SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Periods Ended March 31, 1998.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission File No. 333-42499
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
(Name of registrant as specified in its charter)
FLORIDA 59-3307487
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9799 OLD ST. AUGUSTINE ROAD, JACKSONVILLE, FLORIDA 32257
(Address number of principal executive offices)
(904) 886-2985
(Telephone number of principal executive offices)
Securities Registered Pursuant to Section 12(b) of the Act:
None None
(Title of Each Class) (Name of Each Exchange on Which Registered)
Securities Registered Pursuant to Section 12(g) of the ACT:
Common Stock (par value $.001 per share)
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period(s) that the
Registrant was required to file such reports), and (2) has been subject to such
filings requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if the 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 the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-QSB or any
amendment to this for 10-QSB. [X]
The aggregate book value of Common Stock held of the Registrant on March
31, 1998 was (2,163,337), based on shares outstanding for the Common Stock on
such date. For the purpose of this computation, all restricted issues have been
included. Such shares may not have, in fact, been issued.
The number of shares outstanding of the Registrant's Common Stock on March
31, 1998 was 10,680,000 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Form SB-2/A Registration Statement.
Form 10-KSB for Fiscal Year Ended December 31, 1997.
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TABLE OF CONTENTS
PART I
Item 1. BUSINESS ...................................................... 3
PART II
Item 2. SUBMISSION MATTERS TO A VOTE OF SHAREHOLDERS................... 3
Item 3. SELECTED FINANCIAL DATA ....................................... 4
Item 4. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ..................................... 4
PART F/S
Item 5. CONSOLIDATED FINANCIAL STATEMENTS ............................. 7
Item 6. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .................... 13
PART III
Item 7. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT ................ 22
Item 8. ENDORSEMENTS .................................................. 24
Item 9. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-KSB ......................................................... 25
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PART I
ITEM 1. BUSINESS
General
Success Development International, Inc. was incorporated in Florida in 1995
to serve as a holding company for its five operating subsidiaries, The LeGrand
Group, Inc. ("LGI"), Results Publishing, Inc. ("RPI"), Telstar Consulting, Inc.
("TCI"), SDI Direct Corporation ("SDC") and SDI Internet Services, Inc. ("SIS").
The LeGrand Group, Inc. was founded in 1989 and incorporated in Florida in
1991 for the purpose of marketing and distributing information about real estate
investment.
Results Publishing, Inc. was incorporated in Nevada in 1995 for the purpose
of sponsoring workshops and seminars about the LeGrand Group, Inc.'s financial
products and business opportunities.
Telstar Consulting, Inc. was incorporated in Nevada in 1995 for the purpose
of supplying telemarketing sales for the LeGrand Group, Inc. and other third
party products and services.
The Company provides information, education, financial and other services to
small businesses and their owners. The services offered by the Company include a
magazine, a variety of seminars, conferences, home study courses, hands-on
training events in the areas of real estate investment and management,
marketing, business structuring and planning, and income tax planning.
Additional specialty services include mortgage lending, equipment leasing,
factoring accounts receivable and business lines of credit. The products and
services provided by the company are designed to enable its customers to create,
increase and maintain financial wealth.
The Company strives to provide business consumers with information that can
be used independently or, at the purchaser's option, with assistance from
workshop leaders. The Company believes that its ability to teach this
information in an understandable, easy-to- follow format together with its
ongoing support system for customers has enabled it to reach its current
financial position. Maintaining its commitment to quality customer support and
building ongoing relationships with customers is necessary, in the Company's
opinion, to achieve rapid expansion and long-term profitability.
The Company sells its products and services to a broad spectrum of
individuals and entities from beginning entrepreneurs seeking skills to achieve
financial independence to experienced entrepreneurs looking to enhance their
existing plans and protect existing assets. The products and services are sold
through several mediums, including direct mail, telemarketing, Internet,
periodical advertising, radio, television, direct sales and customer referral.
The Company's executive offices are located at 9799 Old St. Augustine Road,
Jacksonville, Florida 32257, and its phone number is (904) 886-2985.
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PART II
ITEM 2. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED ShareholderS MATTERS
BROKER-DEALER
We have entered into an Agency Agreement (the "Agreement") with Attkisson,
Carter & Akers, Incorporated, a registered securities broker-dealer (the
Broker-Dealer"). Under the Agreement, we are employing the Broker-Dealer as our
exclusive agent to sell our stock on a "best efforts -- 100,000 Share minimum --
500,000 Shares maximum" basis. All subscription payments will be deposited into
an escrow account at First Union National Bank, Corporate Trust Group, 225 Water
Street, 3rd Floor, Jacksonville, FL 32202, (904) 361-3174. All subscribers'
checks will be made payable to First Union National Bank, as escrow agent. The
Broker-Dealer will transmit such checks directly to the escrow agent by noon of
the next business day after receipt. If the Minimum is not obtained within 3
months after the date of this Prospectus, all proceeds deposited in the escrow
account will be promptly refunded in full, with interest, but without any
deduction for expenses.
If the Minimum is raised, no interest will be paid to subscribers, and
interest earned during the escrow period will be paid to the Company. All funds
held in the escrow account will be invested in an interest bearing bank account.
Upon raising the Minimum amount, the escrow shall be terminated, subscribers
will become Shareholders and all additional proceeds from the sale of shares
will go directly to the Company.
During the Escrow Period, all subscription payments for shares must be
delivered by the Broker-Dealer to the Escrow Agent. A written confirmation along
with a copy of the Share Purchase Agreement will be mailed by the Broker-Dealer
to each subscriber or purchaser within fifteen business days of receipt by the
Broker-Dealer. Stock certificates will not be issued to subscribers until such
time as the funds are released from the escrow account to SDI. During the Escrow
Period, subscribers will have no right to a return of their payment.
The offering will continue until subscriptions for all 500,000 shares
offered are received, or until six months from the effective date of the
Offering or until the Broker- Dealer and the Company mutually agree to terminate
the Offering, whichever event first occurs.
Subject to sale of the minimum of 100,000 shares prior to the termination
of the Offering, the Company has agreed to pay the Broker-Dealer a sales
commission of ten percent. The Broker-Dealer may offer the shares through other
dealers who are members of the National Association of Securities Dealers, Inc.,
and may grant concessions to or otherwise allow such dealers such proportion of
the ten percent commission as the Broker- Dealer may consider proper.
The Company has agreed to provide to the Broker-Dealer for no consideration
options (the "Options") to purchase up to 50,000 shares at an exercise price of
$5.50 per share on the basis of one Option for each ten shares sold in the
Offering. The Options are exercisable during the five year period commencing on
the date of this prospectus (the "Option Exercise Term"). During the Option
Exercise Term, the holders of the Options are given, at no cost, the opportunity
to profit from a rise in the market price of the Company's Common Stock. To the
extent that the Options are exercised, dilution to the interest of the Company's
Shareholders will occur. The Options will not be transferred, assigned, pledged
or hypothecated for a period of one year from the effective date of this
offering except to officers or partners of the Broker-Dealer and members of any
selling group and/or their officers or partners. Further, the terms upon which
the Company will be able to obtain additional equity capital may be adversely
affected since the holders of the Options can be expected to exercise them at a
time when the Company would, in all likelihood, be able to obtain any needed
capital on terms more favorable to the Company than those provided in the
Options. Any profit realized by the Broker-Dealer on the exercise of the options
and the ensuing sale of the underlying shares of Common Stock may be deemed
additional compensation to the Broker-Dealer.
The Company expects to pay up to $15,000 in accountable expenses to the
Broker-Dealer to cover legal expenses and other costs of the Offering.
The Company has agreed to indemnify the Broker-Dealer against liabilities
incurred by
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the Broker-Dealer by reason of any untrue statement of a material fact contained
in the prospectus or by reason of the omission of a material fact necessary in
order to make the statements in the prospectus, in light of the circumstances,
not misleading, where such information relates to or was furnished by the
Broker-Dealer in writing.
ITEM 3. LEGAL PROCEEDINGS
As of the date of this Prospectus, there is no pending material litigation
involving the Company.
GOVERNMENT REGULATION
SDI's business is subject to regulation under the Telemarketing and
Consumer Fraud and Abuse Prevention Act and state laws applicable to
telemarketing activities. See "Risk Factors." Management believes that it is in
substantial compliance with all of the foregoing federal and state laws and the
regulations promulgated thereunder. Any claim that we were not in compliance
could result in judgments or consent agreements that required the Company to
modify its marketing program. In the worst cases, enforcement of fraud laws can
result in forcing a business to close and to subject the business and its
management and employees to be subject to criminal prosecution and civil damage
actions.
EMPLOYEES
As of March 31, 1998, SDI had 40 full time employees and 5 part-time
employees. We also use approximately 15 independent contractors. SDI's employees
are not represented by a labor union and are not subject to any collective
bargaining arrangement. The Company has never experienced a work stoppage and we
believe that it has good relations with its employees and contractors.
ITEM 4. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 5. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
During the third quarter one item was submitted to a vote of security holders
which was the election of directors at the annual shareholders meeting on August
5th 1998.
ITEM 6. SELECTED FINANCIAL DATA
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
FOR THE PERIODS ENDED March 31, 1996 AND 1997 AND 1998
<TABLE>
<CAPTION>
March 31, March 31, March 31,
1996 1997 1998
Unaudited Unaudited Unaudited
------------ ------------ ------------
<S> <C> <C> <C>
Balance Sheet Data:
Working capital (net unearned revenue) $ (857,740) $(1,840,720) $(1,812,655)
Total assets ......................... 2,046,066 2,077,320 2,016,971
Total debt ........................... 1,611,456 4,240,655 2,985,102
Operating Statement Data:
Operating revenue .................... 1,749,925 2,377,379 1,769,630
Operating expenses ................... 1,362,379 1,169,874 1,613,993
Other revenue (expenses) net ......... (8,533) 10,692 (2,869)
Cash Flow Data:
Operating activities ................. (457,845) (300,924) 133,411
Investing activities ................. (12,877) (25,373) (26,684)
Financing activities ................. (13,839) 322,701 (216,046)
Shareholders' Equity Data:
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Shareholders' equity (deficit) ....... $ (94,610) (2,163,337) (968,131)
Shares Outstanding ................... 10,380,000 10,680,000 11,380,151
</TABLE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THIS SHOULD BE READ TOGETHER WITH THE FINANCIAL STATEMENTS AND THEIR NOTES.
OPERATING DATA PRESENTED IN THIS DISCUSSION ARE UNAUDITED.
OVERVIEW. We produce, market and distribute information, education and financial
products and services to small business and their owners.
We have strengthened our management team over the last few years. In May
1995, we elected Daniel S. Pena, Sr. as Director and Chairman of the Board of
Directors. Mr. Pena is an executive experienced in the accelerated growth of an
entrepreneurial company and in the management of public companies. In August
1995, we elected Shawn M. Casey as the new Chief Executive Officer to lead the
Company into its current phase of growth. In July 1996, two executives
experienced in the management of public companies, Hugh Carey and Jarrell
Ormand, agreed to serve on the Board of Directors. In January, 1997, we hired a
new Controller, Ralph E. Vroman Jr., who is now the Chief Financial Officer,
experienced in the financial management and information systems required for
public companies.
These individuals, along with other key managers recruited by us during this
time frame, bring to the Company significant experience in creating and
marketing personal and financial development products.
We realized significant improvement in our sales during 1996 and 1997 as well
as significant improvement in our Balance Sheet and financial strength in 1998,
primarily as a result of our expanded marketing efforts during 1996 and early
1997, in which we incurred substantially higher levels of marketing
expenditures. Our net sales increased by 110.14% in 1996 and by 9.82% in 1997,
when compared to 1995 and 1996, respectively. We will continue to seek further
improvement in sales and profit over time as we are able to take advantage of
the increased marketing staff and marketing budget, as more internally developed
products become available for sale, and as economies of scale are achieved as we
continue to grow.
We account for the recognition of income from "Boot Camps" when the customer
has attended the event or one year has passed. This results in unearned revenue
being reported for the current period. Although we have received payment which
would otherwise be recognized as income, the revenue is treated as unearned
until the purchaser attends the event or one year has passed from the date of
purchase. Our history shows that we will be able to recognize more than 90%
percent of this unearned revenue as income within the following twelve-month
period. The amount of revenue unearned is net of all related expenses so, after
the purchasers attend the event or the one year period passes, the recognized
revenue directly increases the income from operations.
RESULTS OF OPERATIONS.
The following discussion and analysis of the Company's consolidated results
of operations for the years ended March 31, 1997 and 1998 is based upon, and
should be read in conjunction with, the financial information set forth in the
Consolidated Financial Statements, including their notes, included elsewhere in
this report.
OPERATIONS
Our accounting, purchasing, inventory control, scheduling, order processing,
warehousing and shipping activities are coordinated at our headquarters.
Production and major vendor initial shipments are performed by independent
contractors working under SDI's direction. Our computer system handles order
entry, order processing, picking, billing, accounts receivable, accounts
payable, general ledger, inventory control, catalog management and analysis and
mailing list management. Subject to credit terms and product availability,
orders are typically shipped from our facilities within 24 hours of
receiving an order. Third party contractors print and assemble the Company's
audio and video tapes, manuals, transcripts, newsletters, software, inserts and
the boxes in which the products are shipped. We have multiple sources for all
components of our products,
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and have not experienced any material delays in production or assembly.
PRODUCT RETURNS
Reserves for returns by customers have been established in the allowance for
bad debt and returns that we believe are adequate based on product sell-through,
inventory levels and historic return rates. We periodically adjust our reserves
for these returns. SDI sells on credit, with varying discounts, return
privileges and unsecured credit terms.
PERIOD ENDED March 31, 1997 COMPARED TO PERIOD ENDED March 31, 1998.
Operating revenue decreased $679,878, or 28.60%, to $1,697,501 in 1998 from
$2,377,379 in 1997. The decrease resulted primarily from the Company's focus on
restructuring the company's internal systems and developing its new products and
services.
Cost of product sales and direct operating expenses decreased $641,695, or
51.34%, to $608,228 in 1998 from $1,249,923 in 1997. The decrease resulted
primarily from the more effective financial cost controls. The acquisition of
certain rights to certain products. Inventory is reported based on physical
counts with allocation for overages, shrinkages and product returns.
Royalties and costs to authors and speakers decreased $70,706, or 13.24% to
$463,279 in 1998, from $533,985 in 1997. The decrease resulted from the
acquisition of certain products for which no further royalty payments are due
and the renegotiation of certain other royalty agreements.
General and administrative expenses increased $352,253, or 97.18%, to
$714,728 in 1998 from $362,475 in 1997. The increase in expenses was
attributable to the startup of two additional enterprise operations.
Depreciation and amortization expenses increased $4,267, or 18.16%, to
$27,758 in 1998 from $23,491 in 1997. The increase resulted primarily from the
acquisition of additional equipment, primarily through capital leases.
Rent and other income decreased $4,295, or 13.97%, to $26,455 in 1998 from
$30,750 in 1997. The increase resulted primarily from an decrease in earnings
from miscellaneous company owned investments.
Interest expense increased $9,266, or 46.20%, to $29,324 in 1998 from $20,058
in 1997, primarily attributed to the conversion of various notes payable and
accrued interest to stock.
Liquidity and capital resources have traditionally been financed through
operating cash flow, private placement of convertible debt and issuance of
stock.
Cash management is a key element of our operating philosophy and future
strategic plans. Even while under capitalized, we have managed cash flow
sufficiently to allow for continued growth and increased operating revenues.
In our opinion, working capital is sufficient to meet our present working
capital needs. We have historically grown at a fast pace despite being under
capitalized. We will use the available funds in the manner we see fit to
continue our growth. Any funds which are added to working capital will improve
our financial condition.
We expect to continue to grow at approximately the same pace as demonstrated
from 1996 to 1997. The additional availability of funds is expected to
accelerate the internal growth of the Company. While we intend to make every
attempt to increase marketing using whatever funds are available, a lack of
funds will impede these efforts.
The company plans to maintain an aggressive growth pattern through the use of
cash flows from operations, financing activities and a direct public offering.
The company has systematically contacted each Creditor and restructured its
liabilities and made payment arrangements which have avoided material
litigation, moved billings into current status and reestablished creditor
confidence. Management further took steps towards cost controls by adopting
standardized staffing techniques. This resulted in a work force reduction of
approximately 30% as of year end 1997 from year end 1996.
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Operating activities generated $129,259 in cash through the first quarter of
1998 as compared to cash used by operating activities of $300,924 in the first
quarter of 1997. The cash provided by operating activities is ear marked for the
start up of two additional and new business activities-SDI Direct Corporation in
the second quarter and SDI Internet Services Inc. in the third quarter.
During 1997 and 1998 our investing activities consisted primarily of
investment in property and equipment representing net cash used in 1997 of
$25,373 and $26,684 for 1998. 1998 investment activities were represented by
lease swaps on equipment upgrades.
Financing activities in 1996 we issued $445,000 of convertible notes which
are payable 270 days from the date of their issuance. In 1997 we issued an
additional $140,000 in convertible notes. All notes are convertible into our
Common Stock at a conversion rate of one share of Common Stock for each $1.00 of
principal amount of the notes. The conversion of the notes is subject to the
legal registration of the shares issuable upon conversion or an applicable
exemption from such registration. From January 1, 1996 through March 31, 1997,
we have allowed the holders of notes totaling $266,294 to convert those notes
into Common Stock in exchange for cancellation of the debt. $266,294 in notes
payable have been converted to 294,010 shares of common stock through March 31,
1997. $102,163 in notes payable have been converted to 139,000 shares of common
stock through March 31, 1998.
We have approximately $2,000,000 in net operating loss carryovers from 1996
and prior years available to reduce future taxable income through the year 2010.
Utilization of the net operating loss carryovers is subject to the separate
return limitation year ("SRLY") restrictions for consolidated tax returns, and
realization is dependent upon Results Publishing, Inc. and Telstar, Inc.
generating sufficient separate taxable income to utilize the net operating
losses.
EFFECT OF INFLATION. The Company's income and profitability is not affected
positively or adversely by inflation.
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PART F/S
Item 8. FINANCIAL STATEMENTS
FINANCIAL DEPARTMENTS' REPORT
The Board of Directors of
Success Development International, Inc.:
We have prepared the accompanying consolidated balance sheets of Success
Development International, Inc. and subsidiaries as of March 31, 1996, 1997 and
1998, and the related consolidated statements of operations, shareholders'
equity and cash flows for the periods then ended.
We prepared our statements in accordance with the instructions to Form 10-QSB
and therefore omit or condense certain footnotes and other information. The Form
10-QSB requires that we plan and perform with reasonable assurance about whether
the financial statements are free of material misstatement. The accounting
policies followed for interim financial reporting are the same as those
disclosed in Note 2 of the Notes to Consolidated Financial Statements included
in the Company's audited financial statements for the fiscal year ended December
31, 1996 which are included in For 10-KSB, dated for year end December 31, 1997
and Form SB-2 dated for February 18, 1998. We believe that our financial
statements provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Success
Development International, Inc. and subsidiaries as of March 31, 1996, 1997 and
1998 and the results of their operations and their cash flows for the periods
then ended in conformity with generally accepted accounting principles and the
instructions for the Form 10-QSB which may take precedence.
Ralph E. Vroman, Jr., Chief Financial Officer
Jacksonville, Florida
October 29, 1998
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INDEPENDENT AUDITORS' REPORT
The Board of Directors of
Success Development International, Inc.:
We have audited the accompanying consolidated balance sheets of Success
Development International, Inc. and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of operations, shareholders'
deficit and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Success
Development International, Inc. and subsidiaries as of December 31, 1996 and
1995 and the results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
James Moore & Co., P.L.
Holly Hill, Florida
September 18, 1997
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SUCCESS DEVELOPMENT INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
AND PERIODS ENDED MARCH 31, 1997 AND 1998
<TABLE>
<CAPTION>
December 31 December 31 March 31 March 31
ASSETS 1996 1997 1997 1998
CURRENT ASSETS Audited Unaudited Unaudited Unaudited
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash and cash equivalents .................. $ 800 $ 31,326 $ 22,376 $ 19,793
Restricted Cash ............................ 43,045 82,279 17,954 (11,354)
Current portion of notes receivable-
trade, net................................. 247,836 465,824 385,594 339,115
Inventories ................................ 75,218 72,158 44,884 82,959
Prepaid expenses ........................... 28,982 11,145 55,537 14,134
----------- ----------- ----------- -----------
Total current assets ............. 395,961 662,732 526,346 444,647
----------- ----------- ----------- -----------
PROPERTY AND EQUIPMENT, net ..................... 1,076,460 1,102,788 1,096,104 1,100,712
----------- ----------- ----------- -----------
OTHER ASSETS
Notes receivable-trade, less current
portions, net.............................. 165,224 178,819 368,700 298,879
Receivables from employees and others ...... 10,500 9,678 8,399 10,084
Organizational costs and other ............. 54,819 161,914 77,771 162,649
----------- ----------- ----------- -----------
Total other assets ............... 230,543 350,411 454,869 471,612
----------- ----------- ----------- -----------
TOTAL ASSETS .................................... $ 1,702,964 $ 2,115,931 $ 2,077,320 $ 2,016,971
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses ...... $ 1,149,121 $ 1,051,918 $ 1,315,586 $ 1,234,233
Accounts payable to management and
Shareholders .............................. 420,736 412,804 222,063 389,751
Current portion of long-term debt .......... 1,073,717 837,473 829,415 621,964
Unearned revenue ........................... 1,144,625 770,143 1,426,881 545,165
----------- ----------- ----------- -----------
Total current liabilities ........ 3,788,202 2,996,321 3,793,945 2,791,113
----------- ----------- ----------- -----------
LONG-TERM DEBT, less current portion ............ 296,831 194,526 446,710 193,989
----------- ----------- ----------- -----------
Total liabilities ................ 4,085,033 3,266,864 4,240,655 2,985,102
----------- ----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
(Notes 6, 9, 11, and 12)
SHAREHOLDERS' EQUITY
Common stock, $.001 par value;
12,000,000 and 25,000,000 shares
authorized in 1995 and 1996,
respectively, 10,125,000 and
10,355,000 shares issued and
outstanding in 1995 and 1996, respectively.. 10,355 11,241 10,565 11,380
Additional paid in capital ................. 267,309 800,052 267,309 902,076
Accumulated deficit ........................ (2,659,183) (1,962,051) (2,440,986) (1,881,412)
Unearned compensation -
restricted stock .......................... (550) (175) (225) (175)
----------- ----------- ----------- -----------
Total Shareholders' equity
(deficit) ............................ (2,382,069) (1,150,933) (2,163,337) (968,131)
----------- ----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY ......................................... $ 1,702,964 $ 2,115,931 $ 2,077,320 $ 2,016,971
=========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
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SUCCESS DEVELOPMENT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
AND PERIODS ENDED MARCH 31, 1997 AND 1998
<TABLE>
<CAPTION>
December 31 December 31 March 31 March 31
1996 1997 1997 1998
OPERATING REVENUE: Audited Unaudited Unaudited Unaudited
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Product sales and tuition .............. $ 5,778,301 $ 6,345,837 $ 2,377,379 $ 1,697,501
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Cost of product sales and direct ....... 3,116,217 2,993,302 1,249,923 608,228
operating expenses
Royalties .............................. 2,159,148 1,190,071 533,985 463,279
General and administrative ............. 2,750,377 1,443,608 362,475 714,728
Depreciation and amortization .......... 86,134 93,964 23,491 27,758
------------ ------------ ------------ ------------
Total operating expenses .... 8,111,876 5,720,945 2,169,874 1,613,993
------------ ------------ ------------ ------------
INCOME FROM OPERATIONS ..................... (2,333,575) 624,892 207,505 83,508
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Rent and other income ................. 127,179 152,472 30,750 26,455
Interest expense ...................... (153,905) (80,232) (20,058) (29,324)
Loss on disposal of asset ............. (10,160) -- -- --
------------ ------------ ------------ ------------
Total other income
(expense) .................. (36,886) 72,240 10,692 (2,869)
------------ ------------ ------------ ------------
NET INCOME (LOSS) .......................... $ (2,370,461) $ 697,132 $ 218,197 $ 80,639
============ ============ ============ ============
PRIMARY EARNINGS (LOSS) PER COMMON SHARE$ .. (0.21) $ 0.06 $ 0.02 $ 0.01
NUMBER OF SHARES OUTSTANDING-PRIMARY ....... 10,355,000 11,241,010 10,680,000 11,380,151
============ ============ ============ ============
FULLY DILUTED EARNINGS PER SHARE ........... $ 0.05 $ 0.02 $ 0.01
WEIGHTED AVERAGE NUMBER OF SHARE
OUTSTANDING-FULLY DILUTED .................. 13,595,150 13,023,413 13,623,180
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
12
<PAGE>
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
AND PERIODS ENDED MARCH 31, 1997 AND 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Retained Total
Common Additional Earnings Shareholders
Stock Paid in (Accumulated Unearned Equity
Shares Amount Capital Deficit) Compensation (Deficit)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1995 ........... 10,125,000 $ 10,125 -- $ (288,722) $ (2,655) $ (281,252)
----------- ----------- ----------- ----------- ----------- -----------
Issuance of common stock ............. 85,000 85 -- -- -- 85
Issuance of common stock from
conversion of debt ................... 245,000 245 267,309 -- -- 267,554
Restricted common stock -
restrictions expire .................. -- -- -- -- 2,005 2,005
Forfeit of restricted - common
stock ................................ (100,000) (100) -- -- 100 --
Net income (loss) .................... -- -- -- $(2,370,461) -- $(2,370,461)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1996 ........... 10,355,000 $ 10,355 $ 267,309 $(2,659,183) $ (550) $(2,382,069)
----------- ----------- ----------- ----------- ----------- -----------
Issuance of common stock ............. 500,000 500 -- -- -- 500
Issuance of common stock from
conversion of debt ................... 561,010 561 532,743 -- -- 533,304
Restricted common stock -
restrictions expire .................. -- -- -- -- 200 200
Forfeit of restricted - common
stock ................................ (175,000) (175) -- -- 175 175
Net income (loss) .................... -- -- -- $ 697,132 -- $ 697,132
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1997 ........... 11,241,010 $ 11,241 $ 800,052 $(1,962,051) $ (175) $(1,150,933)
=========== =========== =========== =========== =========== ===========
BALANCE, December 31, 1996 ........... 10,355,000 $ 10,355 $ 267,309 $(2,659,183) $ (550) $(2,382,069)
----------- ----------- ----------- ----------- ----------- -----------
Issuance of common stock ............. 500,000 500 -- -- -- 500
Issuance of common stock from
conversion of debt ................... -- -- -- -- -- --
Restricted common stock -
restrictions expire .................. -- -- -- -- 150 150
Forfeit of restricted - common
stock ................................ (175,000) (175) -- -- 175 --
Net income (loss) .................... -- -- -- $ 218,197 -- $ 218,197
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, March 31, 1997 .............. 10,680,000 $ 10,680 $ 267,309 $(2,440,986) $ (225) $(2,163,222)
=========== =========== =========== =========== =========== ===========
BALANCE, December 31, 1997 ........... 11,241,010 $ 11,241 $ 800,052 $(1,962,052) $ (175) $(1,446,332)
----------- ----------- ----------- ----------- ----------- -----------
Issuance of common stock ............. -- -- -- -- -- 613,402
Issuance of common stock from
conversion of debt ................... 139,000 139 102,024 -- -- 102,163
Restricted common stock - ............ -- --
restrictions expire .................. -- -- -- --
Forfeit of restricted - common ....... -- --
stock ................................ -- -- -- --
Net income (loss) .................... -- -- -- 80,639 -- (69,744)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, March 31, 1998 .............. 11,380,151 $ 11,380 $ 902,076 $(1,881,412) $ (175) $ (968,131)
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
13
<PAGE>
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
AND PERIODS ENDED MARCH 31, 1997 AND 1998
<TABLE>
<CAPTION>
December 31 December 31 March 31 March 31
1996 1997 1997 1998
CASH FLOWS FROM OPERATING ACTIVITIES Audited Unaudited Unaudited Unaudited
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income (loss) .................................. $(2,370,461) $ 697,132 $ 218,197 $ 80,639
----------- ----------- ----------- -----------
Adjustments to reconcile net income (LOSS) to
net cash used in operating activities
Provision for uncollectible receivables ............ 524,152 816,574 131,759 74,165
Depreciation and amortization ...................... 86,134 93,964 23,491 27,758
Issuance of common stock for compensation and
interest .......................................... 24,644 91,351 500 102,024
Interest converted to long-term debt ............... 11,259 -- -- --
Loss on disposal of assets ......................... 10,160 -- -- --
Change in assets and liabilities:
Notes receivable - trade ........................... (847,912) (341,234) 6,649
Inventories ........................................ (36,490) 3,060 30,334 (10,801)
Prepaid expenses ................................... (3,793) 17,837 (26,555) (2,989))
Other assets ....................................... (12,270) (107,095) (22,952) (1,141)
Accounts payable and accrued liabilities ........... 906,222 (97,203) 166,465 (109,290)
Accounts payable to management and
Shareholders ...................................... 376,794 (7,935) (198,673) (23,053)
Unearned revenue ................................... 819,435 (374,482) (282,256) (324,978)
----------- ----------- ----------- -----------
Total adjustments .................................. 1,858,335 (612,086) (519,121) 48,621
----------- ----------- ----------- -----------
Net cash provided (used) in operating
activities ..................................... (512,126) 85,046 (300,924) 129,259
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ................. (80,150) (120,278) (27,474) (25,682)
Proceeds from sale of property and equipment ....... -- -- -- --
Advances to employees and others ................... -- (1,500) -- (1,500)
Collection of receivables from employees and
others ............................................ 15,029 2,322 2,101 1,321
----------- ----------- ----------- -----------
Net cash used in investing activities ........... (65,121) (119,456) (25,373) (26,684)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt ....................... 296,000 105,045 340,000 --
Repayment of long-term debt ........................ (162,155) (140,955) (17,299) (216,046)
Proceeds from convertible notes .................... 445,000 140,000 -- --
Dividends paid ..................................... -- -- -- --
----------- ----------- ----------- -----------
Net cash provided by financing activities ...... 578,845 104,090 322,701 (216,046)
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ............................................ 1,598 69,680 (3,595) (109,318)
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, beginning of period .......... 42,327 43,925 43,925 113,605
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period ................ 43,925 113,605 40,330 8,439
=========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidate financial statements are an integral part
of these statements.
14
<PAGE>
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
AND PERIODS ENDED MARCH 31, 1997 AND 1998
<TABLE>
<CAPTION>
SUPPLEMENT DISCLOSURE OF CASH FLOW INFORMATION December 31 December 31 March 31 March 31
1996 1997 1997 1998
CASH FLOWS FROM OPERATING ACTIVITIES Audited Unaudited Unaudited Unaudited
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash paid during the year for interest ......... $94,267 $80,267 $20,058 $30,078
======= ======= ======= =======
</TABLE>
NON CASH INVESTING AND FINANCING ACTIVITIES:
During 1995 and 1996, the Company entered into various capital leases for
equipment and software for $91,459 and $41,870, respectively. During 1995, land
and building held for disposition were returned to the previous owner for
cancellation of the $218,483 mortgage. During 1996, long-term debt and accrued
interest was converted to stock and paid in capital in the amount of $267,554.
The accompanying notes to consolidated financial statements are an integral part
of these statements.
The accompanying notes to consolidate financial statements are an integral part
of these statements.
15
<PAGE>
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(1) THE COMPANY AND ITS OPERATIONS:
Success Development International, Inc. ("the Company") was incorporated April
7, 1995 for the purpose of forming a holding company structure for two separate,
but commonly owned, business ventures, The LeGrand Group, Inc. ("LeGrand") and
Results Publishing, Inc. ("Results"). The Company also includes a wholly owned
subsidiary, Telstar Consulting, Inc. ("Telstar").
LeGrand develops and sells a variety of real estate related education materials
and conducts seminars on this topic. Results organizes and promotes general
business conferences designed to provide participants with real estate and other
home based business opportunities. Telstar conducts various telemarketing
services for the Company. These operations are conducted throughout the United
States.
On April 14, 1995, and December 20, 1995, the Shareholders of LeGrand and
Results, respectively, approved plans of merger to become wholly owned
subsidiaries of the Company. Under the terms of the merger agreements, LeGrand
and Results Shareholders received, on a pro rata basis, 5,355,000 shares of the
Company's common stock in exchange for all of the issued and outstanding shares
of LeGrand and Results.
At the time of the merger, the majority Shareholder of the Company was deemed to
exercise effective control over both LeGrand and Results. As a result, the
merger was accounted for as a transfer of assets among entities under common
control in a manner similar to a pooling of interests whereby the historical
bases of assets, liabilities and results of operations of LeGrand and Results
have been combined retroactively in the accompanying consolidated financial
statements. All significant intercompany accounts and transactions have been
eliminated in consolidation.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) CASH AND --For purposes of the statement of cash flows, the Company
considers all highly liquid assets purchased with an initial maturity of three
months or less to be cash equivalents.
(b) INVENTORIES--Inventories, consisting of education materials held for
resale, are stated at the lower of cost or market with cost determined on a
first-in, first-out basis.
(c) PROPERTY AND EQUIPMENT--Property and equipment are recorded at cost
less accumulated depreciation and amortization. Depreciation is computed using
the straight-line method over the estimated useful lives of the individual
assets and leased equipment and software is amortized over the useful life of
the asset or the term of the lease, whichever is shorter. Estimated useful lives
of property and equipment are as follows:
Buildings 40 years
Furniture, fixtures and equipment 5-7 years
Vehicles 5 years
Software 3 years
Maintenance and repairs are expended as incurred. Major renewals and betterments
are capitalized. Upon sale or retirement, the cost and related accumulated
depreciation are removed from the accounts and the resulting gain or loss is
included in operations.
(d) ORGANIZATION COSTS--Organization costs are amortized using the
straight-line method over a five year period.
(e) REVENUE RECOGNITION--Revenues include products sold which entitle the
purchaser to attend training seminars within one year after delivery of the
product. Training seminar tuition is deferred and recognized only upon
attendance or lapse of the one year time period. Other revenues are recognized
as earned.
(f) ADVERTISING--The Company expenses the production costs of advertising
the first
16
<PAGE>
time the advertising takes place, except for direct-response advertising, which
is capitalized and amortized over its expected period of future benefit. Direct
response advertising consists primarily of direct mail with order response
information. The capitalized costs of the advertising are amortized over the one
month period following the mail-out campaign. The costs of other advertising,
promotion and marketing programs are charged to operations in the year incurred.
At December 31, 1996 and 1995, advertising costs capitalized and reported as
assets were $19,023 and $19,583, respectively. For the years ended December 31,
1996 and 1995, advertising expense was $667,533 and $255,919, respectively.
(g) INCOME TAXES--Deferred income tax liabilities and assets are
determined based on the difference between the financial statement and tax basis
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
(h) USE OF ESTIMATES--The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities (such as the allowance for uncollectible notes receivable-trade and
certain other accounts) 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.
(i) Earnings Per Share - Earnings per share amounts are based on the
weighted average number of shares outstanding. The assumed conversion of the
stock options and convertible debt do not result in material dilution for the
years ended December 31, 1996 and 1995.
(j) Interim Financial Statements (Unaudited) - The accompanying financial
statements for the interim periods ended March 31, 1997 and 1998 and related
disclosures are unaudited. These unaudited condensed interim financial
statements do not include all of the disclosures provided in the annual
consolidated financial statements and have been prepared in accordance with
Article 10 of Regulation S-X. The Interim financial statements should be read in
conjunction with the accompanying annual audited financial statements and
footnotes thereto. In the opinion of the Company, all adjustments necessary to
fairly present the financial position, results of operations, and cash flows
have been reflected in the financial statements for the periods ended March 31,
1997 and 1998. Results for the interim period March 31, 1998 are not necessarily
indicative of the results to be expected for the year ending December 31, 1998.
(k) New Accounting Standards - The following Statements of Financial
Accounting Standards (SFAS) have been issued which have not yet been adopted by
the company:
SFAS No. 125. - "Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of liabilities," requires and entity to recognize the
financial and servicing assets it controls and the liabilities it has incurred
and to derecognize financial assets when control has been surrendered. The
statement is effective for transfers and extinguishments occurring after
December 31, 1996. Based on current activities, the Company believes the
adoption of SFAS No. 125 will not have a material impact on the Company's
results of operations of financial position.
SFAS No. 128 - "Earnings Per Share," specifies new computation,
presentation and disclosure requirements. The statement will be effective for
both interim and annual periods ending after December 31, 1997. Management
believes that the adoption of this statement will not have a material impact on
the earnings per share presented.
SFAS No. 130 - "Reporting Comprehensive Income" requires components of
comprehensive income in a financial statement that is displayed with the same
prominence as other financial statements. The statement will be effective for
financial statements for periods beginning after December 15, 1997. Management
believes that the adoption of this statement will not have a material impact on
the Company's results of operations of financial position.
SFAS No. 131 - "Disclosures about Segments of an Enterprise and Related
Information" requires reporting of financial and descriptive information about
reportable operating segments. The statement will be effective for financial
statements for periods beginning after
17
<PAGE>
December 15, 1997. Management believes that the adoption of this statement
will not have a material impact on the Company's results of operations or
financial position.
(l) Stock-Based Compensation - The Company has elected to follow Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB
25) and related interpretations in accounting for its employee stock options.
Under APB 25, because the exercise price of the employee stock options exceed
the market price of the underlying stock on the date of grant, no compensation
expense is recorded. The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation.
(3) NOTES RECEIVABLE - TRADE:
Notes receivable are principally due from customers for financed sales of
products and attendance at training seminars and are due on various dates
through December 1999. The Company has imputed interest at 10% on non-interest
bearing long-term notes receivable received in 1995. The discount is amortized
and recognized as interest income over the term of the notes. Notes issued for
1996 sales bear interest at 10% to 15%.
(3) NOTES RECEIVABLE - TRADE: (Continued)
The following is a summary of notes receivable-trade as of December 31, 1996 and
1997:
1996 1997
----------- -----------
Notes receivable-trade ....................... $ 942,867 $ 1,990,370
Less discount ................................ -- --
Less allowance for uncollectibles ............ (529,807) (1,366,145)
----------- -----------
Notes receivable-trade, net .................. 413,050 624,225
Less: current portion of notes receivable .... 247,836 445,406
----------- -----------
Notes receivable - long term portion ......... $ 165,224 $ 178,819
=========== ===========
Additionally, Accounts Receivable is summarized as part of the Notes
Receivable-Trade net current totals for $20,418 in 1997.
Future principal payments scheduled for collection as of December 31, 1996, are
as follows:
YEAR
ENDING AMOUNT
1997 $ 565,720
1998 235,717
1999 141,430
----------
$ 942,867
==========
During the year ended December 31, 1996, the Company entered into an agreement
with a financial institution for a one year term with options to renew whereby
the Company can sell on an ongoing basis, notes receivable at discounts ranging
from 5% to 32% of the total unpaid principal balance. The note receivable
discount is calculated in accordance with a predetermined schedule. Under the
terms of the agreement, a reserve fund, equal to 15% of the unpaid principal
balance of all notes receivable purchased plus the percentage of any delinquent
notes receivable outstanding in the portfolio, is established to offset any
uncollectible notes receivable. The reserve fund is classified as restricted
cash in the accompanying balance sheets. During 1996, the Company sold certain
notes receivable with a face value of $311,981 under this agreement for cash in
the amount of $199,337. The
18
<PAGE>
transaction resulted in a loss in the amount of $112,644.
(4) PROPERTY AND EQUIPMENT:
The following is a summary of property and equipment at December 31, 1996 and
1997:
1996 1997
----------- -----------
Land ....................................... $ 196,741 $ 196,741
Buildings and improvements ................. 723,656 723,656
Furniture, fixtures and equipment .......... 231,347 339,765
Vehicles ................................... -- --
Computer Software .......................... 77,895 89,769
----------- -----------
1,229,639 1,349,931
Less: accumulated depreciation ............. (153,179) (247,143)
----------- -----------
Property and equipment, net ........... $ 1,076,460 $ 1,102,788
=========== ===========
See Note (6) relative to rental properties included above.
The Company leases certain equipment and software under capital leases. The cost
and related accumulated amortization on these assets at December 31, 1996 and
1997, are $133,329 and $41,452, and $144,750 and $99,073, respectively. Certain
capital leases are personally guaranteed by a Shareholder.
(5) LONG-TERM DEBT:
The following is a summary of long-term debt at December 31, 1996 and 1995.
1996 1997
Mortgage note payable in monthly
installments of $3,438 of principal plus
interest at prime plus 1.5% (9.75% and 10%
at December 31, 1996 and 1995, respectively)
through December 2003, collateralized by
property and equipment, guaranteed by a
shareholder.........................................$ 288,750 $ 247,489
Mortgage note payable in monthly
installments of $3,458, including interest
at prime plus 1.5% (9.75% and 10% at
December 31, 1996 and 1995, respectively,)
through July 2004, collateralized by
property and equipment, guaranteed by a
shareholder........................................ 228,850 218,284
Mortgage note payable in monthly
installments of $1,553, including interest
at 14%, through July 2004, collateralized by
property and equipment, guaranteed by a
shareholder........................................ 86,770 79,853
Note payable, principal and accrued interest
at 6% due December 1998, uncollateralized.......... 79,000 79,000
Note payable to shareholder in monthly installments
of $250, including interest at 18% through October
1996, collateralized by equipment.................. -- --
Convertible notes payable, bearing interest at 15%,
payable and due in varying amounts, and dates,
uncollateralized................................... 336,261 167,199
Notes payable, bearing interest at 18%
payable in varying amounts from August, 1997
through October, 1999, certain notes
receivable-trade pledged as collateral............. 251,943 173,213
Obligations under capital leases with
interest ranging from 10.74% to 24.58%
payable in monthly installments ranging from
$329 to $908 through May 2000, collateralized
by software and equipment.......................... 98,974 66,961
----------------------------
Total.............................................. 1,370,548 1,831,999
Less: current portion 1,073,717 837,473
----------------------------
Long-term debt, less current portion $ 296,831 $ 194,526
============================
19
<PAGE>
Maturities of long-term debt for each of the next five years as of December 31,
1997 are as follows:
YEAR
ENDING AMOUNT
------ -----------
1997 $ 1,073,717
1998 222,267
1999 68,481
2000 6,083
2001 --
As discussed in Note 7, a shareholder assigned his interests in land trusts to
the Company. The land trusts hold properties and are obligated on the related
mortgages amounting to $604,370 and $672,207 at December 31, 1996 and 1995,
respectively. The transfer of the interest by the shareholder to the Company
without written consent of the mortgagee violated the mortgage and security
agreement. Also, the property taxes due on the properties have not been paid in
accordance with the mortgage and security agreement. Under the terms of the
agreement, the mortgagee may call the loan for violations of the agreements.
Therefore, the entire amount of the loan balances have been classified as
current in the accompanying balance sheets.
(5) LONG-TERM DEBT: (Continued)
CONVERTIBLE NOTES--During 1996 and 1995, the Company issued $445,000 and
$150,000, respectively, of 15.0% convertible notes, which are payable 270 days
from their date of issuance unless extended. They are due in varying amounts
from February 1996 through May 1998. These notes are convertible into the
Company's common stock at a conversion rate of one share of company common stock
for each $1 principal amount of the notes. Conversion of the notes is subject to
the legal registration of the shares or exemption from such registration.
NOTES PAYABLE--Certain notes receivable-trade have been pledged as collateral on
notes payable. The agreement with the financial institution as discussed in Note
3 has a secured interest in some of the same notes receivable-trade which have
been pledged as collateral on notes payable.
CAPITAL LEASE OBLIGATIONS--Minimum future lease payments under capital leases
(included in long-term debt) as of December 31, 1996 for each of the next five
years and in the aggregate are as follows:
YEAR
ENDING AMOUNT
------ -------
1997 $46,681
1998 43,717
1999 29,375
2000 5,851
2001 --
Thereafter --
-------
Total minimum lease payments 125,624
-------
Less: amount representing interest 26,650
-------
20
<PAGE>
------------
Present value of net minimum lease payments 98,974
============
(6) LEASES:
A portion of the Company's's buildings are leased to tenants under operating
leases through 1998 with several leases having options to renew for two to three
years. The approximate costs and accumulated depreciation of property and
equipment held for lease are $365,078 and $16,403 at December 31, 1996. A
schedule of minimum future lease receipts under operating leases based on the
rentals in effect at December 31, 1997, without regard to the exercise of
renewal options, follows:
1996 1997
----------- ---------
$ 71,760 $ --
57,510 57,510
-- 35,994
----------- ---------
129,270 129,270
=========== =========
(7) RELATED PARTIES:
During 1995, the Company recognized bad debt expense of $19,729 on a receivable
due from an affiliated company, wholly owned by the Company's majority
shareholder.
Royalties or commissions were paid to four of the Company's shareholders during
the years ended December 31, 1996 and 1997. These shareholders and their related
companies have verbal contractual arrangements with the Company whereby they
receive a percentage of the gross sales price of their companies' products sold
at Company events. Royalty expenses recognized by the Company relating to these
shareholders for the years ended December 31, 1996 and 1997 were approximately
$1,065,000 and $217,198, respectively. The product revenues recognized by the
Company relating to these shareholders for the years ended December 31, 1996 and
1997 were approximately $4,720,000 and $723,995, respectively. Approximately
$420,000 and $218,045 were due to these shareholders at December 31, 1996 and
1997, respectively
A Shareholder who is also on the Company's Board of Directors originally
acquired the Company's land and buildings in his personal name as agent for the
Company. He assigned his interests in these properties to land trusts and
assigned his interests in the land trusts to the Company. He is the trustee for
the land trusts. Accordingly, at December 31, 1996, and 1997, these properties
with net book values of $868,514 and $863,130, respectively are included as
property and equipment in the accompanying financial statements. The mortgages
related to these properties are still in the name of the director. The Company
has been paying the mortgages since acquisition and intends to keep paying the
mortgages. Accordingly, at December 31, 1996 and 1997, these mortgages with
outstanding principal balances of $604,370 and $545,626, respectively, are
included as debt in the accompanying financial statements. Reference note 13
subsequent events:
refinancing of properties and buildings.
(8) FINANCIAL INSTRUMENTS, CONCENTRATION OF CREDIT RISK AND ECONOMIC DEPENDENCY:
The Company's financial instruments include cash, notes receivable-trade, and
long-term debt. Financial instruments that are exposed to concentration of
credit risk consist primarily of cash and notes receivable-trade. Cash, at tithe
amounts insured by the FDIC. The Company places its temporary cash investments
in what management believes to be high quality financial institutions. At
December 31, 1996, the cash bank balances of $44,407, were fully insured by the
FDIC. At December 31, 1997, the cash bank balances of $113,605, were fully
insured by the FDIC. Notes receivable-trade primarily represent uncollateralized
receivables arising from financing arrangements granted to training seminar
participants. Although the Company does not perform formal credit evaluations on
these debtors, no single debtor represents a significant concentration of credit
risk.
All of the Company's financial instruments are recorded at cost which is deemed
to approximate fair value. Fair value of notes receivable was determined by
applying the current interest rate at which similar notes would be made to
borrowers with similar
21
<PAGE>
credit ratings. The determination of the fair value of long-term debt is based
on current rates at which the Company could borrow funds with similar remaining
maturities.
The Company derives a majority of its revenue through the sponsoring, promoting
and selling of products, seminars and services which are developed by two
related parties.
(9) ShareholderS' EQUITY:
LONG-TERM INCENTIVE PLAN--During 1995, the Company adopted a Long-Term Incentive
Plan ("the Plan") which permits the issuance of stock options and restricted
stock to employees of the Company and its subsidiaries. Directors and
independent contractors of the Company and its subsidiaries are eligible to
receive grants of restricted stock. The Plan reserves 7,500,000 shares of common
stock for grants and provides that the term of each award be determined by the
Board of Directors charged with administering the Plan.
As prescribed by the Plan, restricted stock awards are dependent upon the
completion of a specified employment term and, in particular situations, the
achievement of certain performance objectives. If a change in control of the
Company occurs, then all restrictions on grants of restricted stock shall lapse
as of the date such change in control occurs. The restricted shares are issued
in the name of the participant and are either held by the Company or are
deposited with a trust administered by the Board. Until the restrictions lapse,
the participant is not entitled to vote or to receive dividends and the shares
are restricted as to transferability and sale. If the conditions or terms under
which an award is granted are not satisfied, the shares are forfeited. During
1995, the Company awarded 2,680,000 shares of restricted common stock to
employees and directors under the Plan, of which 25,000 shares were forfeited
upon the termination of a certain employee. During 1996, 100,000 shares were
forfeited due to employment terms or performance objectives not met. As of
December 31, 1996 and 1995, 1,670,000 and 2,655,000 shares of restricted stock
were outstanding, respectively. Unearned compensation is recorded at $.001 per
share which represents fair value as determined by an independent appraiser. The
unearned compensation related to these shares is recorded as a separate
component of shareholders' equity and is amortized over the life of the grant
which is generally two years.
The Company's Stock Option Plan provides for the granting of incentive stock
options and executive stock options to Plan participants at a price not less
than the fair market value on the date the option is granted. Incentive stock
options are to be treated as executive stock options if the fair market value of
common stock with respect to such incentive stock options, exercisable for the
first time by a plan participant during any calendar year, exceeds $100,000.
Options become exercisable, in whole or in part, after completion of such
periods of service as determined by the Board of Directors. Options expire ten
years after the date of grant unless an earlier expiration date is set at the
time of grant. In the absence of the Board specifying the date such options
become exercisable in the participant's stock option agreement, the options
become exercisable in accordance with a predetermined schedule as prescribed in
the Plan. If a change in control of the Company occurs, then all incentive stock
options and executive stock options shall become fully exercisable. Shareholders
whose ownership percentage exceeds 10 percent of the voting common stock are
subject to an incentive stock option price of at least 110 percent of the fair
market value of the stock at the time of the grant and such incentive stock
options are not exercisable after the expiration of five years from the date
such incentive stock option is granted. No incentive stock options or executive
stock options were outstanding as of December 31, 1995.
During 1996, the Company granted 325,000 executive stock options and 400,000
incentive stock options to its employees. The executive stock options vest upon
the completion of a two-year employment period commencing on the effective
option agreement date. The effective option agreement dates ranged from January
30, 1996 to July 15, 1996. All executive stock options may be exercised at a
price of $0.18 per common share and expire ten years after the effective option
agreement date. The incentive stock options vest upon the completion of certain
performance objectives. All incentive stock options may be exercised at a price
of $0.18 per common share and expire ten years after the effective option
agreement date. No options were exercised during the years ended December 31,
1995 and 1996.
Pro Forma information as required by SFAS No. 123 for valuing stock options
under the fair
22
<PAGE>
value method is not disclosed as there was no significant value to the options
at the date of grant. Management believes application of SFAS No. 123 to future
option grants will not have a significant impact on Pro Forma Earnings or
financial position.
(10) INCOME TAXES:
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109").
The components of the deferred income tax assets and deferred income tax
liabilities recorded on the balance sheet at December 31, 1996 are as follows:
Deferred Tax assets: AMOUNT
---------
Net operating losses ..................................... $ 385,000
Reserve for uncollectible accounts payable ............... 135,000
Related party accruals ................................... 110,000
---------
630,000
---------
Deferred tax liability:
Excess of tax over book depreciation and other ........... (25,000)
---------
605,000
Valuation allowance ........................................... (605,000)
---------
$ --
=========
A valuation allowance was established for the deferred income tax asset because
it is more likely than not that the deferred tax asset will not be realized.
The Company has approximately $2,000,000 in net operating loss carryovers, which
primarily expire in years 2010 and 2011. Utilization of net operating loss
carryovers is subject to separate return limitation year ("SRLY") restrictions
for consolidated tax returns, and realization is dependent upon Results
Publishing, Inc. and Telstar, Inc. generating sufficient separate taxable income
to utilize the net operating losses.
(11) ACCOUNTING CHANGE:
The accompanying consolidated financial statements for the year ended December
31, 1995, have been retroactively restated for the effects of a change in the
method of recognizing revenues on certain product sales. The Company sells
products which entitle the purchaser to attend training seminars within one year
of product delivery. The Company believes it is more appropriate to defer
recognition of the revenue associated with the training seminar until the
customer attends a training seminar or lapse of the time period.
The effect of the change was to increase net loss for the year ended December
31, 1995 by $313,797. The change had no effect on prior years because the
company began selling products which entitled the purchaser to attend training
seminars within one year of product delivery in 1995.
(12) MANAGEMENT PLANS:
As shown in the accompanying financial statements, the Company incurred a net
income of $700 thousand during the year ended December 31, 1997. As of that
date, the Company's current liabilities exceeded its current assets by
approximately $2.3 million, (as described in Note 6), Management of the Company
has developed plans to restructure existing liabilities, reduce or delay
expenditures, reduce personnel and undertake a direct public offering of the
Company's stock (see "Subsequent Events").
(13) SUBSEQUENT EVENTS:
On December 15, 1997 the Company filed and on February 18, 1998 the Securities
Exchange Commission accepted the filing, establishing an "Effective
Registration" for an Initial Public Offering ("IPO"). The IPO was set for a
minimum of 100,000 shares valued at $550,000 and a maximum of 500,000 shares
valued at $2,750,000. On May 18th the minimum offering funds were released. The
offering may continue until the maximum shares are sold
23
<PAGE>
or 1 year from the effective filing date or the company determines to close the
offering.
Regarding Note 6 and Note 11, on May 29, 1998 the Company refinanced the
buildings into the Company's ownership, thus securing the properties and
buildings certainty and moving significant debt from current liability to
long-term liability and strengthening the Company's financial condition.
On May 25th SDI Direct Corporation began operation in developing and testing
infomercial products.
SDI Direct Corporation was incorporated in Florida in 1998 as a wholly
owned subsidiary of the Company. SDI Direct was formed to create and market
products and services primarily through television infomercials. SDI Direct
developed and began testing its first infomercial during the third quarter of
1998.
On July 5 SDI Internet Service Inc. began operations with on-line computer
services and products.
SDI Internet Services Inc. was incorporated in Florida in 1998 as a wholly
owned subsidiary of the Company. SDI Internet services was formed to create an
Internet presence for the Company through the web site at www.success-di.com.
The web site provides information to interested parties about the Company's
products and services. SDI Internet Services also provides web site creation and
hosting for other companies.
24
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
The following persons are the current executive officers and directors of
the Company:
NAME AGE POSITION
Daniel S. Pena, Sr. 52 Director & Chairman(1)
Shawn M. Casey 38 Chief Executive Officer, President, Secretary,
Director & Vice-Chairman(1)
Raymond Rach 63 Director & Vice President(2)
Vicki L. Sessions 30 Vice President of Administration
Patricia D. Casey 46 Vice President of Materials Management
Ralph E. Vroman, Jr. 38 Chief Financial Officer
Jarrell D. Ormand 78 Director(3)
Hugh L. Carey 76 Director(3)
- -----------------------------
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
Directors of the Company serve staggered three year terms, so that two
directors are elected each year. Following is a brief description of the
background of the officers and directors of SDI based on information provided by
them to SDI.
Daniel S. Pena, Sr., joined The LeGrand Group, Inc. in early 1995 as a
director and Chairman of the Board. He became a director of SDI in April, 1995,
and Chairman of the Board of SDI in November, 1995. Since 1992, Mr. Pena has
been the controlling shareholder and chairman of Great Western Development
Corporation, a publishing company. Mr. Pena founded Great Western Resources a
publicly held natural resources company, in 1982 and served as its Chief
Executive Officer and Chairman until 1992. From 1979 to 1982, Mr. Pena was
chairman and CEO of JPK Industries, a natural resources company. From 1977 until
1979, Mr. Pena held the position of Vice President at the investment banking
firm of Bear Stearns and Co. in Los Angeles, California, and from 1975 until
1977, that of Director of Financial Planning at Paine Webber Jackson & Curtis in
Los Angeles, California. He was until recently a member of the board of
trustees, California State University, Northridge, where he graduated in 1971
with a B.S. in Business Administration.
Shawn M. Casey, Esq., joined The LeGrand Group, Inc. as General Counsel and
Conference Director in January, 1995. Since November, 1995, he has served as
President and Chief Executive Officer and Secretary of SDI. He became a director
of SDI in April, 1995. In August, 1997, he was elected Vice-Chairman of the
Board of Directors. From 1989 until 1994, Mr. Casey conducted a solo law
practice in Pittsburgh, PA. focused primarily on real estate and business
matters. At the same time, he was shareholder and President, was a shareholder
and President of Emerald Settlement Services, Inc., a title insurance agency in
Pittsburgh, Pennsylvania. He founded Dream Development Corporation in 1993 to
sponsor and promote seminars, workshops and information products. He graduated
from the University of Scranton in Pennsylvania with a B.A. in Communications in
1981, and received his Juris Doctor degree from Duquesne University in 1985.
Raymond Rach joined The LeGrand Group, Inc., as President in January, 1993.
Mr. Rach served as President of SDI from April, 1995 until November, 1995, when
he became President of Telstar Consulting, Inc., the Company's telemarketing
subsidiary, and a Vice President of SDI. He has served as a director of SDI
since April, 1995. Prior to joining The LeGrand Group, Inc., Mr. Rach spent five
years, from 1987 to 1992, as Executive Vice President with Budd Mayer
Corporation, one of the nation's largest regional food brokerage firms.
Jarrell D. Ormand joined SDI in July, 1996 as a Director. From 1963 to
1990, Mr. Ormand was the Chairman and Chief Executive of Ormand Industries,
Inc., a publicly-traded American Stock Exchange company whose interests included
advertising, container manufacturing, apparel, auto leasing, and electronics.
From 1955 to 1958, Mr. Ormand was on the Board of Directors of the American
Petroleum Institute of the Permian Basin (West Texas and New Mexico). Mr. Ormand
is currently a director of Centinela Hospital, a nonprofit hospital based
25
<PAGE>
in California. Since 1990, Mr. Ormand has been retired.
Governor Hugh L. Carey joined SDI in August, 1996 as a Director. From
November 1974 to November 1982, Mr. Carey served as governor of the State of New
York. From 1982 to December 31, 1995, Mr. Carey was an Executive of W.R. Grace &
Co., a holding company. From January 1, 1996 to the present, Mr. Carey is Of
Counsel to the law firms of Whitman Breed Abbott & Morgan and Heinrich Gordon
Hargrove Weihe & James, P.A.
Vicki L. Sessions joined The LeGrand Group, Inc. as Vice President of
Administration in 1991 and currently serves in that position with SDI. Her
responsibilities include Management of Customer Service, Data Entry and Accounts
Receivable. From 1983 to 1991 she served as office manager for MIM Financial,
Inc.. She is the daughter of Ron LeGrand, founder of the LeGrand Group, Inc.,
and served a term as an officer and director of SDI.
Patricia D. Casey joined SDI in January, 1996 as the purchasing manager.
She was promoted to Vice President of Materials Management in February, 1997 and
is responsible for purchasing, shipping, receiving, inventory, course production
and building maintenance. From 1989 to 1994, Mrs. Casey was a shareholder and
Vice President of Emerald Settlement Services, Inc., a title insurance agency in
Pittsburgh, PA. She is the wife of Shawn M. Casey, an officer and director of
SDI.
Ralph E. Vroman, Jr. joined SDI in January, 1997 as Controller. In
September, 1997, he was promoted to Chief Financial Officer. Prior to joining
the Company, Mr. Vroman served as Controller for Dixie Sales Company, an
international wholesale distributor for Polaroid Corporation, in Jacksonville,
Florida, from 1994 to 1997. From 1986 to 1994, Mr. Vroman was a financial
consultant with FLC Associates, in Tampa, Florida. He consulted to General
Electric, General Motors, Publix, Schnucks and other large corporations. He is a
Chartered Financial Analyst with multiple degrees in Business Administration,
Finance, Economics, Computers and German from Saint Ambrose University in
Davenport, IA.
KEY EMPLOYEE
Ron LeGrand, 51, founded The LeGrand Group, Inc., in 1989. He was President
and a Director of The LeGrand Group, Inc., until January, 1995 and President,
Secretary, Treasurer and a Director of Results Publishing, Inc., until November
1995. He resigned as a Director of the Company in March, 1996. An active real
estate entrepreneur, Mr. LeGrand has bought and sold more than 1,100 single
family houses over the last 13 years. Based upon this personal experience, Mr.
LeGrand developed many of the courses and programs offered by SDI today. In
addition, Mr. LeGrand speaks nationally, teaching his real estate investing and
management methodology at SDI's programs.
26
<PAGE>
Item 11.
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
1 Agency Agreement between the Company and Attkisson, Carter & Akers
10.1 Executive Stock Option Agreement
10.2 Incentive Stock Option Agreement
10.3 Restricted Stock Agreement
10.4 Employment Agreement
10.5 Long Term Incentive Plan
23.1 Consent of James Moore & Co.
23.2 Consent of counsel
27 Financial Data Schedule
27
<PAGE>
Item 12.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of reporting on Form 10-QSB and authorized this report to be
signed on its behalf by the undersigned, in the City of Jacksonville State of
Florida, on November 4, 1998.
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
(ISSUER)
By
SHAWN M. CASEY, CHIEF EXECUTIVE OFFICER
By
RALPH E. VROMAN, JR, CHIEF FINANCIAL OFFICER
Success Development International, Inc. EXHIBIT 1
500,000 Shares of Common Stock
(Par Value .001 Per Share)
February 4, 1998
ATTKISSON, CARTER & AKERS
3060 Peachtree Road, NW
Suite 1475
Atlanta, Georgia 30305
Dear Sirs:
Success Development International, Inc., a Florida corporation (the "Company"),
hereby confirms its agreement with ATTKISSON CARTER & AKERS (the "Agent"), as
follows:
1. GENERAL. The Company proposes to offer, through the Agent on a "best
efforts basis", up to 500,000 shares (the "Maximum Offering") of the
common stock, $.001 par value, of the Company (the "Shares") at a price of
$5.50 per Share in an offering to the public (the "Offering").
The Company has filed a Registration Statement on Form SB-2A (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") pursuant to which the Company will register the Shares for sale to
the public.
On terms and conditions specified in this (the "Agreement"), the Agent,
for the compensation specified below, will provide the services specified
in this Agreement to assist the Company in the Offering.
2. THE OFFERING.
1 SERVICES TO BE RENDERED. Subject to the terms and conditions hereof
and upon the basis of the representations, warranties and agreements
herein set forth, the Company hereby appoints the Agent as its agent
to sell the Shares on a best efforts basis. The Agent hereby accepts
such appointment and agrees to use its best efforts to find
purchasers for the Shares. The Company and the Agent agree that the
Shares shall be offered to the investing public in Georgia, Florida,
and any other state or states where the Company deems it appropriate
to offer the Shares, all in compliance with the Securities Act of
1933 (the "Securities Act"), the Securities Exchange Act of 1934
(the "Exchange Act"), and the securities or "blue sky" laws of any
applicable jurisdiction.
2 EXCLUSIVE ENGAGEMENT. The Company shall not engage any other person
other than the Agent to solicit offers or sales of Shares during the
Offering Period (as such term is herein defined).
3 COMPENSATION. The Company agrees to pay to the Agent for the Agent's
services in connection with the Offering a commission on all Shares
sold in the Offering as follows: the sum of $.55 per Share together
with an option (an "Option") to purchase one Share for each ten
Shares sold in the Offering. Such Options shall have a term of five
years from the Effective Date, and shall have an exercise price of
$5.50 per Share.
4 PAYMENT OF EXPENSES. The Company will pay all expenses in connection
with the Offering including, but not limited to, the Company's
attorneys' fees, expenses for auditing and accounting services,
advertising fees, all securities registration and NASD filing fees,
postage, and document reproduction expenses, and the engraving,
issuance, transfer and delivery of certificates for the Stock. The
Company shall pay the Agent an expense retainer in the amount of
$5,000 upon execution of this Agreement. In the event that the Agent
incurs additional out-of-pocket expenses, the Company shall
immediately reimburse the Agent upon receipt of the Agent's invoice.
The aggregate out-of-pocket expenses to be reimbursed to the Agent
hereunder shall not exceed $15,000.
<PAGE>
5 BLUE SKY. The Company contemplates that the Offering will be made in
those states listed in Exhibit A attached hereto. The Company shall,
at its sole expense, take or cause to be taken all necessary action
and shall furnish to whomever the Agent may direct such information
as may be required to qualify the Shares for sale under the laws of
such jurisdictions and any other jurisdictions where the Company may
hereafter elect that Shares shall be offered and shall continue such
qualifications in effect for as long as may be necessary for the
distribution of the Shares. At the request of the Agent the Company
shall cause its counsel to prepare and furnish to the Agent "Blue
Sky" memoranda concerning the requirements for qualification of the
Shares for sale under the law of such jurisdictions, and the Agent
shall be entitled to rely on such memoranda in carrying out its
obligations under this Agreement.
6 OFFERING PERIOD. The Shares will be offered for sale during the
period (the "Offering Period") commencing with the date that the
Registration Statement is declared effective by the SEC (the
"Effective Date" of the Offering) until the earlier to occur of (a)
the date the Maximum Offering is achieved, or (b) 120 days from and
after the Effective Date, or (C) the termination of the Offering by
the Company. The Company may, upon written notice to the Agent,
elect to extend the Offering Period, and as used herein, the term
"Offering Period" shall include any such extension.
7 ESCROW AGREEMENT. During the period of the Offering, the proceeds
from the sale of Shares shall, upon receipt by the Agent, be
promptly placed in a special account with First Union National Bank
(the "Escrow Agent"), subject to an escrow agreement substantially
in the form of the Impound Agreement which is attached hereto as
Exhibit B and incorporated herein by this reference (the "Escrow
Agreement"). Each of the parties hereto agrees that this Agreement
shall be automatically terminated and the entire proceeds received
from subscriptions for the Shares shall be returned to the
subscribers for such Shares, without interest, upon the failure of
the Minimum Offering to be achieved on or before the date which is
90 days from and after the Effective Date, unless the Offering is
extended by the Company.
8 DELIVERY OF AND PAYMENT FOR THE SHARES. Provided that the Escrow
Agent is authorized and empowered in accordance with the terms of
the Escrow Agreement to release the proceeds of the Offering from
escrow as described in the Escrow Agreement, and provided further
that this Agreement shall not have been terminated pursuant to the
terms hereof, payment for the Shares shall be made at a closing (the
"Closing") to be held at the offices of the Agent's counsel (or such
other place as the parties hereto may agree), as provided herein.
The date of a Closing hereunder is sometimes referred to as the
"Closing Date". Payment for the Shares sold on behalf of the Company
by the Agent shall be made to the Company or to the order of the
Company by the Escrow Agent acting upon instructions from the
Company and the Agent pursuant to the terms and conditions of the
Escrow Agreement, and payment shall be delivered to the Company by
the Escrow Agent by one or more certified or official bank checks in
next-day funds. Such payment shall be made upon delivery by the
Company of the certificates for the Shares to the Agent, for the
respective accounts of the several purchasers of the Shares against
receipt therefor signed by the Agent. The certificates for the
Shares to be delivered at any Closing will be registered in such
name or names, and shall be in such denominations, as the Agent may
request; PROVIDED, HOWEVER, that such request shall be made no later
than three (3) business days prior to the Closing Date. The
certificates representing the Shares will be made available to the
Agent for inspection, checking and packaging at the office of the
Company's transfer agent and registrar (the "Transfer Agent"), not
less than one (1) business day prior to the Closing Date.
9 CLOSINGS.
(a) As soon as practicable after the Agent has determined that
100,000 Shares (the "Minimum Offering") have been subscribed
for, the Agent shall so notify the Company in writing. The
Agent's notice to the Company hereunder shall set forth the
number of shares of Common Stock to be delivered to the Agent
by the Company against payment therefor by the
<PAGE>
Escrow Agent. The initial Closing hereunder (the "Initial
Closing") shall take place at 10:00 a.m., Atlanta time on the
fifth (5th) business day after the date on which the Agent
notifies the Company as provided herein or on such other date
and time as agreed to in writing by the parties hereto;
PROVIDED, HOWEVER, that the Initial Closing must occur no
later than the tenth (10th) business day after such notice is
given by the Agent.
(b) By notice given in writing at each Closing hereunder, the
Company may elect to continue this Agreement until such time
as the maximum number of Shares as provided herein has been
sold, or until January 30, 1999, whichever is earlier;
PROVIDED, HOWEVER, that such Shares may be sold only in
compliance with the terms and conditions of this Agreement and
the Registration Statement.
(c) Closing with respect to Shares sold pursuant to a continuation
of this Agreement pursuant to Section 2.9(b) hereof will occur
on such date(s) and time(s) as the parties may agree in
writing from time to time.
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The Company
hereby represents and warrants to, and agrees with, the Agent that:
(a) The prospectus, including any amendments or supplements thereto (the
"Prospectus") when made available to prospective purchasers
throughout the Offering Period, will comply in all material respects
with federal statutes, regulations and policy statements applicable
thereto, including, without limitation, the applicable rules,
regulations and policy statements of the SEC. At all times during
the Offering Period, the Prospectus will contain all information
including financial statements that are required to be included
therein in accordance with applicable regulations (including
interpretations thereof), and policy statements of the SEC and the
Prospectus will not include any untrue statement of material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading; provided,
however, that no representations or warranties are made to the Agent
with respect to statements or omissions made in reliance upon, or in
conformity with, written information furnished to the Company with
respect to the Agent, by the Agent, or on its behalf expressly for
use in the Prospectus.
(b) The Company is, and at all times during the Offering Period will be,
a corporation duly incorporated and organized and is, and will be,
validly existing and in good standing under the laws of the State of
Florida. The Company has, and at all times during the Offering
Period will have, full power and authority to own or lease all of
its properties and conduct all of its business as described in the
Prospectus.
(c) The Company is, and at all times during the Offering Period will be,
duly qualified to do business and in good standing as a foreign
corporation in each jurisdiction where the ownership or leasing of
its properties or the conduct of its business required such
qualification.
(d) The financial statements contained in the Prospectus present fairly
and accurately the financial position of the Company as the
respective dates thereof and the results of operations of the
Company for the respective periods covered thereby, all in
conformity with generally accepted accounting principles applied on
a consistent basis throughout the entire periods involved.
(e) At all times during the Offering Period except as set forth in or
contemplated by the Prospectus: (I) the Company will not have
incurred and will not incur any material liabilities or obligations,
direct or contingent, except for liabilities or obligations entered
into in the ordinary course of business, and will not have entered
into and will not enter into any material transactions; and (ii)
there will have been no, and there will be no, material adverse
change, or any development relating to the Company which the Company
has cause to believe would involve a prospective material adverse
change in or affecting
<PAGE>
the business, business prospects, general affairs, management,
financial position, net worth, results of operations, or properties
of the Company, or the value of the assets of the Company.
(f) Except as set forth in or contemplated by the Prospectus, to the
best of its knowledge, the Company does not have and will not have
during the Offering Period any material contingent liabilities or
obligations.
(g) There are no actions, suits or proceedings pending or, to the best
of its knowledge, threatened against or affecting the Company or its
business, business prospects, financial condition, results of
operations or properties, or against or affecting any of its
principal officers, before or by any federal or state court,
commission, regulatory body, administrative agency or other
governmental body, domestic or foreign, wherein an unfavorable
ruling or decision or finding would materially and adversely affect
the business, business prospects, financial condition, results of
operations, or properties of the Company.
(h) At all times during the offering Period, the Company will have title
to all properties and assets described in the Prospectus as being
owned by the Company, free and clear of all liens, charges,
encumbrances or restrictions, except such as are described in the
Prospectus or which are not material to the business of the Company.
At all times during the Offering Period, the Company will have
valid, existing and enforceable leases to the properties and
equipment described in the Prospectus as being leased by the
Company, with such exceptions as are not material and do not
materially interfere with the uses made, and proposed to be made, of
such properties by the Company.
(i) The Company has filed all federal and state income tax returns which
are required to be filed by it and has paid all taxes shown on such
returns and on all assessments received by it to the extent such
taxes have become due. To the best of its knowledge, all taxes with
respect to which the Company is obligated have been paid or adequate
accruals have been established to cover any such unpaid taxes.
(j) The Company is not, and at all times during the Offering Period will
not be, in violation of its articles of incorporation or bylaws or
in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any bond, debenture,
note or other evidence of indebtedness or in any contract,
indenture, mortgage, loan agreement or other agreement or instrument
to which the Company is a party or by which it or any of its
properties is bound, and the Company is not, and at all times during
the Offering Period will not be, in violation of any law, order,
rule, regulation, writ, injunction or decree of any government,
governmental instrumentality or court, domestic or foreign, of which
it has knowledge. Neither the Company, nor any employee or agent
thereof, has made any payment of funds of the Company or received or
retained any funds in violation of any law, rule or regulation which
payment, receipt or retention of funds is not fully disclosed in the
Prospectus.
(k) At all times during the Offering Period, there will be no document
or contract of the character required to be described in the
Prospectus which is not described as required, and the descriptions
in the Prospectus are accurate and complete and fairly present the
information required to be shown.
(l) No statement, representation, warranty or covenant made by the
Company in this Agreement or made in any certificate or document
required by this Agreement to be delivered to the Agent was or will
be, when made, inaccurate, untrue or incorrect in any material
respect.
(m) The Company has full right, power and authority to enter into this
Agreement and this Agreement has been duly authorized, executed and
delivered by the Company and will be, upon acceptance by the Agent,
a valid and binding agreement of the Company enforceable in
accordance with its terms. The performance of this Agreement and the
consummation of the transactions contemplated herein will not result
in a breach or violation of any of the
<PAGE>
terms or provision of, or constitute a default under the articles of
incorporation or the bylaws of the Company, any obligation,
agreement, covenant or condition contained in any bond, debenture,
note or other evidence or indebtedness or in any contract,
indenture, mortgage, loan agreement or other agreement or instrument
to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or any of their
respective properties is bound, or any law, order, rule, regulation,
writ, injunction or decree of any government, governmental
instrumentality or court, domestic or foreign, and will not result
in the creation or imposition of any lien, charge claim or
encumbrance upon any property or asset of the Company. No consent,
approval, authorization or order of any government, governmental
instrumentality or court is required in connection with the
execution of this Agreement or the consummation of the transactions
contemplated by this Agreement except such as may be required by the
NASD or by state regulatory authorities under state securities or
blue sky laws in connection with the distribution of the Shares or
in connection with the Agent's services hereunder.
(n) For purposes of the Agent's obligation to file certain documents and
make certain representations to the NASD in connection with the
Offering: (I) except as described in the Registration Statement, the
Company has not placed any securities within the last eighteen
months; (ii) there have been no material dealings within the last
twelve months between the Company and any NASD member or any person
related to or associated with any such member; (iii) except as
contemplated by this Agreement, no financial or management
consulting contracts are outstanding with any other person; (iv)
there has been no intermediary between the Agent and the Company in
connection with the Offering and no person is being compensated in
any manner for providing such service.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE AGENT. The Agent
represents and warrants to, and agrees with the Company that:
(a) Any and all information furnished to the Company by the Agent in
writing expressly for use in the Prospectus will not contain any
untrue statement of material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The Agent is registered with the Securities and Exchange Commission
as a broker-dealer and is a member in good standing with the
National Association of Securities Dealers, Inc. (the "NASD"), and
the Agent and all its agents and representatives have or will have
required licenses and registrations to perform its obligations under
this Agreement; and such registrations, membership and licenses will
remain in effect during the term of this Agreement. The Agent agrees
that, in performing its obligations under this Agreement, the Agent
will comply with all applicable statutes and the rules and
regulations of the NASD and any other federal or state governmental
agency which are applicable to it. This Agreement has been duly and
validly authorized, executed and delivered by the agent and is its
valid and binding agreement and obligation.
(c) All checks and funds received by the Agent with respect to the
subscription price from prospective purchasers in the Offering shall
be made payable to the escrow agent and transmitted directly to the
escrow agent by noon of the next business day after receipt by the
Agent. If the Offering is terminated prior to the end of the
Offering Period by the Company, then subscription funds received
after any such termination shall be promptly returned to the
subscribers for the Shares, with interest.
(d) The Agent will deliver to the Company the original copies of all
subscription documents of prospective purchasers received by the
Agent in the Offering, and the Agent will promptly inform the
Company of any facts which come to the Agent's attention which would
cause a reasonable person to believe that such subscription
documents contain any material misstatement or omission.
5. COVENANTS OF THE COMPANY. The Company further agrees with and covenants
to the Agent as follows:
<PAGE>
(a) To comply with the "Blue Sky" and other securities laws and
regulations of each state in which subscriptions are solicited in
the Offering pursuant to the mutual agreement of the Agent and the
Company and to assist the Agent in any necessary registration or
filings that may be required of the Agent with respect to the
Offering, in the states mutually agreed upon by the Agent and the
Company. The Company will advise the Agent promptly of the issuance
by any state regulatory authority of any stop order or other order
suspending the registrations or exemptions therefrom of the
Prospectus or of the institution of any proceedings for that
purpose, will use its best efforts to prevent the issuance of any
stop order or other such order, and should a stop order or other
such order be issued, to obtain as soon as possible the lifting
thereof.
(b) To furnish the Agent with such numbers of printed copies of the
Prospectus, with all amendments, supplements and exhibits thereto,
together with subscription materials, as the Agent may reasonable
request, and similarly, to furnish the Agent and others designated
by the Agent with as many copies of additional sales literature or
other materials approved by the Company for use in connection with
the Offering as the Agent may reasonably request.
(c) Promptly to furnish such information and execute and file such
documents as may be necessary for the Company to offer and sell the
Shares in full compliance with applicable state and federal
statutes, regulations and policy statements.
(d) To advise the Agent promptly if any event known to the Company shall
have occurred as a result of which the Prospectus in its then
current form (including any amendments or supplements thereto) would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading.
(e) To utilize or furnish no sales literature in connection with the
Offering, other than the Prospectus, unless such other sales
literature has been approved by the SEC and the NASD, if necessary,
and furnished to the Agent at least ten (10) days prior to its first
use and the Agent has failed to object to the contents of, or the
proposed use of, such other sales literature.
6. CONDITIONS OF THE AGENT'S OBLIGATIONS. The Agent's obligation to effect
the transactions contemplated by this Agreement shall be subject to the
continuing accuracy throughout the Offering Period of the representations,
warranties and agreements of the Company, the performance by the Company
of all of its obligations under this Agreement, and the following further
terms and conditions:
(a) The Agent shall have received on any Closing Date hereunder the
opinion of Drew Field, counsel for the Company, dated as of such
Closing Date. Such opinion may be given subject to the January 1,
1992 edition of the Interpretive Standards applicable to Legal
Opinions to Third Parties in Corporate Transactions adopted by the
Legal Opinion Committee of the Corporate and Banking Law Section of
the State Bar of Georgia (the "Interpretive Standards"), and shall
be substantially to the effect that:
(i) the Company is a corporation duly organized, validly existing
and in good standing, under the laws of the State of Florida.
(ii) the Shares to be sold by the Company have been duly authorized
and will be, upon issuance and delivery against payment
therefor in accordance with the terms of this Agreement,
validly issued, fully paid and non-assessable and will not be
subject to any preemptive or other rights to subscribe for or
purchase Shares pursuant to the organizational documents of
the Company or, to the best of such counsel's knowledge,
otherwise.
(iii) the Company's authorized shares consist of 25,000,000 shares
of common stock, $.001 par value, of which 10,798,699 shares
are outstanding. The outstanding shares of the Company's stock
have been duly authorized and validly issued, were not issued
in violation of any statutory preemptive
<PAGE>
rights of shareholders, and are fully paid and nonassessable.
Except as described in the Registration Statement, there are
no options, subscriptions, warrants, calls, rights or
commitments obligating the Company to issue equity securities
or acquire its equity securities.
(iv) the amounts, terms and designations of the capital stock of
the Company conform as to legal matters in all material
respects to the description thereof contained in the
Registration Statement under the caption "Description of
Capital Stock".
(v) this Agreement has been duly authorized, executed and
delivered by the Company and, when so executed and delivered,
constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company.
(vi) the execution and delivery by Company of this Agreement do
not, and if Company were now to perform its obligation under
this Agreement such performance would not, result in any: (1)
violation of Company's articles or incorporation or bylaws;
(2) violation of any existing federal or state constitution,
statute, regulation, rule, order, or law to which Company or
its assets are subject; (3) breach of or default under any
Material Agreements; (4) creation or imposition of a
contractual lien or security interest in, on or against its
assets under any Material Agreements; or (5) violation of any
judicial or administrative decree, writ, judgment or order to
which, to our knowledge, Company or its assets are subject.
(vii) to the knowledge of such counsel, the Company has all
necessary consents, authorizations, approvals, orders,
certificates and permits of and from, and has made all
declarations and filings with, all federal, state, local and
other governmental authorities, all self-regulatory
organizations, all courts and other tribunals, to own, lease,
license and use its properties and assets and to conduct its
business in the manner described in the Registration
Statement, except to the extent that the failure to obtain or
file would not have a material adverse effect on the Company.
(viii) to the knowledge of such counsel, no authorization, consent,
approval of or qualification with any federal or state
governmental authority is required for the execution, delivery
or performance by the Company of this Agreement, except such
as have been previously made or obtained, in connection with
the distribution of the Shares by the Agent, and except those
which, if not made or obtained, will not, individually or in
the aggregate, have a material adverse effect on the Company.
(ix) nothing has come to the attention of such counsel to cause
such counsel to believe that (except for financial statements,
projections, schedules and other financial and statistical
information included or incorporated by reference in the
Registration Statement as to which such counsel need not
express any opinion) the Registration Statement contained any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading, or that the
Registration Statement as of the Closing Date, contained any
untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading.
(x) to such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened to which the
Company is a party or to which any of the properties of the
Company is subject that are not fairly summarized in all
material respects in the Registration Statement.
(xi) to such counsel's knowledge, after due inquiry, all contracts,
indentures, mortgages, loan agreements, leases or other
documents to which the Company is a party or to which its
business or properties are subject are fairly summarized in
all material respects in the Registration Statement; and
<PAGE>
(xii) after due inquiry, such counsel does not know of any pending
or threatened proceeding relating to the revocation or
modification of any consent, authorization, approval, order,
certificate or permit necessary to the conduct of the business
of the Company.
As to questions of fact material to such opinion, counsel may rely
on (without independent verification of the accuracy or completeness
thereof), the representations and warranties of the Company
contained in this Agreement as well as the Material Agreements. The
term "Material Agreement", for purposes of such opinion, shall mean
each of the agreements which has been filed with the Securities and
Exchange Commission as an exhibit (including any document which in
lieu of being filed as an exhibit, is incorporate by reference or
which the Company agrees or has agreed to provide to the Securities
and Exchange Commission upon request) to the Company's most
recently-filed Annual Report on Form 10-KSB or any subsequently
filed report on Form 10-QSB of Form 8-K, pursuant to the
requirements of Item 601(b)(10) of SEC Regulation S-B, 17 CFR
228.601(b)(10), as amended.
(b) On the Closing Date of any Closing hereunder, the Agent shall have
received from the President of the Company a letter dated as of such
Closing Date, in form and substance satisfactory to the Agent in all
respects, concerning the accuracy, to his best knowledge and belief,
of the financial information included in the Prospectus.
(c) At the Closing Date of any Closing hereunder, there shall be
furnished to the Agent a certificate, dated as of such Closing Date,
signed by the President and Secretary of the Company (collectively
the "Officers") in form and substance satisfactory to the Agent (the
"Certificate") to the effect that, to their best knowledge and
belief:
(i) The Officers of the Company have carefully examined the
Prospectus, and as of the date of such Certificate, the
statements in the Prospectus are true and correct, and the
Prospectus does not misstate or omit to state a material fact
required to be stated therein or necessary to make the
statements therein not untrue or misleading.
(ii) The Company has complied with all conditions precedent to the
performance of the Agent's obligations under this Agreement.
(iii) Each of the representations and warranties of the Company
contained in this Agreement was when originally made and is as
of the date of such Certificate true and correct.
(iv) No order from any regulatory body has been issued and no
proceedings have been instituted, or to the knowledge of such
Officers contemplated, to prevent the consummation of the
Offering.
7. INDEMNIFICATION.
(a) The Company will indemnify and hold harmless the Agent, its
officers, directors, counsel, representatives and persons who
control the Agent within the meaning of the Exchange Act, from and
against all losses, claims, damages and liabilities, joint and
several, to which any of the aforesaid parties, including the Agent
(collectively, the "Agent Parties"), may become subject, under
federal or state securities laws or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon: (I) any untrue statement or
alleged untrue statement of a material fact contained in the
Prospectus, or in any Blue Sky application or other document
executed by the Company or on its behalf for the purpose of
qualifying any or all of the Stock for sale under the securities
laws of any jurisdiction, or based upon written information
furnished by the Company under the securities laws thereof (any such
application, document, or information being hereinafter referred to
as a "Blue Sky Application") or (ii) the omission to state in the
Prospectus, or in any Blue Sky Application, a material fact
<PAGE>
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading. The Company will further reimburse the Agent
Parties, and each and every one of them, for any legal or other
expenses reasonably incurred by any one or more of the Agent Parties
in connection with investigating and defending such loss, claim,
damage, liability or action; provided, however, that the Company
will not be liable in any case to the extent that the subject loss,
claim, damage or liability arises out of, or is based upon, an
untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and nonconformity with written
information furnished to the Company by the Agent specifically for
use in the preparation of the subject Prospectus, Blue Sky
Application, or any amendment or supplement thereto. The indemnity
provided for in this Section 7(a) will be in addition to any
liability which the Company may otherwise have.
(b) The Agent will indemnify and hold harmless the Company, its
officers, directors, counsel, representatives and persons who
control the Company which the meaning of the Securities Exchange Act
of 1934, from and against all losses, claims, damages and
liabilities, joint and several, to which any of the aforesaid
parties, including the Company (collectively, the "Company
Parties"), may become subject, under federal or state securities
laws or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon: (I) any untrue statement of material fact contained in
the Prospects, any Blue Sky Application, or any amendment or
supplement thereto; (ii) the omission to state in the Prospectus,
any Blue Sky Application, or any amendment or supplement to any of
the foregoing, a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
in the case of Sections (7)(b)(I) and (7)(b)(ii) to the extent, but
only to the extent, that such untrue statement or omission was made
in reliance upon or in conformity with written information furnished
to the Company by the Agent specifically for use with reference to
the Agent in preparation of the Prospectus, any Blue Sky
Application, or any supplement or amendment thereto; or (iii)
arising out of any misrepresentation by the Agent in this Agreement
or any breach of warranty by the Agent with respect to this
Agreement. The Agent will further reimburse the Company Parties for
legal or other expenses reasonably incurred by the Company Parties
in connection with investigating or defending any loss, claim,
damage, liability or action under this Section (7)(b). The
indemnification provided for in this Section 7(b) shall be in
addition to any liability which the Agent may otherwise have.
(c) Promptly after receipt by an indemnified party under Section (7)(a)
or (7)(b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such Section, notify the
indemnifying party in writing of the commencement of the action; but
the omission so to notify the indemnified part shall not relieve it
from any liability which it may have to an indemnified party
otherwise and under such Section. In any case any such action shall
be brought against any indemnified person, then it shall notify the
indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein, and, to the extent
it shall wish, jointly with any other indemnifying party similarly
notified, the indemnifying party may assume the defense thereof,
with counsel satisfactory to such indemnified party (who may also be
counsel to the indemnifying party only if the representation of both
parties does not constitute a conflict) and after notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such Section for any legal
expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation.
8. SURVIVAL CLAUSE. The respective indemnities, agreements (including,
without limitation, the agreement set forth in Section 7 hereof),
representations, warranties and other statements of the Company and the
Agent as set forth in this Agreement, shall remain in full force and
effect, regardless of any investigation (or any statement as to the
results thereof) made by or behalf of the Agent, any officer or
<PAGE>
director of the Agent, or counsel therefor, or the Company or any officer
or director of the Company, or counsel therefor, and shall survive any
termination of this Agreement and the receipt of any payment for the
Shares.
9. NOTICES. All notices under this Agreement shall be in writing and if sent
to the Agent shall be mailed, delivered or telecopied to the Agent at the
address first provided above, and if sent to the Company shall be mailed
or delivered to the Company at its present headquarters address, 9799 Old
St. Augustine Road, Jacksonville, Florida 32257, Attention: President or
to such other address as may be delivered to the Agent from time to time.
Any notice shall be deemed to have given when it is received by the party
to whom it is addressed.
10. GOVERNING LAW. Except to the extent governed by preemptive federal law,
this Agreement shall be governed by and construed in accordance with the
substantive laws of the State of Georgia.
11. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of the day and year first above written.
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
By:___________________________________
Shawn M. Casey
President and CEO
ACCEPTED AND AGREED TO this 4th day of February, 1998.
ATTKISSON CARTER & AKERS
By:___________________________________
Title:
37
EXHIBIT 10.1
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
EXECUTIVE STOCK OPTION AGREEMENT
Grant Group No.1
No. of Shares 25,000
THIS AGREEMENT is effective as of the 3rd day of JANUARY , 1996 between
Success Development International, Inc., a Florida corporation (the "Company"),
and an employee of the Company or one of its subsidiaries ("Optionee").
WITNESSETH
1. GRANT OF EXECUTIVE STOCK OPTION. Pursuant to the provisions of Article
III of the Long Term Incentive Plan of Success Development International, Inc.,
(the "Plan"), the Company hereby grants to Optionee, subject to the terms and
conditions of the Plan (the terms of which are hereby incorporated by
reference), the right and option (the "Executive Stock Option") to purchase from
the Company 25,000 shares of common stock of the Company, par value $.001 (the
"Common Stock"), subject to the terms and conditions herein set forth and
exercisable as hereinafter provided. This Executive Stock Option shall not
constitute an incentive stock option within the meaning of Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code").
2. TERMS AND CONDITIONS. The Executive Stock Option evidenced hereby is
subject to the following terms and conditions:
(a) PRICE. The purchase price per share is $0.18.
(b) EXPIRATION DATE. The Executive Stock Option shall expire 10
years after the date hereof, or on JANUARY 3 , 2006.
(C) EXERCISE OF OPTION. No part of the Executive Stock Option may be
exercised until Optionee has remained in the employ of the Company or a
subsidiary of the Company as defined in the Plan (any such subsidiary, being
hereinafter called a "Subsidiary") for a period of two (2) years after the date
hereof.
This Executive Stock Option may be exercised thereafter, to the
extent exercisable by its terms, in whole, or from time to time in part, at any
time prior to the expiration hereof in accordance with the exercise schedule set
forth below (the "Exercise Schedule"). Any exercise shall be accompanied by a
written notice to the Company specifying the number of shares as to which the
Executive Stock Option is being exercised. The Exercise Schedule shall be as
follows:
FULL YEARS CUMULATIVE PERCENTAGE
ELAPSED SINCE OF THE SHARES WHICH
DATE OF GRANT MAY BE EXERCISED
3 50%
4 75%
5 100%
(d) PAYMENT OF PURCHASE PRICE UPON EXERCISE. At the time of any
exercise, the full purchase price of the shares of Common Stock as to which this
Executive Stock Option shall be exercised shall be paid to the Company in the
form of cash, Common Stock at fair market value, or any combination thereof. For
the purposes of this paragraph, "fair market value" of the Common Stock shall
have the meaning assigned thereto in the Plan.
(e) EXERCISE UPON DEATH. DISABILITY OR TERMINATION OF EMPLOYMENT.
(1) DEATH WHILE EMPLOYED. If Optionee shall die while an
employee of the Company or of a Subsidiary, this Executive Stock Option may be
fully exercised by the person or persons to whom Optionee's rights under this
Executive Stock Option shall pass by will or by applicable law, or if no such
person has such right, by Optionee's executors or
<PAGE>
administrators, at any time, or from time to time, within one year from the date
of Optionee's death.
(2) DISABILITY OR NORMAL RETIREMENT. If Optionee's employment
with the Company or with a Subsidiary shall terminate because of Disability (as
defined in the Plan), Optionee may fully exercise this Executive Stock Option at
any time, or from time to time, within one year from the date of termination of
employment.
(3) EARLY RETIREMENT. If Optionee's employment with the
Company or with a Subsidiary shall terminate because of early retirement within
the meaning of the Company's applicable retirement plan, Optionee may fully
exercise this Executive Stock Option at any time, or from time to time, within
one year from the date of termination of employment, provided, however, that
such exercise shall be limited in the aggregate to the number of shares which
Optionee was entitled to purchase on the date of such retirement.
Notwithstanding this Section 2(c)(3), in no event shall an Executive Stock
Option be exercised after the expiration of ten (10) years from the date of
grant.
(4) OTHER TERMINATION. If Optionee's employment with the
Company or with a Subsidiary shall terminate for any reason other than death,
Disability or Retirement as specified in clauses (1), (2), or (3) of this
subparagraph (e), Optionee may exercise this Executive Stock Option, to the
extent that Optionee is entitled to do so at the date of termination of
employment, at any time, or from time to time, within three months from the date
of termination of employment.
(5) DEATH AFTER TERMINATION OF EMPLOYMENT. If Optionee shall
die following a termination of employment, this Executive Stock Option may be
exercised, by the person or persons to whom Optionee's rights under this
Executive Stock Option shall pass by will or by applicable law, or if no such
person has such right, by Optionee's executors or administrators, to the extent
and during the period that Optionee was entitled to do so.
(6) EXPIRATION. In no event shall Optionee or, on Optionee's
death, Optionee's successors exercise this Executive Stock Option after the
expiration date specified in subparagraph (b) of this Section 2.
(f) NONTRANSFERABILITY. This Executive Stock Option shall not be
assignable or transferable other than by will, the laws of descent and
distribution or a qualified domestic relations order ("QDRO") as defined by the
Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder. During the lifetime of Optionee, this
Executive Stock Option shall be exercisable only by Optionee or by the guardian
or legal representative of Optionee or pursuant to a QDRO.
(g) ADJUSTMENTS. In the event of a reorganization, recapitalization,
stock split, stock dividend, combination of shares, rights offer, liquidation,
dissolution, merger, consolidation, spin-off or sale of assets, or of any other
change in or affecting the corporate structure or capitalization of the Company,
then in any such event the number and kind of shares subject to this Executive
Stock Option and the purchase price per share shall be appropriately adjusted
pursuant to Section 5.2 of the Plan consistent with such change in such manner
as the Committee appointed pursuant to Section 1.2 of the Plan (the "Committee")
may deem equitable to prevent substantial dilution or enlargement of the rights
granted to Optionee hereunder. Any adjustment so made shall be final and binding
upon Optionee.
(h) NO RIGHTS AS SHAREHOLDER. Optionee shall have no rights as a
shareholder with respect to any shares subject to this Executive Stock Option
prior to the date of issuance of a certificate or certificates for such shares.
(I) NO RIGHT TO CONTINUED EMPLOYMENT. This Executive Stock Option
shall not confer upon Optionee any right with respect to continuance of
employment by the Company or any Subsidiary or the Company, nor shall it
interfere in any way with the right of the employer to terminate Optionee's
employment at any time.
(j) COMPLIANCE WITH LAW AND REGULATIONS. The Company shall not be
required to deliver any certificates prior to (1) the listing of such shares on
any stock exchange on which the Common Stock may then be listed and (2) the
completion of any registration or qualification of such shares under any federal
or state law, or any rule or regulation of any governmental body which the
Company shall, in its sole discretion, determine to be necessary or advisable.
<PAGE>
(k) INCOME TAX WITHHOLDING. The parties hereto recognize that the
Company may be obligated to withhold federal, state or local income taxes and
social security taxes in connection with the exercise of the Executive Stock
Option or in connection with the disposition of any shares of Common Stock
acquired by exercise of this Executive Stock Option. Optionee agrees that the
Company may withhold amounts needed to cover such taxes from payments otherwise
due and owing to Optionee, and also agrees that upon demand Optionee will
promptly pay to the Company having such obligation any additional amounts as may
be necessary to satisfy such withholding tax obligation Such payment shall be
made in cash or by certified check payable to the order of the Company.
3. INVESTMENT REPRESENTATION. The Committee may require Optionee to
furnish to the Company, prior to the issuance of any shares upon the exercise of
all or any part of this Executive Stock Option, an agreement (in such form as
such Committee may specify) in which Optionee represents that the shares of
Common Stock acquired upon exercise are being acquired for investment and not
with a view to the sale or distribution thereof. The recipient hereby
acknowledges that any shares issued pursuant to the exercise of the Option shall
be restricted securities within the meaning of Rule 144, promulgated under the
Securities Act of 1933, as amended (the "Act"). Any transfers or resales of such
shares will be made only in compliance with (I) the registration requirements of
the Act, and any applicable state securities laws; (ii) an exemption from the
registration requirements of the Act, and said state laws; or (iii) the
provisions of Rule 144. In addition, the Company shall place on such shares, as
appropriate, a legend describing such restrictions.
4. OPTIONEE BOUND BY PLAN. Optionee hereby acknowledges receipt of a copy
of the Plan and agrees to be bound by all the terms and provisions thereof. In
the event any of the terms of this Agreement are deemed to conflict with any of
the terms of the Plan, the terms of the Plan shall prevail.
5. ACCELERATION. Notwithstanding anything herein to the contrary, if a
Change in Control of the Company, as defined in the Plan, occurs, the date on
which this Executive Stock Option may be exercised shall automatically, and
without further action by the Committee, be accelerated to the date of such
Change in Control.
6. NOTICES. Any notice hereunder to the Company shall be addressed to it
at its office, 9799 Old St. Augustine Road, Jacksonville, Florida 32257,
Attention: Chief Executive Officer, and any notice hereunder to Optionee shall
be addressed to him or her at the address as set forth below optionee's
signature, subject to the right of either party to designate at any time
hereafter, in writing, some other address.
7. COUNTERPARTS. This Agreement may be executed in two counterparts, each
of which shall constitute one and the same instrument.
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
on its behalf by its duly authorized officer and Optionee has executed this
Agreement to be effective as of the day and year first above written.
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
By: SHAWN M. CASEY
Its: President
------------------------------------------------
optionee
Address:________________________________________
----------------------------------------
----------------------------------------
EXHIBIT 10.2
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
INCENTIVE STOCK OPTION AGREEMENT
Grant Group No.1
No. of Shares 125,000
THIS AGREEMENT is effective as of the 1st day of April, 1997 between
Success Development International, Inc., a Florida corporation (the "Company"),
and __________, an employee of the COMPANY or one of its subsidiaries
("Optionee").
WITNESSETH
1. GRANT OF INCENTIVE STOCK OPTION. Pursuant to the provisions of Article
II of the Long Term Incentive Plan of Success Development International, Inc,
(the "Plan"), the Company hereby grants to Optionee, subject to the terms and
conditions of the Plan (the terms of which are hereby incorporated by
reference), the right and option (the "Incentive Stock Option") to purchase from
the Company one hundred twenty five thousand (125,000) shares of common stock of
the Company, par value $.001 (the "Common Stock"), subject to the terms and
conditions herein set forth and exercisable as hereinafter provided. This
Incentive Stock Option shall constitute an incentive stock option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
2. TERMS AND CONDITIONS. The Incentive Stock Option evidenced hereby is
subject to the following terms and conditions:
(a) PRICE. The purchase price per share is $0.21.
(b) EXPIRATION DATE. The Incentive Stock Option shall expire 10
years after the date hereof March 31st, 2007.
(C) EXERCISE OF OPTION. No part of the Incentive Stock Option may be
exercised, until the Optionee has remained in the employ of the Company or a
subsidiary of the Company as defined in the Plan(any such subsidiary, being
hereinafter called a "Subsidiary") for a period of two (2) years after the date
hereof or the Company completes a public offering.
This Incentive Stock Option may be exercised thereafter, to the extent
excisable by its terms, in whole, or from time to time in part' at any time
prior to the expiration hereof in accordance with the exercise schedule set
forth below (the "Exercise Schedule"). Any exercise shall be accompanied by a
written notice to the Company specifying the number of shares as to which the
Incentive Option is being exercised.
The Exercise Schedule for one hundred twenty five thousand (125,000)
shares of the Incentive Stock Option shall be as follows:
GROSS REVENUE GOAL NUMBER OF SHARES FOR WHICH
OPTIONS HAVE BEEN EARNED
$1,500,000 average gross income for any
3 consecutive calendar months 25,000
$2,000,000 average gross income for any
3 consecutive calendar months 25,000
$2,500,000 average gross income for any
3 consecutive calendar months 25,000
$3,000,000 average gross income for any
3 consecutive calendar months 25,000
$3,000,000 average gross income for any
3 consecutive calendar months prior to
January 1, 1999. 25,000
<PAGE>
For the purposes of this Incentive Stock Option Agreement, the term "gross
income" shall include all the income, from any business entity that the company
is legally engaged in, received by the Company, its wholly owned subsidiaries,
and any corporation, partnership, limited liability company, joint venture or
other entity of which the Company owns 25% (twenty-five percent) or more as
recognized in a consolidated financial statement prepared according to Generally
Accepted Accounting Principles.
(d) PAYMENT OF PURCHASE PRICE UPON EXERCISE. At the time of any
exercise, the full purchase price of the shares of Common Stock as to which this
Incentive Stock Option shall be exercised shall be paid to the Company in the
form of cash, Common Stock at fair market value, or any combination thereof. For
the purposes of this paragraph, "fair market value" of the Common Stock shall
have the meaning assigned thereto in the Plan.
(e) EXERCISE UPON DEATH. DISABILITY OR TERMINATION OF EMPLOYMENT.
(1) DEATH WHILE EMPLOYED. If Optionee shall die while an employee of the
Company or of a Subsidiary, this Incentive Stock Option may be fully exercised
by the person or persons to whom Optionee's rights under this Incentive Stock
Option shall pass by will or by applicable law, or if no such person has such
right, by Opts or administrators, at any time, or from time to time, within one
year from the date of Optionee's death.
(2) DISABILITY OR NORMAL RETIREMENT. If Optionee's employment with the
Company or with a Subsidiary shall terminate because of Disability or Retirement
(each as defined in the Plan), Optionee may fully exercise this Incentive Stock
Option at any time, or from time to time, within one year from the date of such
termination of employment.
(3) EARLY RETIREMENT. If Optionee's employment with the Company or with a
Subsidiary shall terminate because of early retirement within the meaning of the
Company's applicable retirement plan, Optionee may fully exercise this Incentive
Stock Option at any time, or from time to time, within one year from the date of
termination of employment, provided, however, that such exercise shall be
limited in the aggregate to the number of shares which Optionee was entitled to
purchase on the date of such retirement.
(4) OTHER TERMINATION. If Optionee's employment with the Company or with
a Subsidiary shall terminate for any reason other than death, Disability or
Retirement as specified in clauses (1), (2), or (3) of this subparagraph (e),
Optionee may exercise this Incentive Stock Option, to the extent that Optionee
is entitled to do so at the date of termination of employment, at any time, or
from time to time, within three months from the date of such termination of
employment.
(5) DEATH AFTER TERMINATION OF EMPLOYMENT. If Optionee shall die
following a termination of employment, this Incentive Stock Option may be
exercised, by the person or persons to whom Optionee's rights under this
Incentive Stock Option shall pass by will or by applicable law, or if no such
person has such right, by Optionee's executors or administrators, to the extent
and during the period that Optionee was entitled to do so.
(6) EXPIRATION. Notwithstanding anything to the contrary in subparagraph
(C) of this Section 2, in no event shall Optionee or, on Optionee's death,
Optionee's successors exercise this Incentive Stock Option after the expiration
date specified in subparagraph (b) of this Section 2.
(f) NONTRANSFERABILITY. This Incentive Stock Option shall not be
assignable or transferable other than by will, the laws of descent and
distribution or a qualified domestic relations order ("QDRO") as defined by the
Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder. During the lifetime of Optionee, this
Incentive Stock Option shall be exercisable only by Optionee or by the guardian
or legal representative of Optionee or pursuant to a QDRO.
(g) ADJUSTMENTS. In the event of a reorganization, recapitalization,
stock split, stock dividend, combination of shares, rights offer, liquidation,
dissolution, merger, consolidation, spin-off or sale of assets, or of any other
change in or affecting the corporate structure or capitalization of the Company,
then in any such event the number and kind of shares subject to this Incentive
Stock Option and the purchase price per share shall be appropriately adjusted
pursuant to Section 5.2 of the Plan consistent with such change in such manner
as the Board may deem equitable to prevent substantial dilution or enlargement
of the rights granted to Optionee hereunder. Any adjustment so made shall be
final and binding upon Optionee.
<PAGE>
(h) NO RIGHTS AS SHAREHOLDER. Optionee shall have no rights as a
shareholder with respect to any shares subject to this Incentive Stock Option
prior to the date of issuance of a certificate or certificates for such shares.
(I) NO RIGHT TO CONTINUED EMPLOYMENT. This Incentive Stock Option shall
not confer upon Optionee any right with respect to continuance of employment by
the Company or any Subsidiary of the Company, nor shall it interfere in any way
with the right of the employer to terminate Optionee's employment at any time.
(j) COMPLIANCE WITH LAW AND REGULATIONS. The Company shall not be required
to deliver any certificates prior to (1) the listing of such shares on any stock
exchange on which the Common Stock may then be listed and (2) the completion of
any registration or qualification of such shares under any federal or state law,
or any rule or regulation of any governmental body which the Company shall, in
its sole discretion, determine to be necessary or advisable.
(k) INCOME TAX WITHHOLDING. The parties hereto recognize that the Company
may be obligated to withhold federal, state or local income taxes and social
security taxes in connection with the exercise of the Incentive Stock Option or
in connection with the disposition of any shares of Common Stock acquired by
exercise of this Incentive Stock Option. Optionee agrees that the Company may
withhold amounts needed to cover such taxes from payments otherwise due and
owing to Optionee, and also agrees that upon demand Optionee will promptly pay
to the Company having such obligation any additional amounts as may be necessary
to satisfy such withholding tax obligation. Such payment shall be made in cash
or by certified check payable to the order of the Company.
3. INVESTMENT REPRESENTATION. The Company may require Optionee to furnish
to the Company, prior to the issuance of any shares upon the exercise of all or
any part of this Incentive Stock Option, an agreement (in such form as the
Company may specify) in which Optionee represents that the shares of Common
Stock acquired upon exercise are being acquired for investment and not with a
view to the sale or distribution thereof. The recipient hereby acknowledges that
any shares issued pursuant to the exercise of the Option shall be restricted
securities within the meaning of Rule 144, promulgated under the Securities Act
of 1933, as amended (the "Act")or resales of such shares will be made only in
compliance with (I) the registration requirements of the Act, and any applicable
state securities laws; (ii) an exemption from the registration requirements of
the Act, and said state laws; or (iii) the provisions of Rule 144. In addition,
the Company shall place on such shares, as appropriate, a legend describing such
restrictions.
4. OPTIONEE BOUND BY PLAN. Optionee hereby acknowledges receipt of a copy of
the Plan and agrees to be bound by all the terms and provisions thereof Except
as provided in Section 5 hereof, in the event any of the terms of this Agreement
are deemed to conflict with any of the terms of the Plan, the terms of the Plan
shall prevail.
5. ACCELERATION. Notwithstanding anything herein to the contrary, if a
Change in Control of the Company, as defined in the Plan, occurs, the date on
which this Incentive Stock Option may be exercised shall automatically, and
without further action by the Company, be accelerated to the date of such Change
in Control. Notwithstanding the foregoing, however, an event which would
otherwise be deemed a Change in Control under subsection (a) of Section 5.13 of
the Plan shall not be deemed a Change in Control hereunder and such event shall
not accelerate the exercisability of this Incentive Stock Option as provided in
this Section 5 and in the Plan.
6. NOTICES. Any notice hereunder to the Company shall be addressed to it
at its office, 9799 Old St. Augustine Road, Jacksonville, Florida 32257,
Attention: Chief Executive Officer, and any notice hereunder to Optionee shall
be addressed to him or her at the address as set forth below optionee's
signature, subject to the right of either party to designate at any time
hereafter, in writing, some other address.
7. COUNTERPARTS. This Agreement may be executed in two counterparts, each
of which shall constitute one and the same instrument.
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
on its behalf by its duly authorized officer and Optionee has executed this
Agreement to be effective as of the day and year first above written.
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
/s/SHAWN M. CASEY
Shawn M. Casey, Vice Chairman
---------------------------------------------
Optionee
Address:__________________________________
----------------------------------
EXHIBIT 10.3
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
RESTRICTED STOCK AGREEMENT
Grant Group No. 1
No. of Shares 250,000
THIS AGREEMENT is effective as of the 1st day of December,
__1995, between Success Development International, Inc., a Florida corporation
(the "Company"), and ______, an employee of the company or one of its
subsidiaries (the "Recipient").
WITNESSETH
1. GRANT OF RESTRICTED STOCK. Pursuant to the provisions of
Article IV of the Long Term Incentive Plan of Success Development
International, Inc. (the "Plan"), the Company hereby grants to the
Recipient, subject to the terms and conditions of the Plan (the terms
of which are hereby incorporated by reference), 250,000 shares (the
"Restricted Stock") of common stock of the Company (the "Common
Stock"), subject to the following terms and conditions.
2. TERMS AND CONDITIONS. The Restricted Stock is subject to the
following terms and conditions:
(a) RIGHTS AS SHAREHOLDER. The Recipient shall have no
voting or dividend rights during the Performance Period.
(b) TRANSFER/ISSUANCE. Stock certificates representing
the Restricted Stock will be imprinted with a legend stating that the
shares may not be sold, exchanged, transferred, pledged,
hypothecated, or otherwise disposed of except in accordance with the
terms of this Agreement, and each transfer agent for the Common Stock
shall be so instructed in respect of such shares.
(C) STOCK SPLITS. DIVIDENDS, ETC. If, due to a stock
stock split, stock dividend,, combination of shares, or any other
change or exchange for other securities by reclassification,
reorganization, merger, consolidation, recapitalization or otherwise,
the Recipient, as the owner of the Restricted Stock, shall be
entitled to new, additional, or different shares of stock or
securities, the certificate or certificates for, or other evidences
of, such new, additional, or different shares or securities, together
with a stock power or other instrument of transfer appropriately
endorsed, also shall be imprinted with a legend as provided in
Section 2(b). When the event(s) described in the preceding sentence
occur, all provisions of this Agreement relating to restrictions and
lapse of restrictions will apply to such new, additional, or
different shares or securities to the extent applicable to the shares
with respect to which they were distributed.
(d) PERFORMANCE PERIOD. The term "Performance Period"
means the period starting on the date the Recipient was first
employed by the Company and ending on the date on which the
Management Objectives (as set forth in Section 2(f)(I) are met,
unless accelerated pursuant to Section 2(f) (iv) of this Agreement.
(e) RESTRICTIONS ON RESTRICTED STOCK DURING PERFORMANCE
PERIOD. During the Performance Period applicable to the shares of
Restricted Stock none of such shares shall be sold, exchanged,
transferred, pledged, hypothecated, or otherwise disposed except as
otherwise provided in the Plan.
(f) LAPSE OF RESTRICTIONS; ACCELERATION OF PERFORMANCE
PERIOD.
<PAGE>
(I) LAPSE OF RESTRICTIONS; MANAGEMENT OBJECTIVES. The
restrictions set forth in Section 2(e) of this Agreement shall lapse
upon each of the following conditions being met:
(A) at any time during the ten (10) year period beginning on the
date of this Agreement, the Company and its Subsidiaries have
collectively met the gross revenue goals listed below (except that
the final goal listed below shall be limited to the time period
indicated);
(B) the Recipient is an employee of the Company or one of its
Subsidiaries on the date such gross revenue goal is met; and
(C) the Recipient has continuously been an employee of the Company
or one of its Subsidiaries for two consecutive years, commencing
from the date such Recipient was first employed by the Company or
its Subsidiaries. The Company intends that conditions (A) and (B)
above (but not (C)) must be met simultaneously. Condition (C) may
be met before or after the fulfillment of conditions (A) and (B).
GROSS REVENUE GOAL NUMBER OF SHARES EARNED
$400,000 for any 3 consecutive
calendar months 50,000
$600,000 for any 3 consecutive
calendar months 50,000
$750,000 for any 3 consecutive
calendar months 50,000
$1,000,000 for any 3 consecutive
calendar months prior to the
expiration of this Agreement 50,000
$1,000,000 for any 3 consecutive
calendar months prior to January
1, 1997 50,000
(ii) TERMINATION OF EMPLOYMENT DURING PERFORMANCE
PERIOD. If a Recipient's employment has terminated during the
Performance Period, the Committee, in its sole discretion, may
reduce or eliminate the unearned portion of the Restricted Stock
award.
(iii) FAILURE TO ACHIEVE MANAGEMENT OBJECTIVES. If
the Committee determines that the Management Objectives were not
achieved by the Recipient during the Performance Period, the
Restricted Stock shall be forfeited to the Company.
(iv) ACCELERATION OF PERFORMANCE PERIOD; CHANGE IN
CONTROL. Notwithstanding anything herein to the contrary, if a
Change in Control has occurred as defined in Section 8 of this
Agreement, then all restrictions on the Restricted Stock set forth
in Section 2(e) shall lapse on the date of such Change in Control.
3. NO RIGHT TO CONTINUED EMPLOYMENT. This Agreement
shall not confer upon the Recipient any right with respect to
continuance of employment by the Company or any of its Subsidiaries,
nor shall it interfere in any way with the right of the Company or
its Subsidiaries to terminate the Recipient's employment at any
time.
4. COMPLIANCE WITH LAW AND REGULATIONS. The Company
shall not be required to issue or deliver any certificates for
shares prior to (a) the listing of such shares on any stock exchange
<PAGE>
on which the Common Stock may then be listed and (b) the completion
of any registration or qualification of such shares under any
federal or state law, or any rule or regulation of any governmental
body which the Company shall, in its sole discretion, determine to
be necessary or advisable.
5. INCOME TAX WITHHOLDING. The Recipient agrees that the
Company may, at its option, withhold Restricted Stock or Common
Stock in an amount needed to cover any applicable federal, state or
local income taxes and social security taxes from payments otherwise
due and owing to the Recipient, and also agrees that upon demand the
Recipient will promptly pay to the Company any additional amounts as
may be necessary to satisfy such withholding tax obligation.
6. INVESTMENT REPRESENTATION. The Committee may require
the Recipient to furnish to the Company, prior to the issuance of
any shares pursuant to this Agreement, an agreement (in such form as
the Committee may specify) in which the Recipient represents that
the shares of Common Stock acquired pursuant to this Agreement are
being acquired for investment and not with a view to the sale or
distribution thereof and that any transfers of such shares will be
made only in compliance with the registration requirements, if
any, of the Securities Act of 1933, as amended, or an exemption
therefrom.
7. RECIPIENT BOUND BY PLAN. The Recipient hereby
acknowledges receipt of a copy of the Plan and agrees to be bound by
all the terms and provisions thereof. In the event any of the terms
of this Agreement are deemed to conflict with any of the terms of
the Plan, the terms of the Plan shall prevail.
8. CHANGE IN CONTROL. Notwithstanding anything herein to
the contrary, if a Change in Control of the Company, as defined
below, occurs during the Performance Period, then all restrictions
on the Restricted Stock set forth in Section 2(e) shall lapse on the
date of such Change in Control without further action by the
Committee. For the purposes of this Section 8, a Change in Control
Company shall be deemed to have occurred upon the earliest of the
following events:
(a) if any person (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934)
should acquire direct or indirect beneficial ownership of 24 percent
or more of the combined voting power of the then outstanding
securities of the Company, or
(b) if during any period of two consecutive years,
the individuals who at the beginning of such period constitute the
Board of Directors of the Company cease for any reason to constitute
at least a majority thereof, unless the election, or the nomination
for election by the Company's shareholders of each new director was
approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the period,
or
(C) if the Board of Directors or any designated
committee determines in its sole discretion that any person (as such
term is used in Section 13(d) and 14(d) of the Securities Exchange
Act of 1934) directly or indirectly exercises a controlling
influence over the management or policies of the Company.
9. MISCELLANEOUS. This Agreement may be executed in two
counterparts, each of which shall constitute one and the same
instrument. Unless otherwise defined herein, capitalized terms used
in this Agreement shall have the meaning given them in the Plan.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this
Agreement be executed on its behalf by its duly authorized officer
and the
Recipient has executed this Agreement to be effective as of the day
and year first above written.
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
By:______________________
Its:______________________
-----------------------------
Employee
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into as of the 1st day of January,
1996, (the "Effective Date") between Success Development International, Inc., a
Florida corporation, including its successors, assigns, and affiliated companies
(the "Company"), and ("Employee")
Section 1. EMPLOYMENT, The Company hereby agrees to employ Employee and
Employee hereby agrees to remain in the employ of the Company, for a two (2)
year period commencing on the Effective Date (the "Employment Period").
Section 2. POSITION AND DUTIES.
(a) Pursuant to the Bylaws of the Company, the Board of Directors
of the Company has elected Employee as Vice-President of the Company.
(b) During the Employment Period, Employee shall report to the
Board of Directors of the Company. Employee's services will be performed at the
location designated by the Board of Directors.
(C) The duties of Employee shall be those assigned to Employee by
the Chief Executive Officer or the Chairman of the Board of Directors. Employee
acknowledges that his duties may vary from time to time and he further
acknowledges that the Company retains the flexibility to assign various types of
duties to Employee. Employee does not have the authority to enter into any
contracts on behalf of the Company or set salaries for any corporate employee
without the prior approval of the Board of Directors.
(d) Excluding periods of vacation and sick leave to which Employee
is entitled as set forth in Section 3(d) hereof, Employee agrees that during the
Employment Period he shall devote his full business time to his responsibilities
as described herein and shall perform such responsibilities faithfully and
efficiently and to the best of his abilities. Employee will not work as an
employee of any other person, business, or entity, including self-employment,
while t of the Company, without prior written permission from the Company.
Notwithstanding the foregoing, Employee may serve on corporate, civic or
charitable boards or committees so long as such activities do not materially
interfere with the performance of Employee's duties and responsibilities for the
Company.
(e) The Company shall reimburse Employee for reasonable travel,
lodging, entertainment and other business expenses incurred by him in connection
with the Company's business, and Employee shall keep such receipts and maintain
such records as required by Company policy. All requests for reimbursement of
reasonable business expenses shall be reviewed by the Chief Executive Officer to
ensure that such expenses constitute ordinary and necessary business expenses of
the Company.
Section 3. COMPENSATION. During the Employment Period, Employee shall
receive the following compensation and benefits:
(a) SALARY.
(I) Employee shall receive a salary of $__________
per month.
(ii) Any salary payable to Employee shall be paid on
a weekly basis, in advance, by Company check.
(b) LONG-TERM INCENTIVES. Employee shall be granted, within forty
five (45) days from the date of execution of this Agreement, pursuant to the
Long Term Incentive Plan of the Company and a Restricted Stock Agreement entered
into between Employee and the Company (the "Restricted Stock Agreement"),
250,000 shares of the Company's common stock. The common stock shall be
restricted stock subject to restrictions set forth in the Restricted Stock
Agreement and shall vest in accordance with the terms thereof.
<PAGE>
(C) VACATION AND SICK LEAVE. Employee shall be entitled to twenty
(20) days of vacation and sick leave per annum.
Section 4. TERMINATION.
(a) This Agreement may be terminated with 30-days' prior written
notice by the Company for cause. The term "cause" means (I) the willful and
continued failure of Employee substantially to perform his duties with the
Company after a demand for substantial performance is communicated to him by the
Board of Directors which identifies the manner in which the Board believes he
has not substantially performed his duties or (ii) willful misconduct materially
and demonstrably injurious to the Company. An act or failure to act by Employee
shall be considered willful if such act or failure to act was not in good faith
or such act or failure to act was without reasonable belief that it was in the
best interests of the Company. Upon termination for cause, Employee shall not be
entitled to other rights under this Agreement. The Employee shall be entitled to
all payments previously earned and all shares of stock of the Company which have
vested prior to any termination for cause. The termination for cause of the
Employee will not affect the rights of the Employee under the Company's Long
Term Incentive Plan, as amended, or under the Restricted Stock Agreement between
the Company and Employee dated December 1, 1995.
(b) Upon termination of Employee's employment for any reason,
Employee shall resign from the Board of Directors of the Company if he is then a
director, and from the Board of Directors of any affiliates of the Company of
which he is then a director. Such resignation shall be effective no later than
the effective date of termination of his employment.
Section 5. CONFIDENTIALITY AND TRADE SECRETS. Employee's work for the
Company will involve confidential information and/or trade secrets of the
Company, including matters of a technical nature, such as scientific, trade and
engineering secrets, formulae, processes, machines, inventions, and research
projects; matters of business nature, such as information about costs, profits,
markets, sales, and lists of customers and vendors, databases, computer programs
and models; and other information of a similar nature, including plans for
future products and services. Employee agrees to keep secret all confidential
information and trade secrets of the Company and agrees not to disclose, either
directly or indirectly, such information to anyone outside the Company, during
or after Employee's employment with the Company except upon written consent of
the Board of Directors. Employee shall keep such matters confidential after
leaving the employment of the Company, regardless of the reason for the
separation of employment.
Section 6. AGREEMENT NOT to Compete.
(a) Employee covenants and agrees that during his employment with
the Company and for a period of two years thereafter (whatever the reason for
Employee's separation from employment) or for such foregoing period as
applicable following the Company obtaining injunctive relief to prevent
Employee's violation of this covenant, Employee shall not, either directly or
indirectly, engage in the following activities, or assist others in such
activities anywhere in the United States or in any other jurisdiction outside of
the United States in which the Company conducts its time of the termination of
Employee's employment with the Company:
(I) Hiring, recruiting, or attempting to recruit for
any person or business entity which is a
competitor, or a Related Entity (as hereafter
defined) of such competitor, with the Company,
any person employed by the Company;
(ii) Soliciting any business for a competitor, or a
Related Entity of such competitor, from any of
the Company's current or prospective customers,
a prospective customer being defined as any
person or entity the Company has actively
solicited, planned to solicit (as known to
Employee), or provided services to during the
twelve (12) months prior to termination of the
Employee's employment with the Company; or
<PAGE>
(iii) Being employed by, being connected to, or
consulting for any person who or business entity
which is a competitor, or a Related Entity of
such competitor, of the Company's business or
planned businesses at the time of the
termination of Employee's employment with the
Company.
(b) Employee acknowledges that the Company does business in the
fields of marketing and sales of financial and personal development information
products and services on a nationwide basis and that, with respect to such
business, the Company engages in active and substantial competition. For
purposes of this Agreement, the term "Related Entity" means any corporation,
partnership or other business entity:
(I) controlling, controlled by, or under common
control or ownership with a competitor of the
Company's business; or
(ii) in which a competitor of the Company's business
has substantial equity interest.
(C) Employee will provide the Company with such information as the
Company may from time to time request to determine Employee's compliance with
the terms of this Agreement. Employee authorizes the Company to contact
Employee's future employers and other entities with whom Employee has any sort
of business relationship to determine Employee's compliance with this Agreement
or to communicate the contents of this Agreement to such employers and entities.
(d) Employee acknowledges that the restrictions set forth in this
Section 6 are necessary to prevent the use and disclosure of the Company's
confidential information as described in Section 5 and to otherwise protect the
legitimate business interests of the Company. Employee further acknowledges that
if Employee's employment with the Company terminates for any reason, he will be
able to earn a livelihood without violating the foregoing restrictions and that
Employee's ability to earn a livelihood without violating such restrictions is a
material condition to Employee's employment or continued employment with the
Company. Employee agrees that this covenant is reasonable and shall apply both
during the term of Employee's employment under this Agreement and thereafter as
described above, regardless of how said employment is terminated.
Section 7. REMEDIES.
(a) The Company and Employee agree that irreparable injury would
result from any breach by Employee of the provisions in this Agreement,
specifically including the Agreement Not To Compete set forth in Section 6, and
that monetary damages would not provide adequate relief for any such breach.
Accordingly, in addition to other remedies which may be available to the
Company, if Employee breaches Section 6 of this Agreement, Employee agrees that
injunctive relief in favor of the Company is proper and that an injunction
restraining Employee from violating the terms of the Agreement Not To Compete
Section will not be contrary to the public health, safety or welfare. Further,
Employee acknowledges that the covenants contained in the Agreement Not To
Compete Section are reasonable.
(b) If a court of competent jurisdiction or an arbitration panel
determines that any of the restrictions in this Agreement are over broad or
unreasonable, Employee agrees to modification of the affected restriction(s) to
permit enforcement to the maximum extent allowed by law.
(C) With the exception of the availability of injunctive relief
with respect to the Agreement Not to Compete set forth in Section 6, in the
event that the parties are unable to resolve a dispute, including but not
limited to a dispute
<PAGE>
relating to a conflict-of-interest issue, both parties agree to binding
arbitration to resolve the dispute, with each party designating one arbitrator
and the two designated arbitrators choosing a neutral third arbitrator whose
name appears on the list of neutral arbitrators maintained by the American
Arbitration Association. Each party shall designate its arbitrator within twenty
(20) days of written notice being given by either party and the third arbitrator
shall be designated within ten (10) days of the designation of the two parties'
arbitrators. If feasible, the arbitration shall be completed within thirty (30)
days of designation of the arbitrators. Arbitration fees shall be paid jointly
by the parties. If a party fails to comply with provisions of this paragraph,
the other party may seek and obtain injunctive relief or any appropriate decree
of specific performance against the breach of this paragraph, and the party
which failed to comply with the paragraph shall reimburse the other party for
any costs associated with enforcing this paragraph.
Section 8. NOTICES. Any notices, requests, demands and other
communications provided for by this Agreement shall be in writing and personally
delivered by hand or sent by registered or certified mail, if to Employee, to
him at the last address he has filed in writing with the Company or, if to the
Company, to its corporate secretary at its principal executive offices.
Section 9. NON-ALIENATION. Employee shall not have any right to pledge,
hypothecate, anticipate, or in any way create a lien upon any amounts provided
under this Agreement, and no payments or benefits due hereunder shall be
assignable in anticipation of payment either by voluntary or involuntary acts or
by operation of law. So long as Employee lives, no person, other than the
parties hereto, shall have any rights under or interest in this Agreement or the
subject matter hereof.
Section 10. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the
entire agreement of the parties in respect to the subject matter hereof. No
provision of this Agreement may be amended, waived or discharged except by the
mutual written agreement of the parties. The consent of any other person to any
such amendment, waiver or discharge shall not be required.
Section 11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the Company, its successors or assigns, by operation
of law or otherwise, including without limitation any corporation or other
entity or person which shall succeed (whether directly or indirectly, by
purchase, merger, consolidation, or otherwise) to all or substantially all of
the business and/or assets of the Company. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of Employee and
his legal representatives, heirs, and assigns, provided, however, that in the
event of Employee's death prior to payment or distribution of all amounts, and
benefits due him hereunder, each such unpaid amount and distribution shall be
paid to the person or persons designated by Employee to the Company to receive
such payment or distribution and, in the event Employee has made no applicable
designation, to the persons or persons designated by Employee as the residuary
beneficiaries of his estate if he dies testate or to his heirs at law under the
intestate successive laws of his state of domicile if he dies intestate.
Section 12. WITHHOLDING of TAXES. The Company may withhold from any
benefits payable under this Agreement all federal, state, city or other taxes as
shall be required pursuant to any law or governmental regulation or ruling.
Section 13. GOVERNING LAW. The validity, interpretation, and enforcement
of this Agreement shall be governed by the laws of the State of Florida.
Section 14. SEVERABILITY. In the event that any provision or portion of
this Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions. of this Agreement shall be unaffected thereby
and shall remain in full force and effect.
Section 15. MISCELLANEOUS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together constitute one and the same instrument. The parties have read and fully
understand the meaning of this Agreement, have had an opportunity to consider
its provisions, and are in full agreement with all of the provisions.
<PAGE>
IN WITNESS WHEREOF, Employee has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, and its
corporate seal to be hereunto affixed and attested by its Secretary or Assistant
Secretary, all as of the day and year first shown above written.
ATTEST: Success Development International, Inc.
By:___________________ By:______________________________
---------------------------------
Employee
EXHIBIT 10.5
EXHIBIT A
LONG TERM INCENTIVE PLAN OF
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
I. GENERAL
1.1 PURPOSE OF THE PLAN
The purpose of the Long-Term Incentive Plan (the "Plan") of Success
Development International, Inc. (the "Company") is to provide an incentive, in
the form of a proprietary shareholder interest in the Company, to employees of
the Company and/or its subsidiaries, to increase their interest in the Company's
welfare, and to assist the Company and its subsidiaries in attracting and
retaining employees.
1.2 ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board of Directors of the Company or
a committee empowered by the Board of Directors to perform such responsibilities
(collectively, the "Board"). The Board shall have full and final authority in
its discretion, subject to the provisions of the Plan: (a) to determine
individuals to whom and the time or times at which options or restricted stock
shall be granted and exercised and the number of shares and exercise price, if
any, of the common stock, $.OO1 par value, of the Company ("Common Stock"),
covered by each option or grant of restricted stock; (b) to determine the terms
of the option or restricted stock agreements, which need not be identical,
including, without limitation, terms covering vesting, exercise dates, if any,
and exercise prices, if any; (C) to decide all questions of fact arising in the
application of the Plan; and (d) to administer and interpret the Plan in all
respects. All determinations made by the Board shall be final and conclusive.
The Board shall meet once each fiscal year, and at such additional times
as it may determine or as is requested by the chief executive officer of the
company, to designate the eligible employees, if any, to be granted awards under
the Plan and the type and amount of such awards and the time when awards will be
granted. All awards granted under the Plan shall be on the terms and subject to
the conditions hereinafter provided.
1.3 ELIGIBLE PARTICIPANTS
Employees of the Company and the Company's subsidiaries shall be eligible
to participate in the Plan. Directors and independent contractors of the Company
and the Company's subsidiaries shall be eligible to participate in Section IV of
the Plan with respect to awards of restricted stock (any person receiving an
award under this Plan hereinafter referred to as a "Participant"). The terms
"subsidiary" or "subsidiaries" shall mean any corporation now existing or
hereafter organized or acquired (other than the Company) in an unbroken chain of
corporations beginning with the Company, if, at the time of option grant, each
of the corporations (including the Company) other than the last corporation in
the unbroken chain owns stock possessing 80% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
1.4 GRANTS UNDER THE PLAN
Grants under the Plan may be in the form of incentive stock options (as
described in Article II) ("Incentive Stock Options"), executive stock options
(as described in Section III) ("Executive Stock Options") and/or restricted
stock (as described in Section IV) ("Restricted Stock"), or any combination
thereof.
1.5 OTHER COMPENSATION PROGRAMS
The adoption of the Plan contemplates the continuation of any existing
incentive compensation plan(s) of the Company and in no way limits or is limited
by the operation, administration or amendment of any such plan(s). The existence
and terms of
<PAGE>
the Plan shall not limit the authority of the Board in compensating employees,
directors and/or independent contractors of the Company in such other forms and
amounts as it may determine from time to time.
1.6 LIMITATIONS ON GRANTS
The aggregate number of shares of Common Stock, including shares reserved
for issuance pursuant to the exercise of options, which may be granted or issued
under the terms of the Plan, may not exceed 3,200,000 shares, and such shares
hereby are reserved for such purpose. Whenever any outstanding grant or portion
thereof expires, is canceled or forfeited or is otherwise terminated for any
reason without having been exercised or vested or without payment having been
made in respect of the entire grant, the Common Stock allocable to the expired,
forfeited, canceled or otherwise terminated portion of the grant may again be
the subject of further grants hereunder.
During the period that any grants remain outstanding under the Plan, the
Board may make good faith adjustments with respect to the number of shares of
Common Stock attributable to such grants for purposes of calculating the m
shares of Common Stock available for the granting of future grants under the
Plan.
1.7 DEFINITIONS
The following definitions shall apply to the Plan:
(a) "Disability" shall have the meaning provided in the Company's
applicable disability plan or, in the absence of such a definition, when a
Participant becomes totally disabled (as determined by a physician mutually
acceptable to the Participant and the Company) before attaining his or her 65th
birthday and if such total disability continues for more than three months.
Disability does not include any condition which is intentionally self-inflicted
or caused by illegal acts of the Participant.
(b) "Fair Market Value" shall mean the value established by the Board
in good faith on such basis as it deems reasonable and appropriate and, in the
case of an Incentive Stock Option, in accordance with Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
(C) "Retirement" shall have the meaning provided in the Company's
applicable retirement plan or, in the absence of such a definition, the first
day of the month following the month in which the Participant attains his or her
65th birthday.
(d) "Termination" shall mean, unless otherwise limited herein, when a
Participant ceases being an employee, director or independent contractor, as
applicable, of the Company or any subsidiary for any reason, including, without
limitation, Retirement, discharge, layoff or any other voluntary or involuntary
termination of a Participant's employment or tenure as a director or independent
contractor. Transfer of employment within the Company or among the Company and
any subsidiaries shall not be deemed a Termination.
II. INCENTIVE STOCK OPTIONS
2.1 TERMS AND CONDITIONS
Subject to the following provisions of this Article II, all Incentive
Stock Options shall be in such form and upon such terms and conditions as the
Board, in its discretion, may from time to time determine.
2.2 QUALIFIED STOCK OPTIONS
Incentive Stock Options shall, at the time of grant, be in such form and
upon such terms and conditions as may be required in order that such options
will constitute incentive stock options within the meaning of Section 422 of the
Code. To the extent that the Fair Market Value of Common Stock with respect to
which Incentive Stock Options are exercisable for the first time by any
individual during any calendar year (pursuant to the Plan and all other plans of
the Company) exceeds $100,000, such
<PAGE>
options shall be treated as Executive Stock Options.
2.3 OPTION PRICE
The option price per share shall be at least one hundred percent (100%) of
the Fair Market Value of the Common Stock on the date the Incentive Stock Option
is granted.
2.4 TERM OF OPTION
Any Incentive Stock Option granted under the Plan may be exercised no
later than ten (10) years from the date of grant or such shorter period of time
as designated by the time of grant. Subject to Sections 2.7,2.8 and 5.13 hereof
and the stock option governing the grant of the Incentive Stock Options, which
may contemplate vesting rights, options may be exercised in whole or in one or
more parts throughout such rights to exercise an Incentive Stock Option shall
expire at the end of the designated term.
2.5 PAYMENT
Payment for shares for which an option is exercised shall be made in
Corporation in such manner and at such time or times as shall be provided by the
time of grant in either (I) cash or its equivalent or (ii) by tendering shares
of previously acquired Common Stock having a Fair Market Value equal to the
exercise price or (iii) by a combination of (I) and (ii). The proceeds from such
payment shall be added to the general Corporation and shall be used for general
corporate purposes.
2.6 EXERCISE OF OPTION
Subject to Section 5.13, Incentive Stock Options shall be exercisable in
whole or in part after completion of such periods of service as the Board shall
specify when granting provided, however, that in the absence of any Board
specification to the contrary in a Participant's stock option agreement, and
subject to Sections 2.7 and 2.8, fifty percent (50%) of the shares subject to
the Incentive Stock Option shall have been earned and the Incentive Stock Option
shall become exercisable with respect to such shares on the third annual
anniversary of the date of grant of the Incentive Stock Option and twenty-five
percent (25%) of the shares subject to the Incentive Stock Option shall have
been earned and the Incentive Stock Option shall become exercisable with respect
to such shares on each of the fourth and fifth annual anniversaries of the date
of grant of the Incentive Stock Option. In no ever and notwithstanding Sections
2.7 and 2.8, shall an Incentive Stock Option be exercised after the expiration
of ten (10) years from the date of grant.
2.7 TERMINATION OF EMPLOYMENT
A Participant's Incentive Stock Options shall expire three months after
the Termination of the Participant's employment for any reason other than death,
Disability or Retirement and shall be limited to the shares of Common Stock
which could have been purchased by the Participant at the date of termination of
employment.
2.8 TERMINATION OF EMPLOYMENT BY REASON OF DEATH, DISABILITY OR
RETIREMENT
Upon the Termination of a Participant's employment by reason of death,
Retirement, Incentive Stock Options held at the termination date by such
Participant shall be exercisable, irrespective of whether the options were fully
exercisable in accordance with Section 2.6 on that date. The Participant's
Incentive Stock Options shall expire unless exercised within one year from the
date of such Termination.
In the case of Termination of a Participant's employment by reason of
early retirement within the meaning of the Company's applicable retirement plan,
Incentive Stock Options which may be exercised shall be limited to the shares
which could have been purchased by the Participant at the date of such early
retirement, except that the Board, in its discretion, may waive the vesting
requirements of Section 2.6. The Participant's Incentive Stock Options shall
expire unless exercised within one year from the date of such Termination.
<PAGE>
The Board may, at any time on or before the termination of the exercise
period of the Participant's Incentive Stock Options, extend the exercise period
if the Participant's employment is terminated for a reason specified in Section
2.8. If so extended, the term of the exercise period shall expire on the date
specified by the Board, which date shall be no later than the date which is
sixty (60) months following the date of the Participant's Termination of
employment. If such extension could adversely affect the Participant's federal
income tax treatment of the Incentive Stock Option at the time of extension or
exercise, the extension shall only be made with the consent of the Participant.
In no event may the term of an Incentive Stock Option, including extensions,
exceed the term set forth in Section 2.4.
2.9 SPECIAL RULE FOR 10 PERCENT SHAREHOLDERS
If, at the time an Incentive Stock Option is granted, a Participant owns
Common Stock representing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any of its subsidiaries,
then the terms of the Incentive Stock Option shall specify that the option price
shall at the time of grant be at least one hundred-ten percent (110%) of the
Fair Market Value of the stock subject to the option and such option shall not
be exercisable after the expiration of five (5) years from the date such option
is granted.
2.10 NOTICE OF EXERCISE
When exercisable pursuant to the terms of the governing incentive stock
option agreement, Incentive Stock Options granted under the Plan shall be
exercised by the Participant (or by other authorized persons in accordance with
Section 5.9) as to all or part of the shares subject to the option by delivering
written notice of exercise to the Company at its principal business office or
such other office as the Company may from time to time direct, (a) specifying
the number of shares to be purchased, (b)indicating the method of payment of the
exercise price or including a check payable to the Company in an amount equal to
the full exercise price of the number of shares being purchased, and (C)
containing such further provisions consistent with the provisions of the Plan,
as the Company may from time to time prescribe.
2.11 NOTICE OF DISPOSITION
If a Participant makes a disposition, within the meaning of Section 424(C)
of the Code and the regulations promulgated thereunder, of a share or shares of
Common Stock issued to such Participant pursuant to the exercise of an Incentive
Stock Option within the two-year period commencing on the day after the date of
the grant or within the one-year period commencing on the day after the date of
transfer of such share or shares to the Participant pursuant to such exercise,
the Participant shall, within ten (10) days of such disposition, notify the
Company thereof in writing at the Company's principal executive office.
2.12 LIMITATION OF EXERCISE PERIODS
The Board may limit the time periods within which an Incentive Stock
Option may be exercised if a limitation on exercise is deemed necessary in order
to effect compliance with applicable law.
III. EXECUTIVE STOCK OPTIONS
3.1 TYPES OF OPTIONS
Executive Stock Options granted under the Plan shall, at the time of
grant, provide that they will not be treated as an incentive stock option within
the meaning of Section 422 of the Code.
3.2 TERMS AND CONDITIONS OF OPTIONS
Subject to the following provisions, all Executive Stock Options granted
under the Plan shall be in such form and upon such terms and conditions as the
Board, in its discretion, may from time to time determine, provided such terms
and conditions are clearly designated at the time of grant.
<PAGE>
3.3 EXERCISE PRICE
The exercise price per share shall be at least one hundred percent (100%)
of the Fair Market Value of the Common Stock on the date such Executive Stock
Option is granted.
3.4 TERM OF OPTIONS
Any Executive Stock Option granted under the Plan may be exercised no
later than ten (10) years from the date of grant or such shorter period of time
as designated by the Board at the time of grant. Subject to Sections 3.7, 3.8
and 5.13 hereof and the stock option agreement governing the grant of the
Executive Stock Options, which may contemplate vesting of exercise rights,
options may be exercised in whole or in one or more parts throughout such term.
All rights to exercise an Executive Stock Option shall expire at the end of the
designated term.
3.5 PAYMENT
Payment for shares for which an Executive Stock Option is exercised shall
be made in full to the Corporation in such manner and at such time or times as
shall be provided by the Board at the time of grant in either (I) cash or its
equivalent or (ii) by tendering shares of previously acquired Common Stock
having a Fair Market Value equal to the exercise price or (iii) by a combination
of (I) and (ii). The proceeds from such payment shall be added to the general
funds of the Corporation and shall be used for general corporate purposes.
3.6 EXERCISE OF OPTIONS
Subject to Section 5.13, Executive Stock Options shall be exercisable in
whole or in part after completion of such periods of service or achievement of
such conditions as the Board shall specify when granting the options; provided
however, that in the absence of a Board specification to the contrary in a
Participant's stock option agreement and subject to Sections 3.7 and 3.8, fifty
percent (50%) of the shares subject to the Executive Stock Option shall have
been earned and the Executive Stock Option shall become exercisable with respect
to such shares on the third annual anniversary of the date of grant of the
Executive Stock Option and twenty-five percent (25%) of the shares subject to
the Executive Stock Option shall have been earned and the Executive Stock Option
shall become exercisable with respect to such shares on each of the fourth and
fifth annual anniversaries of the date of grant of the Executive Stock Option.
In no event, however, and notwithstanding Sections 3.7 and 3.8, shall an
Executive Stock Option be exercised after the expiration of ten (10) years from
the date of grant.
3.7 TERMINATION OF EMPLOYMENT
A Participant's Executive Stock Options shall expire three months after
the Termination's employment for any reason other than death, Disability or
Retirement and shall be limited to the shares of Common Stock which could have
been purchased by the Participant at the date of Termination of employment.
3.8 TERMINATION OF EMPLOYMENT BY REASON OF DEATH, DISABILITY OR
RETIREMENT
Upon the Termination of a Participant's employment by reason of death,
Disability or Retirement, Executive Stock Options held at the termination date
by such Participant shall be exercisable, irrespective of whether the options
were fully exercisable in accordance with Section 3.6 on that date. The
Participant's Executive Stock Options shall expire unless exercised within one
year from the date of such Termination.
In the case of Termination of a Participant's employment by reason of
early retirement within the meaning of the Company's applicable retirement plan,
Executive Stock Options which may be exercised shall be limited to the shares
which could have been purchased by the Participant at the date of such early
retirement, except that the Board, in its discretion, may waive the vesting
requirements of Section 3.6. The Participant's Executive Stock Options shall
expire unless exercised within one year from the date of such Termination.
<PAGE>
The Board may, at any time on or before the termination of the exercise
period of the Participant's Executive Stock Options, extend the exercise period
if the Participant's employment is terminated for a reason specified in this
Section 3.8. If so extended, the term of the exercise period shall expire on the
date specified by the Board, which date shall be no later than the date which is
sixty (60) months following the date of the Participant's Termination of
employment. If such extension could adversely affect the Participant's federal
income tax treatment of the Executive Stock Option at the time of extension or
exercise, the extension shall only be made with the consent of the Participant.
In no event may the term of an Executive Stock Option, including extensions,
exceed the term set forth in Section 3.4.
3.9 NOTICE OF EXERCISE
When exercisable pursuant to the terms of the governing stock option
agreement, Executive Stock Options granted under the Plan shall be exercised by
the Participant (or by other authorized persons in accordance with Section 5.9)
as to all or part of the shares subject to the option by delivering written
notice of exercise to the Company at its principal business office or such other
office as the Company may from time to time direct, (a) specifying the number of
shares to be purchased, (b) indicating the method of payment of the exercise
price or including a check payable to the Company in an amount equal to the full
exercise price of the number of shares being purchased, (C) including a Tax
Election, if applicable, in accordance with Section 5.8, and (d) containing such
further provisions consistent with the provisions of the Plan, as the Company
may from time to time prescribe.
3.10 LIMITATION OF EXERCISE PERIODS
The Board may limit the time periods within which an Executive Stock
Option may be exercised if a limitation on exercise is deemed necessary in order
to effect compliance with applicable law.
IV. RESTRICTED STOCK
4.1 TERMS AND CONDITIONS OF AWARDS
The Board may grant shares of stock subject to the restrictions described
in Section 4.2 under a restricted stock agreement, without payment by the
Participant for such Restricted Stock. Such agreement shall specify the number
of shares granted and the conditions and terms of the grant. Restricted Stock,
with restrictions noted on the face of the certificates, shall be issued in the
name of the Participant granted the Restricted Stock and deposited with a trust
administered by the Board or, if an election is made with respect to such
Restricted Stock under Sections 83(b) of the Code, held by the Company (and in
each case subject to the claims of the Company's creditors) during the
restriction period.
4.2 RESTRICTIONS
Until the restrictions have lapsed in accordance with Section 4.3, and
unless otherwise permitted under the Restricted Stock Agreement, the shares of
Restricted Stock granted hereunder may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated. The Board may impose such
other restrictions on any shares of restrict stock as required by law including,
without limitation, restrictions under applicable federal or state securities
laws, and may place legends on the certificates representing such Restricted
Stock to provide appropriate notice of such restrictions.
4.3 PERIOD OF RESTRICTION
Subject to Section 5.13, the restrictions set forth in Section 4.2 shall
lapse and such shares shall be freely transferable upon completion of such
periods of service or achievement of such conditions (the "Management
objectives") as the Board shall specify in an individual Restricted Stock
Agreement between the Company and the Participant when granting the shares of
Restricted Stock.
4.4 TERMINATION OF EMPLOYMENT
<PAGE>
If a Participant's employment is terminated or if the Participant's tenure
as a director or independent contractor is terminated prior to the lapsing of
the restrictions in accordance with Section 4.3 as a result of death, Retirement
or Disability, restrictions on the shares of Restricted Stock granted to the
Participant shall immediately lapse on the date of such death, Disability or
Retirement. If any Participant's employment or tenure as a director or
independent contractor is terminated prior to the lapsing of restrictions in
accordance with Section 4.3 for any reason other than death, Disability or
Retirement, the shares of Restricted Stock granted such Participant shall be
forfeited and shall revert to the Company.
4.5 RIGHTS AS SHAREHOLDER
Participants holding shares of Restricted Stock shall have no voting
rights or (unless otherwise provided in the Restricted Stock Agreement) dividend
rights with respect to such shares until such shares of Restricted Stock shall
be deemed to have been earned in accordance with Section 4.3.
V. GENERAL PROVISIONS
5.1 GENERAL RESTRICTIONS
Each grant under the Plan shall be subject to the requirement that if the
Board shall determine, at any time, that (a) the listing, registration or
qualification of the shares of Common Stock subject or related thereto upon any
securities exchange or under any state or federal law, (b) the consent or
approval of any government regulatory body, or (C) an agreement by the
Participant with respect to the disposition of shares of Common Stock, is
necessary or desirable as a condition of, or in connection with, the granting or
the issuance or purchase of shares of Common Stock thereunder, such grant may
not be consummated in whole or in part unless such listing, registration,
qualification, consent, approval or agreement shall have been effected or
obtained free of any conditions not acceptable to the Board.
5.2 ADJUSTMENTS FOR CERTAIN CORPORATE EVENTS
In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, rights offer, liquidation, dissolution, merger,
consolidation, spin-off or sale of assets, or any other change in or affecting
the corporate structure or capitalization of the Company, the Board shall make
such adjustments as the Board in its discretion may deem appropriate in the
number and kind of shares authorized by the Plan, in the number, exercise price
or kind of shares covered by the grants and in any outstanding grants under the
Plan in order to prevent substantial dilution or enlargement thereof.
5.3 AMENDMENTS
The Board may discontinue the Plan at any time and may amend it from time
to time, but no amendment, without approval by a majority of the shares voting,
may (a) increase the total number of shares which may be issued under the Plan,
except as provided in Section 5.2 hereof, (b) materially modify the eligibility
requirements for Participants, (C) materially increase the benefits accruing to
Participants, or (n to no longer comply with any applicable federal or state
statutory or regulatory requirements.
5.4 GRANTS EVIDENCED BY AGREEMENTS
Each grant under the Plan shall be evidenced by an individual Incentive
Stock Option agreement, Executive Stock Option Agreement or Restricted Stock
Agreement, as applicable, which shall be executed by the Company and each
Participant. The agreement shall contain such terms and provisions, not
inconsistent with the terms of the Plan, as shall be determined by the Board,
including, as applicable: (a) the number of shares a Participant may acquire
pursuant to the option granted and the exercise price per share or the number of
shares of Restricted Stock granted, as applicable; (b) any conditions affecting
the exercise of the option; (C) the procedure for exercising the option granted;
(d) a clear designation of whether the exercise of the option granted thereby is
subject to vesting; (e) a clear designation of the period of restriction and
conditions for vesting of Restricted Stock; (f) representations and warranties
of the
<PAGE>
Participant regarding the acquisition of shares for investment purposes; and (g)
such provisions as the Board, upon advice of counsel to the Company, shall deem
necessary or appropriate to comply with the requirements of applicable laws. In
the event there shall be any discrepancy or inconsistency between the terms of
the Plan and any term or provision contained in such an agreement, the terms of
the Plan, as interpreted by the Board, shall govern.
5.5 MODIFICATION, SUBSTITUTION OR CANCELLATION OF GRANTS
Subject to the terms of the Plan, the Board may modify outstanding grants
under the Plan or accept the surrender of outstanding grants and make new grants
in substitution for them. Notwithstanding the foregoing, no modification of any
grant shall adversely alter or impair any rights or obligations of the
Participant without the Participant's consent.
5.6 SHARES SUBJECT TO THE PLAN
Shares distributed pursuant to the Plan shall be made available from
authorized but unissued shares or from shares purchased or otherwise acquired,
in open market, in private transactions or otherwise, by the Company for use in
the Plan, as shall be determined from time to time by the Board.
5.7 RIGHTS OF A SHAREHOLDER
Participants under the Plan, unless otherwise provided by the Plan or the
Restricted Stock Agreement, shall have no rights as shareholders by reason
hereof unless and until certificates for shares of Common Stock are issued to
them.
5.8 WITHHOLDING
The Company shall have the right to deduct from any distribution of Common
Stock to any Participant an amount equal to the federal, state and local income
taxes and other amounts as may be required by law to be withheld (the
"Withholding Taxes") with respect to any grant under the Plan. If a Participant
is to experience a taxable event in connection with the receipt of cash or
shares of Common Stock pursuant to an option exercise (a "Taxable Event"), the
Participant shall pay the Withholding Taxes to the Company prior to the issuance
of such shares of Common Stock. In satisfaction of the obligation to pay
Withholding Taxes to the Company, the Participant may make a written election
(the "Tax Election"), which may be accepted or rejected in the discretion of the
Board, to have withheld a portion of the shares of Common Stock then issuable to
the Participant having an aggregate Fair Market Value on the day immediately
preceding the date of such issuance equal to the Withholding Taxes.
5.9 NONASSIGNABILITY
Except as expressly provided in the Plan, no grant shall be transferable
except by will, the laws of descent and distribution or a qualified domestic
relations order ("QDRO" as d fined by the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder.
During the lifetime of the Participant, except as expressly provided in the
Plan, grants under the Plan shall be exercisable only by such Participant, by
the guardian or legal representative of such Participant or pursuant to a QDRO.
5.10 NONUNIFORM DETERMINATIONS
Determinations by the Board under the Plan (including, without limitation,
determinations of the persons to receive grants, the form, amount and timing of
such grants, and the terms and provisions of such grants and the agreements
evidencing the same) need not be uniform and may be made by it selectively among
persons who receive, or are eligible to receive, grants under the Plan, whether
or not such persons are similarly situated.
5.11 NO GUARANTEE OF EMPLOYMENT
Neither grants under the Plan nor any action taken pursuant to the Plan shall
constitute or be evidence of any agreement or understanding, express or implied,
that the Company shall retain the Participant for any period of time or at any
particular rate of compensation.
<PAGE>
5.12 EFFECTIVE DATE; DURATION
The Plan shall become effective as of May 15, 1995, subject to approval by
shareholders. No grant may be given under the Plan after May 15, 2005, but
grants theretofore granted may extend beyond such date.
5.13 CHANGE IN CONTROL
Notwithstanding anything herein to the contrary, if a Change in Control of
the Company occurs, then all Incentive Stock Options and Executive Stock Options
shall become fully exercisable and all restrictions on grants of Restricted
Stock shall lapse as of the date such Change in Control occurred. For the
purposes of the Plan, a Change in Control of the Company shall be deemed to have
occurred upon the earliest of the following events:
(a) upon the first offering of Common Stock pursuant to an effective
registration statement under the Securities Act of 1933, as amended; or
(b) upon the approval by the Company's shareholders of (I) a merger
or consolidation of the Company with or into another corporation (other than a
merger or consolidation in which the Company is the surviving corporation and
which does not result in any capital reorganization or reclassification or other
change in the Company's then-outstanding shares of Common Stock) or (ii) a sale
or disposition of all or substantially all of the Company's assets.
(C) if the Board or any designated committee determines in its sole
discretion that any person, other than a person who exercised a controlling
influence as of the effective date of the Plan, directly or indirectly exercises
a controlling influence over the management or policies of the Company.
5.14 GOVERNING LAW. The Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Florida.
EXHIBIT 23.1
[JAMES MOORE & CO,, P.L. LETTERHEAD]
We consent to the use of our report dated September 18, 1997 and to the
reference to our firm under the caption "Experts" in the Registration Statement
(Form SB-2) and related Prospectus of Success Development International, Inc.
James Moore & Co.
Holly Hill, Florida
December 15, 1997
EXHIBIT 23.2
[Drew Field,, P.L. LETTERHEAD]
December 18, 1997
Board of Directors
Success Development International, Inc.
9799 Old St. Augustine Road
Jacksonville, Florida 32257
Dear Directors:
You have requested my opinion as to the legality of the securities being
registered by Success Development International, Inc. (the Company) under the
Securities Act of 1933, as amended (the Act), by filing a registration statement
on Form SB-2, relating to the offering of up to 500,000 shares of its common
stock a (the Shares) as described in the registration statement.
In connection with your request for my opinion, you have provided me and I have
reviewed the Company's Articles of Incorporation, as amended, bylaws,
resolutions of the Board of Directors of the Company concerning the offering,
the registration statement and such other corporate documents as I have
considered necessary or appropriate for the purposes of this opinion.
Upon the basis of such examination, it is my opinion that, when the registration
statement shall have become effective under the Act, and when the payment of the
consideration therefor, the Shares will, when sold, be legally issued, fully
paid and non-assessable.
I hereby consent to the filing of this opinion as an exhibit to the registration
statement.
Very truly yours,
By
DREW FIELD
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM 10-QSB (3-31-98) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 8,439
<SECURITIES> 0
<RECEIVABLES> 1,594,985
<ALLOWANCES> (956,991)
<INVENTORY> 82,959
<CURRENT-ASSETS> 444,647
<PP&E> 1,375,613
<DEPRECIATION> (274,901)
<TOTAL-ASSETS> 2,016,971
<CURRENT-LIABILITIES> 2,191,113
<BONDS> 0
0
0
<COMMON> 11,380
<OTHER-SE> (956,733)
<TOTAL-LIABILITY-AND-EQUITY> (968,131)
<SALES> 1,769,630
<TOTAL-REVENUES> 1,697,501
<CGS> 608,228
<TOTAL-COSTS> 1,613,993
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,324
<INCOME-PRETAX> 80,639
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 80,639
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
