003. The Fragrance Industry. The traditional retail fragrance industry is fragmented with different competitive strategies used throughout. The industry includes upscale department stores which compete based on advertising and promotions, not on price, specialty retailers which compete based on pricing, and mass-market retailers and drug stores which emphasize convenience purchasing. Management believes that traditional fragrance retailers face a number of challenges in providing a satisfying shopping experience for consumers: - The number of SKUs and the amount of product inventory that a traditional retailer can carry in a store is constrained by the store's physical space, thereby limiting selection. - Limited shelf space and store layout constraints limit the merchandising flexibility of traditional retailers. - Due to the significant costs of carrying inventory in multiple store locations, traditional retailers focus their product selection on the most popular products that produce the highest inventory turns, thereby further limiting consumer selection. The unique characteristics of the Internet provide a number of advantages for retail and wholesale fragrance sellers. Online sellers are able to display a larger number of products than traditional store-based or catalog sellers at a lower cost. In addition, online sellers are able to frequently adjust their featured selections, editorial content and pricing, providing significant merchandising flexibility. Online sellers also benefit from the minimal cost to conduct business on the Internet, the ability to reach a large group of customers from a central location, and the potential for low-cost customer interaction. Unlike traditional channels, online sellers do not have the burdensome costs of managing and maintaining a retail store infrastructure or the significant printing and mailing costs of catalogs. Online sellers can also easily obtain demographic and behavioral data about customers, increasing opportunities for direct marketing and personalized services. Because brand loyalty is a primary factor influencing a fragrance purchase, a customer's presence at the point-of-sale and ability to physically sense the fragrance product are not critical to the purchasing decision. Shopping at the Online Store perfumania.com's online store provides its retail and wholesale customers with superior features, pricing and convenience. Browsing. The online store offers visitors several special features arranged in simple, easy-to-use formats intended to enhance product search, selection and discovery. By clicking on the permanently displayed products and product categories, users can move directly to the Web page that contains details about the particular products. Users can quickly browse promotions, such as perfumania.com's perfume of the month and other featured products. In addition, customers can browse the online store by linking to specially designed pages dedicated to products from well known national and specialty brands. Customers can also link to pages based on product category, such as women's brand name perfumes, men's brand name colognes, children's fragrances, gift set specials and bath and body products. Large Product Offerings. The online store offers customers a choice of over 1,700 designer and private label fragrances, fragrance related products and bath and body products for men and women at discounted prices. perfumania.com's products are sold for between $5 and $100 and include designer fragrances, fragrance related products, including moisturizers and powders, and bath and body products, including aromatherapy products, scented soaps, scented candles, body washes and massage products. Searching. The most prominent feature of the online store is the interactive, searchable catalog of our extensive line of products. The search capabilities allow users to search for a product by name or category. perfumania.com's "Perfumer Recommends" feature recommends fragrances for different seasons, social occasions, moods, activities and customers' preferences. In addition, for those customers who wish to try new 9 11 products, the online store offers several alternative fragrances similar to a customer's favorite brand or to high demand brands. Selecting Products and Checking Out. To purchase products, customers simply click on a button to add products to their virtual shopping cart. Customers can add and subtract products from their shopping cart as they browse around our store prior to making a final purchase decision, just as in a physical store. To execute orders, customers click on the checkout button and, depending upon whether the customer has previously shopped with perfumania.com, are prompted to supply shipping details online. perfumania.com also offers customers a variety of gift wrapping and shipping options during the checkout process. Prior to finalizing an order by clicking the submit order button, customers are shown their total charges along with the various options chosen, such as shipping method, at which point customers still have the ability to change their order or cancel it entirely. Paying. To pay for orders, a customer must use a credit card, which is authorized during the checkout process, but which is charged when perfumania.com ships the customer's items. The online store uses a security technology that works with the most common Internet browsers and makes it virtually impossible for unauthorized parties to read information sent by the customers. perfumania.com's system automatically confirms receipt of each order via e-mail within minutes and notifies the customer when perfumania.com ships the order, which is typically within one to two business days for in-stock items. Customer Service Features. perfumania.com believes that high levels of customer service and support are critical to retain and expand our customer base. perfumania.com monitors orders from the time they are placed through delivery by providing numerous points of electronic, telephonic and personal communication to customers. perfumania.com confirms all orders and shipments by e-mail. Its customer service representatives are readily available during regular business hours by telephone. Usage. The average daily page views, which represent the number of times per day our server delivers a page to a user, has grown consistently increasing from 5,103 views per day during February 1999 to approximately 68,418 views per day during February 2000. User sessions per day have grown from 769 shortly after launch of our online store to approximately 9,685 for February 2000. Marketing and Advertising perfumania.com has established a variety of relationships with several Internet sites to build traffic and attract customers, including Yahoo!. perfumania.com has an agreement with Yahoo! to promote and advertise its online store. perfumania.com has delivered to Yahoo! content about the online store that Yahoo! has agreed to insert onto its banners and on its search results page. perfumania.com gives Yahoo! discount coupons that can be used at the online store by members of the Yahoo! Birthday Club. perfumania.com intends to expand its use of these kinds of alliances in the future. perfumania.com strives to ensure that future alliances are cost-effective in terms of the potential customers to be acquired, potential revenue to be generated, level of exclusivity and brand exposure. perfumania.com sends e-mails to its customers advising them of its promotions and other pricing specials for their favorite fragrances. perfumania.com intends to continue to advertise in whichever forms of media proves most effective. Fulfillment and Inventory Management perfumania.com offers over 1,700 fragrances and fragrance related products, which it believes is a wider selection of products than offered by most traditional fragrance sellers. perfumania.com obtains most of its inventory from Perfumania, Inc., because they have offered the most favorable pricing and services to date. perfumania.com's relationship with its former parent gives it access to Perfumania, Inc.'s extensive network of suppliers, and perfumania.com may obtain inventory directly from these and other suppliers depending on which offers us the most favorable selection, pricing, quality and quantity terms. perfumania.com's inventory is stocked in its Miami, Florida facility. Products are generally shipped within 24 hours unless they are out-of-stock, in which case they are generally shipped within 48 to 96 hours. 10 12 Customers have numerous shipping options including overnight or international shipping. Orders not filled through our online network are processed by a telephone order group. Technology perfumania.com believes that it uses an advanced e-commerce platform. perfumania.com believes that its platform will allow it to grow rapidly while providing reliable, secure, and cost-effective e-commerce solutions. Its online store is hosted by USinternetworking in Annapolis, Maryland. perfumania.com's web site uses a Microsoft NT Server platform which was developed using the latest Microsoft technology to optimize the conducting of business online. perfumania.com has taken steps to prevent the failure of its mission-critical business applications. Routers, switches, firewalls, and servers associated with its Web sites are all deployed with backup or stand-by components so that it has at least six different paths to the Internet. perfumania.com's Web site uses USinternetworking's total security architecture. This architecture is specially designed and built to deliver Web-enabled enterprise applications and ensures that customer information is protected and that transactions are conducted securely over the Internet. USinternetworking has taken significant measures to provide customers with secure application hosting services. The security architecture is a layered approach that addresses security at every layer from the application down to the physical wire and ensures the primary aspects of security of confidentiality, integrity, and availability are addressed and that customer information is secure. perfumania.com's technology allows it to avoid Internet congestion as it has secured direct access to each of the six major Internet backbones in the U.S. This enables its customers to achieve LAN-like speeds for over 80% of all Internet connections, which makes roundtrip performance up to four times faster than can be achieved using traditional Internet service provider network architectures. The Web site's workload is distributed over a web server and a database server, both high-end Compaq machines. With this solution, perfumania.com can rapidly achieve its goal of implementing a fully scalable and a robust e-commerce Web site without investing in hardware, software, servers, or infrastructure. If, in the future, it becomes necessary to increase the capacity of the Web site, USinternetworking can easily do this for perfumania.com by adding new hardware. With a file replication system in place, identical Web sites can easily be hosted on multiple Web servers. With the addition of a Cisco Local Director switch, the workload can be dynamically balanced across the different Web servers. The high-performance switch is equipped with a failure mechanism that eliminates all points of failure for the Web server platform. Credit cards are authorized and processed securely using Cybercash, which handles the authorization in real time, while the shopper is online. If the authorization is successful, the user is presented with an order confirmation message and number, and the order information is written to a database at USinternetworking. Using perfumania.com's software package's accounting, merchandising and warehousing modules, fulfilling orders and running other aspects of the business is an efficient process. RF scanning technology is used when receiving goods from vendors, fulfilling orders and conducting inventory counts, making these processes more accurate and efficient. Its system prints packing slips and shipping labels and directs the fulfillment team to conduct efficient product picking and packing using the RF scanners' LED readout. Once the order is fulfilled and shipped, the customer is e-mailed a confirmation. perfumania.com's software package is capable of scaling very high, often running businesses much larger than itself. Competition perfumania.com's competition includes: - nationally known discount fragrance retailers such as Perfumania, Inc.; - competition from other retailers who seek to purchase high demand or limited supply products; 11 13 - web sites maintained by online retailers of fragrances and fragrance related products including fragrancecounter.com and fragrancenet.com; and - catalog retailers of fragrances and fragrance related products. perfumania.com believes that its ability to compete depends upon many factors, including: - the market acceptance of its online store and services; - the success of sales and marketing efforts; - the performance and reliability of its services; - the price of its products; and - the effectiveness of our customer service and support efforts. perfumania.com's competitors may be larger than itself and may have substantially greater financial, distribution and marketing resources. In addition, its competitors may be able to secure products from vendors on more favorable terms, fulfill customer orders more efficiently and adopt more aggressive pricing or inventory availability policies than perfumania.com can. Traditional retailers also enable customers to see, feel, and smell products in a manner that is not possible over the Internet. Some online competitors, including fragrancenet.com and fragrancecounter.com, may be able to use the Internet as a marketing medium to reach significant numbers of potential customers more effectively that perfumania.com can. perfumania.com's wholesale competitors may have more established distribution channels than perfumania.com and may have entered into exclusive supply arrangements with retailers who constitute part of perfumania.com's potential wholesale market. These factors may preclude perfumania.com from competing effectively in the wholesale fragrance distribution market. EMPLOYEES As of April 27, 2000, Envision employed 53 full-time employees. The loss of services of one or more of its key employees could damage the business of Envision. None of Envision's employees are represented by unions and Envision considers its relationship with its employees to be excellent. Envision believes that success is dependent on its ability to attract and retain qualified personnel in numerous areas, including software development. EXECUTIVE OFFICERS OF THE REGISTRANT
NAME AGE POSITION HELD - ---- --- ------------- William J. Patch....................... 53 Chief Executive Officer Michael E. Amideo...................... 30 Chief Financial Officer Alex Adamopoulos....................... 33 Executive Vice President, Technology and Development Tom Nolan.............................. 52 Vice President of Operations
William J. Patch. Mr. Patch is the Company's Chief Executive Officer. From January 2000 until April 2000, Mr. Patch was the President and Chief Operating Officer of the Company. Mr. Patch founded and has served as President of VP Incorporated since 1989. At VP, his responsibilities included developing and managing global enterprise network programs, professional services, logistics, acquisitions, sales, and strategic planning for clients including Compaq, Dell, IBM, Kodak, SonicAir/UPS, and dozens of smaller entrepreneurial companies. From 1976 to 1980, Mr. Patch was employed in a number of executive positions with Bell Atlantic Business Systems Services and its predecessor Sorbus Inc., including Vice President, marketing and sales. From 1972 to 1976, Mr. Patch was manager of equal employment opportunity for NCR Corporation. Michael E. Amideo. Mr. Amideo has served as the Chief Financial Officer and a director of the Company since June 1999 and as Secretary of the Company since January 2000. From July 1999 until 12 14 January 2000, he also served as the Company's Chief Operating Officer. From April 1999 to June 1999, Mr. Amideo served as controller of perfumania.com. From 1995 to 1999, Mr. Amideo was employed by PricewaterhouseCoopers LLP as a certified public accountant. From 1994 to 1995, Mr. Amideo was employed by Arthur Andersen LLP, as a certified public accountant. Alex Adamopoulos. Mr. Adamopoulos has served as Executive Vice President, Technology and Development at Envision since February 2000. From March 1999 to February 2000, Mr. Adamopoulos served as Chief Technology Officer for Biz2Net, Inc. From August 1998 to February 1999, he served as Chief Technology Officer of MicroAge. From February 1997 to August 1998, he served as Chief Technology Officer CIC Systems. Mr. Adamopoulos' responsibilities at Biz2Net, Inc., MicroAge and CIC Systems included overall management and responsibility for the technological direction of the companies, including strategic relationships, mergers and acquisitions, service delivery and solution selling methodology. From 1993 to 1997, Mr. Adamopoulos served in various capacities in Workgroup Solutions, Inc. and Omni Multimedia Group, Inc. Tom Nolan. Mr. Nolan has served as Vice President of Operations of the Company since February 2000. From 1995 to 2000, Mr. Nolan served as Vice President, Computer Services at Halifax Corporation. At Halifax, his responsibilities have included the developing and management of operations through a combination of key account initiatives, productivity enhancements, and expense control programs. Previously, Mr. Nolan served in various capacities for a number of companies, including Bell Atlantic. PROPERTIES Envision's administrative and warehouse facilities related to perfumania.com business are located in Miami, Florida and total approximately 20,000 square feet. The space is shared with Perfumania, Inc. pursuant to an intercompany services agreement between perfumania.com and Perfumania, Inc. Envision relocated a portion of its operations from Miami and is currently located in Marlboro, Massachusetts and has plans to relocate its corporate headquarters to Bridgewater, Massachusetts in 2000. The Company has executed a lease and development agreement with a developer for new corporate facilities in Bridgewater, Massachusetts. LEGAL PROCEEDINGS Envision is not presently involved in any material legal proceedings. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Envision did not submit any matter for the vote of security holders in the fourth quarter of the last fiscal year. 13 15 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Information. Our common stock currently is listed on the American Stock Exchange under the symbol "EDV". The following table sets forth, for the quarters indicated, the high and low sale prices of the common stock, as reported by the American Stock Exchange. For periods ended prior to February 14, 2000, the date on which Envision common stock began to be publicly traded in lieu of perfumania.com common stock, the high and low sales prices presented are the high and low sales prices for perfumania.com common stock were quoted on the American Stock Exchange under the symbol "PF."
HIGH LOW ---- --- FISCAL YEAR ENDED JANUARY 29, 2000 Third quarter (beginning September 29, 1999)................ $ 8 1/2 $ 5 3/4 Fourth quarter.............................................. $52 $ 6 3/4 FISCAL YEAR ENDING JANUARY 27, 2001 First quarter (through April 26, 2000)...................... $74 1/8 $37
Holders. As of April 26, 2000, there were 362 shareholders of record of the common stock. Dividends. Envision has not declared cash dividends since our inception and management does not anticipate paying any cash dividends in the foreseeable future, but intends instead to retain any future earnings for reinvestment in our business. Any future determination as to the payment of dividends will be made at the discretion of our Board of Directors and will depend upon our operating results, financial condition, capital requirements, general business conditions and such other factors as the Board of Directors deem relevant. 14 16 SELECTED FINANCIAL DATA The selected financial data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and notes thereto appearing herein. The selected statement of operations data for the period from January 7, 1999 through January 30, 1999 (the "Inception Period") and the fiscal year ended January 29, 2000 have been derived from our financial statements. STATEMENT OF OPERATIONS DATA:
FOR THE PERIOD FROM JANUARY 7, 1999 (DATE OF FISCAL INCEPTION) YEAR ENDED THROUGH JANUARY 29, JANUARY 30, 2000 1999 ------------ ---------------- Net sales................................................... $ 2,290,149 $ -- Cost of goods sold.......................................... 1,832,094 -- ------------ ---------- Gross profit................................................ 458,055 -- ------------ ---------- Operating expenses: General and administrative expenses....................... 3,234,910 60,245 Sales and marketing expenses.............................. 1,548,742 32,852 Web site development expenses............................. 196,673 18,146 Consulting fees........................................... 277,190 15,019 Management fees to affiliate.............................. 433,655 29,644 Consulting fees to related party.......................... -- 115,000 ------------ ---------- Total operating expenses.......................... 5,691,170 270,906 ------------ ---------- Loss from operations........................................ (5,233,115) (270,906) Interest income............................................. 180,886 -- Interest expense to affiliate............................... (176,238) (2,599) ------------ ---------- Net loss.................................................... $ (5,228,467) $ (273,505) ============ ========== Basic and diluted loss per common share..................... $ (0.89) $ (0.05) Basic and diluted weighted average common shares outstanding............................................... 5,844,780 5,000,000
BALANCE SHEET DATA:
JANUARY 29, JANUARY 30, 2000 1999 ------------ ----------- Cash and cash equivalents................................... $ 9,208,501 $ 100,000 Working capital (deficit)................................... 9,481,434 (287,708) Total assets................................................ 11,237,497 323,868 Due to affiliate............................................ 255,201 531,326 Shareholders' equity (deficit).............................. 9,717,809 (273,495)
15 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion may contain forward-looking statements. The Company's actual results could differ materially from those discussed in such forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this Annual Report on Form 10-K. The following discussion and analysis should be read in conjunction with the Financial Statements and the Notes thereto which appear elsewhere in this Annual Report Form 10-K. GENERAL perfumania.com was incorporated in January 1999 and launched its online store in February 1999. Operations during the period from January 7, 1999 through January 30, 1999 (the "Inception Period") resulted in net sales of $0 and a net loss of $274,000. For the fiscal year ended January 29, 2000, net sales and net loss totaled $2.3 million and $5.2 million, respectively. The loss during the inception period was attributable to the developmental nature of the business during the start-up phase. Perfumania, Inc. financed our operations from our inception on January 7, 1999 through the initial public offering in September 1999. These results are not indicative of the results that would have resulted had perfumania.com been operating as a separate stand-alone company during the periods presented. Since our inception, perfumania.com has incurred significant losses. Management believes that our operating expenses will significantly increase as a result of the financial commitments related to the development of marketing channels, future strategic relationships and other capital expenditures projected in developing the professional service. Management expects to incur losses and generate negative cash flow from operations for the foreseeable future. Our profitability primarily depends upon our ability to substantially increase revenues from professional consulting services. In view of the rapidly changing nature of our business and our limited operating history, management believes that our historical operating results are not necessarily meaningful and should not be relied upon as an indication of future performance. 16 18 RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, our results of operations in dollar and percentage of sales terms. OPERATIONS STATEMENT DATA:
FOR THE PERIOD FROM FISCAL JANUARY 7, 1999 YEAR ENDED (DATE OF INCEPTION) THROUGH JANUARY 29, 2000 JANUARY 30, 1999 ---------------------------- --------------------------- Net sales.................................... $ 2,290,149 100.0% $ -- * Cost of goods sold........................... 1,832,094 80.0% -- * ----------- ------ ----------- ------ Gross profit................................. 458,055 20.0% -- * ----------- ------ ----------- ------ Operating expenses: General and administrative expenses........ 3,234,910 141.3% 60,245 * Sales and marketing expenses............... 1,548,742 67.6% 32,852 * Web site development expenses.............. 196,673 8.6% 18,146 * Consulting fees............................ 277,190 12.1% 15,019 * Management fees to affiliate............... 433,655 18.9% 29,644 * Consulting fees to related party........... -- 115,000 * ----------- ------ ----------- ------ Total operating expenses........... 5,691,170 248.5% 270,906 * ----------- ------ ----------- ------ Loss from operations......................... (5,233,115) (228.5)% (270,906) * Interest income.............................. 180,886 7.9% -- * Interest expense to affiliate................ (176,238) (7.7)% (2,599) * ----------- ------ ----------- ------ Net loss..................................... $(5,228,467) (228.3)% $ (273,505) * =========== ====== =========== ====== Basic and diluted loss per common share...... $ (0.89) $ (0.05) Basic and diluted weighted average common shares outstanding......................... 5,844,780 5,000,000
- --------------- * Percentage of net sales is not meaningful due to $0 revenue for the inception period. 17 19 RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED JANUARY 29, 2000 COMPARED TO THE INCEPTION PERIOD Net sales. Net sales includes the sale of our fragrances and fragrance related products, net of discounts and returns. Net sales for the fiscal year ended January 29, 2000 were $2,290,100. There were no sales during the inception period. During the fiscal year ended January 29, 2000, net sales included $378,000 of wholesale sales. The resulting net sales for the fiscal year ended January 29, 2000 were attributable to the launch of the online store subsequent to the inception period. Cost of goods sold. Cost of goods sold consists primarily of the cost of merchandise sold plus shipping costs. Cost of goods sold for the fiscal year ended January 29, 2000 was $1,832,100. There was no cost of goods sold during the inception period. During the fiscal year ended January 29, 2000, cost of goods sold included $215,000 of wholesale sales. The resulting cost of good sold for the fiscal year ended January 29, 2000 was attributable to the launch of the online store subsequent to the inception period. Gross profit. For the fiscal year ended January 29, 2000, gross profit was $458,100 or 20.0% of net sales compared to $0 during the inception period. Gross profit for the fiscal year ended January 29, 2000, included $163,000 of gross profit from perfumania.com's wholesale division, representing 7.1% of net sales. General and administrative expenses. General and administrative expenses consist of payroll and related expenses for executive, accounting and administrative personnel, recruiting, professional fees and other general corporate expenses. General and administrative expenses for the fiscal year ended January 29, 2000 increased to $3,234,900 from $60,200 for the inception period. The increase was attributable to the hiring of additional personnel to support the growth of Envision, the payment of approximately $600,000 in compensation following the termination of employment of the previous chief executive officer, sign-on bonuses of $322,900 for three of its executive officers and increased professional fees, as well as the length of the inception period compared to the full year of results being reported in 2000. General and administrative expenses will continue to increase as our staff expands and incurs additional costs to support the growth of the business. Sales and marketing expenses. Sales and marketing expenses consist of expenditures related to advertising and promotion. Marketing and advertising expenses for the fiscal year ended January 29, 2000 increased to $1,548,700 from $32,900 for the inception period. During February 1999, perfumania.com began a cross-marketing campaign with Perfumania, Inc. that it intends to continue. perfumania.com expects to expand its marketing efforts and, as a result, it is expected that marketing expenses will continue to increase. Web site development expenses. Web site development expenses consist principally of expenses for development of our Web site, network operations and systems and telecommunications infrastructure. Web site development expenses for the fiscal year ended January 29, 2000 increased to $196,700 from $18,100 for the inception period. This amount reflects the staffing and associated costs related to building and enhancing our online store and transaction-processing systems, as well as our investment in systems and telecommunications infrastructure. Web site development expenses are expected to increase as perfumania.com continues to enhance its online store and expand our staff. Consulting fees. Consulting fees consist primarily of amounts paid to various technical and managerial consultants for services provided in the development of perfumania.com. For the period from January 7, 1999 to January 30, 1999, consulting fees were $130,000. Consulting fees for the year ended January 29, 2000, amounted to $277,200. Management fees to affiliate. Management fees consist primarily of expenses, which have been allocated to perfumania.com by Perfumania, Inc., for costs associated with resources it shares. These fees consist primarily of the pro-rata cost of rent, utilities and facilities maintenance. Management fees for the fiscal year ended January 29, 2000 increased to $433,700 from $29,600 for the inception period. The increase was attributable to the increase in resources necessary to support the growth of the perfumania.com. Effective May 1, 1999, perfumania.com and Perfumania, Inc. entered into an intercompany services agreement covering these services. 18 20 Net loss. As a result of the factors discussed above, primarily relating to the significant initial investments made in establishing and developing our web site, which included among others, the marketing and advertising of our site and attracting competitive personnel, the net loss for the fiscal year ended January 29, 2000 increased to $5,228,500 from $273,500 for the inception period. Management anticipates to continue to incur losses in the foreseeable future. LIQUIDITY AND CAPITAL RESOURCES On September 29, 1999, perfumania.com completed its initial public offering and received net proceeds of approximately $16,100,000, net of underwriting discounts and commission expenses. Prior to its initial public offering, perfumnia.com's primary source of liquidity had been advances from Perfumania, Inc. perfumania.com used approximately $3,300,000 of the public offering net proceeds to repay the advances from Perfumania, Inc. At January 29, 2000, Envision had a working capital of $9,481,400, compared to a deficit of $287,700 at January 30, 1999. The increase in working capital was due to the completion of perfumania.com's initial public offering offset by results of operations. Net cash used in operating activities was $5,408,700 for the fiscal year ended January 29, 2000, compared to cash used in operating activties of $196,300 during the inception period. The difference between Envision's net loss of $5,228,500 for the fiscal year ended January 29, 2000, and its operating cash flow was due primarily to a $1,466,100 increase in inventory, an increase of $141,300 in accounts receivable and prepaid expenses, offset by non-cash items such as depreciation and amortization and impairment of long-term assets and an increase in accounts payable and accrued expenses of $1,198,500. Net cash used in investing activities for the fiscal year ended January 29, 2000 was $360,300. These expenditures are primarily related to the purchase of computer equipment and $50,000 for the acquisition of PostAcard.com from Perfumania, Inc. Net cash provided by financing activities was $14,877,500 for the fiscal year ended January 29, 2000, compared to $310,600 during the inception period. In September 1999, the perfumnia.com completed its initial public offering and received proceeds of $16,100,000, net of $1,400,000 in underwriting discounts and commissions, from the sale of 2,500,000 shares of its common stock. perfumania.com used approximately $3,344,000 of the proceeds to repay advances from Perfumania, Inc. Additionally, perfumania.com incurred approximately $496,000 in other costs in connection with the offering. Also, during 1999, Envision acquired certain assets of PostAcard.com, primarily an e-commerce greeting card website, from Perfumania, Inc. for $500,000 in cash, of which $450,000 was recorded as a reduction to additional paid in capital and considered as a dividend to Perfumania, Inc. Management of Envision expects to use the remaining proceeds for working capital, general corporate purposes, and expansion of the Company's operations, including potential acquisitions. Pending completion of such uses, Envision has invested the net proceeds of the offering in high-quality short-term, interest bearing investment-grade debt securities, certificates of deposit or direct or guaranteed obligations of the United States. perfumania.com's principal capital requirements are to acquire merchandise, maintain and improve our online store and engage in advertising and promotional activities. perfumania.com's long-term capital requirements beyond this period will depend on numerous factors, including, but not limited to, the following: - The rate of market acceptance of the online store; - The ability to expand our customer base; - The cost of upgrades to our online store; and - The level of expenditures for sales and marketing and other factors. 19 21 Envision's principal capital requirements are to: - Build-out our technical infrastructure so that we can rapidly fulfill future engagements and increase our development efficiency; - Continue and expand development of new technologies so that we can increase our competitiveness and gross margins; - Extend and intensify our marketing efforts so that we can achieve a leading position in the ebusiness Solution Provider category and achieve our revenue growth objectives; - Fund future strategic acquisitions; and - Provide working capital in order to achieve our business objectives. The Company has a history of significant operating losses and its future capital needs may exceed its current financial resources. The Company also anticipates continuing operating losses in the future and presently is unable to predict when it may become profitable, if at all. As a result of the foregoing, a significant shareholder of the Company has committed to fund the Company's operations and cash requirements through May 31, 2001. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"). Among other provisions, SFAS No. 133 establishes accounting and reporting standards for derivative instruments and for hedging activities. It also requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. SFAS No. 133 is effective for financial statements for fiscal years beginning after June 15, 2000. Management has not determined the effect, if any, of adopting SFAS No. 133. YEAR 2000 Envision has had no disruption to its operations to date as a result of the Year 2000 issue. The Year 2000 issue results from computer systems using two digits rather than four to represent the year so that a date using "00" is recognized as the year 1900 rather than the year 2000. This situation may disrupt the smooth operation of both our and third party computer systems. Envision has assessed the Year 2000 exposure and completed a program to ascertain our systems were Year 2000 compliant during 1999. A plan of communication with significant business partners was developed to obtain appropriate assurances that their Year 2000 issues are resolved in a timely manner. The remediation costs to date have not been material and it is not anticipated that any future remediation costs will have a material effect on the Company's financial position or results of operations. However, the Company may be exposed to incur significant costs if unanticipated internal or external Year 2000 compliance issues arise. Despite assurances from outside parties, there is no assurance that vendors, suppliers and customers have resolved all Year 2000 issues. Given the responses from our internal vendor compliance effort and our experience thus far in 2000, the Company believes it will be highly unlikely that a large number of outside parties will experience any significant problems due to unresolved Year 2000 issues. Envision has contingency plans to address situations that may result if a Year 2000 issue is encountered in a critical application system. Those contingency plans cover the disruption of Perfumania, Inc.'s internal inventory management system, the inability of vendors, principal suppliers and other third party providers to achieve Year 2000 compliance and the disruption of the Web pages and communications links affecting the online store. If both our solutions and contingency plans fail for a critical system for a prolonged period, the impact on our business, financial condition, results of operations and prospects for growth would be material. 20 22 SEASONALITY perfumania.com operations are expected to fluctuate according to the retail industry seasonalities. IMPACT OF INFLATION The primary inflationary factor affecting our operations is increased labor costs. Competition for qualified personnel could increase labor costs for us in the future. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK None. 21 23 FINANCIAL STATEMENTS
PAGE ---- Report of Independent Certified Public Accountants.......... 23 Balance Sheets as of January 29, 2000 and January 30, 1999...................................................... 24 Statements of Operations for the Year Ended January 29, 2000 and for the Period from January 7, 1999 (date of inception) through January 30, 1999....................... 25 Statements of Changes in Shareholders' Equity (Deficit) for the Year Ended January 29, 2000 and for the Period from January 7, 1999 (date of inception) through January 30, 1999...................................................... 26 Statements of Cash Flows for the Year Ended January 29, 2000 and for the Period from January 7, 1999 (date of inception) through January 30, 1999....................... 27 Notes to Financial Statements............................... 28
22 24 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors and Shareholders of Envision Development Corporation: In our opinion, the accompanying balance sheets and the related statements of operations, shareholders' equity (deficit) and cash flows present fairly, in all material respects, the financial position of Envision Development Corporation (successor to perfumania.com, inc.) (the "Company") at January 29, 2000 and January 30, 1999 and the results of its operations and its cash flows for the year ended January 29, 2000 and for the period from January 7, 1999 (date of inception) through January 30, 1999 in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of the financial statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Miami, Florida April 28, 2000 23 25 ENVISION DEVELOPMENT CORPORATION (SUCCESSOR TO PERFUMANIA.COM, INC.) BALANCE SHEETS
JANUARY 29, JANUARY 30, 2000 1999 ----------- ----------- ASSETS Current assets: Cash and cash equivalents................................. $ 9,208,501 $ 100,000 Accounts receivable....................................... 38,937 -- Inventories............................................... 1,651,327 209,655 Prepaid expenses and other current assets................. 102,357 -- ----------- --------- Total current assets.............................. 11,001,122 309,655 Property and equipment, net................................. 236,375 14,213 ----------- --------- Total assets...................................... $11,237,497 $ 323,868 =========== ========= LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities: Amounts due to affiliate.................................. $ 255,201 $ 531,326 Accounts payable and accrued expenses..................... 1,264,487 66,037 ----------- --------- Total current liabilities......................... 1,519,688 597,363 ----------- --------- Commitments and contingencies Shareholders' equity (deficit): Preferred stock, $0.01 par value, 5,000,000 shares authorized, 0 shares issued and outstanding........................ -- -- Common stock, $0.01 par value, 20,000,000 shares authorized, 7,500,000 and 5,000,000 shares issued and outstanding, respectively........................................... 75,000 50,000 Additional paid in capital................................ 15,194,771 -- Accumulated deficit....................................... (5,551,962) (323,495) ----------- --------- Total shareholders' equity (deficit).............. 9,717,809 (273,495) ----------- --------- Total liabilities and shareholders' equity (deficit)....................................... $11,237,497 $ 323,868 =========== =========
The accompanying notes are an integral part of these financial statements. 24 26 ENVISION DEVELOPMENT CORPORATION (SUCCESSOR TO PERFUMANIA.COM, INC.) STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM JANUARY 7, FOR THE 1999 (DATE OF YEAR ENDED INCEPTION) JANUARY 29, THROUGH 2000 JANUARY 30, 1999 ----------- ---------------- Net sales................................................... $ 2,290,149 $ -- Cost of goods sold.......................................... 1,832,094 -- ----------- ---------- Gross profit................................................ 458,055 -- ----------- ---------- Operating expenses: General and administrative expenses....................... 3,234,910 60,245 Sales and marketing expenses.............................. 1,548,742 32,852 Web site development expenses............................. 196,673 18,146 Consulting fees........................................... 277,190 15,019 Management fees to affiliate.............................. 433,655 29,644 Consulting fees to related party.......................... -- 115,000 ----------- ---------- Total operating expenses.......................... 5,691,170 270,906 ----------- ---------- Loss from operations........................................ (5,233,115) (270,906) Interest income............................................. 180,886 -- Interest expense to affiliate............................... (176,238) (2,599) ----------- ---------- Net loss.................................................... $(5,228,467) $ (273,505) =========== ========== Basic and diluted loss per common share..................... $ (0.89) $ (0.05) Basic and diluted weighted average common shares outstanding............................................... 5,844,780 5,000,000
The accompanying notes are an integral part of these financial statements. 25 27 ENVISION DEVELOPMENT CORPORATION (SUCCESSOR TO PERFUMANIA.COM, INC.) STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
COMMON STOCK ADDITIONAL --------------------- PAID IN ACCUMULATED SHARES AMOUNT CAPITAL DEFICIT TOTAL ---------- -------- ----------- ----------- ----------- Balance at January 7, 1999 (date of inception)............ 1,000 $ 10 $ -- $ -- $ 10 Net loss from the period from January 7, 1999 (date of inception) through January 30, 1999..................... -- -- -- (273,505) (273,505) 5,000-for-1 stock split................................... 4,999,000 49,990 -- (49,990) -- ---------- -------- ----------- ----------- ----------- Balance at January 30, 1999............................... 5,000,000 50,000 -- (323,495) (273,495) Net loss.................................................. -- -- -- (5,228,467) (5,228,467) Issuance of common stock warrants in exchange for services................................................ -- -- 66,150 -- 66,150 Issuance of common stock through an initial public offering, net of expenses of $1,896,379................. 2,500,000 25,000 15,578,621 -- 15,603,621 Dividend to affiliate..................................... -- -- (450,000) -- (450,000) ---------- -------- ----------- ----------- ----------- Balance at January 29, 2000............................... 7,500,000 $ 75,000 $15,194,771 $(5,551,962) $ 9,717,809 ========== ======== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 26 28 ENVISION DEVELOPMENT CORPORATION (SUCCESSOR TO PERFUMANIA.COM, INC.) STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 7, 1999 (DATE OF FOR THE INCEPTION) YEAR ENDED THROUGH JANUARY 29, 2000 JANUARY 30, 1999 ---------------- ----------------- Cash flows from operating activities: Net loss.................................................. $(5,228,467) $(273,505) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization.......................... 17,673 95 Impairment of long-term assets......................... 120,452 -- Other.................................................. 24,414 11,035 Charge for warrants issued in exchange for services.... 66,150 -- Changes in operating assets and liabilities, net of acquisitions: Accounts receivable.................................. (38,937) -- Inventories.......................................... (1,466,086) -- Prepaid expenses and other current assets............ (102,357) -- Accounts payable and accrued expenses................ 1,198,450 66,037 ----------- --------- Net cash used in operating activities....................... (5,408,708) (196,338) ----------- --------- Cash flows from investing activities: Capital expenditures...................................... (310,287) (14,308) Acquisition from affiliate................................ (50,000) -- ----------- --------- Net cash used in investing activities....................... (360,287) (14,308) ----------- --------- Cash flows from financing activities: Issuance of common stock, net of transaction costs of $1,896,379............................................. 15,603,621 -- Dividend to affiliate..................................... (450,000) -- (Payments to) borrowings from affiliate, net.............. (276,125) 310,646 ----------- --------- Net cash provided by financing activities................... 14,877,496 310,646 ----------- --------- Net increase in cash and cash equivalents................... 9,108,501 100,000 Cash and cash equivalents, beginning of period.............. 100,000 -- ----------- --------- Cash and cash equivalents, end of period.................... $ 9,208,501 $ 100,000 =========== ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest to affiliate..................................... $ 176,238 $ -- =========== =========
The accompanying notes are an integral part of these financial statements. 27 29 ENVISION DEVELOPMENT CORPORATION (SUCCESSOR TO PERFUMANIA.COM, INC.) NOTES TO FINANCIAL STATEMENTS NOTE 1 -- NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES On January 7, 1999, perfumania.com, inc. ("perfumania.com") was created as a wholly-owned subsidiary of Perfumania, Inc. (the "Affiliate"). The Affiliate is a wholly-owned subsidiary of E Com Ventures, Inc. perfumania.com operates an online store that specializes in the sale of fragrances, fragrance related products and bath and body products on a retail and wholesale basis. perfumania.com launched its online store in February 1999. On September 29, 1999, perfumania.com completed its initial public offering (see Note 2). On January 11, 2000, a change in control of perfumania.com occurred when Alta Limited ("Alta") exercised an option to purchase from the Affiliate 2,000,000 shares of common stock of perfumania.com at a price of $6.00 per share pursuant to an Option Agreement, dated December 10, 1999, among the Affiliate, Alta and the optionees who are signatories thereto. In connection with such exercise, Alta nominated two directors to the Board of Directors of perfumania.com and an additional four directors were added by the Board of Directors effective upon the expiration of the waiting requirements of Rule 14f-1 under the Securities Exchange Act of 1934, as amended. Under the Option Agreement, Alta has a second option to purchase 500,000 shares of common stock of Envision at a price of $8.00 per share on or prior to the earlier to occur of December 31, 2000 or various other events, as defined in the Option Agreement. On February 10, 2000, Envision Development Corporation (the "Company") was formed in the State of Florida. The Company entered into a plan of merger with perfumania.com and EDC Sub, Inc., a Florida corporation and wholly-owned subsidiary of the Company on February 10, 2000. The plan of merger provided for, among other things, the merger of EDC Sub, Inc. with perfumania.com, with perfumania.com as the surviving corporation. As a result, perfumania.com became a direct wholly-owned subsidiary of the Company. The Company does not have any present significant operations itself or through any other subsidiary, except for the operations of perfumania.com. In addition, each share of common stock, par value $0.01 per share, of perfumania.com issued and outstanding before the reorganization was converted into and exchanged for one share of common stock, par value $0.01 per share, of the Company. Consequently, shareholders of perfumania.com became shareholders of the Company and ceased to be shareholders of perfumania.com. Pursuant to Florida Statutes, shareholder approval of this reorganization was not required, and the reorganization was tax-free for Federal income tax purposes to perfumania.com's shareholders. A summary of the significant accounting policies followed in the preparation of the accompanying financial statements is presented below: Fiscal year-end. The Company's fiscal year ends the Saturday closest to January 31 to enable the Company's operations to be reported in a manner which more closely coincides with general retail reporting practices and the financial reporting needs of the Company. Management's estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management fees. Management fees reflected in the statements of operations represent shared expenses which have been allocated to the Company by the Affiliate for costs associated with resources it shares with the Affiliate using the proportional cost allocation method. Such allocations include the prorata share of the rent, utilities, facilities, maintenance, and administrative services provided by the Affiliate. Prorata amounts of rent, utilities and facilities expense were determined based on the square footage utilized by the Company 28 30 ENVISION DEVELOPMENT CORPORATION (SUCCESSOR TO PERFUMANIA.COM, INC.) NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) while administrative services charges by the Affiliate were determined based on the prorata share of time spent by the Affiliate's administrative personnel. Although no formal agreement existed through May 1, 1999, management believes these allocations are reasonable. The financial statements of the Company do not necessarily reflect the results of operations or financial position that would have existed had the Company been independent of the Affiliate, however, management believes that these fees are representative of the fair value of the services provided. Effective May 1, 1999, the Company entered into an intercompany services agreement (the "Agreement") with its Affiliate. Under the terms of the Agreement, the Company will pay various management fees to the Affiliate as follows: for corporate services, the monthly fee is fixed at $10,000 unless monthly gross sales exceed $50,000, at which time, the monthly fee will amount to $10,000 plus two percent of the Company's monthly gross sales; for fulfillment services, the fee is equal to three percent of the costs of goods sold by the Company and serviced by the Affiliate; for advertising services, the fee ranges between 20% to 50% of the cost of the advertisement incurred by the Affiliate; for shared facilities, the fee is equal to a proportionate share of the facility costs incurred by the Affiliate, initially 15%; and for inventory purchases, the purchase price is equal to 105% of the Affiliate's cost of such inventory. Management fees for the year ended January 29, 2000, amounted to $433,655. Sales and marketing expense. Sales and marketing expenses, which consist primarily of advertising and promotional costs, are charged to operations as incurred. Web site development expenses. Web development expenses consist principally of expenses incurred for the development of the Company's web site and are expensed as incurred. These costs are primarily covered under a service agreement with a software and network developer providing web hosting services. Revenue recognition. The Company's revenues are derived principally from the sale of products over the internet. Revenue and related costs are recognized upon delivery of goods, net of discounts and returns. Sales from electronic commerce transactions accounts for 84% of net sales for the year ended January 29, 2000. No one customer accounted for 10% or more of net revenues during the year ended January 29, 2000. Loss per share. Basic loss per common share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per common share include the dilutive effect of stock options using the treasury stock method. The difference between the weighted average common shares outstanding used to calculate basic and diluted earnings per share relates to stock options assumed exercised under the treasury method of accounting. Potentially dilutive shares as of January 29, 2000 not included in the diluted per share calculation include 224,244 shares because their effects would be anti-dilutive due to the loss incurred by us. Accordingly, for the year ended January 29, 2000 and the period from January 7, 1999 through January 30, 1999, diluted net loss per common share is the same as basic net loss per common share. Cash and cash equivalents. Short-term investments with maturities of three months or less are considered to be cash equivalents. Inventories. Inventories, consisting of finished goods, are carried at the lower cost or market, cost being determined on a moving average cost basis. Inventories include product costs, freight and insurance charges. Property and equipment. Property and equipment are recorded at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the respective assets. Expenditures for repairs and maintenance are charged to expense as incurred. Intangibles and other long lived assets. Assets and liabilities acquired in connection with business combinations accounted for under the purchase method are recorded at their respective estimated fair values. Goodwill represents the excess of the purchase price over the estimated fair value of net assets acquired, 29 31 ENVISION DEVELOPMENT CORPORATION (SUCCESSOR TO PERFUMANIA.COM, INC.) NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) including the recognition of applicable deferred taxes. At January 29, 2000, the Company had no recorded goodwill. The Company reviews long-lived assets, identifiable intangibles and goodwill and record an impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future discounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets or expected future cash flows on an undiscounted basis. The Company determined that the carrying amount of the Company's goodwill and other long-term assets was not recoverable; therefore, an impairment of approximately $120,000 was recorded as general and administrative expenses in the accompanying statement of operations for the year ending January 29, 2000. Income taxes. The Company records income taxes using the liability method of accounting for deferred income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequence of temporary differences between the financial statement and income tax bases of assets and liabilities. A valuation allowance is established when it is more likely than not that any or all of the deferred tax assets will not be realized. Prior to the change in control that occurred in January 2000, the Company filed a consolidated U.S. Federal income tax return with its Affiliate. Fair value of financial instruments. The Company's short-term financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, consist primarily of instruments without extended maturities, the fair value of which, based on management's estimates, equaled their carrying values. Due to Affiliate. Amounts due to Affiliate include accounts payable primarily for inventory and management fees. Such amounts have similar terms as with other suppliers which are due in 30 days. Interest is charged at 12.5% per annum. Total interest expense approximated $176,200 for the year ended January 29, 2000 and $2,600 during the period from January 7, 1999 through January 30, 1999. Concentration of risk. The Company operates an online store that specializes in the sale of fragrances, fragrance-related products and bath and body products. The Company has relied upon its Affiliate to provide corporate, fulfillment, inventory supply, advertising space-sharing and other administrative services through an intercompany agreement. Accordingly, a significant portion of the inventory sold since inception is purchased from the Affiliate at an amount equal to the Affiliate's cost plus five percent. The inability of the Affiliate to adequately provide these services or the failure of the Company to develop management and financial systems and alternative sources of inventory supply could adversely impact the Company's financial position or results of operations. The Company's principal competitors include department stores, discount perfume retailers, on-line retailers, catalog retailers and other retailers. Many of the Company's competitors are larger in scope and have greater financial and marketing resources. Recent accounting pronouncements. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"). Among other provisions, SFAS No. 133 establishes accounting and reporting standards for derivative instruments and for hedging activities. It also requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS No. 133 is effective for financial statements for fiscal years beginning after June 15, 2000. Management has not determined the effect, if any, of adopting SFAS No. 133. 30 32 ENVISION DEVELOPMENT CORPORATION (SUCCESSOR TO PERFUMANIA.COM, INC.) NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) NOTE 2 -- INITIAL PUBLIC OFFERING In September 1999, perfumania.com completed its initial public offering of its common stock (the "Offering"), in which perfumania.com and its Affiliate sold 3,500,000 shares of common stock at an offering price of $7.00 per share. Of the 3,500,000 shares of common stock, 2,500,000 shares of common stock were sold by perfumania.com. perfumania.com received proceeds of approximately $16,100,000, net of $1,400,000 underwriting discounts and commissions. perfumania.com used approximately $3,344,000 of the proceeds to repay advances from the Affiliate. Additionally, perfumania.com incurred approximately $496,000 in other costs in connection with the Offering. In connection with the Offering, perfumania.com granted common stocks warrant to the underwriters to purchase 350,000 shares of common stock at an exercise price of $9.80 per share. The common stock warrants can be exercised at any time for a period of five years. NOTE 3 -- ACQUISITION On October 31, 1999, perfumania.com acquired certain assets of PostAcard.com, primarily an e-commerce greeting card website, from the Affiliate for $500,000 in cash. The acquisition has been recorded at the Affiliate's historical cost of $50,000 and the excess was treated as a dividend to the Affiliate. The acquisition was accounted for using the purchase method of accounting and since PostAcard.com had no tangible assets the Affiliate's historical cost was recorded as goodwill. Subsequent to its acquisition, perfumania.com determined that the carrying amount recorded was not recoverable; therefore, an impairment charge was recorded in the accompanying statement of operations. PostAcard.com had no significant operations for the year ended January 29, 2000. NOTE 4 -- PROPERTY AND EQUIPMENT, NET Property and equipment, net is comprised of the following as of January 29, 2000 and January 30, 1999:
ESTIMATED USEFUL JANUARY 29, JANUARY 30, LIVES (IN 2000 1999 YEARS) ----------- ----------- ------------- Furniture, fixtures and equipment.................... 54,119 -- 5 Computer equipment and software...................... 200,024 14,308 3 -------- -------- 254,143 14,308 Accumulated depreciation............................. (17,768) (95) -------- -------- $236,375 $ 14,213 ======== ========
Depreciation expense for the year ended January 29, 2000 and the period from January 7, 1999 (date of inception) through January 30, 1999 approximated $18,000 and $95, respectively. NOTE 5 -- COMMITMENTS Effective April 15, 1999, perfumania.com entered into a 36 month service agreement with a software and network developer providing web hosting services. Pursuant to the agreement, perfumania.com must remit 36 equal monthly installments of $14,200. Under the term of the service agreement, in return for displaying the network developer's corporate logo on perfumania.com's web page, perfumania.com shall receive a marketing credit of $1,700 per month, resulting in a net monthly web hosting service fee of $12,500 per month. perfumania.com is subject to an early termination fee of $201,165 if cancelled within the first 12 months and $100,583 if cancelled after 24 months of service. The net monthly web hosting service fee is expensed as incurred and is reflected in web site development expenses in the accompanying financial statements. 31 33 ENVISION DEVELOPMENT CORPORATION (SUCCESSOR TO PERFUMANIA.COM, INC.) NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) In May 1999, perfumania.com entered into an employment agreement with its then chief executive officer and president for a five year initial term. Total annual base salary is $200,000. A total of 225,000 common stock options were granted at an exercise price equal to the initial public offering price of $7.00 per share. These options vested immediately at the date of grant. Upon change of control of perfumania.com, the president is entitled to a lump sum payment equal to three times the annual base salary. Due to the change in control that took effect on January 11, 2000, the then president received a lump sum payment of $600,000. Such amount has been recorded as general and administrative expenses in the accompanying statement of operations for the year ended January 29, 2000. Four of the Company's officers have employment agreements which provide for aggregate base salaries of $715,000. The agreements expire at various dates from January 2003 through February 2004. The officers are eligible for an annual bonus, payable in the Company's stock or cash, based upon such criteria as may be established in advance by the Board of Directors. NOTE 6 -- RELATED PARTY TRANSACTIONS perfumania.com has purchased a majority of the inventory sold since inception from the Affiliate at an amount equal to the Affiliate's cost plus five percent. For the year ended January 29, 2000 and the period from January 7, 1999 (date of inception) through January 30, 1999, such purchases totaled approximately $1,748,000 and $220,000, respectively. perfumania.com is charged for various services provided by the Affiliate including administrative, distribution and other services. Such charges were approximately $434,000 and $30,000 for the year ended January 29, 2000 and for the period from January 7, 1999 (date of inception) to January 30, 1999, respectively, and are classified as management fees in the accompanying statements of operations. Purchases of inventory and expenses charged by the Affiliate are not necessarily indicative of costs and expenses which might have been incurred had perfumania.com been operating as a separate, or stand-alone company. Management believes that all operating costs incurred by the Affiliate on behalf of perfumania.com are reflected in the accompanying financial statements. perfumania.com's former Chief Executive Officer (the "former CEO") provided consulting services to perfumania.com amounting to $50,000 during the period from January 7, 1999 (date of inception) through January 30, 1999. In addition, a party related to the former CEO provided consulting services to perfumania.com amounting to $65,000 during the period from January 7, 1999 (date of inception) through January 30, 1999. These consulting services were not subject to a written consulting agreement. Management believes that these amounts are representative of the time both parties spent in providing these consulting services to perfumania.com during the respective period. Both of these amounts are included in consulting fees in the accompanying statement of operation during the period from January 7, 1999 (data of inception) through January 30, 1999. NOTE 7 -- STOCK OPTION PLAN Effective May 1, 1999, the Company adopted the 1999 Incentive Stock Option Plan (the "Plan"). Officers, key employees and nonemployee consultants may be granted stock options, stock appreciation rights, stock awards, performance shares and performance units under the Plan. The Company has reserved 1,000,000 shares of common stock for issuance under the Plan. Prior to establishment of a Compensation Committee (the "Committee") of the Board of Directors, the Plan was administered by the Board of Directors of the Company. The Board of Directors or the Committee was authorized to determine, among other things, the key employees to whom, and the time at which, options and other benefits were granted, the number of shares subject to each option, the applicable vesting schedule 32 34 ENVISION DEVELOPMENT CORPORATION (SUCCESSOR TO PERFUMANIA.COM, INC.) NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) and the exercise price. The Board of Directors or the Committee will determine the treatment to be afforded to a participant in the Plan in the event of termination of employment for any reason, including death, disability or retirement. Under the Plan the maximum term of an incentive stock option is 10 years and the maximum term of a nonqualified stock option is 10 years. The Board of Directors has the power to amend the Plan from time to time. Shareholder approval of an amendment is only required to the extent that it is necessary to maintain the Plan's status as a protected plan under applicable securities laws or the Plan's status as a qualified plan under applicable tax laws. Options to purchase an aggregate of 740,000 have been granted under the Plan to employees and non-employee director nominees of the Company before January 11, 2000, the change in control date. These options have a total term of ten years. Of the total options to purchase shares granted under the Plan before the change in control date, 460,000 options vested immediately on the date of grant, and options to purchase 280,000 shares had vesting as follows: 16.67%, 33.33% and 50.0% of the total number of shares granted on the first, second and third anniversary of the date of grant, respectively. Given the change in control that occurred in January 2000, the 280,000 options became 100% vested in accordance with the Plan provisions of change in control. After the change in control date, the Company has granted 1,496,547 options to purchase shares of the Company common stock, exceeding the current Plan limits by 1,236,547 options. These options in excess of the current Plan limits are subject to shareholders' approval of an increase of the reserve shares of common stock under the Plan. The vesting period of these 1,496,547 options to purchase shares of the Company's common stock extends from three to four years. SFAS No. 123 encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company measures compensation expense for the stock Plan using the intrinsic value method prescribed by Accounting Principal Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25"). Accordingly, compensation expense for qualified and non-qualified employee stock options granted under the Plan is equal to the difference between the fair market value of the stock at the date of grant and the amount an employee must pay to acquire the stock. For options granted to employees which were outstanding prior to the Offering, the compensation expense is equal to the difference between the fair market value of the stock at the offering price and the amount an employee must pay to acquire the stock. For options granted to non-employee directors or other employees in exchange for goods and services, compensation cost is measured in accordance with SFAS No. 123. The following is a summary of all stock option transactions:
WEIGHTED WEIGHTED AVERAGE FAIR STOCK AVERAGE EXERCISE VALUE OF OPTIONS OPTIONS PRICE GRANTED --------- ---------------- ---------------- Granted............................................... 2,236,547 $18.25 $16.72 Exercised............................................. -- -- Canceled.............................................. -- -- --------- ------ Outstanding at January 29, 2000....................... 2,236,547 $18.25 ========= ======
33 35 ENVISION DEVELOPMENT CORPORATION (SUCCESSOR TO PERFUMANIA.COM, INC.) NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) The following table summarizes information about stock options outstanding at January 29, 2000:
STOCK OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------------------- ------------------------ WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE RANGE OF EXERCISE NUMBER OF REMAINING EXERCISE NUMBER OF EXERCISE PRICES STOCK OPTIONS CONTRACTUAL LIFE PRICE STOCK OPTIONS PRICE - ----------------- ------------- ---------------- -------- ------------- -------- $ 6.75 - $ 7.50 720,000 9.40 $ 7.03 720,000 $ 7.03 $ 7.51 - $10.50 20,000 9.80 10.50 20,000 10.50 $10.51 - $22.00 775,556 10.00 22.00 55,556 22.00 $22.01 - $26.13 720,991 10.00 25.63 110,991 26.13 --------- ----- ------ --------- ------ $ 6.75 - $26.13 2,236,547 9.80 $18.25 906,547 $10.36 ========= ===== ====== ========= ======
Reflected below are losses as of January 29, 2000 and January 30, 1999, as if compensation expense relative to the fair value of the options granted had been recorded under the provisions of SFAS No. 123. The fair value of each option grant was estimated using the Black-Scholes option-pricing model with the following assumptions used for grants: 10 years expected life with expected turnover of 10%; volatility factor of 100%; risk-free interest rates of 5.9%; and no dividend payments.
JANUARY 29, JANUARY 30, 2000 1999 ----------- ----------- NET LOSS: As reported............................................... $(5,228,467) $(273,505) =========== ========= Pro forma................................................. $(9,569,865) $(273,505) =========== ========= BASIC LOSS PER SHARE: As reported............................................... $ (0.89) $ (0.05) Pro forma................................................. $ (1.64) $ (0.05) DILUTED LOSS PER SHARE: As reported............................................... $ (0.89) $ (0.05) Pro forma................................................. $ (1.64) $ (0.05)
34 36 ENVISION DEVELOPMENT CORPORATION (SUCCESSOR TO PERFUMANIA.COM, INC.) NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) NOTE 8 -- INCOME TAXES Prior to the change in control that occurred in January 2000, the Company filed a consolidated U.S. Federal income tax return with its Affiliate. The provision for income taxes is computed as if the Company filed a separate tax return, on a stand-alone basis. The provision (benefit) for income taxes consists of the following:
JANUARY 29, 2000 JANUARY 30, 1999 ---------------- ---------------- Current: Federal............................................... $ -- $ -- State and local....................................... -- -- ----------- --------- -- -- ----------- --------- Deferred: Federal............................................... (1,865,636) (95,723) State and local....................................... (251,373) (7,193) ----------- --------- (2,117,009) (102,916) Valuation allowance..................................... 2,117,009 102,916 ----------- --------- Provision for income taxes.............................. $ -- $ -- =========== =========
The significant components of the net deferred tax asset (liability) as of January 29, 2000 and January 30, 1999 are as follows:
JANUARY 29, 2000 JANUARY 30, 1999 ---------------- ---------------- Deferred tax assets: Net operating loss carryforward....................... $ 2,138,802 $ 98,763 Reserves and allowances............................... 69,874 4,153 ----------- --------- 2,208,676 102,916 Valuation allowance................................... (2,117,009) (102,916) ----------- --------- Total deferred tax asset...................... 91,667 -- ----------- --------- Deferred tax liability: Property and equipment................................ (6,200) -- State taxes........................................... (85,467) -- ----------- --------- Total deferred tax liabilities................ (91,667) -- ----------- --------- Net deferred tax asset (liability)...................... $ -- $ -- =========== =========
The Company provides a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company has established a valuation allowance against deferred tax assets of $2,117,009 and $102,916 at January 29, 2000 and January 30, 1999, respectively. The Company has Federal and State net operating loss carryforwards of approximately $5,400,000 as of January 29, 2000, both of which will begin to expire in the year 2018. During 1999, the Company was involved in certain transactions that included changes in the ownership of the Company's stock. In connection with the ownership charge, the Internal Revenue Code may restrict the amount of losses and credit that may be used to offset future income. 35 37 ENVISION DEVELOPMENT CORPORATION (SUCCESSOR TO PERFUMANIA.COM, INC.) NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) A reconciliation of U.S. statutory federal income tax expense on the earnings from continuing operations is as follows:
JANUARY 29, 2000 JANUARY 30, 1999 ---------------- ---------------- U.S. statutory federal rate applied to pretax income.............................................. 34.0% 34.0% State income taxes.................................. 3.6% 3.6% Valuation allowance................................. (37.6)% (37.6)% ----- ----- Provision for income taxes............................ -- -- ===== =====
NOTE 9 -- SUBSEQUENT EVENTS On March 10, 2000, the Company signed an Amended and Restated Agreement and Plan of Merger to acquire all of the outstanding stock of Envision Development Corporation, a Massachusetts corporation. The closing of this transaction is subject to Shareholder approval. On April 7, 2000, Envision acquired approximately 80% of the voting stock of Qui Vive, Inc. ("Qui Vive"), a Delaware corporation pursuant to an Amended and Restated Stock Acquisition Agreement (the "Stock Acquisition Agreement"), dated March 31, 2000, among Envision, QV Acquisition Corporation, a Delaware corporation that is a wholly-owned subsidiary of Envision and created solely for the purpose of the acquisition, Sundog Technologies, Inc., a Delaware corporation, and RockMountain Ventures Fund, LP, a Delaware limited partnership. Pursuant to this Stock Acquisition Agreement, Envision issued shares of its common stock in order to acquire shares of Series A Preferred Stock and Series B Preferred Stock of Qui Vive on April 7, 2000. Envision issued 1,492,500 shares of its common stock to acquire the 80% interest. Envision will issue additional shares of its common stock to complete the acquisition of 80% of the voting stock of Qui Vive subject to Envision's shareholder approval. Qui Vive, which does business as "QV Tech", has no significant operations except for the development of its proprietary "Interosa" technology. On April 10, 2000, the Company entered into an Amended and Restated Stock Purchase Agreement with VP IP, a Delaware corporation. Pursuant to the terms of this agreement, the Company acquired the software and URL of VP IP. In exchange, the Company issued 200,000 shares of its common stock to the owners of VP IP which were William Patch, Chairman and Chief Executive Officer of the Company, and his immediate family and Alex Adamopoulos, an officer of the Company. On April 20, the Board of Directors approved a lease for the new corporate headquarters in Bridgewater, Massachusetts. The lease commences on August 1, 2000 for a term of seven years. The minimum lease payments are approximately $529,000 annually for years one to five and approximately $568,000 annually for years six and seven. The Company has a history of significant operating losses and its future capital needs may exceed its current financial resources. The Company also anticipates continuing operating losses in the future and presently is unable to predict when it may become profitable, if at all. As a result of the foregoing, a significant shareholder of the Company has committed to fund the Company's operations and cash requirements through May 31, 2001. 36 38 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES On April 4, 2000, the Company dismissed its independent certified public accountants, PricewaterhouseCoopers LLP, effective upon the completion of the audit of the financial statements as of January 29, 2000. The decision to dismiss the accountants was approved by the Board of Directors, as the Company did not have an audit or similar committee. PricewaterhouseCoopers LLP audited the Company's financial statements for the period from January 7, 1999 (date of inception) through January 30, 1999, the three-month period ended May 1, 1999 and the fiscal year ended January 29, 2000. Their reports on such financial statements contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle, except that their reports for each of the periods referred to above, with the exception of the fiscal year ended January 29, 2000, contained a modification to their opinion relating to the Company's ability to continue as a "going concern". In connection with its audits noted in the preceding paragraph, and through April 28, 2000, there have been no disagreements with PricewaterhouseCoopers LLP on any matter of accounting principles and practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of PricewaterhouseCoopers LLP would have caused them to make reference thereto in their reports on the financial statements for the periods noted in the preceding paragraph. During the audit periods noted above and through April 28, 2000, there have been no reportable events. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding our executive officers is included in this Annual Report under the caption "Executive Officers of the Registrant." Information regarding our directors and nominees for directors will be contained in our Proxy Statement relating to the 2000 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission on or before April 30, 2000 (the "Proxy Statement"), and is incorporated in this Annual Report by reference. EXECUTIVE COMPENSATION Information regarding compensation of our executive officers will be contained in the Proxy Statement and is incorporated in this Annual Report by reference. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information regarding the ownership of our common stock will be contained in the Proxy Statement and is incorporated in this Annual Report by reference. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information regarding certain relationships and related transactions will be contained in the Proxy Statement and is incorporated in this Annual Report by reference. 37 39 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements -- The financial statements and the reports of our Certified Public Accountants are listed on pages 22 through 36. 2. Financial Statements Schedules -- Not Applicable. 3. Exhibits including those incorporated by reference:
EXHIBIT DESCRIPTION - ------- ----------- 2.1 -- Agreement and Plan of Merger dated February 8, 2000, among the Registrant, perfumania.com, inc. and EDC Sub, Inc.(2) 2.2 -- Amended and Restated Stock Purchase Agreement dated April 10, 2000, between Envision Development Corporation and William J. Patch, III, Elisabeth M. Patch, Lisabeth Patch, William Patch, IV and Alex Adamopoulos 3.1 -- Articles of Incorporation 3.2 -- Bylaws 10.1 -- 1999 Incentive Stock Option Plan (1) 10.2 -- Intercompany Services Agreement dated as of May 1, 1999 by and between perfumania.com, inc. and Perfumania, Inc. (1) 10.3 -- Technology Transfer and License Agreement dated as of May 1, 1999 by and between perfumania.com, inc. and Perfumania, Inc. (1) 10.4 -- Employment agreement, dated as of January 11, 2000, between Envision and William J. Patch. 10.5 -- Employment agreement, dated as of January 11, 2000, between Envision and Michael E. Amideo. 10.6 -- Employment agreement, dated as of January 14, 2000, between Envision and Thomas Nolan. 10.7 -- Employment agreement, dated as of February 22, 2000, between Envision and Alex Adamopoulos. 10.8 -- Employment agreement of Ilia Lekach (1) 10.9 -- Employment agreement of Rachmil Lekach (1) 10.10 -- Employment agreement of Richard Veliz (1) 10.11 -- Lease Agreement dated as of April 6, 2000, between Envision Development Corporation (Tenant) and Claremont Bridgewater I, LLC 16.1 -- Letter re change in certifying accountant (3) 21.1 -- Subsidiaries of Envision 23.1 -- Consent of PricewaterhouseCoopers LLP 24.1 -- Power of attorney (included on the signature page to this Annual Report on Form 10-K) 27.1 -- Financial Data Schedule
- --------------- (1) Incorporated by reference to the exhibit of the same description filed with the Registrant's Registration Statement on Form S-1 (No. 33-80059). (2) Incorporated by reference to the exhibit of the same description filed with the Registrant's Current Report on Form 8-K dated February 8, 2000. (3) Incorporated by reference to the exhibit of the same description filed with the Registrant's Current Report on Form 8-K dated April 4, 2000. (b) Reports on Form 8-K A Current Report on Form 8-K dated January 11, 2000 was filed on January 24, 2000 containing information on Item 1. Change in Control of Registrant. 38 40 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. April 28, 2000 ENVISION DEVELOPMENT CORPORATION By: /s/ WILLIAM J. PATCH ------------------------------------ William J. Patch Chairman and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints William J. Patch and Michael E. Amideo and each of them, his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Annual Report on Form 10-K and to file the same with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This power of attorney may be executed in counterparts. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, 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 TITLE DATE --------- ----- ---- /s/ WILLIAM J. PATCH Chairman and Chief Executive April 28, 2000 - ----------------------------------------------------- Officer William J. Patch /s/ MICHAEL E. AMIDEO Secretary, Chief Financial April 28, 2000 - ----------------------------------------------------- Officer and Director Michael E. Amideo /s/ SUNNY C. VANDERBECK Director April 28, 2000 - ----------------------------------------------------- Sunny C. Vanderbeck /s/ DEAN M. WILLARD Director April 28, 2000 - ----------------------------------------------------- Dean M. Willard /s/ THOMAS H. CARMODY Director April 28, 2000 - ----------------------------------------------------- Thomas H. Carmody /s/ JAMES B. WEINSTOCK Director April 28, 2000 - ----------------------------------------------------- James B. Weinstock /s/ ALAN E. RUDD Director April 28, 2000 - ----------------------------------------------------- Alan E. Rudd
39 41 INDEX TO EXHIBITS
EXHIBIT DESCRIPTION - ------- ----------- 2.1 -- Agreement and Plan of Merger dated February 8, 2000, among the Registrant, perfumania.com, inc. and EDC Sub, Inc.(2) 2.2 -- Amended and Restated Stock Purchase Agreement dated April 10, 2000, between Envision Development Corporation and William J. Patch, III, Elisabeth M. Patch, Lisabeth Patch, William Patch, IV and Alex Adamopoulos 3.1 -- Articles of Incorporation 3.2 -- Bylaws 10.1 -- 1999 Incentive Stock Option Plan (1) 10.2 -- Intercompany Services Agreement dated as of May 1, 1999 by and between perfumania.com, inc. and Perfumania, Inc. (1) 10.3 -- Technology Transfer and License Agreement dated as of May 1, 1999 by and between perfumania.com, inc. and Perfumania, Inc. (1) 10.4 -- Employment agreement, dated as of January 11, 2000, between Envision and William J. Patch. 10.5 -- Employment agreement, dated as of January 11, 2000, between Envision and Michael E. Amideo. 10.6 -- Employment agreement, dated as of January 14, 2000, between Envision and Thomas Nolan. 10.7 -- Employment agreement, dated as of February 22, 2000, between Envision and Alex Adamopoulos. 10.8 -- Employment agreement of Ilia Lekach (1) 10.9 -- Employment agreement of Rachmil Lekach (1) 10.10 -- Employment agreement of Richard Veliz (1) 10.11 -- Lease Agreement dated as of April 6, 2000, between Envision Development Corporation (Tenant) and Claremont Bridgewater I, LLC 16.1 -- Letter re change in certifying accountant (3) 21.1 -- Subsidiaries of Envision 23.1 -- Consent of PricewaterhouseCoopers LLP 24.1 -- Power of attorney (included on the signature page to this Annual Report on Form 10-K) 27.1 -- Financial Data Schedule
- --------------- (1) Incorporated by reference to the exhibit of the same description filed with the Registrant's Registration Statement on Form S-1 (No. 33-80059). (2) Incorporated by reference to the exhibit of the same description filed with the Registrant's Current Report on Form 8-K dated February 8, 2000. (3) Incorporated by reference to the exhibit of the same description filed with the Registrant's Current Report on Form 8-K dated April 4, 2000. 40 EX-2.2 2 FIRST AMENDED & RESTATED AGREEMENT - 4/10/00 1 EXHIBIT 2.2 Amended and Restated Stock Purchase Agreement, dated as of April 10, 2000 (this "AGREEMENT"), between Envision Development Corporation, a Florida corporation (the "BUYER") and each of the parties listed on Schedule I hereto (each a "SELLER," and, collectively, the "SELLERS"). WHEREAS, the Corporation has entered into a Stock Purchase Agreement (the "ORIGINAL PURCHASE AGREEMENT") with William J. Patch III, Elisabeth M. Patch, Lisabeth Patch and William J. Patch IV, dated April 10, 2000; WHEREAS, the parties hereto wish to amend and restate the Original Purchase Agreement in its entirety as set forth herein; NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants, and agreements herein contained, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS 1.1 DEFINED TERMS. In addition to the terms defined elsewhere herein, the terms below have the following meanings when used herein: "Closing Date" means the date hereof. "Governmental Approval" means with respect to any Person, any consent, approval, authorization, waiver, Permit, agreement, license, certificate, exemption, order, registration, declaration or filing of, with or to any Governmental Authority, in each case binding upon such Person or such Person' assets, business or properties. "Governmental Authority" means any federal, state, local, foreign or other governmental department, commission, board, bureau, agency, arbitral body, or instrumentality, including, without limitation, any court or tribunal of competent jurisdiction. "Intellectual Property" means all intellectual property listed on Schedule 2 hereto and other rights relating thereto. "Legal Requirement" means with respect to any Person, any statute, law, ordinance, code, rule, regulation, judgment, decree, decision, writ, stipulation, settlement, ruling, injunction, order and any other requirement of or under any Governmental Authority. 2 "Organizational Documents" means with respect to a Person that is a corporation or other business entity, articles of incorporation, charter, bylaws, code of regulations or other organizational documents of such Person. "Permit" means any federal, state, local, and foreign governmental approval, authorization, certificate, easement, filing, franchise, license, notice, permit, or right to which any Person is a party or that is or may be binding upon or inure to the benefit of any Person or its securities, assets, or business. "Person" means an individual, a partnership, a joint venture, a limited liability company, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof, as the case may be. "Purchase Price" means, as to each Seller, the Purchase Price listed on Schedule I hereto opposite such Seller's name. "Securities Act" means the Securities Act of 1933, as amended. "Subsidiary" means VP IP, Inc., a Delaware corporation. "Shares" means the shares of common stock of the Subsidiary owned by each Seller and listed opposite such Seller's name on Schedule I hereto. ARTICLE 2 SALE OF SHARES 2.1 SALE OF SHARES. On the Closing Date each Seller shall sell and deliver to the Buyer against payment of such Seller's Purchase Price, and the Buyer shall purchase and accept from such Seller, all of such Seller's Shares free and clear of all encumbrances or other liens. The transfer and delivery of the Shares to the Buyer shall be made by delivering share certificates evidencing all of the Shares, duly endorsed in blank or accompanied by duly executed stock powers, in form satisfactory to the Buyer and with all required stock transfer stamps affixed, to the Buyer. 2 3 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE BUYER The Buyer represents and warrants to the Sellers as follows: 3.1 DUE INCORPORATION AND POWER. The Buyer is a corporation duly incorporated, validly existing and in good standing under the laws of the state of Florida and has all requisite corporate power and authority to enter into this Agreement to which it is a party and perform its obligations hereunder. 3.2 AUTHORIZATION; VALIDITY OF AGREEMENT; NECESSARY ACTION. The execution, delivery and performance by the Buyer of this Agreement and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Buyer and no other action or proceeding on part of the Buyer, its board of directors or shareholders is necessary for the execution, delivery and performance by the Buyer of this Agreement and the consummation by the Buyer of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Buyer, and assuming this Agreement constitutes a valid and binding obligation of each Seller, constitutes a valid and binding obligation of the Buyer, enforceable against the Buyer in accordance with its terms, subject to the effects of bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or other similar laws relating to or affecting creditors' rights generally, general principles of equity (whether considered in a proceeding at law or in equity) and an implied covenant of good faith and fair dealing. 3.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for filings required under applicable federal and state securities laws and regulations, the execution, delivery and performance of this Agreement, the consummation by the Buyer of the transactions contemplated hereby, and the compliance by the Buyer with any of the provisions hereof do not and will not (i) conflict with or result in a breach of the Organizational Documents of the Buyer, (ii) require the Buyer to make or obtain any Governmental Approval from any Governmental Authority, (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, guarantee, other evidence of indebtedness, lease, license, contract, agreement or other instrument or obligation to which the Buyer is a party or by which it or any of its properties or assets may be bound or (iv) violate any Legal Requirement applicable to the Buyer or any of its properties or assets. 3.4 PURCHASE FOR INVESTMENT. The Buyer is aware that no shares of capital stock or other securities being purchased pursuant to the transactions contemplated hereby are registered under the Securities Act or under any state or foreign securities laws. The Buyer is not an underwriter, as such term is defined in the Securities Act, and the Buyer is purchasing such shares solely for investment with no present intention to distribute any such shares to any person and the Buyer will not sell or otherwise dispose of such 3 4 shares except in compliance with the registration requirements or exemption provisions under the Securities Act and the rules and regulations promulgated thereunder, or any other applicable securities laws. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF EACH SELLER Each Seller represents and warrants to the Buyer as follows: 4.1 AUTHORIZATION; VALIDITY OF AGREEMENT; NECESSARY ACTION. This Agreement has been duly executed and delivered by such Seller, and assuming this Agreement constitutes a valid and binding obligation of the Buyer, constitutes a valid and binding obligation of such Seller, enforceable against such Seller in accordance with its terms, subject to the effects of bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or other similar laws relating to or affecting creditors' rights generally, general principles of equity (whether considered in a proceeding at law or in equity) and an implied covenant of good faith and fair dealing. 4.2 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for filings required under applicable federal and state securities laws and regulations, the execution, delivery and performance of this Agreement, the consummation by such Seller of the transactions contemplated hereby, and the compliance by such Seller with any of the provisions hereof do not and will not (i) require such Seller to make or obtain any Governmental Approval from any Governmental Authority, (ii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, guarantee, other evidence of indebtedness, lease, license, contract, agreement or other instrument or obligation to which such Seller is a party or by which such Seller or any of its properties or assets may be bound or (iii) violate any Legal Requirement applicable to such Seller or any of its properties or assets. 4.3 CAPITALIZATION OF THE SUBSIDIARY. (a) As of the date hereof, the Subsidiary has authorized capital stock of 1000 shares of common stock, $0.01 par value, of which 1000 shares are issued and outstanding. As of the date hereof, the Sellers own all of the issued and outstanding shares of common stock of the Subsidiary and the Shares collectively represent 100% of such shares owned by the Sellers. (b) All of the Shares have been validly issued, fully paid and non-assessable and are owned by such Seller free and clear of all liens or encumbrances. (c) Other than this Agreement, there are no outstanding or authorized rights or agreements of any kind relating to the sale, issuance, redemption, return or voting of any shares of capital stock of, or other ownership interests in, the Subsidiary, or evidencing the right to purchase any shares of capital stock of, or other ownership interests in, the Subsidiary and 4 5 no equity securities of the Subsidiary are reserved for issuance for any purpose. There are also no "phantom" stock rights, stock appreciation rights or other similar rights relating to the capital stock of, or other ownership interests in, the Subsidiary. 4.4 LIABILITIES OF THE SUBSIDIARY. Each Seller represents and warrants that as of the Closing Date the Subsidiary shall have no liabilities. 4.5 ACQUISITION FOR INVESTMENT. Each Seller is aware that no shares of capital stock or other securities being acquired pursuant to the transactions contemplated hereby are registered under the Securities Act or under any state or foreign securities laws. Such Seller is not an underwriter, as such term is defined in the Securities Act, and such Seller is acquiring such shares solely for investment with no present intention to distribute any such shares to any person and such Seller will not sell or otherwise dispose of such shares except in compliance with the registration requirements or exemption provisions under the Securities Act and the rules and regulations promulgated thereunder, or any other applicable securities laws. 4.6 LIMITATION ON TRANSFER. Each Seller acknowledges that it will not pledge, transfer, sell, assign or hypothecate any shares of capital stock or other securities being acquired pursuant to the transactions contemplated hereby without the prior written consent of the Buyer. 4.7 NO OTHER REPRESENTATIONS AND WARRANTIES. Except for the representations and warranties contained in this Agreement, none of the Sellers nor any other person makes any other express or implied representation or warranty on behalf of the Sellers, including, without limitation, as to the probable success or profitability of the ownership, use or operation of the Intellectual Property by the Buyer after the closing of the transactions contemplated hereby. ARTICLE 5 MISCELLANEOUS 5.1 FURTHER ASSURANCES. From time to time, at the other party's request and without further consideration, each party hereto shall execute and deliver such additional documents and take all such further action as may be necessary or desirable to consummate the transactions contemplated by this Agreement. 5.2 NOTICES. All notices or other communications which are required or permitted hereunder shall be in writing and sufficient if delivered personally or sent by nationally recognized overnight courier or by registered or certified mail, postage prepaid, return receipt requested, or by electronic mail, with a copy thereof to be delivered or sent as provided above or by facsimile or telecopier, as follows (or to such other address as the party to whom notice is to be given may have furnished to the other party in writing in accordance herewith): 5 6 (a) If to the Buyer: Envision Development Corporation 11701 N.W. 101st Road Miami, FL 33178 Facsimile: E-Mail: Attention: 6 7 (b) If to any Seller, [Name of Seller] c/o William J. Patch III VP Incorporated 131 W. Park Avenue Schwenksville, PA 19473 Facsimile: (508) 481-8304 E-Mail: billp@edvcorp.com Attention: Bill Patch All such notices or communications shall be deemed to be received (i) in the case of personal delivery, nationally recognized overnight courier or registered or certified mail, on the date of such delivery and (ii) in the case of facsimile or telecopier or electronic mail, upon confirmed receipt. 5.3 INTERPRETATION. When a reference is made in this Agreement to Sections or subsections such reference shall be to a Section or subsection to this Agreement unless otherwise indicated. The words "include," "includes" and "including" when used herein shall be deemed in each case to be followed by the words "without limitation." The word "herein" and similar references mean, except where a specific Section or Article reference is expressly indicated, the entire Agreement rather than any specific Section or Article. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 5.4 SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible. 5.6 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and thereof, and is not intended to confer upon any Person other than the parties hereto any rights or remedies hereunder. 5.7 GOVERNING LAW; ENFORCEMENT. This Agreement and the rights and duties of the parties hereunder shall be governed by, and construed in accordance with, the Law of the State of New York. In addition, each of the parties hereto, (a) consents to submit itself to the personal jurisdiction of the Federal District Court for the Southern District of New York in the event any dispute arises out of this Agreement or any transaction contemplated hereby, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction 7 8 by motion or other request for leave from any such court, (c) agrees that it will not bring any action relating to this Agreement or any transaction contemplated hereby in any court other than the Federal District Court for the Southern District of New York and (d) waives any right to trial by jury with respect to any action related to or arising out of this Agreement or any transaction contemplated hereby. 5.8 COUNTERPARTS. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. [Remainder of this page intentionally left blank] 8 9 IN WITNESS WHEREOF, each Seller and the Buyer have caused this Agreement to be signed by their respective officers or other authorized person thereunto duly authorized as of the date first written above. ENVISION DEVELOPMENT CORPORATION By: --------------------------------- Name: Title: ------------------------------------ WILLIAM J. PATCH III ------------------------------------ ELISABETH M. PATCH ------------------------------------ LISABETH PATCH ------------------------------------ WILLIAM J. PATCH IV ------------------------------------ ALEX ADAMOPOULOS 9 10 SCHEDULE 1
-------------------------- ----------------------------- ------------------------------------------------- Seller Shares Purchase Price -------------------------- ----------------------------- ------------------------------------------------- William J. Patch III 125 shares of common stock 25,000 shares of common stock of of VP IP, Inc. Envision Development Corporation -------------------------- ----------------------------- ------------------------------------------------- Elisabeth M. Patch 125 shares of common stock 25,000 shares of common stock of of VP IP, Inc. Envision Development Corporation -------------------------- ----------------------------- ------------------------------------------------- Lisabeth Patch 125 shares of common stock 25,000 shares of common stock of of VP IP, Inc. Envision Development Corporation -------------------------- ----------------------------- ------------------------------------------------- William J. Patch IV 125 shares of common stock 25,000 shares of common stock of of VP IP, Inc. Envision Development Corporation -------------------------- ----------------------------- ------------------------------------------------- Alex Adamopoulos 500 shares of common stock 100,000 shares of common stock of of VP IP, Inc. Envision Development Corporation -------------------------- ----------------------------- -------------------------------------------------
11 SCHEDULE 2 INTELLECTUAL PROPERTY 1. The vertical portal concept and business plan for service4all.com 2. The URL and all rights to the trademark and corporate name service4all.com EX-3.1 3 ARTICLES OF INCORPORATION 1 EXHIBIT 3.1 ARTICLES OF INCORPORATION OF ENVISION DEVELOPMENT CORPORATION I, the undersigned, hereby make, subscribe, acknowledge and file with the Secretary of State of the State of Florida these Articles of Incorporation for the purpose of forming a corporation for profit in accordance with the laws of the State of Florida: ARTICLE I The name of the corporation is Envision Development Corporation (the "Corporation"). ARTICLE II The purpose for which the Corporation is organized is to engage any lawful business for which corporations may be incorporated under the Florida Business Corporation Act. ARTICLE III The aggregate number of shares of all classes of capital stock which this Corporation shall have authority to issue is Twenty-Five Million (25,000,000), consisting of (i) Twenty Million (20,000,000) shares of common stock, par value $0.01 per share (the "Common Stock"), and (ii) Five Million (5,000,000) shares of preferred stock, par value $0.01 per share (the "Preferred Stock"). The designations and the preferences, limitations and relative rights of the Preferred Stock and the Common Stock of the Corporation are as follows: A. PROVISIONS RELATING TO THE PREFERRED STOCK. 1. The Preferred Stock may be issued from time to time in one or more classes or series, the shares of each class or series to have such designations and powers, preferences and rights, and qualifications, limitations and restrictions thereof as are stated and expressed herein and in the resolution or resolutions providing for the issue of such class or series adopted by the Board of Directors (the "Board") as hereinafter prescribed. 2. Authority is hereby expressly granted to and vested in the Board to authorize the issuance of the Preferred Stock from time to time in one or more classes or series, to determine and take necessary action to effect the issuance and redemption of any such Preferred Stock, and, with respect to each class or series of the Preferred Stock, to fix and state by the resolution or resolutions from time to time adopted providing for the issuance thereof the following: 2 (a) whether or not the class or series is to be without voting rights or is to have voting rights, and, if so, the terms of such voting rights; (b) the number of shares to constitute the class or series and the designations thereof; (c) the preferences and relative, participating, optional or other special rights, if any, and the qualifications, limitations or restrictions thereof, if any, with respect to any class or series; (d) whether or not the shares of any class or series shall be redeemable and, if redeemable, the redemption price or prices, and the time or times at which, and the terms and conditions upon which, such shares shall be redeemable and the manner of redemption; (e) whether or not the shares of a class or series shall be subject to the operation of' retirement or sinking funds to be applied to the purchase or redemption of such shares for retirement, and if such retirement or sinking fund or funds be established, the annual amount thereof and the terms and provisions relative to the operation thereof; (f) the dividend rate, whether dividends are payable in cash, stock of the Corporation, or other property, the conditions upon which and the times when such dividends are payable, the preference to or relative rights of priority of payment of the dividends payable on any other class or classes or series of stock, whether or not such dividend shall be cumulative or noncumulative, and if cumulative, the date or dates from which such dividends shall accumulate; (g) the preferences, if any, and the amounts thereof which the holders of any class or series thereof shall be entitled to receive upon the voluntary or involuntary liquidation dissolution of, or upon any winding up or distribution of the assets of, the Corporation; (h) whether or not the shares of any class or series shall be convertible into, or exchangeable for, the shares of any other class or classes or of any other series of the same or any other class or classes of stock of the Corporation and the conversion price or prices or ratio or ratios or the rate or rates at which such conversion or exchange may be made, with such adjustments, if any, as shall be stated and expressed or provided for in such resolution or resolutions; and (i) such other special rights and protective provisions with respect to any class or series as the Board may deem advisable. The shares of each class or series of the Preferred Stock may vary from the shares of any other series thereof in any or all of the foregoing respects. The Board may increase the number of shares of the Preferred Stock designated for any existing class or series by a resolution adding to such class or series 2 3 authorized and unissued shares of the Preferred Stock not designated for any other class or series. The Board may decrease the number of shares of the Preferred Stock designated for any existing class or series by a resolution, subtracting from such series unissued shares of the Preferred Stock designated for such class or series, and the shares so subtracted shall become authorized, unissued and undesignated shares of the Preferred Stock. B. PROVISIONS RELATING TO THE COMMON STOCK. 1. Except as otherwise required by law or as may be provided by the resolutions of the Board authorizing the issuance of any class or series of Preferred Stock, as hereinabove provided, all rights to vote and all voting power shall be vested exclusively in the holders of the Common Stock. Each holder of shares of the Common Stock shall be entitled to one vote for each share held. 2. Subject to the rights of the holders of the Preferred Stock, the holders of the Common Stock shall be entitled to receive when, as and if declared by the Board, out of funds legally available therefor, dividends payable in cash, stock or otherwise. 3. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, and after the holders of the Preferred Stock shall have been paid in full the amounts to which they shall be entitled (if any) or a sum sufficient for such payment in full shall have been set aside, the remaining net assets of the Corporation shall be distributed pro rata to the holders of the Common Stock in accordance with their respective rights and interests to the exclusion of the holders of the Preferred Stock. C. GENERAL PROVISIONS 1. Except as may be provided by the resolutions of the Board authorizing the issuance of any class or series of Preferred Stock, as hereinabove provided, cumulative voting by any shareholder is hereby expressly denied. 2. No shareholder of the Corporation shall have, by reason of its holding shares of any class or series of stock of the Corporation, any preemptive or preferential rights to purchase or subscribe for any other shares of any class or series of the Corporation now or hereafter to be authorized, and any other equity securities, or any notes, debentures, warrants, bonds, or other securities convertible into or carrying options or warrants to purchase shares of any class, now or hereafter to be authorized, whether or not the issuance of any such shares, or such notes, debentures, bonds or other securities, would adversely affect the dividend, voting or other rights of such shareholder. 3 4 ARTICLE IV The Corporation shall exist perpetually unless sooner dissolved according to law. ARTICLE V The name of the Incorporator of the Corporation is Kevin H. Sutton, and the address of the Incorporator is 101 East Kennedy Boulevard, Suite 3700, Tampa, Florida 33602. The Corporation's mailing address and the address of the Corporation's principal office is 11701 NW 101st Road, Miami, Florida 33178. The address of the Corporation's initial registered office in the State of Florida is 101 East Kennedy Boulevard, Suite 3700, Tampa, Florida 33602 and the name of the Corporation's registered agent at such office is Kevin H. Sutton. ARTICLE VI A. NUMBER AND TERM OF DIRECTORS. The Corporation's Board shall consist of not less than five (5) nor more than eleven (11) members with exact number to be fixed from time to time by resolution of the Board except a greater number may be required to give effect to the rights of holders of the Preferred Stock or any series thereof to elect Directors. No decrease in the number of directors shall have the effect of shortening the term of any incumbent director. The Board shall be divided into three classes, Class I, Class II and Class III. The number of directors elected to each class shall be as nearly equal in number as possible. The Board shall apportion any increase or decrease in the number of directorships among the classes so as to make the number of directors in each class as nearly equal as possible. Each director in Class I shall be elected to an initial term to expire at the annual meeting next ensuing, each director in Class II shall be elected to an initial term to expire one year thereafter, and each director in Class III shall be elected to an initial term to expire two years thereafter, in each case and until his or her successor is duly elected and qualified or until his or her earlier resignation, death or removal from office. The Initial Directors shall be as follows: Class I: William J. Patch, Michael E. Amideo, Dean Willard Class II: Thomas Carmody, Sunny C. Vanderbeck Class III: Garrick M. Hileman, Alan E. Rudd Upon the expiration of the initial terms of office for each class of directors, respectively, the directors of each class shall be elected for a term of three (3) years to serve until their successors are duly elected and qualified or until their earlier resignation, death or removal from office. B. DIRECTOR VACANCIES; REMOVAL. Whenever any vacancy on the Board shall occur due to death, resignation, retirement, disqualification, removal, increase in the number of directors, or otherwise, only a majority of directors in office, although less than a quorum of the entire Board, may fill the vacancy or vacancies for the balance of the unexpired term of terms, at which time a successor or successors shall be duly elected by the shareholders and qualified. 4 5 Shareholders shall not, and shall have no power to, fill any vacancy on the Board. Shareholders may remove a director from office prior to the expiration of his or her term, but only for "cause" by an affirmative vote of two-thirds of the outstanding shares of capital stock entitled to vote for the election of directors. C. SHAREHOLDER NOMINATIONS OF DIRECTOR CANDIDATES. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation. Nominations of persons for election to the Board at an annual or special meeting of shareholders may be made by or at the direction of the Board by any nominating committee or person appointed by the Board or by any shareholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the procedures set forth in this paragraph C; provided, however, that nominations of persons for election to the Board at a special meeting may be made only if the election of directors is one of the purposes described in the special meeting notice required by Section 607.0705 of the Florida Business Corporation Act. Nominations of persons for election at annual meetings, other than nominations made by or at the direction of the Board, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than One Hundred Twenty (120) days nor more than One Hundred Eighty (180) days prior to the first anniversary of the date of the Company's notice of annual meeting provided with respect to the previous year's annual meeting; provided, however, that if no annual meeting was held in the previous year or the date of the annual meeting has been changed to be more than thirty (30) calendar days earlier than the date contemplated by the previous year's proxy statement or sixty (60) calendar days after such date, such notice by the shareholder to be timely must be so received (i) not more than sixty (60) days prior to the annual meeting of stockholders, or (ii) not later than the close of business on the tenth (10th) day following the date on which notice of the date of the annual meeting is given to shareholders or made public, whichever first occurs. Such shareholder's notice to the Secretary shall set forth (a) as to each person whom the shareholder proposes to nominate for election or re-election as a director at the annual meeting, (i) the name, age, business address and residence address of the proposed nominee, (ii) the principal occupation or employment of the proposed nominee, (iii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the proposed nominee, and (iv) any other information relating to the proposed nominee that is required to be disclosed in solicitations for proxies for election of directors pursuant to Rule 14a under the Securities Exchange Act of 1934, as amended; and (b) as to the shareholder giving the notice of nominees for election at the annual meeting, (i) the name and record address of the shareholder, and (ii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the shareholder. The Corporation may 5 6 require any proposed nominee for election at an annual or special meeting of shareholders to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth herein. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the requirements of this paragraph C, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. ARTICLE VII The Corporation shall indemnify and may advance expenses to its officers and directors to the fullest extent permitted by Florida law in existence either now or hereafter. ARTICLE VIII A. CALL OF SPECIAL SHAREHOLDERS MEETING. Except as otherwise required by law, the Corporation shall not be required to hold a special meeting of shareholders of the Corporation unless (in addition to any other requirements of law) (i) the Chairman; (ii) the holders of not less than fifty (50) percent of all the votes entitled to be cast on any issue proposed to be considered at the proposed special meeting sign, date and deliver to the Corporation's secretary one or more written demands for the meeting describing the purpose or purposes for which it is to be held; or (iii) the meeting is called by the Board pursuant to a resolution approved by a majority of the entire Board. Only business within the purpose or purposes described in the special meeting notice required by Section 607.0705 of the Florida Business Corporation Act may be conducted at a special shareholders' meeting. B. ADVANCE NOTICE OF SHAREHOLDER-PROPOSED BUSINESS FOR ANNUAL MEETING. At an annual meeting of the shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board, (b) otherwise properly brought before the meeting by or at the direction of the Board, 8 or (c) otherwise properly brought before the meeting by a shareholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than One Hundred Twenty (120) days nor more than One Hundred Eighty (180) days prior to the first anniversary of the date of the Company's notice of annual meeting provided with respect to the previous year's annual meeting; provided, however, that if no annual meeting was held in the previous year or the date of the annual meeting has been changed to be more than thirty (30) calendar days earlier than the date contemplated by the previous year's proxy statement or sixty (60) calendar days later than such date, such notice by the shareholder to be timely must be so received (i) not more than sixty (60) days prior to the annual meeting, or (ii) not later than the close of business on the tenth (10th) day following the date on which notice of the date of the annual meeting is given to shareholders or made public, whichever first occurs. Such shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the 6 7 annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the shareholder proposing such business, (iii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the shareholder, and (iv) any material interest of the shareholder in such business. The Chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the requirements of this paragraph B, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. C. AMENDMENTS. Notwithstanding anything contained in these Amended and Restated Articles of Incorporation to the contrary, Articles II, VI and VIII shall not be altered, amended or repealed except by an affirmative vote of at least two-thirds of the outstanding shares of all capital stock entitled to vote for the election of directors. IN WITNESS WHEREOF, the undersigned, being the Incorporator named above, for the purpose of forming a corporation pursuant to the laws of the State of Florida, has executed these Articles of Incorporation this 4th day of February, 2000. /s/ KEVIN H. SUTTON ---------------------------- Kevin H. Sutton, Incorporator 7 8 ACCEPTANCE OF APPOINTMENT OF REGISTERED AGENT The undersigned, having been named the Registered Agent of Envision Development Corporation, a Florida corporation, hereby accepts such designation and is familiar with, and accepts, the obligations of such position, as provided in Florida Statutes Section 607.0505. /s/ KEVIN H. SUTTON ---------------------------- Kevin H. Sutton Date: February 4, 2000 8 EX-3.2 4 BYLAWS 1 EXHIBIT 3.2 ENVISION DEVELOPMENT CORPORATION BYLAWS ARTICLE I OFFICES Section 1. REGISTERED OFFICE. The registered office of Envision Development Corporation, a Florida corporation (the "Corporation"), shall be located at 11701 NW 101st Road, Miami, Florida 33178, unless otherwise designated by the Board of Directors. Section 2. OTHER OFFICES. The Corporation may have offices at such other places, either within or without the State of Florida, as the Board of Directors of the Corporation (the "Board of Directors") may from time to time determine or as the business of the Corporation may require. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. PLACE. All annual meetings of shareholders shall be held at such place, within or without the State of Florida, as may be designated by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Special meetings of shareholders may be held at such place, within or without the State of Florida, and at such time as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. TIME OF ANNUAL MEETING. Annual meetings of shareholders shall be held on such date and at such time fixed, from time to time, by the Board of Directors, provided that there shall be an annual meeting held every year at which the shareholders shall elect the appropriate class of the Board of Directors and transact such other business as may properly be brought before the meeting. Section 3. CALL OF SPECIAL MEETINGS. Special meetings of the shareholders shall be held if called in accordance with the procedures set forth in the Corporation's Articles of Incorporation (the "Articles of Incorporation") for the call of a special meeting of shareholders. Section 4. CONDUCT OF MEETINGS. The Chairman of the Board (or in his absence, the President or such other designee of the Chairman of the Board) shall preside at the annual and special meetings of shareholders and shall be given full discretion in establishing the rules and procedures to be followed in conducting the meetings, except as otherwise provided by law, the Articles of Incorporation or in these Bylaws. Section 5. NOTICE AND WAIVER OF NOTICE. Except as otherwise provided by law, written or printed notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) and not more than sixty (60) days before the day of the meeting, either personally or by 2 first-class mail, by or at the direction of the President, the Secretary, or the officer or person calling the meeting, to each shareholder of record entitled to vote at such meeting. If the notice is mailed at least thirty (30) days before the date of the meeting, it may be done by a class of United States mail other than first class. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his address as it appears on the stock transfer books of the Corporation, with postage thereon prepaid. If a meeting is adjourned to another time and/or place, and if an announcement of the adjourned time and/or place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the Board of Directors, after adjournment, fixes a new record date for the adjourned meeting. Whenever any notice is required to be given to any shareholder, a waiver thereof in writing signed by the person or persons entitled to such notice, whether signed before, during or after the time of the meeting stated therein, and delivered to the Corporation for inclusion in the minutes or filing with the corporate records, shall be equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the shareholders need be specified in any written waiver of notice. Attendance of a person at a meeting shall constitute a waiver of (a) lack of or defective notice of such meeting, unless the person objects at the beginning to the holding of the meeting or the transacting of any business at the meeting, or (b) lack of defective notice of a particular matter at a meeting that is not within the purpose or purposes described in the meeting notice, unless the person objects to considering such matter when it is presented. Section 6. BUSINESS AND NOMINATIONS FOR ANNUAL AND SPECIAL MEETINGS. Business transacted at any special meeting shall be confined to the purposes stated in the notice thereof. At any annual meeting of shareholders, only such business shall be conducted as shall have been properly brought before the meeting in accordance with the requirements and procedures set forth in the Articles of Incorporation. Only such persons who are nominated for election as Directors of the Corporation in accordance with the requirements and procedures set forth in the Articles of Incorporation shall be eligible for election as Directors of the Corporation. Section 7. QUORUM. Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of these shares exists with respect to that matter. Except as otherwise provided in the Articles of Incorporation or by law, a majority of the shares entitled to vote on the matter by each voting group, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders, but in no event shall a quorum consist of less than one-third (1/3) of the shares of each voting group entitled to vote. If less than a majority of outstanding shares entitled to vote are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. After a quorum has been established at any shareholders' meeting, the subsequent withdrawal of shareholders, so as to reduce the number of shares entitled to vote at the meeting below the number required for a quorum, shall not affect the validity of any action taken at the 2 3 meeting or any adjournment thereof. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting. When a quorum is present at any meeting, the vote of the holders of a majority of the shares having voting power, present in person or represented by proxy, shall decide any question brought before such meeting except when the question is one upon which an express provision of the Florida Business Corporation Act, or of the Articles of Incorporation or these Bylaws requires a different vote; then such express provision shall govern and control the decision of such question. Section 8. VOTING PER SHARE. Except as otherwise provided in the Articles of Incorporation or by law, each shareholder is entitled to one (1) vote for each outstanding share held by him on each matter voted at a shareholders' meeting. Section 9. VOTING OF SHARES. A shareholder may vote at any meeting of shareholders of the Corporation, either in person or by proxy. Shares standing in the name of another corporation, domestic or foreign, may be voted by the officer, agent or proxy designated by the bylaws of such corporate shareholder or, in the absence of any applicable bylaw, by such person or persons as the Board of Directors of the corporate shareholder may designate. In the absence of any such designation, or, in case of conflicting designation by the corporate shareholder, the Chairman of the Board, the President, the secretary and the treasurer of the corporate shareholder, in that order, shall be presumed to be fully authorized to vote such shares. Shares held by an administrator, executor, guardian, personal representative, or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name or the name of his nominee. Shares held by or under the control of a receiver, a trustee in bankruptcy proceedings, or an assignee for the benefit of creditors may be voted by such person without the transfer thereof into his name. If shares stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary of the Corporation is given notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, then acts with respect to voting shall have the following effect: (a) if only one votes, in person or by proxy, his act binds all; (b) if more than one vote, in person or by proxy, the act of the majority so voting binds all; (c) if more than one vote, in person or by proxy, but the vote is evenly split on any particular matter, each faction is entitled to vote the share or shares in question proportionally; or (d) if the instrument or order so filed shows that any such tenancy is held in unequal interest, a majority or a vote evenly split for purposes hereof shall be a majority or a vote evenly split in interest. The principles of this paragraph shall apply, insofar as possible, to execution of proxies, waivers, consents, or objections and for the purpose of ascertaining the presence of a quorum. Section 10. PROXIES. Any shareholder of the Corporation, other person entitled to vote on behalf of a shareholder pursuant to law, or attorney-in-fact for such persons may vote the shareholder's shares in person or by proxy. Any shareholder of the Corporation may appoint a proxy to vote or otherwise act for him by signing an appointment form, either personally or by his 3 4 attorney-in-fact. An executed telegram, cablegram or facsimile appearing to have been transmitted by such person, or a photographic, facsimile, or equivalent reproduction of an appointment form, shall be deemed a sufficient appointment form. An appointment of a proxy is effective when received by the Secretary of the Corporation or such other officer or agent which is authorized to tabulate votes, and shall be valid for up to 11 months, unless a longer period is expressly provided in the appointment form. The death or incapacity of the shareholder appointing a proxy does not affect the right of the Corporation to accept the proxy's authority unless notice of the death or incapacity is received by the secretary or other officer or agent authorized to tabulate votes before the proxy exercises his authority under the appointment. An appointment of a proxy is revocable by the shareholder unless the appointment is coupled with an interest. Section 11. SHAREHOLDER LIST. After fixing a record date for a meeting of shareholders, the Corporation shall prepare an alphabetical list of the names of all its shareholders who are entitled to notice of the meeting, arranged by voting group with the address of, and the number and class and series, if any, of shares held by each. The shareholders' list must be available for inspection by any shareholder for a period of ten (10) days prior to the meeting or such shorter time as exists between the record date and the meeting and continuing through the meeting at the Corporation's principal office, at a place identified in the meeting notice in the city where the meeting will be held, or at the office of the Corporation's transfer agent or registrar. Any shareholder of the Corporation or his agent or attorney is entitled on written demand to inspect the shareholders' list (subject to the requirements of law), during regular business hours and at his expense, during the period it is available for inspection. The Corporation shall make the shareholders' list available at the meeting of shareholders, and any shareholder or his agent or attorney is entitled to inspect the list at any time during the meeting or any adjournment. Section 12. FIXING RECORD DATE. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purposes, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than seventy (70) days, and, in case of a meeting of shareholders, not less than ten (10) days, prior to the date on which the particular action requiring such determination of shareholders is to be taken. If no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which the notice of the meeting is mailed or the date on which the resolutions of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section 12, such determination shall apply to any adjournment thereof, except where the Board of Directors fixes a new record date for the adjourned meeting or as required by law. 4 5 Section 13. INSPECTORS AND JUDGES. The Board of Directors in advance of any meeting may, but need not, appoint one or more inspectors of election or judges of the vote, as the case may be, to act at the meeting or any adjournment(s) thereof. If any inspector or inspectors, or judge or judges, are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors or judges. In case any person who may be appointed as an inspector or judge fails to appear or act, the vacancy may be filled by the Board of Directors in advance of the meeting, or at the meeting by the person presiding thereat. The inspectors or judges, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots and consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate votes, ballots and consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all shareholders. On request of the person presiding at the meeting, the inspector or inspectors or judge or judges, if any, shall make a report in writing of any challenge, question or matter determined by him or them, and execute a certificate of any fact found by him or them. Section 14. VOTING FOR DIRECTORS. Unless otherwise provided in the Articles of Incorporation, Directors shall be elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present. ARTICLE III DIRECTORS Section 1. NUMBER; ELECTION AND TERM; REMOVAL. The number of Directors of the Corporation shall be fixed from time to time, within the limits specified by the Articles of Incorporation, by resolution of the Board of Directors; provided, however, that no Director's term shall be shortened by reason of a resolution reducing the number of Directors. The Board shall be divided into three classes, Class I, Class II and Class III. The number of Directors elected to each class shall be as nearly equal in number as possible. The Board shall apportion any increase or decrease in the number of directorships among the classes so as to make the number of Directors in each class as nearly equal as possible. Each Director in Class I shall be elected to an initial term to expire at the annual meeting next ensuing, each Director in Class III shall be elected to an initial term to expire one year thereafter, and each Director in Class III shall be elected to an initial term to expire two years thereafter, in each case and until his or her successor is duly elected and qualified or until his or her earlier resignation, death or removal from office. Upon the expiration of the initial terms of office for each class of Directors, respectively, the Directors of each class shall be elected for a term of three (3) years to serve until their successors are duly elected and qualified or until their earlier resignation, death or removal from office. The appropriate class of the Board of shall be elected at the annual meeting of the shareholders, except as provided in Section 2 of this Article, and each Director elected shall hold office for 5 6 the term for which he is elected and until his successor is elected and qualified or until his earlier resignation, removal from office or death. Directors must be natural persons who are 18 years of age or older but need not be residents of the State of Florida, shareholders of the Corporation or citizens of the United States. Shareholders shall have the right to remove Directors only as provided in the Articles of Incorporation. Section 2. VACANCIES. A Director may resign at any time by giving written notice to the Corporation, the Board of Directors or the Chairman of the Board. Such resignation shall take effect when the notice is delivered unless the notice specifies a later effective date, in which event the Board of Directors may fill the pending vacancy before the effective date if they provide that the successor does not take office until the effective date. Any vacancy occurring in the Board of Directors and any directorship to be filled by reason of an increase in the size of the Board of Directors shall be filled only by the affirmative vote of a majority of the current Directors though less than a quorum of the Board of Directors. Shareholders shall not, and shall have no power to, fill any vacancy on the Board of Directors. A Director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office, or until the next election of one or more Directors by shareholders if the vacancy is caused by an increase in the number of Directors. Section 3. POWERS. Except as provided in the Articles of Incorporation and by law, all corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, its Board of Directors. Section 4. PLACE OF MEETINGS. Meetings of the Board of Directors, regular or special, may be held either within or outside the State of Florida. Section 5. ANNUAL MEETING. The first meeting of each newly elected Board of Directors shall be held, without call or notice, immediately following each annual meeting of shareholders. Section 6. REGULAR MEETINGS. Regular meetings of the Board of Directors may also be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors. Section 7. SPECIAL MEETINGS AND NOTICE. Special meetings of the Board of Directors may be called by the Chairman of the Board or by the President and shall be called by the Secretary on the written request of any two Directors. Written notice of special meetings of the Board of Directors shall be given to each Director at least forty-eight (48) hours before the meeting. Except as required by statute, neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Notices to Directors shall be in writing and delivered personally or mailed to the Directors at their addresses appearing on the books of the Corporation. Notice by mail shall be deemed to be given at the time when the same shall be received. Notice to 6 7 Directors may also be given by telegram, facsimile or other form of electronic communication. Notice of a meeting of the Board of Directors need not be given to any Director who signs a written waiver of notice before, during or after the meeting. Attendance of a Director at a meeting shall constitute a waiver of notice of such meeting and a waiver of any and all objections to the place of the meeting, the time of the meeting and the manner in which it has been called or convened, except when a Director states, at the beginning of the meeting or promptly upon arrival at the meeting, any objection to the transaction of business because the meeting is not lawfully called or convened. Section 8. QUORUM; REQUIRED VOTE; PRESUMPTION OF ASSENT. A majority of the number of Directors fixed by, or in the manner provided in, the Articles of Incorporation and these Bylaws shall constitute a quorum for the transaction of business; provided, however, that whenever, for any reason, a vacancy occurs in the Board of Directors, a quorum shall consist of a majority of the remaining Directors until the vacancy has been filled except that in no event may a quorum consist of fewer than one-third of the number of Directors so fixed. The act of a majority of the Directors present at a meeting at which a quorum is present when the vote is taken shall be the act of the Board of Directors. A Director of the Corporation who is present at a meeting of the Board of Directors or a committee of the Board of Directors when corporate action is taken shall be presumed to have assented to the action taken, unless he objects at the beginning of the meeting, or promptly upon his arrival, to holding the meeting or transacting specific business at the meeting, or he votes against or abstains from the action taken. Section 9. ACTION WITHOUT MEETING. Any action required or permitted to be taken at a meeting of the Board of Directors or a committee thereof may be taken without a meeting if a consent in writing, setting forth the action taken, is signed by all of the members of the Board of Directors or the committee, as the case may be, and such consent shall have the same force and effect as a unanimous vote at a meeting. Action taken under this section is effective when the last Director signs the consent, unless the consent specifies a different effective date. A consent signed under this Section 9 shall have the effect of a meeting vote and may be described as such in any document. Section 10. CONFERENCE TELEPHONE OR SIMILAR COMMUNICATIONS EQUIPMENT MEETINGS. Members of the Board of Directors may participate in a meeting of the Board by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation in such a meeting shall constitute presence in person at the meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground the meeting is not lawfully called or convened. Section 11. COMMITTEES. The Board of Directors, by resolution adopted by a majority of the full Board of Directors, may designate from among its members one or more other committees, each of which, to the extent provided in such resolution, shall have and may exercise all of the authority of the Board of Directors in the business and affairs of the Corporation except where the action of the full Board of Directors is required by statute. Each committee must have two or more members who serve at the pleasure of the Board of Directors. The Board of Directors, by resolution adopted in accordance with this 7 8 Article III, may designate one or more Directors as alternate members of any committee, who may act in the place and stead of any absent member or members at any meeting of such committee. Vacancies in the membership of a committee shall be filled by the Board of Directors at a regular or special meeting of the Board of Directors. Each committee shall keep minutes and other appropriate records of its proceedings and report the same to the Board of Directors when required. The designation of any such committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed upon it or him by law. Section 12. COMPENSATION OF DIRECTORS. The Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as Director. No such payment shall preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Directors may receive such other compensation as may be approved by the Board of Directors. Section 13. CHAIRMAN OF THE BOARD. The Board of Directors may, in its discretion, choose a Chairman of the Board who shall preside at meetings of the shareholders and of the Directors. The Chairman of the Board shall have such other powers and shall perform such other duties as shall be designated by the Board of Directors. The Chairman of the Board shall be a member of the Board of Directors but no other officers of the Corporation need be a Director. The Chairman of the Board shall serve until his successor is chosen and qualified, but he may be removed at any time by the affirmative vote of a majority of the Board of Directors. ARTICLE IV OFFICERS Section 1. POSITIONS. The officers of the Corporation shall consist of a Chairman of the Board, elected by the Board of Directors by resolution, a President, a Chief Executive Officer, a Chief Operating Officer, a Chief Technology Officer, a Secretary and a Treasurer. Any two or more offices may be held by the same person. Section 2. ELECTION OF SPECIFIED OFFICERS BY BOARD. The Board of Directors at its first meeting after each annual meeting of shareholders shall elect a President, a Chief Executive Officer, a Chief Operating Officer, a Chief Technology Officer, a Secretary and a Treasurer. Section 3. ELECTION OR APPOINTMENT OF OTHER OFFICERS. Such other officers and assistant officers and agents as may be deemed necessary may be elected or appointed by the Board of Directors, or, unless otherwise specified herein, appointed by the President of the Corporation. The Board of Directors shall be advised of appointments by the President at or before the next scheduled Board of Directors meeting. 8 9 Section 4. SALARIES. The salaries of all officers of the Corporation to be elected by the Board of Directors pursuant to Article IV, Section 2 hereof shall be fixed from time to time by the Board of Directors or pursuant to its discretion. The salaries of all other elected or appointed officers of the Corporation shall be fixed from time to time by the President of the Corporation or pursuant to his direction. Section 5. TERM; RESIGNATION. The officers of the Corporation shall hold office until their successors are chosen and qualified. Any officer or agent elected or appointed by the Board of Directors or the President of the Corporation may be removed, with or without cause, by the Board of Directors. Any officers or agents appointed by the President of the Corporation pursuant to Section 3 of this Article IV may also be removed from such officer positions by the President, with or without cause. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise shall be filled by the Board of Directors, or, in the case of an officer appointed by the President of the Corporation, by the President or the Board of Directors. Any officer of the Corporation may resign from his respective office or position by delivering notice to the Corporation. Such resignation is effective when delivered unless the notice specifies a later effective date. If a resignation is made effective at a later date and the Corporation accepts the future effective date, the Board of Directors may fill the pending vacancy before the effective date if the Board provides that the successor does not take office until the effective date. Section 6. CHAIRMAN. The Chairman of the Board of Directors shall be the chief executive officer of the Company, shall have general supervision of the affairs of the Company and general control of all of its business and shall see that all orders and resolutions of the Board of Directors are carried into effect. The Chairman of the Board, or in his or her absence, the president, shall preside when present at all meetings of the shareholders and the Board. The Chairman of the Board may execute bonds, mortgages and other contracts requiring a seal under the seal of the Company, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board to some other officer or agent of the Company. The Chairman of the Board may delegate all or any of his or her powers or duties to the president, if and to the extent deemed by the Chairman of the Board to be desirable or appropriate. Section 7. PRESIDENT. The President shall be the ranking executive officer of the Company and shall, subject to the supervision of the Chairman of the Board and the Board, have general management and control of the day-to-day business operations of the Company. The President shall put into operation the business policies of the Company as determined by the Chairman of the Board and the Board and as communicated to him or her by such officer and bodies. The President shall make recommendations to the Chairman of the Board on all matters that would normally be reserved for the final executive responsibility of the Chairman of the Board. In the absence of the Chairman of the board or in the event of his or her inability or refusal to act, the President shall perform the duties and exercise the powers of the Chairman of the Board. 9 10 Section 8. SECRETARY. The Secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders and record all the proceedings of the meetings of the shareholders and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall be. He shall keep in safe custody the seal of the Corporation and, when authorized by the Board of Directors, affix the same to any instrument requiring it. Section 9. TREASURER. The Treasurer shall have the custody of corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors at its regular meetings or when the Board of Directors so requires an account of all his transactions as treasurer and of the financial condition of the Corporation unless otherwise specified by the Board of Directors, the Treasurer shall be the Corporation's Chief Financial Officer. Section 10. OTHER OFFICERS; EMPLOYEES AND AGENTS. Each and every other officer, employee and agent of the Corporation shall possess, and may exercise, such power and authority, and shall perform such duties, as may from time to time be assigned to him by the Board of Directors, the officer so appointing him and such officer or officers who may from time to time be designated by the Board of Directors to exercise such supervisory authority. ARTICLE V CERTIFICATES FOR SHARES Section 1. ISSUE OF CERTIFICATES. The Corporation shall deliver certificates representing all shares to which shareholders are entitled; and such certificates shall be signed by the Chairman of the Board or President, and by the Secretary or an Assistant Secretary of the Corporation, and may be sealed with the seal of the Corporation or a facsimile thereof. Section 2. LEGENDS FOR PREFERENCES AND RESTRICTIONS ON TRANSFER. The designations, relative rights, preferences and limitations applicable to each class of shares and the variations in rights, preferences and limitations determined for each series within a class (and the authority of the Board of Directors to determine variations for future series) shall be summarized on the front or back of each certificate. Alternatively, each certificate may state conspicuously on its front or back that the Corporation will furnish the shareholder a full statement of this information on request and without charge. Every certificate representing shares that are restricted as to the sale, 10 11 disposition, or transfer of such shares shall also indicate that such shares are restricted as to transfer and there shall be set forth or fairly summarized upon the certificate, or the certificate shall indicate that the Corporation will furnish to any shareholder upon request and without charge, a full statement of such restrictions. If the Corporation issues any shares that are not registered under the Securities Act of 1933, as amended, or registered or qualified under applicable state securities laws, the transfer of any such shares shall be restricted substantially in accordance with the following legend: "THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE LAW, OR (2) AT HOLDER'S EXPENSE, AN OPINION (SATISFACTORY TO THE CORPORATION) OF COUNSEL (SATISFACTORY TO THE CORPORATION) THAT REGISTRATION IS NOT REQUIRED." Section 3. FACSIMILE SIGNATURES. The signatures of the Chairman of the Board, the Chief Executive Officer, the President or Chief Operating Officer and the Secretary or Assistant Secretary upon a certificate may be facsimiles, if the certificate is manually signed by a transfer agent, or registered by a registrar, other than the Corporation itself or an employee of the Corporation. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of the issuance. Section 4. LOST CERTIFICATES. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed. Section 5. TRANSFER OF SHARES. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 6. REGISTERED SHAREHOLDERS. The Corporation shall be entitled to recognize the exclusive rights of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share 11 12 or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Florida. Section 7. REDEMPTION OF CONTROL SHARES. As provided by the Florida Business Corporation Act, if a person acquiring control shares of the Corporation does not file an acquiring person statement with the Corporation, the Corporation may, at the discretion of the Board of Directors, redeem the control shares at the fair value thereof at any time during the 60-day period after the last acquisition of such control shares. If a person acquiring control shares of the Corporation files an acquiring person statement with the Corporation, the control shares may be redeemed by the Corporation, at the discretion of the Board of Directors, only if such shares are not accorded full voting rights by the shareholders as provided by law. ARTICLE VI INDEMNIFICATION Section 1. DEFINITIONS. For purposes of this Article VI: (a) "Corporation" includes any domestic or foreign predecessor entity of the Company in a merger, conversion or other transaction in which some or all of the liabilities of the predecessor are transferred to the Company by operation of law and in any other transaction in which the Company assumes the liabilities of the predecessor but does not specifically exclude liabilities that are the subject matter of this Article VI; (b) "Director" means any person who is or was a director of the Company and any person who, while a Director of the Company, is or was serving at the request of the Company as a Director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, employee benefit plan, other enterprise or other entity; (c) "Expenses" include court costs and attorneys' fees, including those for appeal; (d) "Official capacity" means: (i) when used with respect to a Director, the office of Director in the Company, but does not include service for any other foreign or domestic corporation or any employee benefit plan, other enterprise or other entity; (ii) when used with respect to a person other than a Director, the elective or appointive office in the Company held by the officer or the employment or agency relationship undertaken by the employee or agent on behalf of the Company, 12 13 but does not include service for any other foreign or domestic corporation, employee benefit plan, other enterprise or other entity; and (e) "Proceeding" means any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative, any appeal in such an action, suit or proceeding, and any inquiry or investigation that could lead to such an action, suit or proceeding. Section 2. MANDATORY INDEMNIFICATION. The Company shall indemnify a person who was, is or is threatened to be made a named defendant or respondent in a proceeding because the person is or was a Director only if it is determined in accordance with Section 6 hereof that the person: (a) conducted himself or herself in good faith; (b) reasonably believed: (i) in the case of conduct in his or her official capacity as a Director of the Company, that his or her conduct was in the Company's best interests; and (ii) in all other cases, that his or her conduct was at least not opposed to the Company's best interests; and (c) in the case of any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. Section 3. PROHIBITED INDEMNIFICATION. Except to the extent permitted by Section 5 hereof, a Director may not be indemnified under Section 2 hereof in respect of a proceeding: (a) in which the person is found liable on the basis that personal benefit was improperly received by him or her, whether or not the benefit resulted from an action taken in the person's official capacity; or (b) in which the person is found liable to the Company. Section 4. TERMINATION OF PROCEEDINGS. The termination of a proceeding by judgment, order, settlement or conviction, or on a plea of nolo contendere or its equivalent is not of itself determinative that the person did not meet the requirements set forth in Section 2 hereof. A person shall be deemed to have been found liable in respect of any claim, issue or matter only after the person shall have been so adjudged by a court of competent jurisdiction after exhaustion of all appeals therefrom. Section 5. JUDGMENTS, EXPENSES. A person may be indemnified under Section 2 hereof against judgments, penalties (including excise and similar taxes), fines, settlements and reasonable expenses actually incurred by the person in connection with the proceeding; but if the person is found liable to the Company or is found liable on the basis that personal benefit was improperly 13 14 received by the person, the indemnification (a) is limited to reasonable expenses actually incurred by the person in connection with the proceeding and (b) shall not be made in respect of any proceeding in which the person shall have been found liable for willful or intentional misconduct in the performance of his or her duty to the Company. Section 6. DETERMINATION OF INDEMNIFICATION. A determination of indemnification under Section 2 hereof must be made: (a) by a majority vote of a quorum consisting of Directors who at the time of the vote are not named defendants or respondents in the proceeding; (b) if such a quorum cannot be obtained, by a majority vote of a committee of the Board, designated to act in the matter by a majority vote of all Directors, consisting solely of two or more Directors who at the time of the vote are not named defendants or respondents in the proceeding; (c) by special legal counsel selected by the Board or a committee thereof by vote as set forth in subsection (a) or (b) of this Section 6, or if such a quorum cannot be obtained and such a committee cannot be established, by a majority vote of all Directors; or (d) by the shareholders of the Company in a vote that excludes the shares held by Directors who are named defendants or respondents in the proceeding. Section 7. DETERMINATION OF REASONABLENESS OF EXPENSES. Determination as to reasonableness of expenses must be made in the same manner as the determination that indemnification is permissible, except that if the determination that indemnification is permissible is made by special legal counsel, determination as to reasonableness of expenses must be made in the manner specified by subsection (c) of Section 6 hereof for the selection of special legal counsel. SECTION 8. INDEMNIFICATION AGAINST REASONABLE EXPENSES. The Company shall indemnify a Director against reasonable expenses incurred by the Director in connection with a proceeding in which the Director is a named defendant or respondent because the Director is or was a Director if the Director has been wholly successful, on the merits or otherwise, in the defense of the proceeding. Section 9. PAYMENTS IN ADVANCE OF DISPOSITION. Reasonable expenses incurred by a Director who was, is or is threatened to be made a named defendant or respondent in a proceeding shall be paid or reimbursed by the Company, in advance of the final disposition of the proceeding and without any of the determinations specified in Section 6 and Section 7 hereof, after the Company receives a written affirmation by the Director of the Director's good faith 14 15 belief that the Director has met the standard of conduct necessary for indemnification under this Article VI and a written undertaking by or on behalf of the Director to repay the amount paid or reimbursed if it is ultimately determined that the Director has not met those requirements. Section 10. WRITTEN UNDERTAKING. The written undertaking required by Section 9 hereof must be an unlimited general obligation of the Director but need not be secured. It may be accepted without reference to financial ability to make repayment. Section 11. CONSISTENCY WITH ARTICLES OF INCORPORATION. Any provision for the Company to indemnify or to advance expenses to a Director who was, is or is threatened to be made a named defendant or respondent in a proceeding, whether contained in the articles of incorporation, these Bylaws, a resolution of shareholders or Directors, an agreement or otherwise, except in accordance with Section 16 hereof, is valid only to the extent it is consistent with this Article VI as limited by the Articles of Incorporation, if such a limitation exists. Section 12. OTHER EXPENSES. Notwithstanding any other provision of this Article VI, the Company may pay or reimburse expenses incurred by a Director in connection with his or her appearance as a witness or other participation in a proceeding at a time when he or she is not a named defendant or respondent in the proceeding. Section 13. OFFICERS, EMPLOYEES AND AGENTS. An officer, employee or agent of the Company shall be indemnified as, and to the same extent, provided by Section 8 hereof for a Director and is entitled to seek indemnification under such section to the same extent as a Director. The Company shall advance expenses to an officer and may advance expenses to an employee or agent of the Company to the same extent that it shall advance expenses to Directors under this Article VI. Section 14. OTHER CAPACITIES. A corporation may indemnify and advance expenses to persons who are not or were not officers, employees or agents of the Company, but who are or were serving at the request of the Company as a Director, officer, partner, venturer, proprietor, trustee, employee, agent or similar Dictionary of another foreign or domestic corporation, employee benefit plan, other enterprise or other entity to the same extent that it shall indemnify and advance expenses to Directors under this Article VI. Section 15. FURTHER INDEMNIFICATION. The Company may indemnify and advance expenses to an officer, employee agent or person identified in Section 14 hereof and who is not a Director to such further extent, consistent with applicable law, as may be provided by the articles of incorporation, these Bylaws, general or specific action of the Board, or contract or as permitted or required by common law. Section 16. INSURANCE. The Company may purchase and maintain insurance or another arrangement on behalf of any person who is or was a Director, officer, employee or agent of the Company or who is or was serving at the request of the Company as a Director, officer, partner, venturer, proprietor, trustee, employee, agent or similar Dictionary of another foreign or domestic corporation, employee benefit plan, other enterprise or other entity against any 15 16 liability asserted against him or her and incurred by him or her in such a capacity or arising out of his or her status as such a person, whether or not the Company would have the power to indemnify him or her against that liability under this Article VI. If the insurance or other arrangement is with a person or entity that is not regularly engaged in the business of providing insurance coverage, the insurance or arrangement may provide for payment of a liability with respect to which the Company would not have the power to indemnify the person only if including coverage for the additional liability has been approved by the shareholders of the Company. Without limiting the power of the Company to procure or maintain any kind of insurance or other arrangement, the Company may, for the benefit of persons indemnified by the Company, (a) create a trust fund; (b) establish any form of self insurance; (c) secure its indemnity obligation by grant of a security interest or other lien on the assets of the Company; or (d) establish a letter of credit, guaranty or surety arrangement. The insurance or other arrangement may be procured, maintained or established within the Company or with any insurer or other person deemed appropriate by the Board regardless of whether all or part of the stock or other securities of the insurer or other person are owned in whole or part by the Company. In the absence of fraud, the judgment of the Board as to the terms and conditions of the insurance or other arrangement and the identity of the insurer or other person participating in an arrangement shall be conclusive and the insurance or arrangement shall not be voidable and shall not subject the Directors approving the insurance or arrangement to liability, on any ground, regardless of whether Directors participating in the approval are beneficiaries of the insurance or arrangement. Section 17. EMPLOYEE BENEFIT PLANS. For purposes of this Article VI, the Company is deemed to have requested a Director to serve as a trustee, employee, agent or similar functionary of an employee benefit plan whenever the performance by the Director of his or her duties to the Company also imposes duties on or otherwise involves services by him or her to the plan or participants or beneficiaries of the plan. Excise taxes assessed on a Director with respect to an employee benefit plan pursuant to applicable law are deemed fines. Action taken or omitted by a Director with respect to an employee benefit plan in the performance of his or her duties for a purpose reasonably believed by him or her to be in the interest of the participants and beneficiaries of the plan is deemed to be for a purpose that is not opposed to the best interests of the Company. Section 18. CHANGE IN GOVERNING LAW. In the event of any amendment or addition to Section 607.0850 of the Florida Business Corporation Act or the addition of any other section to such law that shall limit indemnification rights thereunder, the Company shall, to the extent permitted by the Florida Business Corporation Act, indemnify to the fullest extent authorized or permitted hereunder, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including an action by or in the right of the Company), by reason of the fact that he or she is or was a Director, officer, employee or agent of the Company or is or was serving at 16 17 the request of the Company as a Director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise, against all judgments, penalties (including excise and similar taxes), fines, settlements and reasonable expenses (including attorneys' fees and court costs) actually and reasonably incurred by him or her in connection with such action, suit or proceeding. ARTICLE VII INTERESTED DIRECTORS, OFFICERS AND SHAREHOLDERS Section 1. VALIDITY, DISCLOSURE, APPROVAL. An otherwise valid contract or transaction between the Company and one or more of its Directors or officers, or between the Company and any other domestic or foreign corporation, or other entity in which one or more of its Directors or officers are Directors or officers or have a financial interest, shall be valid notwithstanding whether the Director or officer is present at or participates in the meeting of the Board or committee thereof that authorizes the contract or transaction, or solely because his or her or their votes are counted for such purpose, if any one of the following is satisfied: (a) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested Directors, even though the disinterested Directors be less than a quorum; or (b) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or (c) the contract or transaction is fair as to the Company as of the time it is authorized, approved or ratified by the Board, a committee thereof or the shareholders. Section 2. QUORUM. Common or interested Directors may be counted in determining the presence of a quorum at a meeting of the Board or by a committee that authorizes the contract or transaction. Section 3. NONEXCLUSIVE. This Article VII shall not be construed to invalidate any contract or transaction that would be valid in the absence of this Article VII. ARTICLE VIII GENERAL PROVISIONS Section 1. DIVIDENDS. The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in cash, property, or its own shares pursuant to law and subject to the provisions of the Articles of Incorporation. 17 18 Section 2. RESERVES. The Board of Directors may by resolution create a reserve or reserves out of earned surplus for any proper purpose or purposes, and may abolish any such reserve in the same manner. Section 3. CHECKS. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 4. AMENDMENTS OF BYLAWS. Unless otherwise provided by law, these Bylaws may be altered, amended or repealed in whole or in part, or new Bylaws may be adopted, by action of the Board of Directors. Section 5. FISCAL YEAR. The fiscal year of the Corporation shall end on the last Saturday in the month of January, unless otherwise fixed by resolution of the Board of Directors. Section 6. SEAL. The corporate seal shall have inscribed thereon the name and state of incorporation of the Corporation. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. SECTION 7. BOOKS AND RECORDS. The Company shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its shareholders, Board and committees and shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of the shares held by each. 18 EX-10.4 5 EMPLOYMENT AGREEMENT WITH W. PATCH 1 EXHIBIT 10.4 EXECUTIVE EMPLOYMENT AGREEMENT This Executive Employment Agreement (this "Agreement") is entered into effective January 11, 2000 by and between Envision Development Corporation, ("Company"), and William J. Patch ("Executive"). FACTUAL BACKGROUND The Company wishes to employ Executive as its President / Chief Operating Officer and Executive wishes to be employed by Company in such capacity upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and conditions herein contained, the receipt and sufficiency of which is hereby acknowledged and accepted, the Company and the Executive hereby agree as follows: AGREEMENT 1. EMPLOYMENT AND DUTIES. The Company employs Executive as its President / Chief Operating Officer. In that capacity, Executive shall discharge such responsibilities as are commensurate with such office and position including without limitation by directing all technology, sales, service, financial and human resources operations and administration of the Company. The Company's CFO, CTO, Group Presidents of its business units, and vice presidents of Human Resources, Sales, Marketing and Operations shall report to Executive, and Executive shall in turn report to the Board of Directors. Executive shall manage customers and employees, and develop and implement business strategies and programs. Executive shall be responsible for achieving its Company's annual revenues and EBITDA goals, as may be set from time to time by the Board of 2 Directors. The Company's anticipates acquiring other operating business and references in this paragraph to "the Company" include such future acquisitions. The Executive's principal place of employment will be in the Boston area, unless the Executive approves an alternate location. 2. EXCLUSIVE SERVICES. For so long as the Company employs Executive, he shall, except as the Board may otherwise agree from time to time in writing, devote substantially all of Executive's business time and attention to the performance of Executive's duties hereunder, faithfully serve the Company, conform to and comply with the lawful and good faith directions and instructions given to Executive by the Company, and use Executive's best efforts to promote, serve and further the interests of the Company. 3. NO OTHER EMPLOYMENT AND NO CONFLICTS OF INTEREST. For so long as the Company employs Executive he shall not, directly or indirectly, render services to any other person or organization for which he receives compensation (except, at the direction of the Board) or otherwise engage in activities that would interfere significantly with Executive's faithful performance of Executive's duties hereunder. Executive may perform inconsequential services with nominal compensation therefore in connection with the management of Executive's and Executive's family's personal investments, provided that such activity does not contravene the provisions of Sections 1 and 2. 4. TRAVEL AND OTHER BUSINESS RELATED EXPENSES REIMBURSEMENTS. The Company shall reimburse Executive for all reasonable travel and other business-related expenses Executive incurs fulfilling Executive's duties hereunder. 5. TERM. Executive's employment hereunder commenced on January 11, 2000 (the "Commencement Date") and will continue for a term of four (4) years ("Initial Term") or until such earlier date as Executive's employment shall be terminated pursuant to Section 7 (the "Termination Date"). This Agreement may be extended by mutual consent at any time. 2 3 6. COMPENSATION. For the services to be rendered hereunder, the Company shall provide the following compensation to Executive: (a) BASE SALARY. The Company shall pay Executive an initial base salary of Two Hundred Thousand Dollars ($200,000) per annum in accordance with its customary payroll practices. Such base salary shall be subject to annual review and increase by the Board of Directors or a compensation committee thereof. (b) BONUS. Executive shall have the right to earn up to 100% of Executive's Base Salary as an annual performance bonus, based on such criteria as may be established in advance by the Board of Directors. At the discretion of the Board of Directors, the form of payment for the annual performance bonus may be EDV stock or option, cash, or a combination of the two. (c) CAR ALLOWANCE. Executive shall receive a monthly car allowance in an amount mutually agreeable. (d) STOCK OPTIONS. Effective on the Commencement Date, the Company hereby grants Executive Stock Options to purchase 400,000 shares of the Company's common stock at a price of $22.00/share which is the fair market value of such shares as of the Effective Date. The first 100,000 of such options shall vest on January 11, 2001, and the remaining 300,000 shall vest at the rate of 25,000 per calendar quarter beginning with the quarter that ends on March 31, 2001, until the options are fully vested on December 31, 2003. The Option Agreement shall contain such other provisions as are Customary for such agreements. Notwithstanding the foregoing, all of Executive's options shall also vest upon the occurrence of any of the following: 3 4 (i) Termination of Executive's employment with the Company as a result of death or disability as defined in Section 7(a), 7(b) or termination without cause as defined in Section 7(d) below; or (ii) The Company is acquired and within one year following the closing of the acquisition, Executive terminates Executive's employment with the Company. For purposes of this subparagraph (ii), the Board of Directors shall determine in its discretion whether an event triggering such acceleration and vesting of Executive's options has occurred. (iii) In the event Executive is terminated without cause the provisions of 7(d) shall apply. In the event Executive is terminated for cause as set forth in Section 7(c), or in the event Executive voluntarily terminates Executive's employment for any reason other than an acquisition as set forth in Section 6(c)(ii), the Executive's right to vest in the stock options shall terminate at the end of the vesting quarter in which the Executive was terminated, and no further vesting shall occur. (e) SIGNING BONUS. As further consideration for Executive's accepting this appointment, the Company agrees to pay Executive promptly following the commencement of Executive's employment $100,000 net of all Federal and State withholding taxes and other employment taxes which shall be paid for by the Company (i.e. grossed-up for taxes). (f) VACATION. Executive shall be entitled to four (4) weeks vacation per year. (g) EMPLOYEE BENEFITS. The Company shall provide at no cost to the Executive such insurance, pension and other benefits as it provides to its other Executive employees which shall include, but not be limited to health, long-term disability, short-term disability, dental, and life insurance and employee savings or 401(k) plans. 4 5 (h) REGISTRATION RIGHTS. Executive shall have reasonable and customary piggy back registration rights with respect to any shares granted to Executive (including shares received upon exercise of stock options) if such shares cannot otherwise be sold without registration. 7. TERMINATION. Executive's employment may be terminated in any one of the following ways, prior to the expiration of the Initial Term: (a) DEATH. The death of Executive shall immediately terminate this Agreement. Any rights or entitlements pursuant to this Agreement earned prior to the death of Executive will inure to the benefit of Executive's estate. All unvested options shall vest upon death and inure to the benefit of the Executive's estate as defined in 6(c)(i.) above. (b) DISABILITY. If, as a result of incapacity due to physical or mental illness or injury, Executive shall have been unable to perform the essential functions of Executive's position on a full-time basis for a period at least six (6) months with a reasonable accommodation, then thirty (30) days after written notice to the Executive (which notice may be given before or after the end of the aforementioned period, but which shall not be effective earlier than the last day of the applicable period), the Company may terminate Executive's employment hereunder if Executive is unable to resume Executive's full-time duties at the conclusion of such notice period. In the event of a termination pursuant to this Section 7(b), all payments to Executive due pursuant to this Agreement shall cease effective the last day of Executive's employment, but all benefits (as defined in 6(f) shall continue for the greater of one year following termination for disability and/or the terms of this agreement. The appointment by the Company of an interim executive to assume the responsibilities of the Executive while the Executive is incapacitated shall not constitute a breach of Section 1 of this Agreement. (c) TERMINATION BY THE EMPLOYER FOR CAUSE. The Company may terminate Executive's employment for Cause immediately upon written notice. Termination for cause is defined as: (i) Executive's material breach of this 5 6 Agreement or of any Proprietary Information Agreement (however denominated) between the Company and the Executive; (ii) Executive's gross negligence in the performance of Executive's duties hereunder, intentional failure to perform such duties, or refusal to abide by or comply with the reasonable directives of the Chairman, the Board, or the Company's policies and procedures; (iii) Executive's dishonesty, fraud or misconduct with respect to the business or affairs of Company or which in the reasonable judgment of the Company materially and adversely affects the operation or reputation of Company; (iv) Executive's conviction of a felony or a crime involving moral turpitude; or (v) Executive's abuse of alcohol or drugs (legal or illegal) that in the Company's reasonable judgment materially impairs Executive's ability to perform Executive's duties hereunder. In the event Executive is terminated for cause pursuant to this Section 7(c), all payments and benefits, including the future vesting of stock options, to Executive due pursuant to this Agreement, shall cease in accordance with paragraph 6(c)(ii). (d) TERMINATION BY COMPANY WITHOUT CAUSE. The Company may terminate Executive's employment without Cause immediately upon written notice to Executive. If terminated within the first year of employment, the Company shall pay Executive severance in a lump sum amount equal to Executive's then base annual salary plus full annual bonus as specified in 6(b) above, and all remaining unvested stock options shall vest immediately. Otherwise if Executive is terminated without cause anytime after one (1) year, Executive is entitled to one month severance of Executive's then annual salary and all remaining unvested stock options shall vest immediately, provided Executive executes a full release of all claims against the Company. Such severance pay shall not be subject to reduction for any reason. The employee by accepting severance pay agrees to a strict non-solicitation of EDV employees and/or customers. 6 7 (e) EXECUTIVE'S RESIGNATION. Executive may voluntarily terminate Executive's employment upon not less than thirty (30) days' prior written notice. Upon any such resignation, except to the extent such resignation occurs in the context of an acquisition as defined by Section 6(c)(ii), all payments and benefits due pursuant to this Agreement for future services shall cease effective the last day of Executive's employment and all earned amounts shall be paid in full. In the event Executive voluntarily terminates within one year from the date of an acquisition as defined in 6(c)(ii) above, Executive shall still be entitled to the same benefits as those defined in paragraph 7(d) (Termination Without Cause). 8. CONFIDENTIALITY. (a) Executive understands that during the course of Executive's employment with the Company he will receive and have access to materials and information in which the Company and its affiliated entities have, or may in the future acquire, exclusive and proprietary rights (the "Confidential Information"). Such Confidential Information may include, but is not limited to, the Company's and its affiliated entities' trade secrets, research, marketing data, know-how, technical data, business strategies, computer software, financial information, client lists, client information, this Agreement and other personnel information. Executive hereby expressly and unconditionally agrees that he will keep all Confidential Information strictly confidential and will not disclose, use, or allow anyone else to use, directly or indirectly, any Confidential Information in any form except for the express purpose of performing the tasks for which Executive is engaged pursuant to this Agreement. The foregoing applies to all Confidential Information unless such information has become publicly known or made generally available through no wrongful act of Executive. (b) FORMER EMPLOYER INFORMATION. Executive agrees that he will not, during Executive's employment with the Company, improperly use or disclose any proprietary information or trade secrets of any former employer or any other 7 8 person or entity and that he will not bring onto the premises of the Company any unpublished document or proprietary information belonging to any such employer, person or entity unless consented to in writing by such employer, person or entity. (c) THIRD PARTY INFORMATION. Executive recognizes that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. The Executive agrees to hold all such confidential and proprietary information in the strictest confidence and not to disclose it to any person, or entity or to use it except as necessary in carrying out Executive's work for the Company consistent with the Company's agreement with such third party. (d) SURVIVAL. The provisions of this Section 8 shall survive the termination of the remainder of this Agreement. 9. EFFECT OF TERMINATION. Executive agrees that upon termination of Executive's employment, he will deliver to the Company (and will not keep in Executive's possession, recreate or deliver to anyone else) any and all devices, records, data, notes, reports, proposals, lists, correspondence, specifications, materials, equipment and other documents or property or reproductions of any of the aforementioned items developed or received by Executive pursuant to Executive's employment with the Company or otherwise belonging to the Company, its successors, assigns, or affiliates, except that Executive may retain Executive personal files relating to Executive's service as a director of the Company. 8 9 10. MISCELLANEOUS. (a) GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, as applicable to contracts executed and performed entirely within and by residents of such state. (b) NO OTHER AGREEMENTS. This Agreement constitutes the entire agreement between the parties relating to its subject matter, and supercedes all prior agreements, proposals, representations and commitments, oral and otherwise. This Agreement may only be amended by an instrument signed by an authorized representative of the Company, and Executive. Any breach by a party of the terms of any other agreement between them also constitutes a breach of this Agreement. (c) DISPUTES AND ATTORNEYS FEES. In the event any action or proceeding, at law or in equity, is filed to enforce or interpret this Agreement, the prevailing party in such action or proceeding will be entitled to recover reasonable attorneys' fees and costs in addition to any other award of the court or tribunal, as the case may be. (d) NOTICE. Any communication among the parties hereto, and any notices or communications herein provided to be made, shall be given or made by personal delivery, telecopy, facsimile or overnight courier, or by mailing the same by first class mail, postage prepaid, to the parties at the address indicated below, or to such other address(es) as either party may in writing hereafter provide in accordance with this Section 10(d). Notices will be deemed to be received when personally delivered or transmitted by telecopy or facsimile, one (1) day after the date of forwarding by overnight courier, or two (2) business days after posting in the U.S. Mails, as the case may be. 9 10 (e) COUNTERPARTS. This Agreement may be executed in counterparts, each of which, taken together, shall constitute one and the same instrument. Signatures obtained via facsimile shall be acceptable as original signatures. (f) SAVINGS CLAUSE. In the event that any provision, or provisions, of this Agreement should be declared invalid or unenforceable by any court of law, the remaining terms and conditions set forth herein shall remain in full force and effect. (g) HEADINGS. The headings to paragraphs or sections of this Agreement have been inserted for identification and ease of reference purposes only and shall have no bearing whatsoever concerning the construction or interpretation of this Agreement. 10 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement below as of the date first written above. EXECUTIVE: EMPLOYER: ENVISION DEVELOPMENT CORP. By ----------------------------- Its: /s/ WILLIAM J. PATCH ----------------------------- - -------------------------------- Address: William J. Patch ------------------------------- ------------------------------- Address: - -------------------------------- - -------------------------------- 11 EX-10.5 6 EMPLOYMENT AGREEMENT WITH M. AMIDEO 1 EXHIBIT 10.5 EXECUTIVE EMPLOYMENT AGREEMENT This Executive Employment Agreement (this "Agreement") is entered into effective January 11, 2000 by and between Envision Development Corporation, ("Company"), and Michael E. Amideo ("Executive"), the ("Effective Date"). FACTUAL BACKGROUND The Company wishes to employ Executive as its Chief Financial Officer, and Executive wishes to be employed by Company in such capacity upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and conditions herein contained, the receipt and sufficiency of which is hereby acknowledged and accepted, the Company and the Executive hereby agree as follows: AGREEMENT 1. EMPLOYMENT AND DUTIES. The Company employs Executive as its Chief Financial Officer. In that capacity, Executive shall discharge such responsibilities as are commensurate with such office and position including without limitation by directing all financial and accounting operations and administration of the Company. The Company's accounting personnel and Presidents of its business units shall report to Executive, and Executive shall in turn report to the Board of Directors and President / COO / CEO. Executive shall manage customers and employees, and develop and implement business strategies and programs. Executive shall be responsible for achieving its Company's annual revenues and EBITDA goals, as may be set from time to time by the Board of Directors and the President / COO / CEO. The Company's anticipates acquiring other operating business and references in this paragraph to "the Company" include such future acquisitions. The Executive's principal place of employment will be in the Boston area, unless the Executive approves an alternate location. 2 2. EXCLUSIVE SERVICES. For so long as the Company employs Executive, he shall, except as the Board may otherwise agree from time to time in writing, devote substantially all of Executive's business time and attention to the performance of Executive's duties hereunder, faithfully serve the Company, conform to and comply with the lawful and good faith directions and instructions given to Executive by the Company, and use Executive's best efforts to promote, serve and further the interests of the Company. 3. NO OTHER EMPLOYMENT AND NO CONFLICTS OF INTEREST. For so long as the Company employs Executive, he shall not engage in activities that would interfere significantly with Executive's faithful performance of Executive's duties hereunder. Executive may perform services for compensation to any other person / corporation or organization. Executive may perform services in connection with the management of Executive's and Executive's family's personal investments, provided that such activity does not contravene the provisions of Sections 1 and 2. 4. TRAVEL AND OTHER BUSINESS RELATED EXPENSES REIMBURSEMENTS. The Company shall reimburse Executive for all reasonable travel and other business-related expenses Executive incurs fulfilling Executive's duties hereunder. 5. TERM. Executive's employment hereunder commenced on January 11, 2000 (the "Commencement Date") and will continue for a term of four (4) years ("Initial Term") or until such earlier date as Executive's employment shall be terminated pursuant to Section 7 (the "Termination Date"). This Agreement may be extended by mutual consent at any time. 6. COMPENSATION. For the services to be rendered hereunder, the Company shall provide the following compensation to Executive: (a) BASE SALARY. The Company shall pay Executive an initial base salary of One Hundred Eighty Thousand Dollars ($180,000) per annum in 2 3 accordance with its customary payroll practices. Such base salary shall be subject to annual review and increase by the Board of Directors or a compensation committee thereof. (b) BONUS. Executive shall have the right to earn up to 50% of Executive's Base Salary as an annual performance bonus, based on such criteria as may be established in advance by the Board of Directors. At the discretion of the Board of Directors, the form of payment for the annual performance bonus may be EDV stock or option, cash, or a combination of the two. (c) CAR ALLOWANCE. Executive shall receive a monthly car allowance in an amount mutually agreeable. (d) STOCK OPTIONS. Effective on the Commencement Date, the Company hereby grants Executive Stock Options to purchase 320,000 shares of the Company's common stock at a price of $22.00/share which is the fair market value of such shares as of the Effective Date. The first 106,666 of such options shall vest on January 11, 2001, and the remaining 213,334 shall vest at the rate of 26,667 per calendar quarter beginning with the quarter that ends on March 31, 2001, until the options are fully vested on December 31, 2002. The Executive on the Commencement Date shall receive 55,556 of immediately vested options to purchase shares of the Company's common stock at a price of $22.00/share which is the fair market value of such shares as of the Effective Date. The Option Agreement shall contain such other provisions as are Customary for such agreements. Notwithstanding the foregoing, all of Executive's options shall also vest upon the occurrence of any of the following: (i) Termination of Executive's employment with the Company as a result of death or disability as defined in Section 7(a), 7(b) or termination without cause as defined in Section 7(d) below; or 3 4 (ii) The Company is acquired and within one year following the closing of the acquisition, Executive terminates Executive's employment with the Company. For purposes of this subparagraph (ii), the Board of Directors shall determine In its discretion whether an event triggering such acceleration and vesting of Executive's options has occurred. (iii) In the event Executive is terminated without cause the provisions of 7(d) shall apply. In the event Executive is terminated for cause as set forth in Section 7(c), or in the event Executive voluntarily terminates Executive's employment for any reason other than an acquisition as set forth in Section 6(c)(ii), the Executive's right to vest in the stock options shall terminate at the end of the vesting quarter in which the Executive was terminated, and no further vesting shall occur. (e) SIGNING BONUS. As further consideration for Executive's accepting this appointment, the Company agrees to pay Executive promptly following the commencement of Executive's employment $70,000 net of all Federal and State withholding taxes and other employment taxes which shall be paid for by the Company (i.e. grossed-up for taxes). (f) VACATION. Executive shall be entitled to four (4) weeks vacation per year. (g) EMPLOYEE BENEFITS. The Company shall provide at no cost to the Executive such insurance, pension and other benefits as it provides to its other Executive employees which shall include, but not be limited to health, long-term disability, short-term disability, dental, and life insurance and employee savings or 401(k) plans. (h) REGISTRATION RIGHTS. Executive shall have reasonable and customary piggy back registration rights with respect to any shares granted to Executive (including shares received upon exercise of stock options) if such shares cannot otherwise be sold without registration. 4 5 7. TERMINATION. Executive's employment may be terminated in any one of the following ways, prior to the expiration of the Initial Term: (a) DEATH. The death of Executive shall immediately terminate this Agreement. Any rights or entitlements pursuant to this Agreement earned prior to the death of Executive will inure to the benefit of Executive's estate. All unvested options shall vest upon death and inure to the benefit of the Executive's estate as defined in 6(c)(i.) above. (b) DISABILITY. If, as a result of incapacity due to physical or mental illness or injury, Executive shall have been unable to perform the essential functions of Executive's position on a full-time basis for a period at least six (6) months with a reasonable accommodation, then thirty (30) days after written notice to the Executive (which notice may be given before or after the end of the aforementioned period, but which shall not be effective earlier than the last day of the applicable period), the Company may terminate Executive's employment hereunder if Executive is unable to resume Executive's full-time duties at the conclusion of such notice period. In the event of a termination pursuant to this Section 7(b), all payments to Executive due pursuant to this Agreement shall cease effective the last day of Executive's employment, but all benefits (as defined in 6(f) shall continue for the greater of one year following termination for disability and/or the terms of this agreement. The appointment by the Company of an interim executive to assume the responsibilities of the Executive while the Executive is incapacitated shall not constitute a breach of Section 1 of this Agreement. (c) TERMINATION BY THE EMPLOYER FOR CAUSE. The Company may terminate Executive's employment for Cause immediately upon written notice. Termination for cause is defined as: (i) Executive's material breach of this Agreement or of any Proprietary Information Agreement (however denominated) between the Company and the Executive; (ii) Executive's gross negligence in the performance of Executive's duties hereunder, intentional failure to perform such duties, or refusal to abide by or comply with the reasonable directives of the 5 6 Chairman, the Board, or the Company's policies and procedures; (iii) Executive's dishonesty, fraud or misconduct with respect to the business or affairs of Company or which in the reasonable judgment of the Company materially and adversely affects the operation or reputation of Company; (iv) Executive's conviction of a felony or a crime involving moral turpitude; or (v) Executive's abuse of alcohol or drugs (legal or illegal) that in the Company's reasonable judgment materially impairs Executive's ability to perform Executive's duties hereunder. In the event Executive is terminated for cause pursuant to this Section 7(c), all payments and benefits, including the future vesting of stock options, to Executive due pursuant to this Agreement, shall cease in accordance with paragraph 6(c)(ii). (d) TERMINATION BY COMPANY WITHOUT CAUSE. The Company may terminate Executive's employment without Cause immediately upon written notice to Executive. If terminated within the first year of employment, the Company shall pay Executive severance in a lump sum amount equal to Executive's then base annual salary plus full annual bonus as specified in 6(b) above, and all remaining unvested stock options shall vest immediately. Otherwise if Executive is terminated without cause anytime after one (1) year, Executive is entitled to one month severance of Executive's then annual salary and all remaining unvested stock options shall vest immediately, provided Executive executes a full release of all claims against the Company. Such severance pay shall not be subject to reduction for any reason. The employee by accepting severance pay agrees to a strict non-solicitation of EDV employees and/or customers. (e) EXECUTIVE'S RESIGNATION. Executive may voluntarily terminate Executive's employment upon not less than thirty (30) days' prior written notice. Upon any such resignation, except to the extent such resignation occurs in the context of an acquisition as defined by Section 6(c)(ii), all payments and benefits due pursuant to this Agreement for future services shall cease effective the last day of Executive's employment and all earned amounts 6 7 shall be paid in full. In the event Executive voluntarily terminates within one year from the date of an acquisition as defined in 6(c)(ii) above, Executive shall still be entitled to the same benefits as those defined in paragraph 7(d) (Termination Without Cause). 8. CONFIDENTIALITY. (a) Executive understands that during the course of Executive's employment with the Company he will receive and have access to materials and information in which the Company and its affiliated entities have, or may in the future acquire, exclusive and proprietary rights (the "Confidential Information"). Such Confidential Information may include, but is not limited to, the Company's and its affiliated entities' trade secrets, research, marketing data, know-how, technical data, business strategies, computer software, financial information, client lists, client information, this Agreement and other personnel information. Executive hereby expressly and unconditionally agrees that he will keep all Confidential Information strictly confidential and will not disclose, use, or allow anyone else to use, directly or indirectly, any Confidential Information in any form except for the express purpose of performing the tasks for which Executive is engaged pursuant to this Agreement. The foregoing applies to all Confidential Information unless such information has become publicly known or made generally available through no wrongful act of Executive. (b) FORMER EMPLOYER INFORMATION. Executive agrees that he will not, during Executive's employment with the Company, improperly use or disclose any proprietary information or trade secrets of any former employer or any other person or entity and that he will not bring onto the premises of the Company any unpublished document or proprietary information belonging to any such employer, person or entity unless consented to in writing by such employer, person or entity. 7 8 (c) THIRD PARTY INFORMATION. Executive recognizes that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. The Executive agrees to hold all such confidential and proprietary information in the strictest confidence and not to disclose it to any person, or entity or to use it except as necessary in carrying out Executive's work for the Company consistent with the Company's agreement with such third party. (d) SURVIVAL. The provisions of this Section 8 shall survive the termination of the remainder of this Agreement. 9. EFFECT OF TERMINATION. Executive agrees that upon termination of Executive's employment, he will deliver to the Company (and will not keep in Executive's possession, recreate or deliver to anyone else) any and all devices, records, data, notes, reports, proposals, lists, correspondence, specifications, materials, equipment and other documents or property or reproductions of any of the aforementioned items developed or received by Executive pursuant to Executive's employment with the Company or otherwise belonging to the Company, its successors, assigns, or affiliates, except that Executive may retain Executive personal files relating to Executive's service as a director of the Company. 10. MISCELLANEOUS. (a) GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, as applicable to contracts executed and performed entirely within and by residents of such state. (b) NO OTHER AGREEMENTS. This Agreement constitutes the entire agreement between the parties relating to its subject matter, and supercedes all prior agreements, proposals, representations and commitments, oral and otherwise. This Agreement may only be amended by an instrument signed by an 8 9 authorized representative of the Company, and Executive. Any breach by a party of the terms of any other agreement between them also constitutes a breach of this Agreement. (c) DISPUTES AND ATTORNEYS FEES. In the event any action or proceeding, at law or in equity, is filed to enforce or interpret this Agreement, the prevailing party in such action or proceeding will be entitled to recover reasonable attorneys' fees and costs in addition to any other award of the court or tribunal, as the case may be. (d) NOTICE. Any communication among the parties hereto, and any notices or communications herein provided to be made, shall be given or made by personal delivery, telecopy, facsimile or overnight courier, or by mailing the same by first class mail, postage prepaid, to the parties at the address indicated below, or to such other address(es) as either party may in writing hereafter provide in accordance with this Section 10(d). Notices will be deemed to be received when personally delivered or transmitted by telecopy or facsimile, one (1) day after the date of forwarding by overnight courier, or two (2) business days after posting in the U.S. Mails, as the case may be. (e) COUNTERPARTS. This Agreement may be executed in counterparts, each of which, taken together, shall constitute one and the same instrument. Signatures obtained via facsimile shall be acceptable as original signatures. (f) SAVINGS CLAUSE. In the event that any provision, or provisions, of this Agreement should be declared invalid or unenforceable by any court of law, the remaining terms and conditions set forth herein shall remain in full force and effect. (g) HEADINGS. The headings to paragraphs or sections of this Agreement have been inserted for identification and ease of reference purposes only and shall have no bearing whatsoever concerning the construction or interpretation of this Agreement. 9 10 IN WITNESS WHEREOF, the parties hereto have executed this Agreement below as of the date first written above. EXECUTIVE: EMPLOYER: ENVISION DEVELOPMENT CORP. By ---------------------------- Its: President ---------------------------- /s/ MICHAEL E. AMIDEO - ------------------------------ Address: 11701 N.W. 101 Road Michael E. Amideo Miami, FL 33178 Address: 787 South Shore Drive Miami Beach, FL 33141 10 EX-10.6 7 EMPLOYMENT AGREEMENT WITH T. NOLAN 1 EXHIBIT 10.6 EXECUTIVE EMPLOYMENT AGREEMENT This Executive Employment Agreement (this "Agreement") is entered into effective January 14, 2000 by and between Envision Development Corporation, ("Company"), and Thomas F. Nolan ("Executive"), the ("Effective Date"). FACTUAL BACKGROUND The Company wishes to employ Executive as its Vice President of Operations, and Executive wishes to be employed by Company in such capacity upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and conditions herein contained, the receipt and sufficiency of which is hereby acknowledged and accepted, the Company and the Executive hereby agree as follows: AGREEMENT 1. EMPLOYMENT AND DUTIES. The Company employs Executive as its Vice President of Operations. In that capacity, Executive shall discharge such responsibilities as are commensurate with such office and position including without limitation by developing and directing operations and administration programs of the Company. The Company's Executive shall report to the President / COO / CEO. Executive shall contribute to achieving Company annual revenues and EBITDA goals, as may be set from time to time by the Board of Directors and the President / COO / CEO. The Executive's principal place of employment will be in the Boston area, unless the Executive approves an alternate location. 2. EXCLUSIVE SERVICES. For so long as the Company employs Executive, he shall, except as the Board may otherwise agree from time to time in writing, devote substantially all of Executive's business time and attention to the 2 performance of Executive's duties hereunder, faithfully serve the Company, conform to and comply with the lawful and good faith directions and instructions given to Executive by the Company, and use Executive's best efforts to promote, serve and further the interests of the Company. 3. NO OTHER EMPLOYMENT AND NO CONFLICTS OF INTEREST. For so long as the Company employs Executive he shall not, directly or indirectly, render services to any other person or organization for which he receives compensation (except, at the direction of the Board) or otherwise engage in activities that would interfere significantly with Executive's faithful performance of Executive's duties hereunder. Executive may perform inconsequential services with nominal compensation therefore in connection with the management of Executive's and Executive's family's personal investments, provided that such activity does not contravene the provisions of Sections 1 and 2. 4. TRAVEL AND OTHER BUSINESS RELATED EXPENSES REIMBURSEMENTS. The Company shall reimburse Executive for all reasonable travel and other business-related expenses Executive incurs fulfilling Executive's duties hereunder. 5. TERM. Executive's employment hereunder commenced on January 14, 2000 (the "Commencement Date") and will continue for a term of four (4) years ("Initial Term") or until such earlier date as Executive's employment shall be terminated pursuant to Section 7 (the "Termination Date"). This Agreement may be extended by mutual consent at any time. 6. COMPENSATION. For the services to be rendered hereunder, the Company shall provide the following compensation to Executive: (a) BASE SALARY. The Company shall pay Executive an initial base salary of One Hundred Fifty Five Thousand Dollars ($155,000) per annum in accordance with its customary payroll practices. Such base salary shall be subject to annual review and increase by the Board of Directors or a compensation committee thereof. 2 3 (b) BONUS. Executive shall have the right to earn up to 50% of Executive's Base Salary as an annual performance bonus, based on such criteria as may be established in advance by the Board of Directors. At the discretion of the Board of Directors, the form of payment for the annual performance bonus may be EDV stock or option, cash, or a combination of the two. (c) CAR ALLOWANCE. Executive shall receive a monthly car allowance in an amount mutually agreeable. (d) STOCK OPTIONS. Effective on the Commencement Date, the Company hereby grants Executive Stock Options to purchase 150,000 shares of the Company's common stock at a price of $26.125/share which is the fair market value of such shares as of the Effective Date. The first 50,000 of such options shall vest on January 14, 2001, and the remaining 100,000 shall vest at the rate of 12,500 per calendar quarter beginning with the quarter that ends on March 31, 2001, until the options are fully vested on December 31, 2002. The Executive on the Commencement Date shall receive 28,829 of immediately vested options to purchase shares of the Company's common stock at a price of $26.125/share which is the fair market value of such shares as of the Effective Date. The Option Agreement shall contain such other provisions as are Customary for such agreements. Notwithstanding the foregoing, all of Executive's options shall also vest upon the occurrence of any of the following: (i) Termination of Executive's employment with the Company as a result of death or disability as defined in Section 7(a), 7(b) or termination without cause as defined in Section 7(d) below; or (ii) The Company is acquired and within one year following the closing of the acquisition, Executive terminates Executive's employment with the Company. For purposes of this subparagraph (ii), the Board 3 4 of Directors shall determine in its discretion whether an event triggering such acceleration and vesting of Executive's options has occurred. (iii) In the event Executive is terminated without cause the provisions of 7(d) shall apply. In the event Executive is terminated for cause as set forth in Section 7(c), or in the event Executive voluntarily terminates Executive's employment for any reason other than an acquisition as set forth in Section 6(c)(ii), the Executive's right to vest in the stock options shall terminate at the end of the vesting quarter in which the Executive was terminated, and no further vesting shall occur. (e) SIGNING BONUS. As further consideration for Executive's accepting this appointment, the Company agrees to pay Executive promptly following the commencement of Executive's employment $25,000 net of all Federal and State withholding taxes and other employment taxes which shall be paid for by the Company (i.e. grossed-up for taxes). (f) VACATION. Executive shall be entitled to four (4) weeks vacation per year. (g) EMPLOYEE BENEFITS. The Company shall provide at no cost to the Executive such insurance, pension and other benefits as it provides to its other Executive employees which shall include, but not be limited to health, long-term disability, short-term disability, dental, and life insurance and employee savings or 401(k) plans. (h) REGISTRATION RIGHTS. Executive shall have reasonable and customary piggy back registration rights with respect to any shares granted to Executive (including shares received upon exercise of stock options) if such shares cannot otherwise be sold without registration. 7. TERMINATION. Executive's employment may be terminated in any one of the following ways, prior to the expiration of the Initial Term: (a) DEATH. The death of Executive shall immediately terminate this Agreement. Any rights or entitlements pursuant to this Agreement earned prior to the death of Executive will inure to the benefit of Executive's estate. 4 5 All unvested options shall vest upon death and inure to the benefit of the Executive's estate as defined in 6(c)(i.) above. (b) DISABILITY. If, as a result of incapacity due to physical or mental illness or injury, Executive shall have been unable to perform the essential functions of Executive's position on a full-time basis for a period at least six (6) months with a reasonable accommodation, then thirty (30) days after written notice to the Executive (which notice may be given before or after the end of the aforementioned period, but which shall not be effective earlier than the last day of the applicable period), the Company may terminate Executive's employment hereunder if Executive is unable to resume Executive's full-time duties at the conclusion of such notice period. In the event of a termination pursuant to this Section 7(b), all payments to Executive due pursuant to this Agreement shall cease effective the last day of Executive's employment, but all benefits (as defined in 6(f) shall continue for the greater of one year following termination for disability and/or the terms of this agreement. The appointment by the Company of an interim executive to assume the responsibilities of the Executive while the Executive is incapacitated shall not constitute a breach of Section 1 of this Agreement. (c) TERMINATION BY THE EMPLOYER FOR CAUSE. The Company may terminate Executive's employment for Cause immediately upon written notice. Termination for cause is defined as: (i) Executive's material breach of this Agreement or of any Proprietary Information Agreement (however denominated) between the Company and the Executive; (ii) Executive's gross negligence in the performance of Executive's duties hereunder, intentional failure to perform such duties, or refusal to abide by or comply with the reasonable directives of the Chairman, the Board, or the Company's policies and procedures; (iii) Executive's dishonesty, fraud or misconduct with respect to the business or affairs of Company or which in the reasonable judgment of the Company materially and adversely affects the operation or reputation of Company; (iv) Executive's 5 6 conviction of a felony or a crime involving moral turpitude; or (v) Executive's abuse of alcohol or drugs (legal or illegal) that in the Company's reasonable judgment materially impairs Executive's ability to perform Executive's duties hereunder. In the event Executive is terminated for cause pursuant to this Section 7(c), all payments and benefits, including the future vesting of stock options, to Executive due pursuant to this Agreement, shall cease in accordance with paragraph 6(c)(ii). (d) TERMINATION BY COMPANY WITHOUT CAUSE. The Company may terminate Executive's employment without Cause immediately upon written notice to Executive. If terminated within the first year of employment, the Company shall pay Executive severance in a lump sum amount equal to Executive's then base annual salary plus full annual bonus as specified in 6(b) above, and all remaining unvested stock options shall vest immediately. Otherwise if Executive is terminated without cause anytime after one (1) year, Executive is entitled to one month severance of Executive's then annual salary and all remaining unvested stock options shall vest immediately, provided Executive executes a full release of all claims against the Company. Such severance pay shall not be subject to reduction for any reason. The employee by accepting severance pay agrees to a strict non-solicitation of EDV employees and/or customers. (e) EXECUTIVE'S RESIGNATION. Executive may voluntarily terminate Executive's employment upon not less than thirty (30) days' prior written notice. Upon any such resignation, except to the extent such resignation occurs in the context of an acquisition as defined by Section 6(c)(ii), all payments and benefits due pursuant to this Agreement for future services shall cease effective the last day of Executive's employment and all earned amounts shall be paid in full. In the event Executive voluntarily terminates within one 6 7 year from the date of an acquisition as defined in 6(c)(ii) above, Executive shall still be entitled to the same benefits as those defined in paragraph 7(d) (Termination Without Cause). 8. CONFIDENTIALITY. (a) Executive understands that during the course of Executive's employment with the Company he will receive and have access to materials and information in which the Company and its affiliated entities have, or may in the future acquire, exclusive and proprietary rights (the "Confidential Information"). Such Confidential Information may include, but is not limited to, the Company's and its affiliated entities' trade secrets, research, marketing data, know-how, technical data, business strategies, computer software, financial information, client lists, client information, this Agreement and other personnel information. Executive hereby expressly and unconditionally agrees that he will keep all Confidential Information strictly confidential and will not disclose, use, or allow anyone else to use, directly or indirectly, any Confidential Information in any form except for the express purpose of performing the tasks for which Executive is engaged pursuant to this Agreement. The foregoing applies to all Confidential Information unless such information has become publicly known or made generally available through no wrongful act of Executive. (b) FORMER EMPLOYER INFORMATION. Executive agrees that he will not, during Executive's employment with the Company, improperly use or disclose any proprietary information or trade secrets of any former employer or any other person or entity and that he will not bring onto the premises of the Company any unpublished document or proprietary information belonging to any such employer, person or entity unless consented to in writing by such employer, person or entity. (c) THIRD PARTY INFORMATION. Executive recognizes that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for 7 8 certain limited purposes. The Executive agrees to hold all such confidential and proprietary information in the strictest confidence and not to disclose it to any person, or entity or to use it except as necessary in carrying out Executive's work for the Company consistent with the Company's agreement with such third party. (d) SURVIVAL. The provisions of this Section 8 shall survive the termination of the remainder of this Agreement. 9. EFFECT OF TERMINATION. Executive agrees that upon termination of Executive's employment, he will deliver to the Company (and will not keep in Executive's possession, recreate or deliver to anyone else) any and all devices, records, data, notes, reports, proposals, lists, correspondence, specifications, materials, equipment and other documents or property or reproductions of any of the aforementioned items developed or received by Executive pursuant to Executive's employment with the Company or otherwise belonging to the Company, its successors, assigns, or affiliates, except that Executive may retain Executive personal files relating to Executive's service as a director of the Company. 10. MISCELLANEOUS. (a) GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, as applicable to contracts executed and performed entirely within and by residents of such state. (b) NO OTHER AGREEMENTS. This Agreement constitutes the entire agreement between the parties relating to its subject matter, and supercedes all prior agreements, proposals, representations and commitments, oral and otherwise. This Agreement may only be amended by an instrument signed by an authorized representative of the Company, and Executive. Any breach by a party of the terms of any other agreement between them also constitutes a breach of this Agreement. 8 9 (c) DISPUTES AND ATTORNEYS FEES. In the event any action or proceeding, at law or in equity, is filed to enforce or interpret this Agreement, the prevailing party in such action or proceeding will be entitled to recover reasonable attorneys' fees and costs in addition to any other award of the court or tribunal, as the case may be. (d) NOTICE. Any communication among the parties hereto, and any notices or communications herein provided to be made, shall be given or made by personal delivery, telecopy, facsimile or overnight courier, or by mailing the same by first class mail, postage prepaid, to the parties at the address indicated below, or to such other address(es) as either party may in writing hereafter provide in accordance with this Section 10(d). Notices will be deemed to be received when personally delivered or transmitted by telecopy or facsimile, one (1) day after the date of forwarding by overnight courier, or two (2) business days after posting in the U.S. Mails, as the case may be. (e) COUNTERPARTS. This Agreement may be executed in counterparts, each of which, taken together, shall constitute one and the same instrument. Signatures obtained via facsimile shall be acceptable as original signatures. (f) SAVINGS CLAUSE. In the event that any provision, or provisions, of this Agreement should be declared invalid or unenforceable by any court of law, the remaining terms and conditions set forth herein shall remain in full force and effect. (g) HEADINGS. The headings to paragraphs or sections of this Agreement have been inserted for identification and ease of reference purposes only and shall have no bearing whatsoever concerning the construction or interpretation of this Agreement. 9 10 IN WITNESS WHEREOF, the parties hereto have executed this Agreement below as of the date first written above. EXECUTIVE: EMPLOYER: ENVISION DEVELOPMENT CORP. By ------------------------------- Its: ------------------------------- /s/ THOMAS F. NOLAN - -------------------------------- Address: Thomas F. Nolan --------------------------------- --------------------------------- Address: - -------------------------------- - -------------------------------- 10 EX-10.7 8 EMPLOYMENT AGREEMENT WITH A. ADAMAPOLOUS 1 EXHIBIT 10.7 EXECUTIVE EMPLOYMENT AGREEMENT This Executive Employment Agreement (this "Agreement") is entered into on February 17, 2000 by and between Envision Development Corporation, ("Company"), and Alex L. Adamopoulos ("Executive"). FACTUAL BACKGROUND The Company wishes to employ Executive as its Executive Vice President of Technology and Development, and Executive wishes to be employed by Company in such capacity upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and conditions herein contained, the receipt and sufficiency of which is hereby acknowledged and accepted, the Company and the Executive hereby agree as follows: AGREEMENT 1. EMPLOYMENT AND DUTIES. The Company employs Executive as its Executive Vice President of Technology and Development. In that capacity, Executive shall discharge such responsibilities as are commensurate with such office and position including directing all technology, sales, and service personnel. The Company's Executive shall report to the President and COO and CEO. Executive shall manage customers and employees, and develop and implement business strategies and programs. Executive shall contribute to achieving the Company's annual revenues and EBITDA goals, as may be set from time to time by the Board of Directors and the President / COO / CEO. The Company's anticipates acquiring other operating business and references in this paragraph to "the Company" include such future acquisitions. The Executive's principal place of employment will be in the Boston area, unless the Executive approves an alternate location. 2 2. EXCLUSIVE SERVICES. For so long as the Company employs Executive, he shall, except as the Board may otherwise agree from time to time in writing, devote substantially all of Executive's business time and attention to the performance of Executive's duties hereunder, faithfully serve the Company, conform to and comply with the lawful and good faith directions and instructions given to Executive by the Company, and use Executive's best efforts to promote, serve and further the interests of the Company. 3. NO OTHER EMPLOYMENT AND NO CONFLICTS OF INTEREST. For so long as the Company employs Executive he shall not, directly or indirectly, render services to any other person or organization for which he receives compensation (except, at the direction of the Board) or otherwise engage in activities that would interfere significantly with Executive's faithful performance of Executive's duties hereunder. Executive may perform inconsequential services with nominal compensation therefore in connection with the management of Executive's and Executive's family's personal investments, provided that such activity does not contravene the provisions of Sections 1 and 2. 4. TRAVEL AND OTHER BUSINESS RELATED EXPENSES REIMBURSEMENTS. The Company shall reimburse Executive for all reasonable travel and other business-related expenses Executive incurs fulfilling Executive's duties hereunder. 5. TERM. Executive's employment hereunder commenced on February 17, 2000 (the "Commencement Date") and will continue for a term of four (4) years ("Initial Term") or until such earlier date as Executive's employment shall be terminated pursuant to Section 7 (the "Termination Date"). This Agreement may be extended by mutual consent at any time. 6. COMPENSATION. For the services to be rendered hereunder, the Company shall provide the following compensation to Executive: 2 3 (a) BASE SALARY. The Company shall pay Executive an initial base salary of One Hundred Eighty Thousand Dollars ($180,000) per annum in accordance with its customary payroll practices. Such base salary shall be subject to annual review and increase by the Board of Directors or a compensation committee thereof. (b) BONUS. Executive shall have the right to earn up to 50% of Executive's Base Salary as an annual performance bonus, based on such criteria as may be established in advance by the Board of Directors. At the discretion of the Board of Directors, the form of payment for the annual performance bonus may be EDV stock or option, cash, or a combination of the two. (c) CAR ALLOWANCE. Executive shall receive a monthly car allowance in an amount mutually agreeable. (d) STOCK OPTIONS. The Company hereby grants Executive Stock Options to purchase 360,000 shares of the Company's common stock at a price of $41.25 /share which is the fair market value of such shares as of the Effective Date. The first 90,000 of such options shall vest on February 22, 2001, and the remaining 270,000 shall vest at the rate of 22,500 per calendar quarter beginning with the quarter that ends on March 31, 2001, until the options are fully vested on December 31, 2003. The Executive on the Commencement Date shall receive 82,162 of immediately vested options to purchase shares of the Company's common stock at a price of $41.25/share which is the fair market value of such shares as of the Effective Date. The Option Agreement shall contain such other provisions as are Customary for such agreements. Notwithstanding the foregoing, all of Executive's options shall also vest upon the occurrence of any of the following: (i) Termination of Executive's employment with the Company as a result of death or disability as defined in Section 7(a), 7(b) or termination without cause as defined in Section 7(d) below; or 3 4 (ii) The Company is acquired and within one year following the closing of the acquisition, Executive terminates Executive's employment with the Company. For purposes of this subparagraph (ii), the Board of Directors shall determine in its discretion whether an event triggering such acceleration and vesting of Executive's options has occurred. (iii) In the event Executive is terminated without cause the provisions of 7(d) shall apply. In the event Executive is terminated for cause as set forth in Section 7(c), or in the event Executive voluntarily terminates Executive's employment for any reason other than an acquisition as set forth in Section 6(c)(ii), the Executive's right to vest in the stock options shall terminate at the end of the vesting quarter in which the Executive was terminated, and no further vesting shall occur. (e) SIGNING BONUS. As further consideration for Executive's accepting this appointment, the Company agrees to pay Executive promptly following the commencement of Executive's employment $70,000 net of all Federal and State withholding taxes and other employment taxes which shall be paid for by the Company (i.e. grossed-up for taxes). (f) VACATION. Executive shall be entitled to four (4) weeks vacation per year. (g) EMPLOYEE BENEFITS. The Company shall provide at no cost to the Executive such insurance, pension and other benefits as it provides to its other Executive employees which shall include, but not be limited to health, long-term disability, short-term disability, dental, and life insurance and employee savings or 401(k) plans. (h) REGISTRATION RIGHTS. Executive shall have reasonable and customary piggy back registration rights with respect to any shares granted to Executive (including shares received upon exercise of stock options) if such shares cannot otherwise be sold without registration. 4 5 7. TERMINATION. Executive's employment may be terminated in any one of the following ways, prior to the expiration of the Initial Term: (a) DEATH. The death of Executive shall immediately terminate this Agreement. Any rights or entitlements pursuant to this Agreement earned prior to the death of Executive will inure to the benefit of Executive's estate. All unvested options shall vest upon death and inure to the benefit of the Executive's estate as defined in 6(c)(i.) above. (b) DISABILITY. If, as a result of incapacity due to physical or mental illness or injury, Executive shall have been unable to perform the essential functions of Executive's position on a full-time basis for a period at least six (6) months with a reasonable accommodation, then thirty (30) days after written notice to the Executive (which notice may be given before or after the end of the aforementioned period, but which shall not be effective earlier than the last day of the applicable period), the Company may terminate Executive's employment hereunder if Executive is unable to resume Executive's full-time duties at the conclusion of such notice period. In the event of a termination pursuant to this Section 7(b), all payments to Executive due pursuant to this Agreement shall cease effective the last day of Executive's employment, but all benefits (as defined in 6(f) shall continue for the greater of one year following termination for disability and/or the terms of this agreement. The appointment by the Company of an interim executive to assume the responsibilities of the Executive while the Executive is incapacitated shall not constitute a breach of Section 1 of this Agreement. (c) TERMINATION BY THE EMPLOYER FOR CAUSE. The Company may terminate Executive's employment for Cause immediately upon written notice. Termination for cause is defined as: (i) Executive's material breach of this Agreement or of any Proprietary Information Agreement (however denominated) between the Company and the Executive; (ii) Executive's gross negligence in the performance of Executive's duties hereunder, intentional failure to perform such 5 6 duties, or refusal to abide by or comply with the reasonable directives of the Chairman, the Board, or the Company's policies and procedures; (iii) Executive's dishonesty, fraud or misconduct with respect to the business or affairs of Company or which in the reasonable judgment of the Company materially and adversely affects the operation or reputation of Company; (iv) Executive's conviction of a felony or a crime involving moral turpitude; or (v) Executive's abuse of alcohol or drugs (legal or illegal) that in the Company's reasonable judgment materially impairs Executive's ability to perform Executive's duties hereunder. In the event Executive is terminated for cause pursuant to this Section 7(c), all payments and benefits, including the future vesting of stock options, to Executive due pursuant to this Agreement, shall cease in accordance with paragraph 6(c)(ii). (d) TERMINATION BY COMPANY WITHOUT CAUSE. The Company may terminate Executive's employment without Cause immediately upon written notice to Executive. If terminated within the first year of employment, the Company shall pay Executive severance in a lump sum amount equal to Executive's then base annual salary plus full annual bonus as specified in 6(b) above, and all remaining unvested stock options shall vest immediately. Otherwise if Executive is terminated without cause anytime after one (1) year, Executive is entitled to one month severance of Executive's then annual salary and all remaining unvested stock options shall vest immediately, provided Executive executes a full release of all claims against the Company. Such severance pay shall not be subject to reduction for any reason. The employee by accepting severance pay agrees to a strict non-solicitation of EDV employees and/or customers. (e) EXECUTIVE'S RESIGNATION. Executive may voluntarily terminate Executive's employment upon not less than thirty (30) days' prior written notice. Upon any such resignation, except to the extent such resignation occurs in the context of an acquisition as defined by Section 6(c)(ii), all payments and benefits due pursuant to this Agreement for future services shall 6 7 cease effective the last day of Executive's employment and all earned amounts shall be paid in full. In the event Executive voluntarily terminates within one year from the date of an acquisition as defined in 6(c)(ii) above, Executive shall still be entitled to the same benefits as those defined in paragraph 7(d) (Termination Without Cause). 8. CONFIDENTIALITY. (a) Executive understands that during the course of Executive's employment with the Company he will receive and have access to materials and information in which the Company and its affiliated entities have, or may in the future acquire, exclusive and proprietary rights (the "Confidential Information"). Such Confidential Information may include, but is not limited to, the Company's and its affiliated entities' trade secrets, research, marketing data, know-how, technical data, business strategies, computer software, financial information, client lists, client information, this Agreement and other personnel information. Executive hereby expressly and unconditionally agrees that he will keep all Confidential Information strictly confidential and will not disclose, use, or allow anyone else to use, directly or indirectly, any Confidential Information in any form except for the express purpose of performing the tasks for which Executive is engaged pursuant to this Agreement. The foregoing applies to all Confidential Information unless such information has become publicly known or made generally available through no wrongful act of Executive. (b) FORMER EMPLOYER INFORMATION. Executive agrees that he will not, during Executive's employment with the Company, improperly use or disclose any proprietary information or trade secrets of any former employer or any other person or entity and that he will not bring onto the premises of the Company any unpublished document or proprietary information belonging to any such employer, person or entity unless consented to in writing by such employer, person or entity. 7 8 (c) THIRD PARTY INFORMATION. Executive recognizes that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. The Executive agrees to hold all such confidential and proprietary information in the strictest confidence and not to disclose it to any person, or entity or to use it except as necessary in carrying out Executive's work for the Company consistent with the Company's agreement with such third party. (d) SURVIVAL. The provisions of this Section 8 shall survive the termination of the remainder of this Agreement. 9. EFFECT OF TERMINATION. Executive agrees that upon termination of Executive's employment, he will deliver to the Company (and will not keep in Executive's possession, recreate or deliver to anyone else) any and all devices, records, data, notes, reports, proposals, lists, correspondence, specifications, materials, equipment and other documents or property or reproductions of any of the aforementioned items developed or received by Executive pursuant to Executive's employment with the Company or otherwise belonging to the Company, its successors, assigns, or affiliates, except that Executive may retain Executive personal files relating to Executive's service as a director of the Company. 10. MISCELLANEOUS. (a) GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, as applicable to contracts executed and performed entirely within and by residents of such state. (b) NO OTHER AGREEMENTS. This Agreement constitutes the entire agreement between the parties relating to its subject matter, and supercedes all prior agreements, proposals, representations and commitments, oral and 8 9 otherwise. This Agreement may only be amended by an instrument signed by an authorized representative of the Company, and Executive. Any breach by a party of the terms of any other agreement between them also constitutes a breach of this Agreement. (c) DISPUTES AND ATTORNEYS FEES. In the event any action or proceeding, at law or in equity, is filed to enforce or interpret this Agreement, the prevailing party in such action or proceeding will be entitled to recover reasonable attorneys' fees and costs in addition to any other award of the court or tribunal, as the case may be. (d) NOTICE. Any communication among the parties hereto, and any notices or communications herein provided to be made, shall be given or made by personal delivery, telecopy, facsimile or overnight courier, or by mailing the same by first class mail, postage prepaid, to the parties at the address indicated below, or to such other address(es) as either party may in writing hereafter provide in accordance with this Section 10(d). Notices will be deemed to be received when personally delivered or transmitted by telecopy or facsimile, one (1) day after the date of forwarding by overnight courier, or two (2) business days after posting in the U.S. Mails, as the case may be. (e) COUNTERPARTS. This Agreement may be executed in counterparts, each of which, taken together, shall constitute one and the same instrument. Signatures obtained via facsimile shall be acceptable as original signatures. (f) SAVINGS CLAUSE. In the event that any provision, or provisions, of this Agreement should be declared invalid or unenforceable by any court of law, the remaining terms and conditions set forth herein shall remain in full force and effect. (g) HEADINGS. The headings to paragraphs or sections of this Agreement have been inserted for identification and ease of reference purposes only and shall have no bearing whatsoever concerning the construction or interpretation of this Agreement. 9 10 IN WITNESS WHEREOF, the parties hereto have executed this Agreement below as of the date first written above. EXECUTIVE: EMPLOYER: ENVISION DEVELOPMENT CORP. By --------------------------------- Its: --------------------------------- Address: /s/ ALEX L. ADAMOPOULOS - --------------------------------- --------------------------------- Alex L. Adamopoulos --------------------------------- Address: - --------------------------------- - --------------------------------- 10 EX-10.11 9 BASIC LEASE PROVISIONS 1 Exhibit 10.11 LEASE AGREEMENT ARTICLE I - BASIC LEASE PROVISIONS Each reference in this Lease to titles or terms contained in Article I shall be deemed to incorporate the applicable definitions or data. The Exhibits attached to this Lease are incorporated by reference. Date of Lease: April 6, 2000 Commencement Date: The later of August 1, 2000 or the date on which possession of the Premises has been delivered to Tenant and Substantial Completion of Landlord's Work has been achieved. Landlord: Claremont Bridgewater I, LLC Landlord's Mailing Address: One Lakeshore Center Bridgewater, MA 02324 Tenant: Envision Development Corporation Tenant's Mailing Address: 4 Mount Royal Avenue Marlboro, MA 01752 Premises: Approximately 25,518 rentable square feet of space, as shown on EXHIBIT A, on the third floor of the building ("Building"), currently containing approximately 74,000 rentable square feet of space, located in Bridgewater, Plymouth County, Massachusetts, with an address of One Lakeshore Center ("Property"). The Premises exclude elevator shafts, stairs or other common elements of the Building. Term: Eighty-four (84) months commencing on the Commencement Date, unless sooner terminated or extended as provided herein. Permitted Use: General offices and software development and ancillary activities related thereto and for no other use or purpose. Base Rent: Lease Years Per Sq. Ft. Annually Monthly ----------- ----------- -------- ------- 1-5 $20.75 $529,498.50 $44,124.88 6-7 $22.25 $567,775.50 $47,314.63 Lease Year: Twelve (12) month period beginning on the Commencement Date and each anniversary of the Commencement Date; provided that if the Commencement Date is not the first day of the calendar month, the first Lease Year shall include the partial calendar month at the beginning of the Term and subsequent Lease Years shall commence on the anniversary of the first day of the first full calendar month during the Term. Additional Rent: All sums, other than Base Rent, due from Tenant pursuant to the terms of this Lease. -1- 2 Pro Rata Share: Initially (34.5%) percent. In the event that the rentable square footage of either the Premises or the Building is increased or decreased during the Term, Tenant's Share shall be determined from time to time during the Term by Landlord's architect and shall be based on the ratio between the rentable square footage of the Premises and the rentable square footage of the space in the Building. Utilities: Tenant shall have the right to use the utilities which service the Premises as of the Commencement Date. Tenant shall pay all electrical charges with respect to the Premises, which shall be separately metered by Landlord. Broker: Atlantic Commercial Properties 185 Dean Street Norwood, MA 02062 Hunneman Commercial Brokers 78 Lincoln Street Boston, MA Security Deposit: See Section 11.17 hereof. ARTICLE II - PREMISES 2.1 PREMISES. On the terms of this Lease, Landlord leases to Tenant, and Tenant accepts from Landlord, the Premises. 2.2 COMMON AREAS. The term "Common Areas" shall mean all areas within the Property which are available for the common use of tenants of the Property from time to time, as designated by Landlord, and which are not leased or held for the exclusive use of Tenant or other tenants including, but not limited to, loading areas, hallways, entrances, exits, corridors and two (2) passenger elevators. Landlord may, from time to time, change the size, location, nature and use of any of the Common Areas, and convert Common Areas into leasable area but shall use reasonable efforts not to materially and adversely alter access to the Premises, shall use reasonable efforts to minimize disruption of Tenant's business, and shall not reduce the parking ratio below that required by this Lease. Tenant acknowledges that such activities may result in an inconvenience or interruption to Tenant, but that Tenant shall not be entitled to (a) any reduction in rent, except in the event that there is an interruption in Tenant's ability to conduct business for in excess of a consecutive 24 hour period, or (b) damages, notwithstanding any interference or interruption of Tenant's business upon the Premises or any inconvenience caused by construction work. Tenant shall have the non-exclusive right (in common with other tenants, their employees, agents and invitees, and all others to whom Landlord has granted or may grant such rights) to use the Common Areas for the intended purposes, subject to reasonable rules and regulations established by Landlord from time to time. Tenant shall abide by such rules and regulations, shall cause others who use the Common Areas with Tenant's express or implied permission to abide by Landlord's rules and regulations, and shall not interfere with the rights of Landlord, other tenants or any other person entitled to use the Common Areas. Landlord will enforce the rules and regulations in a consistent, non-discriminatory fashion with all tenants, except where leases or circumstances require otherwise. At any time, Landlord may close any Common Area to perform any acts in the Common Area as, in Landlord's reasonable judgment, are desirable to improve the Property or to protect Landlord's rights with respect to the Property. Landlord shall maintain the Common Areas in good -2- 3 order, condition, replacement and repair, subject to reasonable wear and tear. Landlord shall maintain parking spaces for Tenant's use from time to time, which spaces may be provided in common with other tenants and occupants in the Building from time to time on a first-come, first-serve basis. The number of Tenant's parking spaces shall be calculated on the basis of four (4.0) spaces per one thousand square feet of Premises rentable square footage. ARTICLE III - TERM; LANDLORD'S AND TENANT'S WORK 3.1 TERM. This Lease is for the Term beginning on the Commencement Date. 3.2 TENANT IMPROVEMENTS; CONDITION OF THE PREMISES. The tenant finish improvements to be provided by Landlord for the Premises shall be described in a set of plans and specifications to be developed by Landlord in cooperation with Tenant ("Landlord's Work"). Landlord shall use reasonable efforts to achieve Substantial Completion of Landlord's Work prior to the later to occur of (a) the date which is 120 days after the date on which Landlord and Tenant approve in writing a final set of plans and specifications (the "Plans"), or (b) August 1, 2000. As used herein, the term "Substantial Completion" shall mean completion of Landlord's Work, subject to completion of punchlist details of construction or mechanical adjustments which do not materially interfere with Tenant's work or use of the Premises, and the obtaining of a Certificate of Occupancy for the Premises if required by applicable law. At the time Landlord has completed Landlord's Work, Landlord shall notify Tenant, and Tenant and Landlord shall jointly inspect the Premises and prepare a punchlist of items to be completed, if any. Landlord agrees to complete any such punchlist items with respect to Landlord's Work within sixty (60) days after Substantial Completion of Landlord's Work. Landlord and Tenant shall cooperate with each other in all reasonable ways so as to coordinate their work and to achieve the completion of the work. If Substantial Completion does not occur within one hundred twenty (120) days after the later to occur of the dates specified in clauses (a) or (b) of this sentence, as such period may be extended pursuant to Section 28(c) hereof including, without limitation, because of delays caused by the action or inaction of Tenant or due to long lead time items (the date as so extended being referred to herein as the "Outside Delivery Date"), Tenant may elect to terminate this Lease by giving written notice of such termination to Landlord on or after the Outside Delivery Date. Such termination shall be effective thirty (30) days after the receipt of such notice by Landlord unless Substantial Completion occurs prior to the expiration of such thirty (30)-day period in which event Tenant's termination notice shall be null and void and of no effect. Landlord shall bear the cost of Landlord's Work, including, without limitation, the costs of preparing the Plans and conducting other necessary architectural and engineering work, up to a maximum of $740,000.00. Tenant shall be responsible for the cost, if any, of Landlord's Work in excess of such amount, and shall pay directly to Landlord's general contractor any such excess within seven (7) business days of receipt by Tenant from Landlord of the invoice therefor. In the event that the actual cost of Landlord's Work is less than $740,000.00, Minimum Rent payable under this Lease shall be adjusted to reflect the reduced cost of Landlord's Work. Landlord's Work shall be done in a good and workmanlike manner using first-class new materials and equipment, and in accordance with the requirements of all applicable Laws and Insurance Regulations as defined in Section 5.1(a). Subject to the completion of Landlord's Work, the Premises shall be delivered "AS-IS", subject to all recorded matters, all applicable zoning, and Laws and Insurance Regulations, as defined in Section 5.1(a), and Landlord shall not be required to make any repairs or replacements (hereafter jointly "Repairs") or improvements, alterations or additions (hereafter collectively "Improvements") to the Premises. Tenant shall have the right to inspect the Premises prior to delivery of the Premises to Tenant. Tenant's execution of this Lease shall be deemed an acknowledgment that Tenant has inspected (or had the opportunity to inspect) the Premises, is satisfied with the condition -3- 4 thereof and waives any existing defect in the condition of the Premises or Property (latent or otherwise), subject to the completion of any necessary punchlist items. All Improvements, whether placed in or attached or made to the Premises prior to or during the Term, shall become and be the property of Landlord and shall be and remain part of the Premises as of the end of the Term, except any trade fixtures of Tenant. Tenant shall be solely responsible for the repair of the Improvements within the Premises except general building systems unless required as a result of the negligence or willful misconduct of Tenant, its employees, agents, contractors or invitees. In case of damage or destruction of such Improvements during the Term of this Lease, Landlord shall have the right to recover its loss from any insurance company which has insured the same. 3.3 TENANT'S WORK. Tenant's Work, if any, shall be done in a good and workmanlike manner using first-class new materials and equipment, and in accordance with the requirements of all applicable Laws and Insurance Regulations as defined in Section 5.1(a). In the event that Tenant desires to install communications lines (such as T1 and T3 lines), such installation shall be at Tenant's sole cost and expense, and Tenant shall be required to post with Landlord a deposit in the amount of not less than one (1) years service fees depending upon the contract required by the Building's internet service provider. In the event that Tenant is able to negotiate its own separate contract with such internet service provider, then such deposit shall not be required. ARTICLE IV - RENT 4.1 BASE RENT AND ADDITIONAL RENT. Tenant shall pay Base Rent monthly, in advance, on the Commencement Date and on the first day of each calendar month thereafter. Additional Rent, which includes Operating Cost Rent, Tax Rent and all other sums (except Base Rent) payable by Tenant, shall be paid when due. If (i) Base Rent and/or any Additional Rent is not received by Landlord or otherwise paid by the due date, or (ii) Tenant's check is not honored, and because actual damages result from late payments and dishonored checks are difficult to fix, Tenant agrees to pay $100.00 as liquidated damages for each late payment or dishonored check provided Tenant shall not be required to pay liquidated damages with respect to the first such failure unless same is not cured within five (5) days after written notice from Landlord. In addition, Landlord may charge interest from the initial due date at the rate of the lesser of eighteen percent (18%) or the maximum legal rate on all amounts not paid or received by Landlord within five (5) days of the due date. If two (2) or more of Tenant's checks are dishonored, Landlord may demand all future payments be by certified or bank check or money order. The late charge and interest payments do not modify Tenant's obligation to pay Base Rent and Additional Rent when due, nor is Landlord precluded from pursuing other remedies under the Lease or as are otherwise available. 4.2 PAYMENT OF RENT. Tenant shall pay all Base Rent, Additional Rent and costs of every kind relating to the Premises without notice, demand, setoff, deduction, counterclaim, defense or abatement except as specifically provided in the Lease. 4.3 TAX RENT. Tenant shall pay Tenant's Pro Rata Share of all Taxes in excess of the Tax Base ("Tax Rent"). For purposes hereof, the Tax Base shall be the Taxes for Tax Fiscal Year 2002 (July 1, 2001 through June 30, 2002, based on the assessment as of January 1, 2001). Taxes shall include real estate taxes, assessments, sales or use taxes, sewer entrance fees, rent taxes and other public charges on or relating to the Property including, without limitation, the Building, other improvements, land and personalty, taxes on rentals, and taxes in addition to or in lieu of existing taxes, foreseen and unforeseen, ordinary and extraordinary, and all reasonable costs related to attempts to secure a refund or abatement (together called "Taxes"); provided Taxes shall not include -4- 5 franchise, estate, inheritance, succession, transfer, income or excess profits taxes assessed on Landlord. Tenant also shall pay before the due date all taxes attributable to its signs or personal property, and all Tax increases resulting from Tenant's Improvements to the Premises. If less than ninety-five percent (95%) of the Building is leased and occupied on the applicable Taxes assessment date, then the Taxes for such year shall be extrapolated to reflect the Taxes that would have been assessed had the Building been ninety-five percent (95%) leased and occupied on the applicable Taxes assessment date. Tenant's Pro Rata Share shall be based upon Taxes provided Landlord first shall receive from any Tax refund all costs of securing the refund and, to the extent Tenant paid Taxes for which the refund was received, Tenant then shall be entitled to its Pro Rata Share of the balance. Landlord shall have sole control of all tax abatement proceedings, and the pendency of abatement proceedings or Landlord's withholding of tax payments shall not affect Tenant's obligation to pay Taxes as provided herein. If the Property or the Premises is not separately assessed, Landlord shall reasonably determine Tenant's Pro Rata Share of Taxes based on the assessor's worksheet and other reasonably available information. Tax Rent shall be paid to Landlord monthly with Base Rent in the amount which Landlord estimates, from time to time, will represent Tenant's Tax Rent. Landlord shall notify Tenant of its actual Pro Rata Share after receipt of a Tax bill, and any excess paid by Tenant shall be applied to Tenant's next Tax Rent payment or refunded, at Landlord's election, or Tenant shall pay any deficiency within thirty (30) days of such notice. 4.4 OPERATING COSTS RENT. Commencing on January 1, 2002, Tenant shall pay Tenant's Pro Rata Share of all of the "Operating Costs" in excess of the Operating Cost Base ("Operating Cost Rent"). The Operating Cost Base shall be the Operating Costs for the period of January 1, 2001 through December 31, 2001. (a) "Operating Costs" include all costs and expenses of every kind and nature incurred by Landlord in operating, managing, equipping, lighting, cleaning, maintaining, repairing and replacing the Premises, the Building and the Property including, without limitation, costs for janitorial service, rubbish removal, HVAC service, utilities, landscaping and snow removal; service contracts with independent contractors including, but not limited to, elevator and HVAC maintenance; management fees equal to six percent (6%) of all Rents, Additional Rents and charges, wages, salaries, benefits, payroll taxes and unemployment compensation insurance for employees of Landlord or any contractor of Landlord engaged in the cleaning, operating, maintenance of security of the Property; the cost of all of Landlord's insurance, including, without limitation, casualty, liability and loss of rent insurance provided any and all costs incurred by Landlord shall be properly allocated between the Building and any other property of Landlord also benefitted. If less than ninety-five percent (95%) of the Building is leased and occupied at any time during the calendar year, then the Operating Costs for such year shall be extrapolated to reflect the Operating Costs that would have been incurred had the Building been ninety-five percent (95%) leased and occupied during such calendar year. In the event that other buildings are constructed on the Property, the costs of maintaining the access roads and other exterior Common Areas will be allocated among all the buildings (including the Building) in accordance with the leaseable square footage of such buildings. Operating Costs shall not include financing expenses, real estate taxes, costs paid directly by individual tenants to suppliers including tenant electricity and telephone costs. Operating Costs shall not include any utilities which are separately metered to individual tenants in the Building, the cost of build out or fit up for individual tenants in the Building, Direct Reimbursable Expenses (as defined below) of the Tenant or any other tenants, capital expenditures with respect to the Building made within the first five (5) Lease Years, and initial construction costs of any other improvements on the Property. In all Lease Years other than the first -5- 6 five (5) Lease Years, only that portion of any capital expenditures attributable to any rental year (as determined by Landlord in accordance with its accounting practices) shall be included in Operating Costs for that rental year. (b) Operating Costs Rent shall be paid to Landlord monthly with Base Rent in the amount which Landlord estimates, from time to time, will represent Tenant's Operating Costs Rent. Landlord shall notify Tenant of its actual Pro Rata Share within ninety (90) days of the end of each calendar year (provided Landlord's failure to so notify Tenant shall not reduce Tenant's liability when such notice is issued), and any excess paid by Tenant shall be applied shall be applied to Tenant's next Operating Cost Rent payment or refunded, at Landlord's election, or Tenant shall pay any deficiency within fifteen (15) days of such notice. (c) In addition to Operating Costs Rent, Tenant shall reimburse Landlord for Tenant's Direct Reimbursable Expenses. Direct Reimbursable Expenses means operating costs which can be attributable directly to the operating, maintenance, repair and/or replacement of the premises of an individual tenant or group of tenants. Such expenses include, but are not limited to, building repairs, utilities, janitorial services, HVAC and similar expenses which would otherwise qualify as operating costs. At Landlord's option and to the extent Landlord deems feasible, Landlord may (but shall not be required to) charge Direct Reimbursable Expenses, for which Tenant is responsible, directly to Tenant or pro rata to those tenants for which such expenses were incurred, and such expenses shall be due and payable within fifteen (15) days of receipt of a bill. To the extent Landlord elects to charge tenant or a group of tenants for Direct Reimbursable Expenses, the applicable amount shall not be included in Operating Costs for the purposes of determining Tenant's Pro Rata Share so as to eliminate duplication of charges. If Tenant requests that Landlord perform work on Tenant's behalf, there shall be added to the cost of such work a ten percent (10%) administrative fee. ARTICLE V - TENANT'S COVENANTS AND LANDLORD'S OBLIGATIONS 5.1 GENERAL COVENANTS. In addition to Tenant's other Lease covenants, Tenant shall, at its expense, (a) use the Premises solely for the Permitted Use and for no other purpose, procure all required licenses and permits (other than the building permit for Landlord's Work and the certificate of occupancy with respect thereto), and not use the Premises or Property in violation of any laws, ordinances, orders or regulations of any public authority or of any insurer, Board of Fire Underwriters, or similar insurance rating bureau having jurisdiction over the Premises (hereafter collectively "Laws and Insurance Regulations"), or in a manner which may be injurious to or adversely affect the general character of the Property and not conduct any auction, bankruptcy or similar sale thereon; (b) comply with Landlord's sign criteria, if any, and sign criteria imposed by applicable governmental authorities and, in connection therewith, and any signs or lettering in the public corridors or on the doors or visible from the exterior of the Premises must be submitted to Landlord and its architect for written approval of the size, color, design and location of such signs or lettering before installation, such approval not to be unreasonably withheld or delayed (Landlord hereby agreeing that, subject to the provisions of this paragraph, Tenant may place an exterior sign on the third floor at the northeast corner of the Building); (c) pay, as they become due, all charges for utilities for the Premises and contract for same in Tenant's name, and Tenant acknowledges that the electricity for lights, outlets and air conditioning for the Premises shall be separately metered (the installation of such separate meters being part of -6- 7 Landlord's Work); (d) keep the Premises in a neat, clean, sanitary condition and in good order and repair (making replacements as necessary) including, without limitation, doors, locks, hardware, carpets, walls, ceilings, lighting, windows, plumbing, electrical, sewage, mechanical, air conditioning, ventilating and heating equipment, and all fixtures and equipment appurtenant to the Premises, provided that if Tenant makes capital expenditures necessary for repair or replacement of the HVAC systems serving the Premises during the final two (2) years of the Term (as extended), Landlord shall reimburse Tenant for the unamortized cost of such capital expenditures at the end of the Term (based on the useful life of the item). By way of example, if Tenant replaces the compressor in the HVAC system on the first day of the sixth (6th) lease year of the initial term at a cost of $1,000, and if the useful life of the compressor is five (5) years, then Landlord would reimburse Tenant on the last day of the Term for three-fifths of the cost of the compressor ($600), and Tenant would bear the remainder of the cost ($400), which would represent the two (2) years of use of the compressor of which Tenant had the benefit. In the foregoing example, if Tenant exercised its option to extend the term for an additional five-year period, then Tenant would bear 100% of the cost of the compressor. (e) maintain kitchen areas and all similar areas in a clean and sanitary condition free of all vermin, wash any dishes and perform any cleaning necessary to maintain kitchen areas or any other areas in the Premises in which beverages or foods may be prepared or dispensed; be responsible for any damage to the Premises arising out of frozen sprinkler system pipes caused by Tenant's failure to keep windows or doors in the Premises closed during cold weather; replace broken glass with the same quality glass; and in any event at such times as may reasonably be required to keep the Premises attractive in appearance; not overload, damage or deface the Premises; properly store and dispose of all trash using services (if any) designated by Landlord; and place and maintain business machines and mechanical equipment and Tenant's other personal property in settings sufficient to absorb and prevent vibration, noise and annoyance; (f) make Improvements and Repairs of whatever nature required by Laws or Insurance Regulations, except that Tenant shall not be required to make any structural Improvements, unless required as a result of Tenant's Improvements to or use of the Premises; (g) pay for all repairs and replacements to the Premises, the Building and the Property required by Tenant's misuse or negligence; (h) not act in any manner which prevents Landlord or Tenant from obtaining, or makes void or voidable, any insurance, or creates extra premiums for or increases the rate of, insurance, and if Tenant causes extra premiums or increased rates, Tenant will pay the increased cost to Landlord upon demand; (i) not act in any manner which prevents Landlord or Tenant from obtaining, or causes the revocation of, any government license, permit, or authority, and if as a direct or indirect result of Tenant's business an addition to or change in the same is required by Laws or Insurance Regulations, Tenant shall pay for the addition or change; (j) not use, permit or suffer anything to be done in the Premises or anything to be brought into or kept in the Premises, in either case, which occasions undue discomfort or annoyance to any other tenants or occupants of the Building, or which in Landlord's reasonable judgment may tend to impair the reputation or appearance of the Building or tend to interfere with the proper and economic operation of the Building by Landlord, not use the Premises or any part thereof, or permit the Premises or any part thereof to be used, for the preparation or dispensing of food, whether by vending machines or otherwise, provided that subject to the other terms and conditions of this Article and this Lease, Tenant may install at its own expense so-called hot-cold water fountains, -7- 8 coffee makers, beverage vending machines, microwave ovens, refrigerators, sinks and stoves ("kitchen areas") for the preparation of beverages and foods for consumption on the Premises by Tenant's employees only, provided that no cooking, frying, etc. are carried on in the Premises to such extent as requires special exhaust venting, and provided further that the installation and operation of such kitchen areas shall not result in any increase in Landlord's insurance premiums or costs, unless such increase is fully paid for, in advance, by Tenant, and Tenant hereby acknowledges that the Building is not engineered to provide any such special venting; (k) not assign, mortgage, license, transfer or encumber this Lease of the Premises in whole or in part, or sublease all or any portion of the Premises (each of the foregoing being a "Transfer") without Landlord's consent which shall not be unreasonably withheld, and any purported Transfer shall be void and confer no rights upon any third person unless Tenant first receives Landlord's prior written consent. If there is a Transfer, Landlord may collect rent from the transferee without waiving the prohibition against Transfers, accepting the transferee, or releasing Tenant from full performance under this Lease, and, in addition to any other remedies available to Landlord, Landlord shall have the right to terminate this Lease on thirty (30) days written notice within sixty (60) days after written notice from Tenant to Landlord of any Transfer, or within one (1) year after Landlord first learns of the Transfer if no notice is given. In addition, Landlord shall be entitled to fifty percent (50%) of all consideration which Tenant receives from a sublessee or assignee (whether in a lump sum, periodic installments or otherwise) in excess of the Base Rent and Additional Rent due from Tenant under this Lease, less reasonable brokerage fees incurred by Tenant in connection with such sublease or assignment; and (l) abide by the Rules and Regulations attached as EXHIBIT B and any other reasonable rules and regulations made by Landlord from time to time such rules and regulations to be applied in a consistent, non-discriminatory fashion for all tenants except where leases or circumstances require otherwise. (m) provide security for the Premises and its own personnel. (n) not make any improvements or install any equipment or furniture or otherwise do anything in the Premises which would cause the load capacity (100 pounds live load) to be exceeded. 5.2 ENVIRONMENTAL COVENANTS. (a) DEFINITION. As used in this Lease, the term "Hazardous Material" means any flammable items, explosives, radioactive materials, hazardous or toxic substances, material or waste or related materials, including any substances defined as or including in the definition of "hazardous substances", "hazardous wastes", "infectious wastes", "hazardous materials" or "toxic substances" now or subsequently regulated under any federal, state or local laws, regulations or ordinances including, without limitation, oil, petroleum-based products, paints, solvents, lead, cyanide, DDT, printing inks, acids, pesticides, ammonia compounds and other chemical products, asbestos, PCBs and similar compounds, and including any different products and materials which are subsequently found to have adverse effects on the environment or the health and safety of persons. (b) GENERAL PROHIBITION. Tenant shall not cause or permit any Hazardous Material to be generated, produced, brought upon, used, stored, treated, discharged, released, spilled or disposed of in the Premises by Tenant, its affiliates, agents, employees, contractors, sublessees, assignees or invitees, provided that Tenant may, in accordance with applicable law, use and store hazardous materials in the amounts and of the types typically used in offices for cleaning and for office machines and computer equipment. Tenant shall indemnify, defend and hold Landlord harmless from and against any and all actions (including, without limitation, remedial or enforcement actions of any kind, administrative or judicial proceedings, and orders or judgments arising -8- 9 out of or resulting therefrom), costs, claims, damages (including, without limitation, punitive damages), reasonable expenses (including, without limitation, attorneys', consultants' and experts' fees, court costs and amounts paid in settlement of any claims or actions), fines, forfeitures or other civil, administrative or criminal penalties, injunctive or other relief (whether or not based upon personal injury, property damage, or contamination of, or adverse effects upon, the environment, water tables or natural resources), liabilities or losses arising from a breach of this prohibition by Tenant, its affiliates, agents, employees, contractors, sublessees, assignees or invitees. (c) NOTICE. In the event that Hazardous Materials are discovered in the Premises, and any governmental agency or entity having jurisdiction over the Premises requires the removal of such Hazardous Materials, Tenant shall be responsible for removing those Hazardous Materials arising out of or related to the use or occupancy of the Premises by Tenant or its affiliates, agents, employees, contractors, sublessees, assignees or invitees but not those of its predecessors. Notwithstanding the foregoing, Tenant shall not take any remedial action in or about the Premises without first notifying Landlord of Tenant's intention to do so and affording Landlord the opportunity to protect Landlord's interest with respect thereto. Tenant immediately shall notify Landlord in writing of: (i) any spill, release, discharge or disposal of any Hazardous Material in, on or under the Premises, the Premises or any portion thereof, (ii) any enforcement, clean-up, removal or other governmental or regulatory action instituted, contemplated, or threatened (if Tenant has notice thereof) pursuant to any Hazardous Materials Laws; (iii) any claim made or threatened by any person against Tenant, the Premises, relating to damage, contribution, cost recovery, compensation, loss or injury resulting from or claimed to result from any Hazardous Materials; and (iv) any reports made to any governmental agency or entity arising out of or in connection with any Hazardous Materials in, on, under or about or removed from the Premises, including any complaints, notices, warnings, reports or asserted violations in connection therewith. Tenant also shall supply to Landlord as promptly as possible, and in any event within five (5) business days after Tenant first receives or sends the same, copies of all claims, reports, complaints, notices, warnings or asserted violations relating in any way to the Premises, the Premises or Tenant's use or occupancy thereof. (d) SURVIVAL. The respective rights and obligations of Landlord and Tenant under this subsection shall survive the expiration or earlier termination of this Lease. 5.3 LANDLORD'S OBLIGATIONS. (a) Landlord shall provide subject to such reimbursement as may be provided for in Section 4.4: 1. Access to the Building (8:00 a.m. to 8:00 p.m. Monday through Friday and 8:00 a.m. to 1:00 p.m. on Saturdays) on business days (Sundays and Holidays are to be excepted) and at all other times Landlord agrees to provide limited access to the Building through mechanical systems. 2. Necessary elevator facilities during regular business hours (8:00 a.m. to 8:00 p.m. Monday through Friday) on business days and 8:00 a.m. to 1:00 p.m. on Saturdays (Sundays and Holidays are to be excepted) and at all other times Landlord agrees to provide limited automatic elevator service to the Premises by at least one elevator. 3. Heat and cooling to the Common Areas on business weekdays from 8:00 a.m. to 8:00 p.m. and on Saturdays from 8:00 a.m. to 1:00 p.m., when heat or cooling may reasonably be required for the comfortable occupancy of the Building. -9- 10 4. Cleaning of the lobby, elevators, public corridors, washrooms and stairs, and routine cleaning (such as dusting and vacuuming) of the Premises, including routine trash removal. 5. Hot and cold running water for washrooms and lavatories and hot and cold running water to kitchen areas. 6. Electricity for normal lighting of the main lobby, elevators, washrooms and stairs, but not for the Premises. 7. Shoveling of snow and sanding of ice at the entry and sidewalks to the Building and plowing of parking areas and access roads, and maintenance of landscape areas, plantings, parking areas, and Common Area lighting. 8. Display of Tenant's firm name on the lobby directory as per the Building standard. ARTICLE VI - CONDITION OF PREMISES 6.1 IMPROVEMENTS. Landlord shall be responsible for the cost of preparation of the initial floor plan for Tenant's Improvements prepared by Dacon and the cost breakdown of the floorplan. Notwithstanding the foregoing, Tenant may not make structural or non-structural Improvements to the Premises (or create additional access points to common areas in the Building) without Landlord's prior written consent which consent with respect to non-structural Improvements shall not be unreasonably withheld or delayed. Landlord may require, without limitation, that Tenant submit to Landlord in advance for Landlord's approval detailed plans and specifications describing Tenant's Improvements. Landlord shall present any objection to such plans and specifications within thirty (30) days after their receipt by Landlord. Upon approval of such plans and specifications by Landlord, Tenant shall construct Tenant's Improvements. All work by Tenant shall be done at Tenant's own cost (subject to Section 3.5 hereof), in a good and workmanlike manner, using first-class materials and in accordance with all Laws and Insurance Regulations, and any work which affects the structure of the Building or the Building systems shall be performed so as not, in Landlord's sole judgment, to adversely affect same. Tenant shall pay when due all charges for labor and materials in connection with any work on the Premises. Tenant shall furnish indemnification bonds against performance, liens, costs, damages and expenses in form and amount satisfactory to Landlord. Tenant's Improvements shall be deemed Improvements. At the end of the Term of this Lease, Tenant shall, at the option of Landlord, remove any and all of Tenant's Improvements and restore the Premises to their original configuration and condition (reasonable wear and tear excepted) to the installation of Tenant's Improvements including, without limitation, cutting, capping and disconnecting pipes and wires constituting Tenant's Improvements and sealing them off in a safe and lawful manner flush with the applicable wall, floor or ceiling, and redecorating the area consistent with the Improvements in the Premises. 6.2 FIXTURES; YIELD-UP. Except as Landlord directs in writing, Tenant shall remove its goods, effects, signs and trade fixtures, and peaceably yield-up the Premises, broom-clean and in the same condition as at the Commencement Date, reasonable wear and tear excepted, with all Repairs, including painting and patching to the Premises required by such removal, having been made and all utility lines left exposed or unconnected having been capped. If Tenant fails to remove its property or to make the Repairs by the end of the Term, Landlord may remove and store Tenant's property in a public warehouse at Tenant's expense or sell same at public auction, and make the Repairs, and Tenant promptly shall reimburse Landlord for its costs. -10- 11 6.3 MECHANIC'S LIEN. Tenant shall immediately discharge (by payment, filing of bonds or otherwise) any mechanic's, materialmen's or other lien against the Premises and/or Landlord's interest therein arising out of any payment due, or purported to be due, for any labor, services, materials, supplies, or equipment alleged to have been furnished to or for Tenant. ARTICLE VII - 7.1 INSURANCE. TENANT shall maintain, at its sole expense, coverages in the following amounts, and such additional types and amounts of insurance as Landlord may reasonably require in accordance with customary practices, or as may be required by Landlord's lender, including the following coverages: (a) COMMERCIAL GENERAL LIABILITY INSURANCE covering the insured against claims of Bodily Injury, Personal Injury and Property Damage arising out of Tenant's operations, assumed liabilities or use of the Property and the Premises, including the performance by Tenant of the indemnity agreements set forth in Section 7.3 of this Lease, for limits of liability not less than: (i) Bodily Injury and Property Damage Liability $1,000,000.00 Each Occurrence and $3,000,000.00 Annual Aggregate and (ii) Personal Injury Liability $1,000,000.00 Each Occurrence and $3,000,000.00 Annual Aggregate, or combined single limit coverage of $3,000,000.00 or in such higher limits as or may be reasonably required by Landlord based upon inflation, increased liability awards, recommendations of Landlord's professional insurance advisors and other relevant factors or any Mortgagee, as hereinafter defined. Liability policies obtained should be extended to include Contractual Liability, Personal Advertising Injury, Products/Completed Operations, Host or Full Liquor Liability and Fire Legal Liability. (b) PROPERTY DAMAGE INSURANCE covering (i) all office furniture, trade fixtures, office equipment, merchandise and all other items of Tenant's property on the Premises installed by, for, or at the expense of Tenant, (ii) all Tenant improvements, and (iii) all other improvements, alterations and additions to the Premises. Such insurance shall be written on an "all risks" of physical loss or damage basis, for the full replacement cost value new without deduction for depreciation of the covered items and in amounts that meet any co-insurance clauses of the policies of insurance, and shall include a vandalism and malicious mischief endorsement, sprinkler leakage coverage and earthquake coverage. (c) BOILER AND MACHINERY INSURANCE. If during the Term of this Lease, Tenant shall receive Landlord's prior written consent to operate on the Property a boiler or other pressured vessels, Tenant shall, as a pre-condition to installing the same, place and maintain Boiler Insurance with Limits of Liability in an amount not less than $250,000.00 Per Occurrence or as needed, and providing coverage for the full replacement value thereof. (d) WORKER'S COMPENSATION/EMPLOYER'S LIABILITY INSURANCE. If the nature of Tenant's use of the Premises requires that any or all of its employees be provided coverage under State Worker's Compensation Insurance or similar statutes, Tenant shall keep in force Worker's Compensation Insurance or similar statutory coverage containing statutorily prescribed limits and Employer's Liability with limits of at least $1,000,000.00 Bodily Injury by Accident for Each Accident, $1,000,000.00 Bodily Injury by Disease for Each Person and $1,000,000.00 Bodily Injury by Disease policy limit. Landlord and Tenant acknowledge that insurance markets experience rapid changes, and that insurance in the form and amounts described in this Lease may not be available in the future. Therefore, if Tenant is unable to maintain the insurance required under this Lease, Tenant shall remain obligated to maintain insurance coverage which is customary and commercially reasonable in the insurance industry for Tenant's type of business, as that coverage may change -11- 12 from time to time. Landlord makes no representation as to the adequacy of any insurance required under this Lease and, as a result, Tenant shall obtain any such additional insurance which Tenant deems necessary to protect Landlord and Tenant. The amount and coverage of Tenant's insurance shall not limit Tenant's liability nor relieve Tenant of any obligation under this Lease. 7.2 TENANT'S RISK. Except as modified by statute, all merchandise, furniture, fixtures and property which may be on or about the Premises, Building or Property shall be at the sole risk and hazard of Tenant. 7.3 GENERAL REQUIREMENTS. All insurance policies shall be with companies qualified to do business in the state in which the Premises are located and acceptable to Landlord, and shall name Landlord, and if Landlord so requests, Landlord's mortgagee(s) and any other party, as insured parties on casualty policies and additional named insureds on liability policies. In addition, all liability insurance obtained by Tenant shall be (a) primary insurance as to all claims thereunder and provide that any insurance carried by Landlord is not excess and is non-contributing with any insurance of Tenant; (b) contain cost liability endorsements or a severability of interest clause acceptable to Landlord; (c) be written on an occurrence basis; and (d) specifically cover the liability assumed by Tenant under this Lease including, but not limited to, Tenant's obligations under Section 7.4. Tenant shall deliver a copy of the policies or certificates of all insurance to Landlord prior to the earlier of entry on the Premises or the Commencement Date, and copies of the new policies or new certificates not later than thirty (30) days prior to the expiration of each policy. Each policy shall provide (and the certificate shall evidence) that it will not expire, or be cancelled or modified without thirty (30) days prior written notice to Landlord and, if Landlord requests, to Landlord's mortgagee(s). If Tenant fails to deliver a policy or certificate to Landlord as required or if any policy is cancelled or modified during the term without Landlord's consent, Landlord may obtain such insurance on behalf of Tenant in which case Tenant shall reimburse Landlord, as additional rent, for the cost of such insurance plus interest at the rate set forth in Section 4.1 within fifteen (15) days after receipt of a statement indicating the cost of such insurance. 7.4 INDEMNITY. Tenant shall save Landlord harmless, and shall exonerate and indemnify Landlord from all claims, liabilities, penalties and expenses arising (a) in connection with death, injury and/or property damage on or related to the Premises which Tenant acknowledges are, subject to the terms of the Lease, under Tenant's exclusive or substantial control, charge, custody and possession (except to the extent caused by any act or omission of Landlord, its agents contractors, or employees), or (b) anywhere if caused wholly or in part by any act or omission of Tenant, its officers, agents, employees, other occupants of the Premises or Tenant's invitees. If Landlord is threatened with or made a party to any litigation commenced by or against Tenant or any of the above parties, or with respect to any matter described above, Tenant shall indemnify and defend Landlord with counsel reasonably acceptable to Landlord or, at Landlord's option, shall advance to Landlord all costs including reasonable attorney's fees in connection with such litigation. All of the foregoing shall be limited to the extent required by Law. 7.5 WAIVER OF SUBROGATION. (a) Landlord and Tenant release each other and each other's officers, directors, employees and agents from liability or responsibility for any loss or damage to their respective property covered by valid and collectible insurance, or which would have been covered if the party complied with the provisions of this Lease. The release shall apply to the parties and anyone claiming through or under the parties by way of subrogation or otherwise, and even if the occurrence was caused by the fault or negligence of a party or anyone for whom a party is responsible, provided the release shall be applicable only for loss or damage occurring when the releasor's policies provide that the release shall not adversely affect the policies or the releasor's recovery rights. Landlord and -12- 13 Tenant each agree that its policies will include such a provision if available without extra cost, or if the other party pays the extra cost, and each promptly shall notify the other of any extra cost. (b) Notwithstanding any other provision of this Lease and subject to applicable law, (i) Landlord shall not be liable to Tenant for any loss or damage, whether or not such loss or damage is caused by the negligence of Landlord, its agents, servants or employees, to the extent that such loss or damage is covered by valid and enforceable insurance carried by Tenant; and (ii) Tenant shall not be liable to Landlord for any loss or damage, whether or not such loss or damage is caused by the negligence of Tenant or its agents, servants or employees, to the extent that such loss or damage is covered by valid and enforceable insurance carried by Landlord. 7.6 LANDLORD'S INSURANCE. Landlord represents and warrants to Tenant that, on the date of this Lease, Landlord carries insurance with respect to the Building and the Property of the types and in the amounts set forth on EXHIBIT C hereto, and Landlord agrees to maintain throughout the Term such insurance or such other insurance as may be required by Landlord's lender or as may be customary for buildings similar to the Building. ARTICLE VIII - CASUALTIES AND EMINENT DOMAIN 8.1 DAMAGE. If the Premises become untenantable in whole or part because of fire or other casualty covered by insurance, or as the result of a taking of, or damage to, the Premises or the Building as a result of the exercise of any power of eminent domain, condemnation, or purchase under threat or in lieu thereof ("Taking"), then unless the Lease is terminated in accordance with Section 8.2, Landlord, with reasonable dispatch (but subject to delays for adjustment of insurance proceeds and causes beyond Landlord's reasonable control), shall repair the damage so that the Premises are in substantially the same condition as on delivery of possession subject to rights of mortgagees, zoning laws, and building codes then in existence, and provided Landlord shall not be required to expend more than the net insurance proceeds Landlord receives for damage to the Premises or the net Taking award attributable to the Premises. "Net" means the insurance proceeds or award less all costs and expenses, including adjusters and attorney's fees, of obtaining the same. Notwithstanding the foregoing to the contrary, (a) Tenant shall be required to pay to Landlord the amount of any deductible under Landlord's insurance policy if the casualty is the result of the acts or omissions of Tenant, its subtenants, assignees or the employee, agents, or visitors of any of such parties and (b) Landlord shall have the right to require Tenant to perform all or any portion of the repair which Landlord would otherwise make and Landlord shall reimburse Tenant for the cost thereof. Tenant immediately shall give written notice to Landlord of any damage to the Premises. 8.2 TERMINATION RIGHTS. (a) If either the Premises or Building are damaged to the extent of 10% or more of its insurable value, or by a risk not covered by Landlord's insurance, or the cost of repair would excess $50,000.00, or the damage is of a character that it cannot reasonably be repaired within sixty (60) days of the date on which repair work commences, or (b) If 25% or more of either (i) the floor area of the Building, or (ii) the land which constitutes the Premises is Taken, then Landlord may elect to terminate this Lease by written notice to Tenant (x) within sixty (60) days after the damage or (y) within six (6) months of the date on which the condemning authority has the right to possession ("Taking Date") in which case the Lease shall terminate as of the Taking Date. If the entire Premises are taken by eminent domain, except for temporary use, this Lease shall terminate automatically as of the Taking Date. -13- 14 8.3 ABATEMENT. If a portion of the Premises is damaged or Taken, except for temporary use, and this Lease is not terminated, the Base Rent and Tenant's Pro Rata Share shall be reduced proportionately based on the area of the Premises damaged and therefore not used by Tenant, or Taken, until the earlier of when Landlord's Repairs to the Premises are completed or Tenant begins using the damaged area. 8.4 TAKING FOR TEMPORARY USE. If the Premises is Taken for temporary use, this Lease and Tenant's obligations shall continue, except to the extent the Taking renders compliance impossible or impracticable. 8.5 DISPOSITION OF AWARDS. Except for any separate award for Tenant's movable trade fixtures or relocation expenses which does not reduce Landlord's award, all Taking awards to Landlord or Tenant shall be Landlord's property without Tenant's participation. Tenant assigns to Landlord Tenant's share of such award, waives any rights with respect to the loss of its leasehold interest and the Premises, and agrees to execute such instruments as may be necessary to confirm the assignment and to deliver to Landlord any such award recovered by Tenant except the separate award described above. ARTICLE IX - DEFAULTS AND REMEDIES 9.1 TENANT'S DEFAULT. The following conditions shall be considered a "Default" by Tenant: (a) failure to pay Base Rent or the scheduled amount of any Additional Rent when due, provided that with the first failure to pay on any twelve (12) month period, Tenant shall be entitled to written notice and five (5) day cure period, or failure to pay any unscheduled payment of Additional Rent or any other charge payable by Tenant to Landlord hereunder within fifteen (15) days of receipt by Tenant of Landlord's notice that such amount is due; or (b) Tenant's leasehold estate is taken by execution or other process of law; or Tenant is liquidated, dissolved, commits an act of bankruptcy, is declared bankrupt or insolvent according to law or admits in writing its inability to pay debts generally as they become due, or an assignment of Tenant's property is made for the benefit of creditors or a receiver, guardian, conservator, trustee or assignee, or any other similar officer or person is appointed to take charge of any part of Tenant's property; or any reorganization or similar proceedings are commenced by or against Tenant under any bankruptcy or insolvency law and not dismissed within sixty (60) days from its commencement; or any court enters an order providing for the modification of rights of Tenant's creditors; or (c) vacating the Premises or closing for business for an aggregate period during the Term exceeding thirty (30) days except for fire or casualties; or (d) a Transfer without Landlord's prior written consent; or (e) failure to perform or observe any other Lease terms or covenants for a period of thirty (30) days after notice, or if same shall reasonably take longer than thirty (30) days, if Tenant fails to commence same promptly and to complete same with due diligence; or (f) any other breach for which the Lease gives Landlord the right of termination. If Tenant Defaults, Landlord may at any time until the Default is cured either (1) terminate this Lease by written notice effective on the date of the notice or on any date specified in the notice, or (2) without demand or notice, -14- 15 re-enter, take possession and repossess the Premises and, with a court order and at Tenant's risk, expel Tenant and those claiming under Tenant and remove, store and sell their effects at public action, all without prejudice to any remedies for arrearages or preceding Defaults. The net proceeds of any sale shall be applied to sums due to Landlord from Tenant and the balance paid to Tenant. Tenant waives all statutory rights (including rights of redemption) to the extent such rights may be lawfully waived. With or without terminating this Lease, Landlord may re-let all or any part of the Premises from time to time for periods (even if beyond the Term of this Lease), at such rental, and upon the terms and conditions as Landlord deems advisable, and may make Improvements and Repairs to the Premises. No re-entry or taking of possession by Landlord shall terminate this Lease unless Landlord gives a written notice of such intention to Tenant or a court of competent jurisdiction terminates the Lease. 9.2 DAMAGES. Tenant's liability and obligations under this Lease shall survive termination or repossession, and Tenant shall pay as current damages the Base Rent, Additional Rent and other sums up to what would have been the end of the Term in the absence of the termination or repossession, with a credit for the net proceeds, if any, Landlord receives from any reletting of the Premises, after deducting all of Landlord's expenses in connection with the reletting including, without limitation, expenses of preparing the Premises for the reletting. Tenant shall pay the current damages to Landlord on the days Base Rent would have been payable if not for the termination or repossession. In addition, and notwithstanding any Lease provision or the termination of this Lease, Tenant shall reimburse Landlord for any free rent and construction allowance, and all other reasonable and customary expenses and liabilities incurred by Landlord in connection with Tenant's Default including brokerage commissions, reasonable attorneys' fees, and reasonable alteration costs. Landlord shall have an obligation to use commercially reasonable efforts to re-let the Premises and otherwise to use commercially reasonable efforts to mitigate damages. After any termination or repossession, whether or not Landlord has collected any current damages, Tenant shall pay to Landlord, at Landlord's option and on demand, liquidated final damages in lieu of all current damages beyond the date final damages are paid. The final damages shall be the amount by which (i) all rent and other charges which would be payable from the date to which Tenant paid current damages through what would have been the unexpired Term exceeds (ii) the then fair net rental value of the Premises for the same period. If any law validly limits the amount of final liquidated damages to less than described above, Landlord shall be entitled to the maximum amount legally allowed. For purposes of this Section, the rent is Tenant's highest total Base and Additional Rent due for any twelve (12) month period preceding the termination or repossession. 9.3 LANDLORD'S SELF HELP. If Tenant Defaults, Landlord may, at its option, without waiving its right to terminate this Lease or its claim for damages, cure the Default, and Tenant shall reimburse Landlord for any amount paid or contractual liability incurred by Landlord in doing so; provided Landlord may immediately cure any Default or failure by Tenant to perform any Lease obligation if the cure or performance is reasonably necessary to protect the Premises or Landlord's interests, or to prevent injury or damage to persons or property. If Tenant fails to reimburse Landlord upon demand, such amount shall be added to the next payment of rent due without further notice. Landlord agrees to give Tenant prior notice of Landlord's intention to enter the Premises for the purposes of exercising such self-help right, except in case of emergency. 9.4 LANDLORD'S DEFAULT. Landlord shall not be deemed to be in default hereunder unless its default continues for thirty (30) days, or such additional time as is reasonably required to correct its default, after Tenant has given written notice to Landlord specifying the nature of the alleged default. If Landlord is in default, Landlord shall use due diligence to commence curing the -15- 16 default within a reasonable time after receipt of notice thereof. ARTICLE X - SUBORDINATION 10.1 SUBORDINATION. Tenant's rights and interests under this Lease shall be (i) subject and subordinate to any existing or future mortgages, deeds of trust, overlease, or similar instruments covering the Premises and to all advances, modifications, renewals, replacements, and extensions ("Mortgages") provided Tenant receives from each Mortgagee (which shall include ground lessor) a Non-Disturbance Agreement whereby Tenant's rights to possess the Premises shall not be disturbed in the event of a foreclosure of the applicable Mortgage, or (ii) if the Mortgagee elects, prior to the lien of any present or future Mortgagee. Tenant further shall attorn to and recognize any successor landlord, whether through foreclosure or otherwise, as if the successor landlord were the originally named Landlord. Tenant concurrently shall give Mortgagee the same notices given to Landlord, and Mortgagee shall have the same opportunity and rights to cure as is available to Landlord to cure a default provided Mortgagee shall have an additional thirty (30) days after the expiration of Landlord's cure period within which to commence a cure or such longer period as may be reasonably necessary including, without limitation, any period of time reasonably required for the Mortgagee to obtain possession of the Property or the Premises from Landlord. Mortgagee's curing of any of Landlord's default shall be treated as performance by Landlord. Although this Section shall be self-executing and no further instrument shall be necessary, Landlord agrees to give Tenant written notice of any Mortgages, and Tenant shall execute and deliver any instruments Landlord reasonably requires for the above purposes, provided that Tenant receives a Non-Disturbance Agreement from the Mortgagee as set forth above. An assignment of lease or similar document shall not result in the assignee having any liability until the assignee takes possession. Notwithstanding the foregoing to the contrary, Landlord shall use reasonable efforts to obtain a so-called "non-disturbance agreement" for Tenant from any existing and future mortgagees. 10.2 REQUEST BY MORTGAGEE. If a Mortgagee or prospective Mortgagee requests any Lease modifications which do not have a material adverse effect on Tenant's rights, Tenant will enter into a written modification agreement in recordable form (which shall have the same force as a Lease amendment) if the Mortgagee forecloses or takes similar action. The modification shall not affect the length of the Term or the size, use, or location of the Premises. ARTICLE XI - MISCELLANEOUS PROVISIONS 11.1 PARTIES BOUND. Except as otherwise provided, the Lease agreements and conditions to be performed and observed by Landlord or Tenant shall bind and inure to the heirs, legal representatives, successors and assigns of each, provided no reference to Tenant's successors and assigns will constitute a consent to a Transfer by Tenant. If Tenant consists of more than one person or entity, or if there is a guarantor, then all such persons, entities and guarantors shall be jointly and severally liable and the word "Tenant," as used in this Lease, including Article IX, includes such person, entities, and guarantors. The word "Landlord" means only the owner, or the lessee if this Lease becomes subject to an overlease, or the mortgagee in possession of the Premises, for the time being, so that if the Premises is sold, a mortgagee takes possession, or another becomes landlord, all prior landlords, including Landlord, automatically shall be entirely relieved of all landlord covenants and obligations accruing thereafter. If the entity which holds Landlord's interest in this Lease is a trust, then the Landlord obligations shall be binding upon the trustees of said trust, as trustees and not individually, and not upon the trust estate. -16- 17 11.2 LANDLORD'S LIABILITIES AND ADDITIONAL RIGHTS. (a) Landlord shall have no obligations or liability with respect to or in any way connected with the Premises or the Building, or services to be provided from same, except to the extent, if any, specifically set forth in the Lease. Landlord shall not be deemed to have committed a breach of any repair obligations unless it makes repairs negligently or fails to commence repairs within a reasonable time after Landlord receives notice from Tenant, and Landlord's liability in any case shall be limited to the cost of making the required repairs. (b) Landlord shall not be liable for indirect or consequential damages for any reason, or for any inconvenience, interruption or consequences resulting from the failure of utilities or any service, making repairs, improvements or resulting from leaks of steam, gas, electricity, water, or any other substance from pipes, wires or other conduits, or from the bursting or stoppage thereof, or from leaks of water, snow, or rain from the plumbing, roof, or for wetness or dampness for any reason. (c) Tenant agrees for itself and each succeeding holder of Tenant's interest, or any portion thereof, that any judgment, decree or award obtained against Landlord, or any succeeding owner of Landlord's interest, which is related to this Lease or the Premises, whether at law or in equity, shall be satisfied out of Landlord's equity in the Premises, and further agrees to look only such assets and to no other assets of Landlord for satisfaction. In no event shall Tenant have the right to deduct any amount allegedly owed to Tenant from any rent or other sums payable to Landlord hereunder, Tenant's sole remedy being an independent action against Landlord for such claim. (d) Landlord reserves the right at any time or times during the Term and without charge, abatement or reduction in rent, after prior reasonable notice to Tenant (except in the case of an emergency) (i) to examine the Premises at reasonable times; (ii) to show the Premises at reasonable times commencing six (6) months prior to the end of the Term; (iii) to put up "For Sale" or "For Rent" signs, which signs Tenant shall not move, remove, block or otherwise interfere with; (iv) to perform such work as may be required by this Lease, any public authority, or to facilitate making repairs or improvements to the Building, the Property or any portion thereof, provided that unless any such work is of an emergency nature, Landlord shall give reasonable notice and shall use reasonable efforts to minimize interference with Tenant's operations; (v) to make repairs which Tenant fails to make promptly; and (vi) to enter upon the Premises for the foregoing purposes. 11.3 COVENANTS AND CONDITIONS. Each term and each provision of this Lease to be performed by Tenant shall be construed to be both a covenant and a condition. 11.4 COSTS AND EXPENSES. Acts to be done by Tenant pursuant to this Lease shall be at the cost and expense of Tenant unless a contrary intent is expressed. In addition, Tenant shall reimburse Landlord for any costs or expenses incurred in connection with enforcement of this Lease by Landlord. 11.5 HOLDING OVER. If Tenant or anyone claiming under it holds over after end of the Term, the party shall, prior to Landlord's acceptance of rent, be a tenant at sufferance, and, after Landlord's acceptance of rent, be a tenant at will subject to the provisions of this Lease insofar as the same may be made applicable to a tenancy at will; provided that Tenant shall pay Base Rent for the period of such tenancy at the greater of 1.75 times the highest rate of Base Rent payable during the Term or market rent, and, in addition, Tenant shall be liable for all damages incurred by Landlord (including consequential damages) as a result of the holding over. 11.6 QUIET ENJOYMENT. Provided Tenant timely pays all rent and performs and observe the terms, conditions and covenants of the Lease, Tenant may -17- 18 peaceably and quietly have, hold and enjoy the Premises as provided in the Lease, without hindrance or molestation from Landlord or anyone claiming legally under Landlord, subject to the terms of this Lease and any instruments having priority. 11.7 NO BROKERAGE. Tenant warrants and represents that it has dealt with no broker in connection with this Lease except the Broker (if any). Tenant agrees to defend and indemnify Landlord against any brokerage claims related to this Lease other than by the Broker. Landlord shall pay all commissions due to Broker in accordance with a separate agreement. 11.8 CERTIFICATES. Within ten (10) days after Landlord's request, Tenant shall deliver to Landlord or to any prospective Mortgagee or purchaser (a) an estoppel certificate in recordable form stating such information as Landlord reasonably requests, and the certificate shall be binding on Tenant, and (b) such financial statements as Landlord reasonably requires to verify the net worth of Tenant or any Transferee or Guarantor of Tenant, and Tenant represents and warrants that each such financial statement shall be true and accurate as of the date thereof. All financial statements shall be confidential and shall be used only for the purposes relating to this Lease or the Property. Landlord agrees to deliver to Tenant within ten (10) days after Tenant's request, an estoppel certificate stating whether this Lease is in full force and effect and whether Landlord is aware of any defaults hereunder and providing such other information as is reasonable and customary in a landlord's estoppel. 11.9 NOTICES. Any notice, consent, or other communication relating to this Lease shall be given in writing and by hand, by registered or certified mail or overnight express mail such as "Federal Express", postage or charges prepaid, to the other party's Notice Address or for Tenant to the Premises, to such other address or addresses as may be designated by the party by notice, and if to a Mortgagee, to such address as the Mortgagee shall designate. 11.10 NO WAIVER. Landlord's or Tenant's failure to complain of any act or omission of the other, no matter how long it continues, shall not be deemed a waiver of any of Landlord's or Tenant's rights. Landlord's or Tenant's waiver, express or implied, of any breach of this Lease shall not be deemed a waiver of a breach of any other provision or a consent to any subsequent breach of the same or any other provision. Landlord's or Tenant's consent to or approval to any action on one occasion shall not be deemed a consent to or approval of any other action or to such action on any subsequent occasion. Tenant's payment or Landlord's acceptance of a lesser amount than is due from Tenant to Landlord shall not be deemed anything but payment on account and Landlord's acceptance of a check for a lesser amount with an endorsement or statement thereon or upon a letter accompanying the check that the lesser amount is payment in full shall not be deemed an accord and satisfaction, and Landlord may accept the check without prejudice to recover the balance due or pursue any other remedy. All of Landlord's and Tenant's rights and remedies under this Lease or by operation of law, either at law or in equity, for any breach shall be distinct, separate, cumulative and non-exclusive and shall not be deemed inconsistent with each other. 11.11 FORCE MAJEURE. If Landlord's or Tenant's performance of any act (other than the payment of money) is delayed, or prevented because of strikes, lockouts, labor troubles, inability to procure materials, power failures, restrictive Laws, riots, insurrection, war, collection of insurance proceeds or taking awards or other causes beyond Landlord's or Tenant's reasonable control, then Landlord's or Tenant's performance shall be excused for the period of the delay and any time period shall be extended for an equivalent period. 11.12 RECORDING. Tenant shall not record this Lease, but may record a memorandum in form acceptable to Landlord and Tenant hereof. Any breach of this covenant shall cause this Lease to terminate automatically, if Landlord so elects in writing. -18- 19 11.13 PARAGRAPH HEADINGS. All paragraph headings are for convenience and reference only, and shall not be held to explain, modify, amplify or aid in the construction, interpretation or meaning of the provisions of this Lease. 11.14 GOVERNING LAW. This Lease shall be governed by the laws of the state in which the Premises are located. 11.15 SEPARABILITY; CONSTRUCTION AND INTERPRETATION. If any Lease term or provision or the application thereof to any person or circumstance is invalid or unenforceable, the remainder of this Lease, or the application of the term or provision to other persons or circumstances shall not be affected, and the Lease shall be valid and be enforced to the fullest extent permitted by law. If any Lease provision is capable of two constructions, then the provision shall have the meaning which renders it valid. 11.16 WHEN LEASE BECOMES BINDING; ENTIRE AGREEMENT. Landlord's employees or agents have no authority to make or agree to make a lease or any other agreement or undertaking, and the submission of this document for examination and negotiation does not constitute an offer to lease, or a reservation of, or option for, the Premises, and this document shall become effective and binding only upon the execution and delivery by both Landlord and Tenant. All negotiations, considerations, representations, and understandings between Landlord and Tenant are incorporated herein, and no oral statements or prior or contemporaneous written matter, whether by the parties or otherwise, which is not specifically incorporated herein shall be of any force or effect. In entering into this Lease, Tenant relies solely upon the representations and agreements contained herein. This Lease shall not be modified except by writing executed by both parties and no act or omission of any employee or agent of Landlord shall alter, change or modify any of the provisions hereof. 11.17 SECURITY DEPOSIT.Within seven (7) days after full execution and delivery of this Lease by the parties hereto, Tenant shall deposit with Landlord an irrevocable standby letter of credit in form and substance satisfactory to Landlord in the amount of $650,000.00 (the "Security Deposit") as security for the faithful performance and observance by Tenant of the terms, provisions and conditions of this Lease. It is agreed that in the event Tenant defaults in respect of any of the terms, provisions and conditions of this Lease, Landlord may use, apply or retain the whole or any part of the Security Deposit to the extent required for payment of any Rent or any other sum as to which Tenant is in default or for any sum which Landlord may expend or may be required to expend by reason of Tenant's default in respect of any of the terms, covenants and conditions of this Lease, including but not limited to any damage or deficiency accrued before or after summary proceedings or other reentry by Landlord, including the costs of such proceeding or reentry and further including, without limitation, reasonable attorney's fees. It is agreed that Landlord shall always have the right to apply the Security Deposit, or any part thereof, as aforesaid, without notice and without prejudice to any other remedy or remedies which Landlord may have, or Landlord may pursue any other such remedy or remedies in lieu of applying the Security Deposit or any part thereof. No interest shall be payable on the Security Deposit. If Landlord shall use, apply or retain the Security Deposit in whole or in part and the Lease continues or Tenant's occupancy continues in the Premises, Tenant shall within ten (10) days after written notice form the Landlord make such further or other deposit of monies as may be necessary to bring the balance of the deposit to a sum equal to the initial Security Deposit. In the event that Tenant shall fully and faithfully comply with all of the terms, provisions, covenants and conditions of this Lease, the Security Deposit shall be returned to Tenant within ninety (90) days after the date fixed as the end of the Lease and after delivery of entire possession of the Premises to Landlord in accordance with the terms of this Lease. In the event of a sale or other transfer of the Building, or leasing of the entire Building including the Premises subject to Tenant's tenancy hereunder, Landlord shall transfer the Security Deposit then remaining to the -19- 20 vendee or lessee and Landlord shall thereupon be released from all liability for the return of such Security Deposit to Tenant; and Tenant agrees to look solely to the new Landlord for the return of said Security Deposit then remaining. The holder of any mortgage upon the Building or Lot shall never be responsible to Tenant for the Security Deposit or its application or return unless the Security Deposit shall actually have been received in hand by such holder. Tenant further covenants that it will not assign or encumber or attempt to assign or encumber the Security Deposit and that neither Landlord nor its successors or assigns shall be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance. Notwithstanding the foregoing, in the event that Tenant, during the term of this Lease, raises in excess of $25,000,000.00 in equity capital, the amount of the Security Deposit required hereunder shall be reduced to $325,000.00, and in the event that Tenant, during the term of this Lease, raises in excess of $50,000,000.00 in equity capital, then Landlord agrees to return the unused portion of the Security Deposit to Tenant. Landlord agrees to notify Tenant in the event that Landlord intends to draw upon the Security Deposit, but the giving of such notice shall not be a precondition to the exercise of Landlord's rights to draw upon the Security Deposit. -20- 21 11.18 EXECUTION. This Lease may be executed in any number of original counterparts. Each fully executed counterpart shall be deemed an original for all purposes. EXECUTED AS A SEALED INSTRUMENT. LANDLORD: CLAREMONT BRIDGEWATER I, LLC By: /s/ Michael Cahill ------------------------------- Claremont Bridgewater I, LLC TENANT: ENVISION DEVELOPMENT CORPORATION By: /s/ William J. Patch ------------------------------- its Print Name: William J. Patch hereunto duly authorized -21- EX-21.1 10 SUBSIDIARIES 1 EXHIBIT 21.1 SUBSIDIARIES OF ENVISION
NAME STATE OF INCORPORATION TYPE OF ORGANIZATION BUSINESS NAMES ---- ---------------------- -------------------- -------------------------------- perfumania.com, inc. Florida Corporation perfumania.com Qui Vive, Inc. Delaware Corporation QVtech QV Acquisition Corporation Delaware Corporation QV Acquisition Corporation Envision Acquisition Corporation Massachusetts Corporation Envision Acquisition Corporation
EX-23.1 11 CONSENT OF PWC 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (File No. 333-93795) of Envision Development Corporation (successor to perfumania.com, inc.) of our report dated April 28, 2000 relating to the financial statements, which appears in this Form 10-K. Miami, Florida April 28, 2000 EX-27.1 12 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF ENVISION DEVELOPMENT CORPORATION FOR THE YEAR ENDED JANUARY 29, 2000 INCLUDED IN THIS ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR JAN-29-2000 JAN-31-1999 JAN-29-2000 9,208,501 0 74,615 35,678 1,651,327 102,357 254,143 17,768 11,237,497 1,519,688 0 0 0 75,000 9,642,809 11,237,497 2,290,149 0 1,832,094 0 5,691,170 35,678 176,238 (5,228,467) 0 (5,228,467) 0 0 0 (5,228,467) (0.89) (0.89)
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