AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 18, 1998
REGISTRATION NO. 333-42499
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2 TO
FORM SB-2A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
(Name of small business issuer in its charter)
FLORIDA 8299
(State or jurisdiction of incorporation or (Primary Standard Industrial
organization) Classification Code Number)
59-3307487
(I.R.S. Employer Identification No.)
9799 OLD ST. AUGUSTINE ROAD
JACKSONVILLE, FLORIDA 32257
(904) 886-2985
(Address and telephone number of principal executive
offices and principal place of business)
SHAWN M. CASEY, CHIEF EXECUTIVE OFFICER
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
9799 OLD ST. AUGUSTINE ROAD
JACKSONVILLE, FLORIDA 32257
(904) 886-2985
(Name, address and telephone of agent for service)
Copies to:
DREW FIELD
534 PACIFIC AVENUE
SAN FRANCISCO, CA 94133
(415) 296-9795
Approximate date of commencement of proposed sale to the public: AS SOON
AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock,
$0.001 par value 500,000 $5.50 $2,500,000 $811.25
Common Stock, (2)
$0.001 par value 50,000 $5.50 $ 275,000 $ 81.13
Total $892.38
</TABLE>
(1) To be issued to the Broker-Dealer upon exercise of the Options. See "Plan
of Distribution."
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
If any of the securities on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box: [X]
500,000 Shares Maximum, 100,000 Shares Minimum
Success Development International, Inc.
COMMON STOCK
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Before this offering, there has been no public market for the Company's
common stock, so the public offering price has been determined by the Company.
After completion of this offering, no active trading market may develop or be
sustained for the Company's shares. See "Risk Factors" and "Shares Eligible for
Future Resale."
This offering is being made by the Company through Attkisson, Carter and
Akers, Incorporated (the "Broker-Dealer") on a best effort basis, for at least
100,000 shares (the "Minimum") and not more than 500,000 shares (the "Maximum").
See "Use of Proceeds." Only until the Minimum is fully subscribed, all
subscription payments will be deposited into an escrow account at First Union
National Bank. If the Minimum is not subscribed within three (3) months after
the date of this prospectus all proceeds deposited in the escrow account will be
promptly refunded in full, with interest, and without any deduction for
expenses. Upon raising the Minimum amount, the escrow will be terminated,
subscribers will become shareowners and any proceeds from more sales of shares
will go directly to the Company. Officers, directors and principal shareholders
are able to purchase up to 50,000 shares toward reaching this minimum. This
offering will end on the earlier of the following: the sale of the Maximum
amount, twelve months after the date of this Prospectus or the date on which the
Company decides to close the offering. A minimum purchase of 200 shares is
required. The Company reserves the right to reject any subscription or share
purchase agreement in full or in part. See "Plan of Distribution."
THE SHARES OFFERED BY THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. SEE
"RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY (2)
---------- -------- ----------
Per Share ........................... $ 5.50 $ 0.55 $ 4.95
Total Minimum (100,000 shares) ...... $ 550,000 $ 55,000 $ 495,000
Total Maximum (500,000 shares) ...... $2,750,000 $275,000 $2,475,000
(1) Does not include additional compensation to be received by Attkisson,
Carter & Akers, Incorporated, the Broker-Dealer, in the form of (i) an
accountable expense allowance of $15,000, or $0.03 per share, and (ii)
options, exercisable over a period of three years commencing on the date
of this prospectus, to purchase up to 50,000 shares of common stock at
$5.50 per share. See "Plan of Distribution."
(2) Before deducting estimated expenses of $250,000 payable by the Company,
including registration fees, escrow agent fees, legal and accounting fees,
costs of printing, copying and postage and other offering costs.
Any purchases by persons affiliated with the Company for the explicit
purpose of meeting the minimum contingency must be made for investment
purposes only, and not with a view toward redistribution.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 18, 1998
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<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, THAT INFORMATION AND REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS IS
NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
IT OFFERS TO ANY PERSON IN ANY JURISDICTION IN WHICH THAT OFFER OR SOLICITATION
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION IN THIS
PROSPECTUS IS CORRECT AS OF ANY DATE LATER THAN THE DATE OF THIS PROSPECTUS.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C>
Reference Data....................................... 3 Principal Shareowners......................... 21
Prospectus Summary................................... 4 Certain Transactions.......................... 21
Risk Factors......................................... 5 Description of Common Stock................... 22
Use of Proceeds...................................... 7 Shares Eligible for Future Resale............. 23
Dilution............................................. 8 Plan of Distribution.......................... 24
Management's Discussion and Analysis of.............. Experts....................................... 25
Financial Condition and Results of Operations...... 9 Additional Information........................ 25
Business............................................. 12 Financial Statements.......................... 28
Management........................................... 18 Notes to Financial Statements................. 35
</TABLE>
UNTIL MAY 18, 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
REFERENCE DATA
Upon the date of this Prospectus, the Company became subject to the
informational filing requirements of the Securities Exchange Act of 1934, as
amended ("Exchange Act") for its current fiscal year. Upon completion of this
offering, the Company may be required to register under the Exchange Act and
continue to file required annual and quarterly reports.
The Company intends to furnish its shareowners with annual reports
containing financial statements audited by an independent public accounting firm
after the end of its fiscal year on December 31.
The Company was incorporated in Florida, on April 10, 1995. The Company's
corporate offices are located at 9799 Old St. Augustine Road, Jacksonville,
Florida 32257. The Company's other addresses are Voice: (904) 886-2985;
Facsimile: (904) 886-2995.
IN CONNECTION WITH THIS OFFERING, THE BROKER-DEALER MAY EFFECT TRANSACTIONS
WHICH STABILIZE THE MARKET PRICE OF THE COMMON STOCK AT A LEVEL ABOVE THAT WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF ANY, MAY BE
DISCONTINUED AT ANY TIME.
3
<PAGE>
PROSPECTUS SUMMARY
THIS IS A BRIEF SUMMARY OF THE INFORMATION AND FINANCIAL STATEMENTS (AND THEIR
NOTES) IN THIS PROSPECTUS. WE ENCOURAGE YOU TO READ THE ENTIRE PROSPECTUS BEFORE
YOU DECIDE WHETHER AND HOW MUCH TO INVEST IN OUR SHARES.
SUCCESS DEVELOPMENT INTERNATIONAL
(Called "SDI" or "the Company.") Our business is teaching customers how to
create, increase and maintain income through such home-based business
opportunities as buying, managing and selling real estate; buying, selling and
brokering mortgages and buying and selling judgements and liens. We do this
through seminars, home study courses, training events and ongoing customer
support services. Our customers include individuals seeking skills to achieve
financial independence, as well as experienced entrepreneurs wanting to enhance
their existing programs and protect their assets. SDI's growth has come
primarily from teaching real estate entrepreneurship and management. See
"Business."
FINANCIAL HISTORY AND CURRENT POSITION
SDI was formed in 1995 to combine an educational conference business and a
publishing business. During the first nine months of 1997, SDI had an unaudited
net income of $668,793. This followed audited losses of $2,370,461 for 1996 and
$461,812 for 1995. Total sales more than doubled from 1995 to 1996 and we
attribute these losses to an emphasis on rapid growth and development of a
management team. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
PLANS FOR THE FUTURE
We intend to expand our customer base through additional marketing and
advertising. We plan to add additional real estate investment workshops and
seminars throughout the United States. We will continue to seek to create and
acquire additional products and services which will be of interest and benefit
to our existing and new customers. We aim to expand the distribution of products
and services through new outlets and mediums. We have jointly developed, with a
major direct response marketing company, a thirty minute television infomercial
that first aired in November 1997 and is being re-edited. We will be seeking to
enter into other strategic alliances which will allow us to increase our
business by leveraging upon the expertise and resources of others. See
"Business: Joint Ventures, Strategic Alliances and Acquisitions."
USE OF ESTIMATED NET PROCEEDS
We estimate the proceeds from this offering, after paying offering
expenses, will be approximately $245,000 if the Minimum is sold and $2,225,000
if the Maximum is sold. We intend to use the proceeds of the offering, after
paying offering expenses, to pay for increased advertising and marketing, to
reduce accounts payable and to have additional working capital. See "Use of
Proceeds."
BECOMING A SHAREOWNER
You will be asked to represent that your investment is not more than ten
percent of your net worth and that you are capable of evaluating the merits and
risks of the prospective investment, because of your knowledge and experience in
financial and business matters. When your order has been accepted, you will
receive a signed copy and an acknowledgment letter. After the minimum 100,000
shares have been ordered, you will receive a certificate for your shares. If the
minimum is not sold, your funds will be returned with interest and without
deduction.
RISK FACTORS
The shares offered by this prospectus involve a high degree of risk, (See
"Risk Factors").
4
<PAGE>
RISK FACTORS
AN INVESTMENT IN SDI SHARES INVOLVES A HIGH DEGREE OF RISK AND SHOULD ONLY
BE MADE BY PERSONS WHO CAN AFFORD TO LOSE UP TO THEIR ENTIRE INVESTMENT. BEFORE
PURCHASING SHARES, YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS, IN
ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS.
SDI HAD LOSSES IN 1995 AND 1996, AND COULD AGAIN IN THE FUTURE.
SDI's net loss of $461,812 in 1995 was primarily due to increased marketing
expenses in the last quarter, which generated increased revenues in 1996. In
1996, SDI's gross revenue increased to nearly $6 million, from less than $3
million in 1995. While this 110% increase in operating revenues compares to a
101% increase for the cost of revenues (principally marketing costs), the costs
of royalties to speakers were up 267% and additions to staff increased general
and administrative overhead by 165% contributing to the net loss of $2,370,461
for 1996. The Company's $668,793 unaudited net income for the first nine months
of 1997 may not represent what the full year's results will be, or what can be
expected for future years. Some of the events that could cause future
fluctuations in operating results include potential acquisition expenditures and
related integration costs, development and promotional expenses for the
introduction of new products and services or new versions of existing products
and services, product returns, changes in pricing policies by SDI and its
competitors, account cancellations and/or delays in shipment, and having expense
levels based on higher expected sales than turn out to be realized. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
SDI'S EXPANSION PLANS WILL BE COSTLY AND MAY NOT BE SUCCESSFUL.
Developing programs for teaching small business owners means careful
planning and control of the time and cost. Our staff has considerable experience
in creating successful tools for teaching financial skills but we will be
applying that to subjects we haven't taught before. There can be delays and
budget overruns, and the resulting programs may not attract sufficient customers
to generate profits. We create information products which take a great deal of
time and require considerable expertise. Those products are produced by third
party vendors whose prices we do not control. For instance, when the price of
paper doubled recently, our costs increased significantly. Our prices can't be
adjusted directly to account for this. We don't know which marketing campaigns
are profitable until we risk the money and measure the response. Sometimes, as
happened recently in Denver, where there was a freak blizzard, the event must be
canceled, resulting in the loss of virtually all marketing expenditures. See
"Business -- Future Product Development and Acquisition Strategy."
THERE MAY BE NO PUBLIC TRADING MARKET FOR YOUR SHARES AND ANY RESALE PRICE IS
DIFFICULT TO PREDICT.
Prior to this offering, there has been no public market for SDI's common
stock, and the offering price for the shares was determined by the board of
directors, which considered such factors as SDI's results of operations, its
current financial condition, its future prospects, the state of the markets for
its products, the experience of management, the economics of the industry
segment in general and the demand for similar securities of companies considered
comparable to SDI. See "Plan of Distribution -- Determination of Offering
Price."
SDI does not currently meet the numerical requirements (such as income,
stockholders' equity and number of public shares outstanding) to have its shares
listed on a United States stock exchange or quoted on the NASDAQ
over-the-counter market, the most liquid trading markets for shares of common
stock. As soon as SDI may be able to meet those requirements, we intend to apply
for a listing on a United States regional stock exchange. Until any listing, we
have been advised that the Broker-Dealer would provide a matching service for
persons wishing to buy or sell shares when this offering has ended. Persons
wishing to buy or to sell SDI shares would provide the Broker-Dealer with
information about the number of shares and desired price and the Broker-Dealer
would notify both sides if and when there was a match and would assist in
closing the transaction. However, there is currently no agreement between SDI
and a registered securities broker-dealer. The price of the shares, after the
completion of this offering, can vary due to general economic
5
<PAGE>
conditions and forecasts, SDI's general business condition, the release of SDI's
financial reports and sales of shares which were outstanding prior to this
offering. See "Shares Eligible For Future Resale."
SOME SHARES OWNED BY EARLIER INVESTORS COULD BE SOLD AFTER THE OFFERING,
AFFECTING THE RESALE PRICE.
As a condition of this offering, all of the officers, directors and owners
of more than 5% of the Company's shares have signed a "Lock-in" agreement for
all of their shares. That agreement includes 9,692,000, or 90%, of the
10,798,699 shares that were outstanding before this offering. The effect of this
agreement is that none of these shares may be sold within one year after the
date of this Prospectus. The owners of 468,699 shares will be able to sell their
shares on various dates any time after December 10, 1997 and the owners of
638,000 shares will be able to sell at any time. Whenever any shares are sold,
it could cause the share price to keep from rising or to go down. See "Shares
Eligible for Future Resale."
THE AMOUNTS PAID FOR SHARES WILL BE KEPT IN A BANK ESCROW UNTIL THE MINIMUM
AMOUNT HAS BEEN SOLD.
If the Minimum 100,000 shares have not been fully subscribed within three
months after the date of this Prospectus, all monies deposited in the escrow
account will be refunded to the subscribers, with interest and without any
deduction for expenses. Officers, directors and principal shareholders are able
to purchase up to 50,000 shares toward reaching this minimum. Until then,
purchasers will be subscribers and not shareowners of SDI. During the Escrow
Period, subscribers will have no right to a return of their payment. See "Plan
of Distribution."
SDI PRESENTLY INTENDS TO RETAIN ANY EARNINGS AND PAY NO DIVIDENDS.
The Company has never declared a dividend and does not presently intend to
pay any dividends. Future dividends, if any, will depend on SDI's profitability,
financial condition, capital requirements and other considerations determined by
the Board of Directors. Any future agreements with lenders may also restrict
SDI's ability to pay dividends.
THE "BOOK VALUE" OF YOUR SHARES WILL BE SUBSTANTIALLY "DILUTED" FROM WHAT YOU
PAID FOR THEM.
One measure of share value is the amount of "shareholder's equity" it
represents. This per share "book value" is equal to SDI's assets, minus its
liabilities, divided by the number of shares it has outstanding. After the
minimum amount of this offering, the per share book value will be ($0.13) and
after the maximum amount it will be $0.05 per share. Purchasers of shares in
this offering will realize immediate substantial "dilution" of approximately
$5.63 per share of their investment from the initial public offering price,
assuming the Minimum amount offered is raised, and approximately $5.45 at the
Maximum. See "Dilution" and "Plan of Distribution -- Determination of Offering
Price." In addition, your proportionate ownership of SDI can be further diluted
by the issuance of more shares, at prices below what you will have paid. There
are currently options granted to employees or former employees for 300,000
shares, exercisable after completion of this offering at a price of $0.18 per
share. There are also options for 2,917,500 shares granted to employees and
former employees, exercisable at a price of $0.21 per share, upon SDI's gross
and net income reaching certain levels. See "Management: Long Term Incentive
Plan."
OUR BUSINESS COULD BE HURT BY THE LOSS OF KEY PEOPLE.
SDI relies heavily on the lectures and teaching methods and materials of
Mr. Ron LeGrand and Mr. Shawn Casey, and pays fees and royalties to them. See
"Management: Certain Transactions." SDI does not carry key person life insurance
with respect to any employee. The Company no longer has any employment
agreements. We are training replacement speakers and acquiring the rights to
other products to diversify our product offerings.
OUR BUSINESS COULD BE HURT BY COMPETITION.
SDI competes with a large number of privately-owned educational and
publishing companies providing personal and financial development information
through a variety of media. Some of our competitors have greater financial,
marketing, distribution, technical and other resources than we do. See "Business
- -- Competition."
6
<PAGE>
STATUTORY AND CHARTER LIMITATIONS COULD DETER AN ACQUISITION OF THE COMPANY.
Florida laws under which the Company is chartered deny voting rights to
persons trying to acquire control, subject to approval by the other
shareholders. The Company's articles of incorporation and bylaws also contain
provisions which (1) divide the Board of Directors into three classes of
staggered three-year terms, (2) require an 80% "supermajority" vote of
shareholders to approve certain business combinations and (3) allow shareholders
to increase the quorum or voting requirement for shareholders. These provisions
would make it relatively difficult to authorize a merger or other business
combination, to change the board of directors or to amend these charter
provisions. This could deter an acquisition of the Company that might otherwise
be of benefit to shareholders who are not part of management. See "Description
of Common Stock."
THE "PENNY STOCK" RULES COULD MAKE SELLING SHARES MORE DIFFICULT.
The Company's common stock might be defined as a "penny stock" pursuant to
Rule 3a51-1 of the Securities and Exchange Act of 1934, as amended (the "34
Act") if the shares were to be traded at a price less than $5.00 per share, if
the company had not yet met certain financial size and volume levels and if the
shares were not registered on a national securities exchange or quoted on the
NASDAQ system. A "penny stock" is subject to Rules 15g- 1 through 15g-100 of the
Securities and Exchange Commission under the '34 Act. Those rules require
securities broker-dealers, before effecting transactions in any "penny stock,"
to (1) deliver to the customer, and obtain a written receipt for a disclosure
document set forth in Rule 15g-100. (Rule 15g-2); to disclose certain price
information about the stock (Rule 15g- 3); to disclose the amount of
compensation received by the broker-dealer (Rule 15g-4) or any "associated
person" of the broker-dealer (Rule 15g-5); and to send monthly statements to
customers with market and price information about the "penny stock." (Rule
15g-6) The company's common stock could also become subject to Rule 15g-9, which
requires the broker-dealer, in some circumstances, to approve the "penny stock"
purchasers account under certain standards and deliver written statements to the
customer with information specified in the rules. (Rule 15g-9) These additional
burdens may discourage broker-dealers from effecting transactions and limit the
ability of purchasers in this offering to sell their shares into any secondary
market for the Company's common stock.
TWO MAJOR SHAREOWNERS COULD CONTROL THE COMPANY
Ron LeGrand will own over 50% of the outstanding common stock of the
Company after this offering, and Daniel S. Pena, Sr. will own nearly 20%. Mr.
LeGrand, alone or with Mr. Pena, could cause the election of a majority of the
Board of Directors, prevent approval of an acquisition of the Company or
otherwise exercise control of the Company.
SDI'S OFFICERS' AND DIRECTORS' LIABILITIES ARE LIMITED.
The Company's articles of incorporation provide that the Company will
indemnify any officer, director or former officer or director, to the full
extent permitted by law. This could include indemnification for liabilities
under securities laws enacted for shareowner protection, although, in the
opinion of the federal Securities and Exchange Commission, that indemnification
is against public policy.
WE ARE SUBJECT TO UNAUTHORIZED COPYING OF OUR INTELLECTUAL PROPERTY, OR CLAIMS
WE COPIED OTHERS.
We rely primarily on copyright laws and employee and third party
nondisclosure agreements to protect the intellectual property used in our
products and services, but we do not register copyrights in any of our
materials. We could be damaged by a significant amount of unauthorized copying
of our products and services. We also license third party intellectual property,
so we do not infringe upon others' rights. Although we are not aware that any of
SDI's products and services are materially infringing the rights of others, it
is possible they are. If so, we could have to modify our products and services,
at substantial possible cost. The Company might be subject to lawsuits if it is
alleged that it is infringing on the property rights of others.
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USE OF PROCEEDS
The net proceeds available to SDI from the sale of the shares in this
offering are estimated to be approximately $245,000 if the Minimum is sold, and
$2,225,000 if the Maximum is sold, after deducting both selling and other
offering expenses (estimated to be $305,000 if the Minimum is sold and $525,000
if the maximum is sold). We expect to use the net proceeds over the 12-month
period commencing from the date that the Minimum escrowed proceeds are released
to the Company (see "Plan of Distribution -- Escrow of Minimum Proceeds") for
the purposes outlined below. If more than the Minimum, but less than the Maximum
is raised, we intend to allocate proceeds in excess of the Minimum in the same
proportions as we would allocate if the Maximum were raised.
MINIMUM MAXIMUM
(100,000 SHARES) (500,000 SHARES)
---------------- -----------------
1 Offering Expenses............ $ 305,000 55% $ 525,000 19%
2 Marketing and advertising ... 245,000 45% $1,325,000 48%
3 Payment of Accounts Payable . -- -- 500,000 18%
4 Working Capital ............. -- -- 400,000 15%
---------------- -----------------
$ 550,000 100% $2,750,000 100%
================ =================
Marketing and Advertising will be allocated all of the net proceeds at the
Minimum offering amount and will be first priority for use of funds beyond the
Minimum. For how the funds will be used, see "Business -- Sales and Marketing."
Payment of Accounts Payable would accelerate the timing of regular payments
to suppliers of the services and products we use, making it easier to make
additional purchases. There are generally no interest payments to be made on
accounts payable and the payment terms are usually within 30 to 60 days after
receipt of invoice. All proceeds over the minimum, not applied to marketing and
advertising, would first be used to pay accounts payable.
Working Capital is the amount of the Company's current assets, such as
cash, receivables and inventory, in excess of its current liabilities, such as
accounts payable. As proceeds over the Minimum offering are received, and not
used for marketing and advertising or for payments of accounts payable, they
would be added to cash bank balances, increasing working capital.
DILUTION
The following table shows, on a pro forma basis as of September 30, 1997,
the difference between existing shareowners (not including options to buy
shares) and new investors purchasing shares in this offering, with respect to
the number of shares purchased, the total consideration paid and the average
price paid per share, at the Minimum and the Maximum:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- -------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------ ---------- ------ ------
<S> <C> <C> <C> <C>
MINIMUM SOLD:
Existing Shareowners(1) 10,798,699 99.1% $ 544,283 49.7% $ 0.05
New Investors .......... 100,000 .9 550,000 50.3 5.50
---------- ------ ---------- ------ ------
Total .................. 10,898,699 100.0% $1,094,283 100.0% --
========== ====== ========== ====== ======
MAXIMUM SOLD:
Existing Shareowners(1) 10,798,699 95.6% $ 544,283 16.5% $ 0.05
New Investors .......... 500,000 4.4 2,750,000 83.5 5.50
---------- ------ ---------- ------ ------
Total .................. 11,298,699 100.00% $3,294,283 100.00% --
========== ====== ========== ====== ======
</TABLE>
(1) Excludes 3,392,500 shares which were subject to outstanding options on
September 30, 1997, granted under the Company's Long Term Incentive Plan.
8
<PAGE>
Also, excludes 175,000 restricted shares issued under the Company's Long
Term Incentive Plan. Excludes the Warrants which may be issued to the
Broker-Dealer.
On September 30, 1997, the Company had a net tangible book value of
($1,608,246), or ($0.15) per share. The net tangible book value per share is
equal to SDI's total tangible assets, less its total liabilities and divided by
its total number of shares of common stock outstanding. After giving effect to
the sale of the Minimum and Maximum number of shares offered, at the public
offering price of $5.50 per share, and the application of the estimated net
offering proceeds, the pro forma net tangible book value of SDI, as of September
30, 1997, would have been ($1,363,246) and $616,754, respectively, or ($0.13)
per share and $0.05 per share, respectively. This represents an immediate
increase in net tangible book value of $0.02 per share and $0.20 per share,
respectively, to existing shareowners and an immediate dilution of $5.63 per
share and $5.42 per share, respectively, to new investors purchasing shares in
this offering. The following table illustrates the per share dilution in net
tangible book value per share to new investors:
MINIMUM MAXIMUM
(100,000 SHARES) (500,000 SHARES)
-------------- --------------
Public offering price per share ................. $ 5.50 $ 5.50
Pro forma net tangible book value per share
as of September 30, 1997 .................. $(0.15) $(0.15)
Increase per share attributed to investors
in this offering .......................... 0.02 0.20
----- -----
Pro forma net tangible book value per share
as of September 30, 1997, after this offering . (0.13) 0.05
----- -----
Net tangible book value dilution per share
to new investors .............................. $5.63 $5.45
===== =====
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 Jarell
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. See "Management
- -Directors and Executive Officers."
We realized significant improvement in our sales during 1996 and the nine
months ended September 30, 1997, 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 17.34% in the first nine months of 1997, when compared to 1995 and the first
nine months of 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.
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We account for the recognition of income from "Boot Camps" (described in
"Business--Our Current Products and Services") 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 December 31, 1995 and
1996 and the nine months ended September 30, 1996 and 1997 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 Prospectus.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996.
OPERATING REVENUE. Operating Revenue increased $827,552, or 17.34%, to
$5,598,688 in the first nine months of 1997 from $4,771,136 in the first nine
months of 1996. The increase resulted primarily from the Company's increased
sales due to its expanded marketing efforts.
Cost of Revenue and Direct Operating Expenses decreased $72,891, or 2.31%,
to $3,088,337 in the first nine months of 1997 from $3,161,228 in the first nine
months of 1996. The decrease resulted from the improvement of financial cost
controls.
Royalties cost to authors and speakers decreased $303,557, or 26.84%, to
$827,436 in the first nine months of 1997 from $1,130,993 in the first nine
months of 1996. The decrease results from the acquisition of certain products
for which no further royalty payments are due and the renegotiation of certain
royalty agreements. Royalties for the fourth quarter of 1996 were $1,028,155 or
48% of the total royalties paid for the year 1996. This was a direct result of
increased sales efforts as they relate to the fourth quarter revenue and
unearned revenue increases of $1,007,165 and $469,209 respectively. Management
sought out, during this time, new revenue streams through new speaker
engagements. These new revenue streams resulted in marginal product costs but
substantial royalties expense. Product costs decreased due to adjustments in
inventory. Inventory adjustments were based on physical counts allocated to
overages and product returns.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased $432,880, or 30.73%, to $975,725 in the first nine months of 1997 from
$1,408,605 in the first nine months of 1996. The decrease in expenses was
attributable to decreased personnel and related costs, and the improvement of
financial cost controls. The General and Administrative expense increased by
$1,341,772 in the fourth quarter for the year 1996. The added expense was due in
part to the lack of managerial cost controls. Managerial cost controls have
since been implemented in part or in whole, as addressed in note 12 of the
auditors' report. New managerial controls include, but are not limited to,
personnel staffing guidelines, materials management and purchasing procedures,
and debt restructuring. Additionally, key management personnel changes were
implemented to better control the flow of information. Also, the enhancement of
technology based systems has resulted in increased employee efficiency.
DEPRECIATION AND AMORTIZATION EXPENSES. Depreciation and amortization
expenses increased $15,853, or 29.02%, to $70,473 in the first nine months of
1997 from $54,620 in the first nine months of 1996. The increase resulted
primarily from the acquisition of property and equipment.
OTHER INCOME. Rent and other income decreased $12,916, or 12.28%, to
$92,250 in the first nine months of 1997 from $105,166 in the first nine months
of 1997. The decrease resulted from the reporting in 1996 of a one time gain on
the disposal of an asset.
INTEREST EXPENSE. Interest expense decreased $65,990, or 52.30%, to $60,174
in the first nine months of 1997 from $126,164 in the first nine months of 1996.
The decreased expense resulted primarily from the issuance of stock for the
elimination of indebtedness.
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YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1996.
OPERATING REVENUE. Operating Revenue increased $3,028,505, or 110.14%, to
$5,778,301 in 1996 from $2,749,796 in 1995. The increase resulted primarily from
the Company's increased expenses due to its expanded marketing efforts.
Cost of Revenue and Direct Operating Expenses increased $1,563,048, or
100.64%, to $3,116,217 in 1996 from $1,553,169 in 1995. The increase resulted
primarily from the increase in marketing expenditures.
Royalties cost to authors and speakers increased $1,571,561, or 267.46% to
$2,159,148 in 1996, from $587,587 in 1995. In 1996, the Company increased sales
of products created by authors and speakers who were not employees or
shareholders of the Company.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $1,713,361, or 165.22%, to $2,750,377 in 1996 from $1,037,016 in 1995.
The increase in expenses was attributable to increased personnel and related
costs.
DEPRECIATION AND AMORTIZATION EXPENSES. Depreciation and amortization
expenses increased $30,035, or 53.54%, to $86,134 in 1996 from $56,099 in 1995.
The increase resulted primarily from the acquisition of additional equipment
through capital leases.
OTHER INCOME. Rent and other income increased $14,975, or 13.35%, to
$127,180 in 1996 from $112,205 in 1995. The increase resulted primarily from an
increase in the rents received from Company-owned office buildings.
OTHER EXPENSE. Other Expenses increased $74,124, or 82.41%, to $164,066 in
1996 from $89,942 in 1995. The increased expense resulted from the increase in
interest expenses on borrowed funds and loss on disposal of asset.
LIQUIDITY AND CAPITAL RESOURCES. OVERVIEW. We have traditionally financed
operations through operating cash flow and private placement of convertible
debt.
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 accelerated growth and increased operating revenues.
Although we intend to sell all the common stock offered in this prospectus,
there is no guarantee that any or all of such common stock will be sold. Of the
funds expected to be raised, only $400,000 is allocated to working capital. In
our opinion, this amount is sufficient to meet our present and future working
capital needs. We have historically grown at a fast pace despite being under
capitalized. If an amount less than the foregoing amount is made available as a
result of the sale of common stock in this offering, then we will use the
available funds in the manner we see fit to continue our growth. No funds will
be spent for working capital at the minimum offering level. Any funds which are
added to working capital will improve our financial condition.
Of the additional $2,350,000 to be raised, $1,325,000 is allocated to
marketing and advertising, $500,000 is allocated to pay certain accounts
payable, and $305,000 is allocated to pay the expenses of this offering. When we
receive funds, we will apply them first to meet the marketing and advertising
needs. The other allocations will only be filled if sufficient funds are raised.
If we do not sell all the stock offered in this prospectus and do not raise
all the contemplated funds, we expect to continue to grow at approximately the
same pace as demonstrated from 1995 to 1996 and from the first nine months of
1996 to the first nine months of 1997. The addition of available funds is
expected to accelerate the internal growth of the Company.
If we do not raise the contemplated funds, the primary effect on our future
plans will be possible limitations on our plans for increased marketing. While
we intend to make every attempt to increase marketing using whatever funds are
available, the lack of funds will impede these efforts.
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The company plans to maintain an aggressive growth pattern through the use
of cash flows from operations, financing activities and a direct public
offering. $604,370 of current mortgages on properties with appraisals of
$1,250,000 are planned to be refinanced. If taxes remain unpaid on these
properties, it is possible that a purchaser could obtain the tax certificates at
auction. Purchasers of tax certificates, owned for two years, may apply for a
tax deed on the properties. To date no tax certificate has been purchased or tax
deed applied for. Application for a tax deed could deprive the company of an
asset without fair market value compensation. The company holds the right to
redeem such tax certificates, if purchased, within 2 years of their sale.
$336,261 in convertible notes have been converted to 323,761 shares of
common stock and $12,500 have renewed their notes. The $46,681 lease is current
and within terms at the time of filing. $86,405 of notes payable are within
terms.
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%.
OPERATING ACTIVITIES. Cash provided by operating activities was $53,801 in
the first nine months of 1997 as compared to cash used by operating activities
of $457,845 in cash in the first nine months of 1996. The cash provided by
operating activities resulted from the decrease in personal, royalties and
general overhead expenses.
The net amount of notes and accounts receivable from customers who
purchased products increased to $770,139 in the first nine months of 1997 from
$388,233 in the first nine months of 1996.
Inventories decreased to $21,687 at September 30, 1997 from $56,746 at
September 30, 1996. The decrease is due primarily to the more efficient
management of inventory and lower purchasing costs due to economies of scale.
INVESTING ACTIVITIES. During 1996 and the first nine months of 1997, our
investing activities consisted primarily of investment in property and
equipment.
FINANCING ACTIVITIES. From January 1, 1996 through September 30, 1997, we
issued $535,000 of 15.0% convertible notes which are payable 270 days from the
date of their issuance. 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 September 30, 1997, we have allowed
the holders of notes totaling $381,841 to convert those notes into Common Stock
in exchange for cancellation of the debt.
NET OPERATING LOSS CARRYOVERS. 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.
BUSINESS
INTRODUCTION
SDI produces, markets and distributes information, education and financial
products and services to small businesses and their owners. The products and
services are designed to help our customers to create, increase and maintain
real estate and other home based businesses. We intend to increase the marketing
and distribution of the existing products and services, to expand into more
lines of products and services, and to make specific alliances with or
acquisitions of companies that will fit our strategy.
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Our customers include a broad spectrum of individuals from beginning
entrepreneurs looking for the 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, an Internet Web Site, periodical
advertising, television, radio, direct sales and customer word of mouth.
We believe our ability to teach this information in an understandable,
easy-to-follow format has enabled us to achieve our present size and operating
results. Maintaining our commitment to quality customer support and
relationships with customers is necessary, in management's opinion, to achieve
rapid expansion and long-term profitability in the market for information,
education and financial products and services.
SDI was incorporated in 1995 to serve as a holding company for its three
operating subsidiaries, The LeGrand Group, Inc. ("LGI"), Results Publishing,
Inc. ("RPI") and Telstar, Inc. ("Telstar").
The LeGrand Group, Inc. was incorporated in Florida in 1989 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, Inc. was incorporated in Nevada in
1995 for the purpose of suppling telemarketing sales for the LeGrand Group, Inc.
and other third party products and services.
Guthy Renker Corp. will bear all costs in the creation of the thirty minute
infomercial, including production costs and airtime. The Company is responsible
for creating products and Guthy Renker will produce and distribute. Guthy Renker
will pay the Company five percent (5%) of net revenues.
MARKET AND CUSTOMER BASE
We believe that the market for information, education and financial
products and services for small businesses and their owners will continue to
grow as job insecurity and changes in the employment market compel individuals
to seek alternative means to improve their financial status. We believe that
this desire for individuals to achieve independence, security and control over
their lives has created a significant market for the types of products and
services SDI provides.
SDI currently markets its products and services in the United States and
Canada. Our customer base includes individuals from all age groups and a broad
range of income and education levels. Our products and services may be used by
people without high school diplomas to gain entrepreneurial skills and are
equally effective to teach educated professionals to increase their cash flow
and/or prepare for career changes.
The traditional workplace has been drastically altered in the last few
years, particularly in once-secure industries which have been devastated by
downsizing. As reported in the 1997 "Premier Issue" of WORK @ HOME magazine, 85
percent of our workforce in the 1900's was in agriculture. Today, it's less than
3 percent. In the 1950's, 73 percent of U.S. employees worked in production or
manufacturing. In 1997, it's less than 15 percent. The largest trend currently
is for Americans to start their own businesses.
As reported in the WORK@HOME article, a recent USA TODAY survey found 96
percent of adults ages 25-44 are very interested in owning their own and
according to INC. magazine, no one knows with certainty how many people are
running businesses from their homes. Estimates range from 5.6 million to 30.7
million. The most reasonable estimates are closer to 15 million. Almost half of
last year's new enterprises took form in their owner's homes.
OUR STRATEGY
Based on our view of the market and what our customer base wants, we have
adopted the following strategy to expand SDI's business:
1. Obtain and create exclusive content for marketable products and
services.
2. Build a large portfolio of products and services, in order to create a
continuing income stream.
3. Develop long-term product and service lines in categories in which a
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significant market share can be achieved.
4. Expand distribution of products and services through new outlets and
mediums.
OUR CURRENT PRODUCTS AND SERVICES
SDI focuses on providing information, education and financial products and
services for small businesses and their owners with an in-place follow-up
support system. To support our customers, we provide trained personnel on
weekdays from 10:00 a.m. to 4:00 p.m. to answer customer questions about real
estate transactions in which they are involved or are considering. This service
is free to purchasers of cash flow systems for ninety days and free to
purchasers of Boot Camps for one year. Other businesses market and distribute
information in this field without any significant follow-up or support. We
believe that success in our industry requires a solid foundation of proven
products and services together with a strong ongoing customer support system.
SDI's management believes that SDI fits this profile, since its products and
services are based upon methods and systems used by us as authors and lecturers
for many years together with our commitment to continuing customer service.
These are descriptions of our primary products and services:
MAIN STREET MONEY MACHINE. The Main Street Money Machine is our
introductory product used to generate interest in SDI's other products and
services. It provides an overview of methods by which to profit in the real
estate business and contains two audio cassette tapes, one video tape, one
manual, three reports and miscellaneous items. These materials explain, in an
overview fashion, the four areas of real estate investing on which we focus:
wholesaling, retailing, owner-financing and lease/option.
CASH FLOW SYSTEMS. The Cash Flow Systems are SDI's mid-level products and
contain sixteen audio cassette tapes, a written transcript, a workbook and
computer software containing forms for use by the customer. There are three Cash
Flow Systems:
(i) WHOLESALE/RETAIL CASH FLOW SYSTEM teaches how to find distressed
properties and make a profit by either selling the property to
another investor (wholesale) or rehabilitating the property and
selling it to an owner/occupant (retail).
(ii) FOR SALE BY OWNER ("FSBO") CASH FLOW SYSTEM teaches how to create
profits by purchasing properties from owners, with owner
financing. The customer profits from the ability to resell the
property to an owner/occupant who can assume the newly-created
financing.
(iii)LEASE/OPTION CASH FLOW SYSTEM teaches how to create profits by
leasing properties with an option to buy from owners of real
estate and creating new leases with options to buy for
tenants/purchasers. The customer profits from the option deposit
received from the tenant/purchaser, the difference between the
monthly lease payments and the difference between the purchase
price from the owner and the selling price to the
tenant/purchaser.
BOOT CAMPS. The Boot Camps offer hands-on training in the three Cash Flow
Systems described above, Wholesale/Retail, FSBO and Lease/Option. In addition to
receiving the materials provided with the Cash Flow Systems, Boot Camp
participants:
(i) have the option of attending live training courses as often as
they wish for one year following their purchase of the product;
(ii) receive a written manual and twelve video tapes of a prior event;
At the live Wholesale/Retail Boot Camp training programs, the participants
review actual real estate multiple listing statements of properties for sale,
select potential properties and visit them while receiving instruction. At the
live FSBO and Lease/Option Boot Camp training programs, the participants make
telephone calls to owners of properties and negotiate transactions while
receiving instruction.
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GUERRILLA MARKETING FOR REAL ESTATE ENTREPRENEURS BOOT CAMP. The purpose of
this Boot Camp is to teach participants how to generate an ongoing stream of
potential real estate sellers who call to offer their homes for sale. The
participant is instructed in a wide variety of marketing approaches by a panel
of individuals experienced in the real estate methods taught by SDI. SDI offers
this Boot Camp on a live basis once per year. Boot Camp participants receive
twelve video tapes of past events, sixteen audio cassette tapes of past events,
a manual, and computer software containing forms, reports, and letters for use
by participants.
CONFERENCES. SDI promotes and sponsors various conferences (both one day
and multiple day events) throughout the United States that feature speakers on
topics ranging from real estate investment and management, buying and selling
discounted paper, business planning, growing your business, raising capital,
reducing your taxes, protecting your assets, managing your properties, adult
congregate living facilities as a business, success coaching, negotiating,
marketing, sales, sales training, auctions and retirement planning. These
conferences usually feature our own employees and speakers, lecturers and
educators under contract with SDI.
ONE DAY WORKSHOPS. SDI sponsors and promotes one-day workshops usually
featuring Mr. LeGrand, who teaches attendees how to profit from real estate
investing either through creating a home-based business or expanding their
current investment activities.
QUICK TURN NEWSLETTER. SDI publishes a free newsletter designed to acquire
new customers. The newsletter provides information and encouragement to real
estate entrepreneurs, including techniques for creating profits from real
estate, income tax updates, listing of upcoming events and feature articles.
DIRECT AND TELEMARKETING SALES. We use both direct mail and telemarketing
to promote our own products and services and those of other authors, lecturers
and educators.
PRIVATE LENDING COURSE. This course provides sixteen audio cassette tapes,
one manual and computer software containing forms and reports for use by the
customer. The course instructs the customer how to profit from lending "hard"
money (I.E., money lent without regard to the creditworthiness of the borrower)
to owners of real estate, how to find lenders and borrowers, and shows the
proper steps necessary to complete these transactions profitably.
SDI SUCCESS SERIES SOFTWARE. We market computer software designed to
perform the following functions:
(i) analyze income and expenses of potential real estate purchases;
(ii) analyze potential mortgage loans;
(iii) create personal financial statements;
(iv) create business plans;
(v) analyze income and expenses of potential business purchases and
appraise the value of the business;
(vi) create and track goals and activities lists for planning
purposes;
(vii) create bi-weekly mortgage payment plans; and
(viii) input, track and market potential sellers of mortgages.
In addition, the software contains numerous pre-formatted business letters and
legal forms relating to real estate and business transactions.
INTERNET WEB SITE. SDI's web site (http://www.success-di.com) provides
browsers with hundreds of pages of free information about creating additional
profits for their businesses. Browsers have the opportunity to review
advertisements for products and services offered by the Company. The web site is
at an early stage of development.
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MORTGAGE COURSE. The Mortgage Course is one of SDI's mid-level products
and contains eight audio cassette tapes and a workbook. This course teaches the
purchaser how to find, evaluate, purchase and sell mortgages or deeds of trust.
MORTGAGE BOOT CAMP. The Mortgage Boot Camp offers hands-on training to
teach the attendee how to find, evaluate, purchase and sell mortgages or deeds
of trust. In addition to receiving the materials provided with the Mortgage
Course, workshop participants:
(i) have the option of attending live training courses as often as
they wish for one year following their purchase of the product;
(ii) receive a written manual and twelve video tapes of a prior
event;
JOINT VENTURES, STRATEGIC ALLIANCES AND ACQUISITIONS
We have developed a thirty minute television infomercial under a June 24,
1997 agreement with Guthy-Renker Corp., a major direct response marketing
company. The infomercial first aired in November 1997 and is being re-edited.
SDI intends to seek other joint ventures with businesses in related markets. We
will consider additional forms of strategic alliances with other companies, as
well as possible acquisitions.
SALES AND MARKETING
SDI's basic marketing strategy is to acquire customers throughout the
United States and in Canada at little or no cost to the Company by selling them
a low-priced ($19-$49) product, such as the Main Street Money Machine, or a one
day workshop designed to educate the purchaser and create a desire to purchase
additional products and services from the Company. Our experience has been that
many customers purchase additional products and services in ensuing years. Thus,
the lifetime value of the customer is significantly greater than just the
purchases in the initial year of contact. The following outlines certain
marketing mediums SDI employs:
DIRECT MAIL/TELEMARKETING: At present, direct mail and telemarketing
represent the majority of the our marketing efforts. The Company, on average,
mails about 7,500 pieces a week. Initial leads generated through the mailings
are directed to Telstar, Inc., our telemarketing subsidiary or to telemarketing
firms under contract to us.
INTERNET WORLD WIDE WEB SITE (http://www.success-di.com): Our website is
currently being remodeled. We use the website to advertise our products and
services and to provide information about our upcoming events.
PERIODICAL ADVERTISING: We advertise in local newspapers and
industry-related magazines.
MEDIA, TELEVISION AND RADIO: We advertise through radio and television
"Infomercials" to promote our conferences and sell our products and services. We
also use radio advertising targeted geographically to coincide with upcoming
events.
DIRECT SALES: During conferences, speakers sell additional programs,
books, video tapes and audio tapes. Generally, fifty percent (50%) of the
proceeds from the sale of these items is paid to the speaker. See "Certain
Transactions."
WORD OF MOUTH: We believe that our programs have met with such high
customer satisfaction ratings that our current customers are one of our best
referral sources. While the initial transaction with a customer does not
necessarily result in a profit to us, each additional sale does. As we acquire
more customers, we increase our potential for profitability.
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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.
COMPETITION
In our view, the financial and personal development information
industry, while large, is highly fragmented into many niches with some
competitors being successful in only certain niches, and with no company having
acquired dominance in the industry.
Many competitors have products and services that are marketed as being
similar, but we believe that our customers can quickly distinguish the
difference between our products and services and those of our competitors. We
believe our strong testimonial base of satisfied customers is a competitive
advantage.
We compete primarily with a large number of privately-owned, educational
and publishing companies providing personal and financial development
information through a variety of media. Some of our competitors have greater
financial, marketing, distribution, technical and other resources than we do. We
regard Anthony Robbins & Associates, Nightingale-Conant Corporation, American
Marketing Systems, Inc., David G. Phillips Publishing Company, Inc., Agora,
Inc., Ted Nicholas & Associates, Inc., Whitney Leadership Group and The Hume
Group, Inc. as our closest competitors in the financial and personal development
market.
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, and have not experienced any material delays in
production or assembly.
LEGAL PROCEEDINGS
As of the date of this Prospectus, there is no pending 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 September 30, 1997, SDI had 34 full time employees and one
part-time employee. 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.
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PROPERTIES
The Company owns the building in which its headquarters is located at
9799 Old St. Augustine Road, Jacksonville, Florida, 32257. This office building
contains approximately 13,260 square feet of space and is occupied entirely by
SDI. Management believes that this building will provide adequate office space
to meet the Company's needs for the foreseeable future.
SDI also owns two properties located at 3001 and 3003 Hartley Road,
Jacksonville, Florida, 32257. SDI leases these buildings as office space to two
tenants under lease agreements expiring July 31, 1998, subject to renewal
options. The Company currently receives rent of $2,850 and $2,981 per month for
the properties, respectively. The buildings contain 3,855 and 3,609 square feet,
respectively. All of the Company's properties are security for mortgage loans.
MANAGEMENT
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
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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, 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 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. She is
the daughter of Ron LeGrand, founder of The LeGrand Group, Inc., and former
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.
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.
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid during
the fiscal year ended December 31, 1996, to Shawn M. Casey, its Chief Executive
Officer, as well as other officers and directors whose compensation exceeded
$100,000 during any fiscal year.
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SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
(a) (b) (c) (d)
NAME AND YEAR SALARY BONUS
PRINCIPAL POSITION ($) ($)
- ------------------ ------ ----
Shawn M. Casey 1996 70,968 0
Raymond Rach 1996 261,908 0
Explanation of Columns:
(c) SALARY: Total base salary earned during applicable fiscal year.
(d) BONUS: Annual incentive award paid for results achieved during applicable
fiscal year. Any amounts deferred at the election of the executive are
included in the reported amounts.
RESTRICTED STOCK
Shares of restricted Common Stock have been granted to management
employees, under the Long Term Incentive Plan, described more fully in the next
paragraph. Shares granted are restricted, in that they cannot be sold, voted or
otherwise enjoyed until the specified conditions in the grant have been met.
Shawn M. Casey was granted 250,000 shares on December 1, 1995, subject to the
restriction that he remain continuously employed by SDI through December 31,
1996. Mr. Casey was also granted 300,000 shares of restricted stock, which
vested in 1996, upon the Company having had gross income exceeding $750,000 for
each of three consecutive months. Ray Rach was granted 150,000 shares of
restricted stock, which vested in 1996 upon the same condition. Mr. Casey has
unvested 100,000 shares of restricted stock. Under employment agreements which
expired at December 31, 1996, Ray Rach received 50,000 shares of restricted
stock and Vicki I. Sessions received 25,000 shares.
EMPLOYMENT AGREEMENTS
Mr. Casey is entitled to receive 100,000 shares of restricted Common Stock
pursuant to the Company's Long Term Incentive Plan, described more fully below.
Mr. Ray Rach executed an Employment Agreement with the Company dated as of
January 1, 1996. The Agreement is effective for a period of two years. The
Agreement provides for Mr. Rach to receive commissions based upon his telephone
sales and a fixed compensation for each day he works at company events. In
addition, he is entitled to receive 50,000 shares of restricted Common Stock
pursuant to the Company's Long Term Incentive Plan. Ms. Vicki Sessions executed
an Employment Agreement with the Company dated as of January 1, 1996. The
Agreement is effective for a period of two years. The Agreement provides for Ms.
Sessions to receive an annual salary. In addition, she is entitled to receive
25,000 shares of restricted Common Stock pursuant to the Company's Long Term
Incentive Plan. In addition, Mr. Rach and Ms. Sessions are entitled to twenty
days of vacation and sick leave per annum. Each of Mr. Rach and Ms. Sessions has
agreed to keep all trade secrets of the Company confidential during and after
his/her employment with SDI and has agreed not to solicit any employees of SDI,
on his/her own behalf or on behalf of a competitor of SDI, during the term of
his/her employment and for a period of two years thereafter.
LONG TERM INCENTIVE PLAN
In November, 1995, SDI adopted the Long Term Incentive Plan under which the
Board of Directors has discretion to grant qualified and nonqualified stock
options and award restricted stock to any employee of the Company or its
subsidiaries, and to award restricted stock to directors and independent
contractors of the Company or its subsidiaries. As amended in July, 1996, a
total of 7,500,000 shares of Common Stock, as may be adjusted for stock splits,
consolidations or other changes in capitalization, have been reserved for
issuance under this plan. As of September 30, 1997, 1,877,500 shares of Common
Stock remain available for new grants under the plan. The exercise price of
options granted under the plan may be
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<PAGE>
no less than the fair market value of the Common Stock on the date of grant. The
Board of Directors has discretion to determine at the time of grant the term of
options, timing and conditions for vesting of options, lapse of restrictions on
restricted stock, and permissible forms of payment of the exercise price. Upon a
change in control (as defined in the plan), all options will become immediately
exercisable and all restrictions on restricted stock shall lapse. The plan may
be amended from time to time without shareholder approval; provided, however,
that shareholder approval is required to increase the number of shares reserved
for issuance under the plan, to change the class of eligible employees or to
take any action that would cause the plan to no longer comply with the federal
securities laws or certain other state or federal statutory or regulatory
requirements. In addition, the employee's consent is required to adversely alter
the terms of any outstanding grant held by such employee.
DIRECTOR COMPENSATION
SDI has no standard arrangements pursuant to which directors of SDI are
compensated, nor was there any other arrangement pursuant to which any director
was compensated during SDI's last fiscal year. SDI has no plans to pay
directors' compensation.
PRINCIPAL SHAREHOLDERS
The following table shows certain information known to the Company
regarding the beneficial ownership of the Company's common stock as of the date
of this Prospectus, and as adjusted to reflect the sale of the shares being
offered, for (i) each shareowner known by the Company to own beneficially 5% or
more of the outstanding shares of its common stock; (ii) each director; and
(iii) all directors and executive officers as a group. The Company believes that
these beneficial owners, based on information they have furnished, have sole
investment and voting power with respect to their shares, subject to community
property laws where applicable.
<TABLE>
<CAPTION>
PERCENTAGE OF
DIRECTORS, SHARES COMMON SHARES OUTSTANDING (1) (2)
EXECUTIVE OFFICERS BENEFICIALLY ----------------------------------
AND 5% SHAREOWNERS: OWNED BEFORE OFFERING MAXIMUM SOLD
- ------------------- --------- --------------- ------------
<S> <C> <C> <C>
Ron LeGrand (a)......................... 5,687,000 52.66% 50.33%
Daniel S. Pena, Sr (b).................. 2,250,000 20.84 19.91
Shawn M. Casey (a)...................... 525,000 4.84 4.65
Ray Rach (a)............................ 705,000 6.53 6.24
Jarrell Ormand (c)...................... 120,000 1.11 1.06
Hugh Carey (d).......................... 120,000 1.11 1.06
All directors and executive officers
as a group (8 persons) (a).............. 4,005,000 37.09 35.45
</TABLE>
(1) Does not include any shares that any person or group has the right to
acquire after 60 days from the date of this prospectus, pursuant to options
or other rights.
(a) Business Address: 9799 Old St. Augustine Road, Jacksonville, FL 32257
(b) Business Address: 575 Esplanada #301, Redondo Beach, VA 90277
(c) Home Address: 577 Perugia Way, Los Angeles, CA 90077
(d) Business Address: 200 Park Avenue, New York, NY 10166
CERTAIN TRANSACTIONS
Shawn M. Casey, SDI's Chief Executive Officer, is the sole shareholder and
president of Dream Development Corporation ("DDC"). Under an oral contract with
SDI, DDC receives 70% of the gross sales price of its products sold at all
Company events at which Mr. Casey is a speaker and 49% of the gross sales price
of its products otherwise sold by SDI. DDC is responsible for paying Mr. Casey's
travel expenses (except for travel to certain conferences, which are paid by the
Company), product costs, event costs and shipping and related costs.
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DDC earned from SDI, pursuant to this arrangement, $885 in December, 1995,
$285,459 in fiscal year 1996, and $147,010 for the first eleven months of 1997.
Ron LeGrand, who is beneficially the owner of 5,687,000 shares of SDI
stock, is the sole shareholder and president of Northside Funding, Inc. ("NFI").
Under an oral contract with SDI during 1995 and 1996, NFI received 40% of the
gross sales price of certain products sold at all Company events at which Mr.
LeGrand was a speaker. NFI has earned from SDI, pursuant to this arrangement,
$264 in December, 1995 and $331,006 in fiscal year 1996. For the period May,
1997 through December, 1997, SDI has agreed to pay Mr. LeGrand $111,923. In
addition, the Company has already paid Mr. LeGrand $115,477 in 1997. All
products or services which Mr. LeGrand has created, or will create, during his
employment with SDI are the exclusive property of SDI. In addition to creating
new products for SDI, Mr. LeGrand creates and maintains the material included in
the "Cash Flow Systems" and "Boot Camps," described in "Business--Our Current
Products and Services," teaches all the "Boot Camps," assists in creating and
planning marketing campaigns and speaks on behalf of SDI at many workshops and
seminars throughout the United States and Canada.
All future transactions between the Company and its officers, directors,
and principal shareowners and their affiliates will be approved by a majority of
the disinterested Directors, who do not have an interest in the transaction and
who had access, at the Company's expense, to the Company's or independent legal
counsel, and will be on terms no less favorable to SDI than could be obtained
from unrelated third parties.
DESCRIPTION OF COMMON STOCK
COMMON STOCK
The authorized capital stock of SDI consists of 25,000,000 shares of common
stock, $0.001 par value (the "Common Stock"), of which 10,798,699 shares were
issued and outstanding on September 30, 1997. There were 42 holders of the
Common Stock as of September 30, 1997.
Holders of the Common Stock are entitled to one vote per share on all
matters submitted to a vote of shareholders of SDI and may not cumulate votes
for the election of directors. Holders of the Common Stock have the right to
receive dividends when, as, and if declared by the Board of Directors from funds
legally available therefor. Upon liquidation of the Company, holders of the
Common Stock are entitled to share pro rata in any assets available for
distribution to shareholders after payment of all obligations of the Company.
Holders of Common Stock have no preemptive rights and have no rights to convert
their Common Stock into any other securities. All shares of Common Stock have
equal rights and preferences. All shares of Common Stock now outstanding are
fully paid for and non-assessable.
Other than distributions made by the Company's subsidiary, The LeGrand
Group, Inc., as a subchapter S corporation in years prior to 1994 and a dividend
to one of SDI's controlling shareholders in connection with the personal tax
liability incurred from changing over from an S corporation to a C corporation,
SDI has never paid a cash dividend on the Common Stock. SDI currently intends to
retain all earnings, if any, to increase the capital of the Company to effect
planned expansion activities and to pay dividends only when it is prudent to do
so and the Company's performance justifies such action. Holders of Common Stock
are entitled to receive dividends out of funds legally available therefor when,
as and if declared by SDI's Board of Directors.
ANTITAKEOVER PROVISIONS IN ARTICLES OF INCORPORATION AND BYLAWS. The Amended and
Restated Articles of Incorporation of SDI (the "Articles") contain certain
provisions that may make more difficult the acquisition of control of SDI by
means of a tender offer, open market purchase, proxy fight or otherwise. The
Amended and Restated Bylaws of SDI (the "Bylaws") also contain provisions that
could have an anti-takeover effect.
CLASSIFIED BOARD OF DIRECTORS. The Articles provide for the Board of
Directors to be divided into three classes of directors serving staggered
three-year terms. Management believes that a classified Board of Directors will
help to assure the continuity and stability of the Board of Directors and of the
business strategies and policies as determined by the Board of Directors. The
classified board provision could have the effect of making the removal of
incumbent directors more time-consuming and difficult, and, therefore
discouraging a third party from making a tender offer or otherwise attempting to
obtain control of the Company, even though such an attempt might be beneficial
to SDI and its shareholders. Thus,
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<PAGE>
the classified board provision could increase the likelihood that incumbent
directors will retain their positions. This provision may be amended, repealed
or otherwise altered only with the approval of 80% of the outstanding stock of
the Company.
GREATER QUORUM OF VOTING REQUIREMENT. The Articles provide that if the
shareholders have adopted or amended a provision of the Articles or the Bylaws
that fixes a greater quorum or voting requirement for shareholders than is
required by Florida law, that adoption or amendment must meet the same quorum
requirement and be adopted by the same vote required to take action under the
quorum and voting requirements then in effect or proposed to be adopted,
whichever is greater. The Bylaws provide that action by the Board of Directors
to adopt or amend a bylaw that changes the quorum or voting requirement for the
Board of Directors must meet the same quorum requirement and be adopted by the
same vote required to take action under quorum and voting requirement then in
effect or proposed to be adopted, whichever is greater.
FAIR PRICE PROVISION. The Articles require that the holders of at least 80%
of the Common Stock must authorize any merger, consolidation or other "business
combination" (as defined in the Articles) with any owner of 10% or more of the
Common Stock, or anyone able to control the Company. Florida law would otherwise
require only a majority vote of shareholders or, in some instances, no vote of
shareholders. This "supermajority" vote of shareholders is not required if the
transaction is approved by a majority vote of the "disinterested directors" (as
defined in the Articles) or if the transaction meets certain minimum price and
procedural requirements. The Articles provide that a vote of the holders of 80%
or more of the voting power of the Voting Stock would be required in order to
amend, alter or repeal, or adopt any provisions inconsistent with, these
provisions.
CONTROL-SHARE ACQUISITION. SDI will be subject to the provisions of Section
607.0902 of the Florida Business Corporation Act. In general, the statute denies
voting rights to shares purchased by an acquiring person who has obtained or
anticipates obtaining a specified level of voting control in shares of an
issuing public corporation as part of a control-share acquisition, except to the
extent to which voting rights are conferred by resolution approved by the
shareholders of the issuing public corporation. A vote of the shareholders to
confer voting power under the statute must meet the criteria set forth in the
statute, including approval by a majority of all votes entitled to be cast in
each voting group entitled to vote separately, excluding all interested shares.
For the purpose of the statute, an "issuing public corporation" is a corporation
which has more than 100 shareholders, has its office and place of business or
substantial assets in the State of Florida, and either has (a) more than 10% of
its shareholders resident in this state; or (b) more than 10% of its shares
owned by residents of this state; or (c) 1,000 shareholders resident in this
state. Provisions of the statute become effective when a person acquires or
intends to acquire stock which, when added to all other shares owned by such
person or in respect of which such person may exercise or direct voting power,
either alone or as part of a group, would entitle such person to exercise at
least 20% of the voting power of the stock of the issuing public corporation.
This statute, as well as the fair price provision in the Articles, may have the
effect of delaying or preventing a change in control of the Company without
further action of the shareholders.
LIMITATIONS ON OFFICERS AND DIRECTORS LIABILITY AND INDEMNIFICATION
The Company's articles of incorporation provide that the Company will
indemnify any officer, director or former officer or director, to the full
extent permitted by law. This could include indemnification for liabilities
under securities laws enacted for shareowner protection. Insofar as
indemnification for liabilities arising under the Securities Act of 1993 (the
"Act") may be permitted to directors, officers and controlling persons of SDI
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock will be Registrar and
Transfer Company, 10 Commerce Drive, Cranford, NJ 07016-3572, 1(800) 456-0596.
23
<PAGE>
SHARES ELIGIBLE FOR FUTURE RESALE
Upon completion of this offering, assuming the sale of 500,000 shares, SDI
will have outstanding 11,298,699 shares of Common Stock. Of these shares, the up
to 500,000 shares of Common Stock sold in this offering will be freely tradable
without restriction or further registration under the Securities Act, except for
any shares purchased by an "affiliate" of the Company, which will be subject to
the resale limitations of Rule 144 adopted under the Securities Act. An
additional 638,000 shares previously issued are also freely tradable. All of the
remaining 10,560,699 shares held by existing shareholders are "restricted"
securities within the meaning of Rule 144. 468,699 shares will become salable,
by complying with Rule 144, on various dates after December 10, 1997. All the
remaining 9,692,000 shares are subject to a "lock-in" agreement and may not be
sold until one year after the date of this prospectus.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least one
year, including "affiliates" as that term is defined under the Securities Act,
is entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of (i) one percent (1%) of the then outstanding shares of
the Common Stock or (ii) the average weekly trading volume in the Common Stock
during the four calendar weeks immediately preceding the date on which the
notice of sale is filed with the Commission. Sales under Rule 144 are subject to
certain requirements relating to manner of sale, notice and availability of
certain current public information about the Company. A person (or persons whose
shares are aggregated) who is not deemed to have been an "affiliate" of SDI at
any time during the 90 days immediately preceding the sale and who has
beneficially owned shares for at least three years is entitled to sell such
shares under Rule 144(k) without regard to these limitations.
SDI has reserved an aggregate of 7,500,000 shares of Common Stock for
issuance pursuant to the Company's Long Term Incentive Plan, of which 1,877,500
shares remain available for new grants thereunder. At this time, the Company
does not intend to file a registration statement under the Securities Act to
register shares issuable pursuant to such plan. Accordingly, shares to be issued
under such plan will also be "restricted" securities within the meaning of Rule
144 and subject to the resale limitations thereunder. Sales of these shares in
the public market could adversely affect prevailing market prices.
The Company's common stock is not listed or quoted on any organized
exchange or other trading market, nor has the Company applied for a formal
listing or quotation. The Company does not currently meet the numerical
requirements to have its shares listed on a United States stock exchange or
quoted on the NASDAQ over-the-counter market. The Company has been advised that
a registered securities broker-dealer would provide a market matching service
for persons wishing to buy or sell shares, upon completion of this offering.
That service receives requests from persons wishing to buy or sell shares,
together with the number of shares and desired price. When there is a match of
buy and sell requests, the broker-dealer notifies both sides and assists in
completing a transaction. However, there is currently no agreement with a
registered securities broker-dealer. A trading market may not develop or be
sustained. The post-offering fair value of SDI's common stock, whether or not
any secondary trading market develops, is variable and may be impacted by the
business and financial condition of the Company, as well as factors beyond the
Company's control. Sales of substantial amounts of shares in any public market
could cause lower market prices and even make it difficult for SDI to raise
capital through a future offering of its equity securities.
PLAN OF DISTRIBUTION
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 reciept.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.
24
<PAGE>
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 shareowners and all additional proceeds from the sale of shares will
go directly to the Company.
During the Escrow Period, all subscription payments for share 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 share 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, 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 exercised, dilution to the interest of the
Company's stockholders 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 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 statement sin the prospectus, in light of the
circumstances, not misleading, where such information relates to or was
furnished by the Broker-Dealer in writing.
DETERMINATION OF OFFERING PRICE
Prior to this offering there has been no market for the common stock of
SDI. The public offering price has been determined by SDI's Board of Directors.
Among factors considered in determining the public offering price were SDI's
results of operations, SDI's current financial condition, its future prospects,
the state of the markets for its products, the experience of management and the
economics of the industry in general.
If the Minimum has been fully subscribed on or before the date 3 months
after the date of this Prospectus, SDI will continue to offer the shares, not
subject to payment for any further minimum amount, but not for more than a total
of 500,000 shares. This offering shall be terminated upon the earlier of the
following: the sale of the Maximum amount, twelve months after the date of this
Prospectus or the date on which the Company decides to close the offering. SDI
reserves the right to reject any subscription or share purchase agreement in
full or in part and to terminate the offering at any time prior the sale of
500,000 shares.
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EXPERTS
The Consolidated balance sheets of Success Development International, Inc.
as of December 31, 1996 and 1995 and the related statements of operations,
stockholders' deficit and cash flows for each of the two years in the period
ended December 31,1996, included in this Prospectus, have been included herein
in reliance on the report of James Moore & Co., P.L., independent certified
public accountants, given on the authority of that firm as experts in accounting
and auditing.
ADDITIONAL INFORMATION
A Registration Statement on Form SB-2, including amendments thereto,
relating to the shares offered hereby has been filed with the Securities and
Exchange Commission. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. For further information with respect to SDI and
the shares offered hereby, reference is made to such Registration Statement,
exhibits and schedules. A copy of the Registration Statement may be inspected by
anyone without charge at the Commission's principal office located at 450 Fifth
Street, N.W., Washington, D.C. 20549, the Northeast Regional Office located at 7
World Trade Center, 13th Floor, New York, New York, 10048, and the Midwest
Regional Office located at Northwest Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661-2511 and copies of all or any part thereof may be
obtained from the Public Reference Branch of the Commission upon the payment of
certain fees prescribed by the Commission. The Commission also maintains a site
on the World Wide Web at http://www.sec.gov that contains information regarding
registrants that file electronically with the Commission.
26
<PAGE>
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, stockholders'
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.
Holly Hill, Florida James Moore & Co., P.L.
September 18, 1997
-1-
<PAGE>
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31 SEPTEMBER 30 SEPTEMBER 30
1995 1996 1996 1997
AUDITED AUDITED UNAUDITED UNAUDITED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents .......................... 42,327 $ 880 $ 20,247 $ 57,609
Restricted cash .................................... -- 43,045 35,623 30,464
Current portion of notes receivable-trade, net ..... 41,314 247,836 213,528 378,137
Inventories ........................................ 38,728 75,218 56,746 21,687
Prepaid expenses ................................... 25,189 28,982 164,407 16,257
----------- ----------- ----------- -----------
Total current assets ........................... 147,558 395,961 490,551 504,153
PROPERTY AND EQUIPMENT, net .......................... 1,042,867 1,076,460 1,085,720 1,110,970
OTHER ASSETS
Notes receivable - trade, less current portion, net 47,986 165,224 174,705 392,002
Receivables from employees and others .............. 25,529 10,500 15,430 10,500
Organizational costs and other ..................... 50,415 54,819 54,819 161,914
----------- ----------- ----------- -----------
Total other assets ............................. 123,930 230,543 244,954 564,416
----------- ----------- ----------- -----------
TOTAL ASSETS ......................................... $ 1,314,355 $ 1,702,964 $ 1,821,225 $ 2,179,539
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses .............. $ 242,899 $ 1,149,121 $ 740,095 $ 823,889
Accounts payable to management and stockholders .... 43,945 420,739 211,129 362,839
Current portion of long-term debt .................. 840,900 1,073,717 1,014,107 1,204,997
Unearned revenue ................................... 325,190 1,144,625 606,669 973,265
----------- ----------- ----------- -----------
Total current liabilities ...................... 1,452,934 3,788,202 2,572,000 3,364,990
LONG-TERM DEBT, less current portion ................. 142,673 296,831 304,909 260,881
----------- ----------- ----------- -----------
Total liabilities .............................. 1,595,607 4,085,033 2,876,909 3,625,871
----------- ----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 6, 9, 11, and 12)
STOCKHOLDERS' 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 ...................................... 10,125 10,355 10,380 10,974
Additional paid in capital ......................... -- 267,309 229,770 533,309
Accumulated deficit ................................ (288,722) (2,659,183) (1,294,030) (1,990,390)
Unearned compensation - restricted stock ........... (2,655) (550) (1,804) (225)
----------- ----------- ----------- -----------
Total stockholders' equity (deficit) ........... (281,252) (2,382,069) (1,055,684) (1,446,332)
----------- ----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........... $ 1,314,355 $ 1,702,964 $ 1,821,225 $ 2,179,539
=========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
-2-
<PAGE>
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31 SEPTEMBER 30 SEPTEMBER 30
1995 1996 1996 1997
AUDITED AUDITED UNAUDITED UNAUDITED
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUE:
Product sales and tuition ......................... $ 2,749,795 $ 5,778,301 $ 4,771,136 $ 5,598,688
----------- ------------ ------------ ------------
OPERATING EXPENSES:
Cost of product sales and direct operating expenses 1,553,168 3,116,217 3,161,228 3,088,337
Royalties ......................................... 587,587 2,159,148 1,130,993 827,436
General and administrative ........................ 1,037,016 2,750,377 1,408,605 975,725
Depreciation and amortization ..................... 56,099 86,134 54,620 70,473
----------- ------------ ------------ ------------
Total operating expenses ...................... 3,233,870 8,111,876 5,755,446 4,961,971
----------- ------------ ------------ ------------
INCOME FROM OPERATIONS .............................. (484,075) (2,333,575) (984,310) 636,717
----------- ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Rent and other income ............................. 112,205 127,179 105,166 92,250
Interest expense .................................. (89,942) (153,905) (126,164) (60,174)
Loss on disposal of asset ......................... -- (10,160) -- --
----------- ------------ ------------ ------------
Total other income (expense) .................. 22,263 (36,886) (20,998) 32,076
----------- ------------ ------------ ------------
NET INCOME(LOSS) .................................... $ (461,812) $ (2,370,461) $ (1,005,308) $ 668,793
=========== ============ ============ ============
PRIMARY EARNINGS (LOSS) PER COMMON SHARE ............ (0.07) (0.23) (0.10) 0.05
=========== ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING-PRIMARY 7,039,973 10,173,479 10,122,930 13,724,982
=========== ============ ============ ============
FULLY DILUTED EARNINGS PER SHARE .................... 0.05
============
WEIGHTED AVERAGE NUMBER OF SHARE OUTSTANDING-
FULLY DILUTED ..................................... 14,023,413
============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
-3-
<PAGE>
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
<TABLE>
<CAPTION>
RETAINED
COMMON ADDITIONAL EARNINGS RECEIVABLE TOTAL
STOCK PAID IN (ACCUMULATED UNEARNED FROM STOCKHOLDERS
SHARES AMOUNT CAPITAL DEFICIT) COMPENSATION AFFILIATE DEFICIT
------------ --------- ----------- ----------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994 ....... 5,355,000 $ 5,355 $ -- $ 233,090 $ -- $ (21,008) $ 217,437
Issuance of common stock ......... 2,115,000 2,115 -- -- -- -- 2,115
Issuance of restricted
common stock ................... 2,680,000 2,680 -- -- (2,680) -- --
Forfeit of restricted
common stock ................... (25,000) (25) -- -- 25 -- --
Net income (loss) ................ -- -- -- (461,812) -- -- (461,812)
Dividends, $.01 per share ........ -- -- -- (60,000) -- -- (60,000)
Advance to affiliate ............. -- -- -- -- -- (8,721) (8,721)
Repayment from affiliate ......... -- -- -- -- -- 10,000 10,000
Write-off ........................ -- -- -- -- -- 19,729 19,729
------------ --------- ----------- ----------- ------- ----------- -----------
BALANCE, December 31, 1995 ....... 10,125,000 10,125 -- (288,722) (2,655) -- (281,252)
Issuance of common stock
to employees and
directors ...................... 85,000 85 -- -- -- -- 85
Conversion of 15%
convertible notes .............. 245,000 245 267,309 -- -- -- 267,554
Restricted common stock
- restrictions expired ......... -- -- -- -- 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)
============ ========= =========== =========== ======= =========== ===========
9 month prior periods comparative:
BALANCE, December 31, 1995 ....... 10,125,000 $ 10,125 $ -- $ (288,722) $(2,655) $ -- (281,252)
Issuance of common stock ......... -- -- -- -- -- -- --
Issuance of common stock to
employees and directors ........ 25,000 25 -- -- -- -- 25
Conversion of notes payable ...... 230,000 230 229,770 -- -- -- 230,000
Restricted common stock
- restrictions expired ......... -- -- -- -- 851 -- 851
Forfeit of restricted
common stock ................... -- -- -- -- -- -- --
Net income (loss) ................ -- -- -- (1,005,308) -- -- (1,005,308)
------------ --------- ----------- ----------- ------- ----------- -----------
BALANCE, September 30, 1996 ...... 10,380,000 $ 10,380 $ 229,770 $(1,294,030) $(1,804) $ -- $(1,055,684)
============ ========= =========== =========== ======= =========== ===========
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 to
employees and directors ........ -- -- -- -- -- -- --
Conversion of 15%
convertible notes .............. 294,000 294 266,000 -- -- -- 266,294
Restricted common stock
- restrictions expired ......... -- -- -- -- 150 -- 150
Forfeit of restricted
common stock ................... (175,000) (175) -- -- 175 -- --
Net income (loss) ................ -- -- -- 668,793 -- -- 668,793
------------ --------- ----------- ----------- ------- ----------- -----------
BALANCE, September 30, 1997 ...... 10,974,000 $ 10,974 $ 533,309 $(1,990,390) $ (225) $ -- $(1,446,332)
============ ========= =========== =========== ======= =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
-4-
<PAGE>
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31 SEPTEMBER 30 SEPTEMBER 30
1995 1996 1996 1997
AUDITED AUDITED UNAUDITED UNAUDITED
--------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (LOSS) .............................................. $(461,812) $(2,370,461) $(1,005,308) $ 668,793
--------- ----------- ----------- ---------
Adjustments to reconcile net income (LOSS) to net cash
used in operating activities:
Provision for uncollectible receivables ...................... 67,104 524,152 345,875 441,168
Depreciation and amortization ................................ 56,099 86,134 54,620 70,473
Issuance of common stock for compensation and
interest .................................................... 2,115 24,644 15,423 5,429
Interest converted to long-term debt ......................... -- 11,259 -- --
Loss on disposal of assets ................................... -- 10,160 -- --
Change in assets and liabilities:
Notes receivable - trade ..................................... (104,302) (847,912) (644,808) (798,247)
Inventories .................................................. (17,028) (36,490) (18,018) 53,531
Prepaid expenses ............................................. 26,263 (3,793) (139,218) 12,725
Other assets ................................................. (52,418) (12,270) (12,270) (107,095)
Accounts payable and accrued liabilities ..................... 163,990 906,222 497,196 (63,717)
Accounts payable to management and stockholders .............. 43,945 376,794 167,184 (57,900)
Unearned revenue ............................................. 205,403 819,435 281,479 (171,360)
--------- ----------- ----------- ---------
Total adjustments ....................................... 391,171 1,858,335 547,463 (614,993)
--------- ----------- ----------- ---------
Net cash used in operating activities ................... (70,641) (512,126) (457,845) 53,801
--------- ----------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ........................... (39,910) (80,150) (77,285) (141,382)
Proceeds from sale of property and equipment ................. 4,178 -- -- --
Advances to affiliate ........................................ (8,721) -- -- --
Cash received from affiliate ................................. 10,000 -- -- --
Advances to employees and others ............................. (42,291) -- -- --
Collection of receivables from employees and others .......... 33,761 15,029 10,099 --
--------- ----------- ----------- ---------
Net cash used in investing activities ................... (42,983) (65,121) (67,186) (141,382)
--------- ----------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt ................................. -- 296,000 193,911 93,624
Repayment of long-term debt .................................. (79,148) (162,155) (50,338) (51,896)
Proceeds from convertible notes .............................. 150,000 445,000 395,000 90,000
Dividends paid ............................................... (60,000) -- -- --
--------- ----------- ----------- ---------
Net cash provided by financing activities ................. 10,852 578,845 538,573 131,728
--------- ----------- ----------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .......... (102,772) 1,598 13,542 44,147
--------- ----------- ----------- ---------
CASH AND CASH EQUIVALENTS, beginning of period ................. 145,099 42,327 42,327 43,925
--------- ----------- ----------- ---------
CASH AND CASH EQUIVALENTS, end of period ....................... $ 42,327 $ 43,925 $ 55,870 $ 88,073
========= =========== =========== =========
SUPPLEMENT DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest ..................................................... $ 85,630 $ 94,267 $ 49,470 $ 42,779
========= =========== =========== =========
</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.
-5-
<PAGE>
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996
(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 stockholders 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 stockholders 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 stockholder 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
-6-
<PAGE>
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
Maintenance and repairs are expensed 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 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 September 30, 1996 and 1997 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 September 30, 1996 and
1997. Results for the interim period September 30, 1997 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1997.
(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 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%.
-7-
<PAGE>
(3) NOTES RECEIVABLE - TRADE: (Continued)
The following is a summary of notes receivable-trade as of December 31, 1996 and
1995:
DECEMBER 31, DECEMBER 31,
1996 1995
--------- ---------
Notes receivable-trade ........................... $ 942,867 $ 123,576
Less discount .................................... -- (9,211)
Less allowance for uncollectibles ................ (529,807) (25,065)
--------- ---------
Notes receivable-trade, net ...................... 413,060 89,300
Less: current portion of notes receivable ........ 247,836 41,314
--------- ---------
Notes receivable - long-term portion ............. $ 165,224 $ 47,986
========= =========
Future principal payments scheduled for collection as of December 31, 1996, are
as follows:
YEAR ENDING DECEMBER 31,
DECEMBER 31 1996
----------- ------------
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 transaction resulted in a loss in the amount of
$112,644.
-8-
<PAGE>
(4) PROPERTY AND EQUIPMENT:
The following is a summary of property and equipment at December 31, 1996 and
1995:
DECEMBER 31, DECEMBER 31,
1996 1995
----------- -----------
Land ....................................... $ 196,741 $ 196,741
Buildings and improvements ................. 723,656 716,818
Furniture, fixtures and equipment .......... 231,347 159,212
Vehicles ................................... -- 24,385
Computer software .......................... 77,895 34,848
----------- -----------
1,229,639 1,132,004
Less: accumulated depreciation ............ (153,179) (89,137)
----------- -----------
Property and equipment, net ........... $ 1,076,460 $ 1,042,867
=========== ===========
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
1995, are $133,329 and $41,452, and $91,459 and $13,868, respectively. The
capital leases are personally guaranteed by a stockholder.
(5) LONG-TERM DEBT:
The following is a summary of long-term debt at December 31, 1996 and 1995.
DECEMBER 31, DECEMBER 31,
1996 1995
-------- --------
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 stockholder ..................... $288,750 $330,001
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 stockholder .................... 228,850 249,888
Mortgage note payable in monthly installments
of $1,553, including interest at 14%, through
July 2004, collateralized by property and
equipment, guaranteed by a stockholder ......... 86,770 92,318
-9-
<PAGE>
(5) LONG-TERM DEBT: (Continued)
DECEMBER 31, DECEMBER 31,
1996 1995
---------- ----------
Note payable, principal and accrued interest
at 6% due December 1998, uncollateralized .......... 79,000 79,000
Note payable to stockholder in monthly installments
of $250, including interest at 18% through October
1996, collateralized by equipment .................. -- 2,389
Convertible notes payable, bearing interest at 15%,
payable and due in varying amounts, and dates,
uncollateralized ................................... 336,261 150,000
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 --
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 79,977
---------- ----------
Total .................................... 1,370,548 983,573
Less: current portion ................... 1,073,717 840,900
---------- ----------
Long-term debt, less current portion ..... $ 296,831 $ 142,673
========== ==========
Maturities of long-term debt for each of the next five years as of December 31,
1996 are as follows:
YEAR ENDED
DECEMBER 31, AMOUNT
------------ -----------
1997 $ 1,073,717
1998 222,267
1999 68,481
2000 6,083
2001 -
-----------
$ 1,370,548
===========
As discussed in Note 7, a stockholder 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 stockholder 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.
-10-
<PAGE>
(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 ENDED DECEMBER 31,
DECEMBER 31, 1996
------------ ------------
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
------------
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, 1996, without regard to the exercise of
renewal options, follows:
YEAR ENDED
DECEMBER 31, AMOUNT
------------ ------------
1997 $ 71,760
1998 57,510
------------
$ 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
stockholder.
-11-
<PAGE>
Royalties or commissions were paid to four of the Company's stockholders during
the years ended December 31, 1996 and 1995. These stockholders 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
stockholders for the years ended December 31, 1996 and 1995 were approximately
$1,065,000 and $98,000, respectively. The product revenues recognized by the
Company relating to these stockholders for the years ended December 31, 1996 and
1995 were approximately $4,720,000 and $187,000, respectively. Approximately
$420,000 and $44,000 were due to these stockholders at December 31, 1996 and
1995, respectively
A stockholder 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 1995, these properties
with net book values of $868,514 and $873,898, 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 1995, these mortgages with
outstanding principal balances of $604,370 and $672,207, respectively, are
included as debt in the accompanying financial statements.
(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, 1995, the cash bank balances of $93,035, 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 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) STOCKHOLDERS' 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.
-12-
<PAGE>
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 stockholders' 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. Stockholders
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,
1996 and 1995.
Pro Forma information as required by SFAS No. 123 for valuing stock options
under the fair 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").
-13-
<PAGE>
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:
Net operating losses $ 385,000
Reserve for uncollectible accounts receivable 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.
-14-
<PAGE>
(12) Management Plans:
As shown in the accompanying financial statements, the Company incurred a net
loss of $2.3 million during the year ended December 31, 1996. As of that date,
the Company's current liabilities exceeded its current assets by approximately
$3.3 million, partly due to uncertain conditions which the Company faces
regarding the mortgages (as described in Note 7), 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.
(13) SUBSEQUENT EVENTS:
The Company granted additional stock options amounting to 2,897,500 shares to
employees and directors on April 1, 1997. The stock options vest upon the
completion of a two year employment period or the occurrence of a public
offering. The stock options may be exercised at a price of $.21 per common share
and expire ten years after the effective date of the option agreement.
During 1997, approximately $112,000 due on convertible notes (including accrued
interest) outstanding at December 31, 1996 were converted to approximately
112,000 common shares.
During 1997, the Company entered into agreements with financial service
organizations for the sale of notes receivable-trade. The contracts sold must
meet specified credit worthiness criteria. The purchase price of the notes
receivable-trade range from 33% to 92% of the note balance.
During January, 1997, the Company issued 500,000 shares of common stock to an
employee. As no market is readily available for the stock, the issuance was
valued at par value.
-15-
<PAGE>
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Articles of Incorporation, Article XI, provide that the
Registrant shall indemnify any officer, director or former officer or director,
to the full extent permitted by law.
Insofar as indemnification for liabilities arising under the Securities
Act, indemnification may be permitted to directors, officers or persons
controlling the Registrant pursuant to the foregoing section. The Registrant has
been informed that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses of the Registrant in connection with the issuance and distribution
of the securities being registered are estimated as follows, assuming the
Maximum offering amount is sold:
Securities and Exchange Commission filing fee .................. $ 1,207
Blue sky fees and expenses ..................................... 10,000
Accountant's fees and expenses ................................. 60,000
Special Counsel's fees and expenses ............................ 75,000
General Counsel's fees and expenses ............................ 10,000
Printing ....................................................... 20,000
Postage ........................................................ 25,000
Marketing expenses ............................................. 30,000
Stock exchange listing fees .................................... 15,000
Miscellaneous .................................................. 3,793
--------
Total ..................................................... $250,000
========
(The Registrant will bear all expenses shown above.)
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
(a) The following information is given for all securities that the Registrant
sold within the past three years without registering the securities under the
Securities Act.
DATE TITLE AMOUNT
---- ------ ------
(1) April 1995 Common Stock 225,000
(2) April, December 1995 Common Stock 5,895,000
(3) May 1995 Common Stock 1,350,000
(4) April 1996 Common Stock 25,000
(5) During 1996, 1997 (x) Common Stock-restricted* 1,755,000
(6) During 1996, 1997 (y) Common Stock 538,699
(7) During 1996, 1997 (z) Common Stock 240,000
(8) January, 1997 Common Stock 500,000
*See form of Restricted Stock Agreement, Exhibit 10.3.
(b) No underwriters were used in connection with any of the issuances of shares.
The classes of persons to whom the Registrant issued shares were:
(1) One officer of the Registrant
(2) Two individual owners of two corporations acquired by the Registrant
(3) One individual, who is Chairman of the Registrant's Board of Directors
(4) One individual, in connection with termination of employment.
(5) Eighteen individuals, all employees of the Registrant.
<PAGE>
(x) January,75,000; August, 210,000; December, 1996 220,000; January, 775,000;
February, 85,000; March, 50,000; April, 25,000; May, 165,000; September, 50,000;
October, 25,000; November, 50,000; December, 1997 25,000. Total 1,755,000.
(6) Nineteen individuals, each of whom was an "accredited investor," as defined
in Rule 501(a).
(y) May, 50,000; June, 75,000; July, 50,000; December, 1996 40,000; February,
30,000; June, 25,000; August, 26,855; September, 212,373; November, 1997 29,471.
Total 538,699.
(7) Two directors of the Registrant
(z) July, 60,000; October, 1996 180,000. Total 240,000.
(8) One individual who is the largest shareholder
(c) There were no underwriting discounts or commissions. The transactions and
the types and amounts of consideration received by the Registrant were:
(1) For services provided and to be provided.
(2) For all the shares of The LeGrand Group, Inc. and Results Publishing, Inc.
(3) Cash in the amount of $1,350.
(4) For services and for release of any claims arising out of employment.
(5) For services to be performed and conditioned upon certain specified
performance by the Registrant.
(6) Cash, services and products from nineteen creditors in the aggregate amount
of $538,699 were paid through the issuance of common stock.
(7) For services to be performed.
(8) For services and to settle claims about the ownership of products.
(d) In addition to the following sections of the Securities Act, the Registrant
alternatively claims exemption for these transactions under Section 3(b) and
Rule 504.
(1) Section 4(2). This was a transaction between the Registrant and two founding
officers, who continue to own the shares.
(2) Section 4(2) This was a transaction between the Registrant and two owners of
companies that are now subsidiaries of the company. The individuals continue
to own the shares.
(3) Section 4(2) The transaction was between the Registrant and its Chairman,
who continues to own the shares.
(4) Section 4(2) The transaction was between the Registrant and one individual
who had been a founding officer of the Registrant and who continues to own
the shares.
(5) Section 4(2) The 18 recipients of these grants have no voting, dividend or
rights to sell, pledge or otherwise transfer their shares during the defined
Performance Period. The grants were made to sophisticated person and those
person had continuous access to all internal financial information prepared
by the Company and to all the Company's officers.
(6) Section 4(2) The shares bear a legend restricting their transfer.
(7) Section 4(2) The two individuals are directors of the Registrant and
continue to own the shares.
(8) Section 4(2) The individual is the largest shareholder and continues to own
the shares.
<PAGE>
ITEM 27. EXHIBITS
The exhibits listed below are filed as part of this Registration Statement
pursuant to Item 601 of Regulation S-B.
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
1 Agency Agreement between the Company and Attkisson, Carter & Akers
3.1 Amended and Restated Articles of Incorporation, dated October 11, 1996
3.2 By-laws, dated April 12, 1995
4.1 Article VIII, pages 4-8, of the Amended and Restated Articles of
Incorporation (Reference is made to Exhibit 3.1) and Article III, pages
1-6, and Article VII, pages 11-14, of the By-laws (Reference is made to
Exhibit 3.2)
4.2 Form of common stock certificate
5 Opinion and consent of counsel with respect to the legality of the
shares being registered
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
10.6 Infomercial Marketing Agreement
18 Letter on change in accounting principles (reference is made to footnote
II of Financial Statements)
23.1 Consent of James Moore & Co.
23.1(a) Consent of James Moore & Co.
23.1(b) Consent of James Moore & Co.
23.2 Consent of counsel (reference is made to Exhibit 5)
#24 Power of Attorney
27 Financial Data Schedule
99.1 Share Purchase Agreement
99.2 Impound Agreement
99.3 Lock-In Agreement
- --------------------------------------
As filed with Amendment No. 2 to this Registration Statement
# As filed in Part II of this Registration Statement
ITEM 28. UNDERTAKINGS.
(a) The Registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
(i) Include any prospectus required by section 10(a)(3) of
the Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change
in the information in the registration statement; and
(iii) Include any additional or changed material information
on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at
that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the
offering.
(e) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Jacksonville State of Florida, on February 11, 1998.
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
(ISSUER)
By
SHAWN M. CASEY, CHIEF EXECUTIVE OFFICER & DIRECTOR
Jarrell D. Ormand and Hugh L. Carey each appoints Daniel S. Pena, Sr. his
attorney-in-fact, with full power of substitution and resubstitution, to sign
any and all amendments (including post-effective amendments) to this
registration statement on Form SB-2 of Success Development International, Inc.,
and to file them, with all their exhibits and other related documents, with the
Securities and Exchange Commission, ratifying and confirming all that their
attorney-in-fact and agent or his or her substitute or substitutes may lawfully
do or cause to be done by virtue of this appointment.
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
SIGNATURE TITLE DATE
--------- ----- ----
DANIEL S. PENA, SR. Chairman of the Board February 11, 1998
of Directors
SHAWN M. CASEY Chief Executive Officer February 11, 1998
and Director
RALPH E. VROMAN, JR. Chief Financial Officer February 11, 1998
RAYMOND RACH Vice President & Director February 11, 1998
HUGH L. CAREY Director February 11, 1998
JARRELL D. ORMAND Director February 11, 1998
II-4
EXHIBIT 1
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
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.
2.1 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.
2.2 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).
2.3 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.
2.4 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>
2.5 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.
2.6 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.
2.7 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.
2.8 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.
2.9 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 Escrow Agent.
The initial Closing hereunder (the "Initial Closing") shall
take place at 10:00 a.m., Atlanta time on the fifth (5th)
business
<PAGE>
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 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.
<PAGE>
(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 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
<PAGE>
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:
(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
<PAGE>
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 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
<PAGE>
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
(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.
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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:/s/ SHAWN M. CASEY
Shawn M. Casey
President and CEO
ACCEPTED AND AGREED TO this 4th day of February, 1998.
ATTKISSON CARTER & AKERS
By: /s/ RONALD ATTKINSSON
Title: PRESIDENT
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
The above corporation (the "Corporation") existing pursuant to the
Florida Business Corporation Law, desiring to give notice of corporate action
effectuating the restatement of its Articles of Incorporation, sets forth the
following facts:
1. The name of the Corporation is SUCCESS DEVELOPMENT INTERNATIONAL,
INC.
2. The Articles of Incorporation are hereby restated in their entirety
to read as follows:
AMENDED & RESTATED
ARTICLES OF INCORPORATION
OF
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
ARTICLE I. NAME AND DURATION
The name of the Corporation is Success Development International, Inc.
The duration of the Corporation is perpetual.
ARTICLE II. PRINCIPAL OFFICE
The address of the principal office of the Corporation in the State of
Florida is 9799 St. Augustine Road, Jacksonville, Florida 32257.
ARTICLE III. REGISTERED OFFICE AND AGENT
The address of the registered office in the State of Florida is c/o
Mahoney Adams & Criser, P.A., 50 North Laura Street, 3400 Barnett Center, in the
City of Jacksonville, County of Duval. The name of the registered agent at such
address is RAX CO.
Prepared by Jaime A. Frias, Esq.
Mahoney Adams & Criser, P.A.
P.O. Box 4099
Jacksonville, FL 32201
(904)354-1100
Attorney No.0879479
<PAGE>
ARTICLE IV. CORPORATE PURPOSES, POWERS AND RIGHTS
1. The nature of the business to be conducted or promoted and the
purposes of the Corporation are to engage in any lawful act or activity for
which corporations may be organized under the Florida Business Corporation Act.
2. In furtherance of its corporate purposes, the Corporation shall have
all of the general and specific powers and rights granted to and conferred on a
corporation by the Florida Business Corporation Act.
ARTICLE V. CAPITAL STOCK
The total number of shares of capital stock which the Corporation has
the authority to issue is Twenty-Five Million (25,000,000) shares of Common
Stock ("Common Stock") $.001 par value per share.
ARTICLE VI. BOARD OF DIRECTORS
1. The number of directors of the Corporation shall be not less than
three nor more than nine. Within the limits specified above, the number of
directors shall be determined from time to time by the Board of Directors. The
directors shall be divided into three classes, Class I, Class II and Class III,
which shall be as nearly equal in number as possible. Each director shall serve
for a term ending on the date of the third annual meeting of shareholders
following the annual meeting of shareholders at which such director was elected;
provided, however, that each director in Class I indicated below shall hold
office until the 1996 annual meeting of shareholders; each director in Class II
indicated below shall hold office until the 1997 annual meeting of shareholders
and initial director in Class III indicated below shall hold office until the
1998 annual meeting of shareholders, and with each class to hold office until
its successors are elected and qualified. In the case of any increase in the
number of directors of the Corporation, the additional directors shall be so
classified that all classes of directors shall be increased equally as nearly as
possible. The provisions of this Article with respect to the sole power of the
Board of Directors to determine the number of directors which will constitute
the entire Board and with respect to the classified Board of Directors shall not
be amended, repealed or otherwise altered without the approval of eighty percent
(80%) of the outstanding voting stock of the Corporation.
2. If any vacancy occurs in the Board of Directors during a term, the
remaining directors, by affirmative vote of a majority thereof, may elect a
director to fill the vacancy until the next annual meeting of shareholders.
3. The names and mailing addresses of the persons who shall serve as
directors of the Corporation until the annual meeting of shareholders indicated
above are as follows:
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CLASS I
NAME ADDRESS
Shawn M. Casey 12377 Fisherman's Wharf Court
Jacksonville, Florida 32223
Ross Wager 1722 Valencia Drive
Jacksonville, Florida 32207
CLASS II
NAME ADDRESS
Raymond Rach 4110 Cambrian Garden Lane
Jacksonville, Florida 32257
Daniel S. Pena, Sr. 55 Crest Road East
Rolling Hills, California 90274
CLASS III
NAME ADDRESS
Jarrell D. Ormand 577 Perugia Way
Los Angeles, California 90077
Hugh Carey Cambridge Partners
Park Avenue Tower
65 East 55th Suite 3300
New York, NY 10022-3219
ARTICLE VII. GREATER QUORUM OR VOTING REQUIREMENT
If the shareholders have adopted or amended a provision of these
Articles of Incorporation or the Corporation's Bylaws that fixes a greater
quorum or voting requirement for shareholders or voting groups of shareholders
than is required by Florida law, the adoption or amendment of such provision of
these Articles or the Corporation's Bylaws that adds, changes or deletes such a
greater quorum or voting requirement for shareholders must meet the same quorum
requirement and be adopted by the same vote and voting groups required to take
action under the quorum and voting requirements then in effect or proposed to be
adopted, whichever is greater. Any provision of the Corporation's By a greater
quorum or voting requirement for shareholders may not be adopted, amended or
repealed by the Board of Directors.
ARTICLE VIII. FAIR PRICE PROVISION
(1)(A) In addition to any affirmative vote required by law or these
Articles of Incorporation, and except as otherwise expressly provided in
paragraph 2 of this Article, any Business Combination (as defined in
subparagraph (B) of this paragraph 1) shall require the affirmative vote of the
holders of at least eighty percent (80%) of the outstanding Common Stock
entitled to vote thereon (the "Voting Stock"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that a lesser
percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
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<PAGE>
(B) The term "Business Combination" as used in this Article
shall mean any of the following transactions:
(i) any merger or consolidation of the Corporation or
any Subsidiary (as hereinafter defined) with (a) any
Interested Shareholder (as hereinafter defined) or (b) any
other corporation (whether or not itself an Interested
Shareholder) which is, or after such merger or consolidation
would be, an Affiliate (as hereinafter defined) of an
Interested Shareholder; or
(ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series
of transactions) to or with any Interested Shareholder or any
Affiliate of any Interested Shareholder of any assets of the
Corporation or any Subsidiary having an aggregate Fair Market
Value (as hereinafter defined) of $1,000,000 or more; or
(iii) the issuance or transfer by the Corporation (in
one transaction or a series of any securities of the
Corporation or any Subsidiary to any Interested Shareholder or
any Affiliate of any Interested Shareholder in exchange for
cash, securities or other property (or a combination thereof)
having an aggregate Fair Market Value of $1,000,000 or more;
or
(iv) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by or
on behalf of an Interested Shareholder or any Affiliate of any
Interested Shareholder; or
(v) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation,
or any merger or consolidation of the Corporation with any
Subsidiary or any other transaction (whether or not with or
into or otherwise involving an Interested Shareholder) which
has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding
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<PAGE>
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly
owned by any Interested Shareholder or any Affiliate of any
Interested Shareholder.
(2) The provisions of paragraph 1 of this Article shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote as is required by law and any other
provision of these Articles of Incorporation, if all of the conditions specified
in either of the following subparagraphs (A) and (B) are met:
(A) The Business Combination shall have been approved by a
majority of the Disinterested Directors (as hereinafter defined).
(B) All of the following conditions shall have been met:
(i) The aggregate amount of (x) cash and (y) Fair
Market Value as of the date of the consummation of the
Business Combination of consideration other than cash, to be
received per share by holders of the Corporation's Common
Stock in such Business Combination shall be at least equal to
the highest amount determined under subclauses (a) and (b)
below:
(a) (if applicable) the highest per share
price (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by the
Interested Shareholder for any share of Common Stock
acquired by it (1) within the two-year period
immediately prior to the first public announcement of
the proposal of the Business Combination (the
"Announcement Date") or (2) in the transaction in
which it became an Interested Shareholder, whichever
is higher;
(b) The Fair Market Value per share of
Common Stock on the Announcement Date or on the date
on which the Interested Shareholder became an
Interested Shareholder (such latter date referred to
in this Article as the "Determination Date"),
whichever is higher.
(ii) The consideration to be received by holders of Voting
Stock shall be in cash or in the same form as the Interested
Shareholder has previously paid for shares of Voting Stock. If the
Interested Shareholder has paid for shares of Voting Stock with varying
forms of consideration, the form of consideration for such Voting Stock
shall be either cash or the form used to acquire the largest number of
shares of Voting Stock previously acquired by it.
(iii) After such Interested Shareholder has become an
Interested Shareholder and prior to the consummation of such Business
Combination: (a) there shall have been (1) no reduction in the annual
rate of dividends paid on the
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<PAGE>
Common Stock (except as necessary to reflect any subdivision of the
Common Stock), except as approved by a majority of the Disinterested
Directors, and (2) an increase in such annual rate of dividends as
necessary to reflect any reclassification (including any reverse stock
split), recapitalization, reorganization or any similar transaction
which has the effect of reducing the number of outstanding shares of
the Common Stock, unless the failure so to increase such annual rate is
approved by a majority of the Disinterested Directors; and (b) such
Interested Shareholder shall not have become the beneficial owner of
any additional shares of Voting Stock except as part of the transaction
which results in such Interested Shareholder becoming an Interested
Shareholder.
(iv) After such Interested Shareholder has become an
Interested Shareholder, such Interested Shareholder shall not have
received the benefit, directly or indirectly (except, proportionately
as a shareholder), of any loans, advances, guaranties, pledges or other
financial assistance or any tax credits or other tax advantages
provided by the Corporation, whether in anticipation of or in
connection with such Business Combination or otherwise.
(v) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934, as amended (together with any
successor thereto, the "Exchange Act") and the rules and regulations
thereunder shall be mailed to any public shareholders of the
Corporation at least thirty (30) days prior to the consummation of such
Business Combination (whether or not such proxy or information
statement is required to be mailed pursuant to the Exchange Act).
(3) For the purposes of this (A) The term "Affiliate' shall have the
meaning given to it in Rule 12b-2 of the Exchange act.
(B) A person shall be a "beneficial owner" of any Voting Stock
(i) which such person or any of its Affiliates beneficially owns,
directly or indirectly; or (ii) which such person or any of its
Affiliates has (x) the right to acquire (whether such right is
exercisable immediately or only after the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise,
or (y) the right to vote pursuant to any agreement, arrangement or
understanding; or (iii) which is beneficially owned, directly or
indirectly, by any other person with which such person or any of its
Affiliates has any agreement, arrangement or understanding or the
purpose of acquiring, holding, voting or disposing of any such share of
Voting Stock. For the purposes of determining whether a person is an
Interested Shareholder pursuant to subparagraph (E) of this paragraph
3, the number of shares of Voting Stock deemed to be outstanding shall
include shares deemed owned
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<PAGE>
through application of subparagraph (E) of this paragraph 3 but shall
not include any other shares of Voting Stock which may be issuable
pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options, or otherwise.
(c) The term "Disinterested Director" means any member of the
Board of Directors who is unaffiliated with the Interested Shareholder
and was a member of the Board of Directors prior to the time that the
Interested Shareholder became an Interested Shareholder, and any
successor of a Disinterested Director who is unaffiliated with the
Interested Shareholder and is recommended to succeed a Disinterested
Director by a majority of Disinterested Directors then on the Board of
Directors.
(D) The term "Fair Market Value' means: (i) in the case of
stock, the highest closing sale price during the thirty (30) day period
immediately preceding the date in question of a share of such stock on
the principal United States securities exchange registered under the
Exchange Act on which such stock is listed, or, if such stock is not
listed on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the thirty (30) day period
preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System or any system then
in use, or if no such quotations are available, the fair market value
on the date in question of a share of such stock as determined in good
faith by a majority of the Disinterested Directors; and (ii) in the
case of property other than cash or stock, the fair market value of
such property on the date in question as determined in good faith by a
majority of disinterested Directors.
(E) The term "Interested Shareholder" (other than the
Corporation, any Subsidiary, the Corporation or any Subsidiary acting
as a Trustee or in a similar fiduciary capacity, or any person who
would have met the definition of an Interested Shareholder as of July
29,1996) means any person who or which (a) is the beneficial owner of
more than 10% of the voting power of the outstanding Voting Stock; or
(b) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the
beneficial owner of 10% of more of the voting power of the then
outstanding Voting Stock; or (c) is an assignee of or has otherwise
succeeded to any shares of Voting Stock which were at any time within
the two-year period immediately prior to the date in question
beneficially owned by any Interested Shareholder, if such assignment or
succession shall have occurred in the course of a transaction or series
of transactions not involving a public offering within the meaning of
the Securities Act of 1993, as amended.
(F) In the event of any Business Combination in which the
Corporation survives, the phrase "other consideration to be received"
as used in subparagraph (8)(i) of paragraph 2 of this Article shall
include the shares of Common Stock retained by the holders of such
shares.
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<PAGE>
(G) The term "subsidiary" means any corporation of which a
majority of any class of equity security is owned, directly or
indirectly, by the Corporation unless owned by the Corporation as
trustee or in a similar fiduciary capacity; provided, however, that for
the purposes of the definition of Interested Shareholder set forth in
subparagraph (E) of this paragraph, the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity security
is owned, directly or indirectly, by the Corporation.
(4) Nothing contained in this Article shall be construed to relieve any
Interested Shareholder from any fiduciary obligation imposed by law.
(5) Notwithstanding any other provisions of these Articles of
Incorporation or the Bylaws of the Corporation (and notwithstanding the fact
that a lesser percentage may be specified by law, these Articles of
Incorporation or the Bylaws of the Corporation), the affirmative vote of the
holders of eighty percent (80%) or more of the shares of Voting Stock shall be
required to alter, amend or adopt any provisions inconsistent with, or to
repeal, this Article.
ARTICLE IX. AMENDMENT
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in these Articles of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon shareholders
herein are granted subject to this reservation.
ARTICLE X. BYLAWS
The power to adopt, amend or repeal bylaws for the management of this
Corporation shall be vested in the Board of Directors or the shareholders, but
the Board of Directors may not amend or repeal any bylaw adopted by the
shareholders if the shareholders specifically provide that such bylaw is not
subject to amendment or repeal by the Board of Directors.
ARTICLE XI. INDEMNIFICATION
The Corporation shall indemnify any incorporator, officer or director,
or any former incorporator, officer or director, to the full extent permitted by
law.
3. The foregoing restatement contains amendments requiring shareholder
approval and was adopted by (a) all of the members of the Board of Directors,
and (b) the holders of outstanding Common Stock of the Corporation entitled to
cast a majority of the votes of the sole voting group which would be entitled to
vote on and adopt the amendments at a meeting at which all voting groups and
shareholders entitled to vote thereon were present and voted. The holders of the
Common Stock of the Corporation constitute the only voting group of the
shareholders entitled to vote on the amendment. Minutes of the Special Meeting
of the Shareholders and Board of Directors dated JULY 29 , 1996, were executed
by the Directors and holders of the Common Stock of the Corporation to cast a
majority of votes, and such majority is sufficient for approval by that voting
group.
4. The duly adopted Amended and Restated Articles of Incorporation
supersede the original Articles of Incorporation and all amendments to them.
IN WITNESS WHEREOF, the undersigned President of the aforesaid
corporation has executed these Amended and Restated Articles of Incorporation
this 11 day of October 1996.
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
By: /s/ SHAWN M. CASEY
Shawn M. Casey, President
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EXHIBIT 3.2
BYLAWS
OF
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
ARTICLE I
BUSINESS OFFICES
SECTION 1.1. FLORIDA. The corporation shall have such offices as its
business may require in or out of the State of Florida.
ARTICLE II
REGISTERED OFFICES AND REGISTERED AGENTS
SECTION 2.1. FLORIDA. The address of the initial registered office in the
State of Florida and the name of the initial registered agent of the corporation
at such address are set forth in the Articles of Incorporation. The corporation
may, from time to time, designate a different address as its registered office
or a different person as its registered agent, or both; provided, however, that
such designation shall become effective only upon the filing of a statement of
such change with the Department of State of the State of Florida as is required
by law.
SECTION 2.2. OTHER STATES. In the event the corporation desires to qualify
to do business in one or more states other than Florida, the corporation shall
designate the location of the registered office in each such state and designate
the registered agent for service of process at such address in the manner
provided by the law of the state in which the corporation elects to be
qualified.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. PLACE OF MEETING. Meetings of the shareholders shall be held
at the principal office of the corporation or at any other place (in or out of
the State of Florida) designated in the notice of the meeting.
SECTION 3.2. ANNUAL MEETING. An annual meeting of the shareholders shall
be held within one hundred and twenty (120) days after the close of each fiscal
year of the corporation, or on such other date as the Board of Directors may
designate, at a time and place designated by the Board of Directors. The
shareholders shall elect a Board of Directors and transact other business at the
annual meeting. If an annual meeting is not held within any 13-month period, the
circuit court of the circuit in which the principal office of the corporation is
located may, on the application of any shareholder, order an annual meeting to
be held.
SECTION 3.3. SPECIAL MEETINGS. Special meetings of the shareholders shall
be held (a) when directed by the President, (b) when directed by the Board of
Directors, or (c) when requested in a written demand signed and dated by the
holders of not less than ten percent (10%) of all the shares entitled to vote at
the meeting, which written demand shall be delivered to the corporation's
Secretary. A meeting requested by shareholders shall be called for a date not
less than ten (10) nor more than sixty (60) days after the request is made. The
call for the meeting shall be issued by the Secretary, unless the President,
Board of Directors or shareholders requesting the meeting shall designate
another person to do so.
SECTION 3.4. NOTICE. Written notice stating the place, day, and hour of
the meeting and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than ten (10) nor more
than sixty (60) days before the meeting, either personally or by first class
mall, by or at the direction of the President, the Secretary, or the officer or
persons calling the meeting to each shareholder of record entitled to vote at
such meeting. If mailed, such notice shall be deemed to be delivered when
deposited, postage prepaid, in the United States mall addressed to the
shareholder at his address as it appears on the stock transfer books of the
corporation.
<PAGE>
SECTION 3.5. NOTICE OF ADJOURNED MEETINGS. When a meeting is adjourned to
another date, time or place, it shall not be necessary to give any notice of the
adjourned meeting if the date, time and place to which the meeting is adjourned
are announced at the meeting at which the adjournment is taken, and any business
may be transacted at the adjourned meeting that might have been transacted on
the original date of the meeting. If, however, after the adjournment, the Board
of Directors fixes a new record date for the adjourned meeting, a notice of the
adjourned meeting shall be given as provided in Section 3.4 above, to each
shareholder of record on the new record date entitled to vote at such meeting.
SECTION 3.6. WAIVER OF NOTICE. A shareholder may waive any notice required
to be given to such shareholder, whether before or after the time stated in such
notice, if a waiver thereof in writing, signed by the shareholder entitled to
such notice, is delivered to the corporation for inclusion in the minutes or
filing with the corporate records. Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of the shareholders need be
specified in the written waiver of notice. Attendance of a shareholder at a
meeting shall constitute a waiver of notice of such meeting, except when the
shareholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the holding of the meeting or the transacting of
business at the meeting.
SECTION 3.7. CLOSING OF TRANSFER BOOKS AND FIXING OF RECORD DATE.
(a) For the purpose of determining shareholders entitled to notice of or
to vote at any meeting of shareholders or any adjournment thereof, or entitled
to receive payment of any dividend, or in order to make a determination of
shareholders for any other purpose, the Board of Directors may provide that the
stock transfer books shall be closed for a stated period not to exceed, in any
case, seventy (70) days.
(b) In lieu of closing the stock transfer books, the Board of Directors
may fix in advance a date as the record date for any determination of
shareholders, such date in any case to be not more than seventy (70) days prior
to the date on which the particular action requiring such determination of
shareholders is to be taken.
(c) If the stock transfer books are not closed and no record date is fixed
for the determination of shareholders entitled to notice of or to vote at an
annual or special meeting of shareholders, the close of business on the day
before the first notice of the meeting is delivered to shareholders shall be the
record date for such determination of shareholders.
(d) If the stock transfer books are not closed and no record date is fixed
for the determination of shareholders entitled to receive a dividend, the date
on which the Board of Directors authorizes the dividend shall be the record date
for such determination of shareholders.
(e) When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this Section 3.7, such determination
shall apply to any adjournment thereof, unless the Board of Directors fixes a
new record date for the adjourned meeting, which the Board of Directors shall do
if the adjourned meeting is more than one hundred and twenty (120) days after
the date fixed for the original meeting.
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SECTION 3.8. RECORD OF SHAREHOLDERS HAVING VOTING RIGHTS. After fixing the
record date for a shareholders' meeting, the officer or agent having charge of
the stock transfer books for shares of the corporation's stock shall prepare, at
least ten (10) days before each meeting of shareholders or such shorter time as
exists between the record date and the meeting, a complete alphabetical list of
the shareholders entitled to vote at such meeting or any adjournment thereof,
with the address of and the number and class and series, if any, of shares held
by each. The list, for a period of ten (10) days prior to such meeting or such
shorter time as exists between the record date and the meeting, shall be kept on
file at the registered office of the corporation, at the corporation's principal
office or at the office of the transfer agent or registrar of the corporation,
and any shareholder, upon written demand, shall be entitled to inspect the list
at any time during regular business hours and at the shareholder's expense. The
list shall also be made available at the meeting and shall be subject to
inspection by any shareholder at any time during the meeting or any adjournment.
The shareholders' list shall be prima facie evidence of the identity of
shareholders entitled to examine the shareholders' list or to vote at a meeting
of the shareholders. If the requirements of this Section 3.8 have not been
substantially complied with, or if the corporation refuses to allow a
shareholder or his agent or attorney to inspect the shareholders' list before or
at the meeting, on the demand of any shareholder in person or by proxy who
failed to obtain such access, the meeting shall be adjourned until the
requirements are complied with. Refusal or failure to comply with the
requirements of this Section 3.8 shall not affect the validity of any action
taken at such meeting.
SECTION 3.9. SHAREHOLDER QUORUM. A majority of the shares entitled to
vote, represented in person or by proxy, shall constitute a quorum at a meeting
of shareholders. When a specified item of business is required to be voted on by
a class or series of stock, a majority of the shares of such class or series
shall constitute a quorum for the transaction of such item of business by that
class or series. If a quorum is present, the affirmative vote of a majority of
the shares represented at the meeting and entitled to vote on the subject matter
shall be the act of the shareholders, unless the vote of a greater number or
voting by classes is required by The Florida Business Corporation Act (Chapter
607, Florida Statutes) or by the Articles of Incorporation. After a quorum has
been established at a shareholders' meeting, the subsequent withdrawal of
shareholders, so as to reduce the number of shares entitled to vote at the
meeting below the number required for a quorum, shall not affect the validity of
any action taken at the meeting or any adjournment thereof.
SECTION 3.10. VOTING OF SHARES.
(a) Each outstanding share, regardless of class, shall be entitled to one
(1) vote on each matter submitted to a vote at a meeting of shareholders, except
as may otherwise be provided in the Articles of Incorporation.
(b) A shareholder may vote either in person or by duly appointed proxy (as
provided in Section 3.11).
(c) At each election for directors every shareholder entitled to vote at
such election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected at
that time and for whose election he has a right to vote, and if cumulative
voting is specifically authorized by the Articles of Incorporation, he may
cumulate his votes by giving one candidate as many votes as the number of
directors to be elected at that time multiplied by the number of his shares, or
by distributing such votes on the same principle among any number of such
candidates.
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SECTION 3.11. PROXIES.
(a) Every shareholder entitled to vote at a meeting of shareholders or to
express consent without a meeting, or a shareholder's duly authorized
attorney-in-fact, may authorize another person or persons to act for him in
person or by proxy.
(b) Every appointment of proxy must be signed by the shareholder or his
attorney-in-fact, and shall be effective when received by the Secretary of the
corporation or such other officer or agent authorized to tabulate votes. No
proxy shall be valid after the expiration of eleven (11) months from the date of
appointment unless otherwise provided in the appointment form. Every appointment
of a proxy shall be revocable at the pleasure of the shareholder executing it,
except as otherwise provided by law.
(c) If an appointment of proxy for the same shares confers authority upon
two or more persons and does not provide otherwise, a majority of them present
at the meeting, or if only one is present, then that one, may exercise all the
powers conferred by the proxy; but if the proxy holders present at the meeting
are equally divided on a particular matter, the voting of such shares shall be
prorated.
SECTION 3.12. ACTION BY SHAREHOLDERS WITHOUT A MEETING.
(a) Any action required to be taken at any annual or special meeting of
shareholders of the corporation, or any action which may be taken at any annual
or special meeting of such shareholders, may be taken without a meeting, without
prior notice, and without a vote, if a consent in writing setting forth the
action so taken, shall be signed and dated by the holders of a majority of the
outstanding stock and delivered to (a) the principal place of business of the
corporation, (b) the Secretary of the corporation, or (c) such other officer or
agent having custody of the corporate record book. If shares are entitled to be
voted by class and if any class of shares is entitled to vote thereon as a
class, such written consent shall be required of the holders of a majority of
the shares of each class of shares entitled to vote as a class thereon and of
the total shares entitled to vote thereon. No written consent shall be effective
to take corporate action unless, within sixty (60) days alter the earliest dated
consent delivered as provided in this Section 3.12, written consents signed by
the holders of a majority of the outstanding stock (or a majority of a class of
shares, if applicable) shall be delivered as provided in this Section 3.12.
(b) Within ten (10) days after obtaining such authorization by written
consent, notice must be given to those shareholders who have not consented in
writing or who are not entitled to vote on the action. The notice shall fairly
summarize the material features of the authorized action and, if the action be a
merger, consolidation, or sale or exchange of assets for which dissenters rights
are provided under The Florida Business Corporation Act, the notice shall
contain a clear statement of the right of shareholders dissenting therefrom to
be paid the fair value of their shares upon compliance with further provisions
of The Florida Business Corporation Act regarding the rights of dissenting
shareholders.
(c) In the event that the action to which the shareholders consent is such
as would have required the filing of a certificate under The Florida Business
Corporation Act if such action had been voted on by shareholders at a meeting
thereof, the certificate filed under The Florida Business Corporation Act shall
state that written consent has been given in accordance with the provisions of
Section 607.0704 of the Florida Statutes.
(d) Whenever action is taken by written consent of the shareholders, as
provided in this Section 3.12, the written consent of the shareholders
consenting thereto, or the written reports of inspectors appointed to tabulate
such consents, shall be filed in the corporate record book.
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ARTICLE IV
DIRECTORS
SECTION 4.1. FUNCTION. All corporate powers shall be exercised by or under
the authority of, and the business and affairs of this corporation shall be
managed under the direction of, the Board of Directors.
SECTION 4.2. QUALIFICATION. Directors shall be natural persons who are
eighteen (18) years of age or older; provided, however, that they need not be
residents of this state or be shareholders of this corporation.
SECTION 4.3. COMPENSATION. The Board of Directors shall have authority to
fix the compensation of directors unless otherwise provided in the Articles of
Incorporation.
SECTION 4.4. ELECTION AND TERM.
(a) Each person named in the Articles of Incorporation as a member of the
initial Board of Directors shall hold office until the first annual meeting of
shareholders and until his successor shall have been elected and qualified or
until his earlier resignation, removal from office or death.
(b) At the first annual meeting of shareholders and at each annual meeting
thereafter, the shareholders shall elect directors to hold office until the next
succeeding annual meeting. Each director shall hold office for the term for
which he is elected and until his successor shall have been elected and
qualified or until his earlier resignation, removal from office or death.
SECTION 4.5. REMOVAL OF DIRECTORS. Any director, or the entire Board of
Directors, may be removed, with or without cause, at a meeting of the
shareholders called expressly for that purpose, as provided in Section 607.0808,
Florida Statutes.
SECTION 4.6. VACANCIES. Any vacancy occurring in the Board of Ding any
vacancy created by reason of an increase in the number of directors, may be
filled by the affirmative vote of a majority of the remaining directors, though
less than a quorum of the Board of Directors, or by the shareholders. A director
elected to fill a vacancy shall hold office only until the next election of
directors by the shareholders.
SECTION 4.7. QUORUM AND VOTING. A majority of the number of directors
fixed by these bylaws shall constitute a quorum for the transaction of business.
The act of the majority of the directors present at a meeting at which the
quorum is present shall be the act of the Board of Directors. A director present
at a meeting of the Board of Directors when corporate action is taken shall be
deemed to have assented to the action unless: (a) the director objects at the
beginning of the meeting (or upon the director's arrival, if later) to the
holding of the meeting or the transacting of business at the meeting; or (b)the
director votes against or abstains from the action taken.
SECTION 4.8. EXECUTIVE AND OTHER COMMITTEES.
(a) The Board of Directors, by resolution adopted by a majority of the
full Board of Directors, may designate from among its members an executive
committee and one or more committees each of which, to the extent provided in
such resolution, shall have and may exercise all the authority of the Board of
Directors, except as limited by the laws of the State of Florida.
(b) The Board of Directors, by resolution adopted in accordance with this
Section 4.9, may designate one or more directors as alternate members of any
such committee, who may act in the place and stead of any absent member or
members at any meeting of such committee.
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SECTION 4.9. PLACE OF MEETING. Regular and special meetings of the Board
of Directors may be held in or out of the State of Florida.
SECTION 4.10. TIME, NOTICE AND CALL OF MEETINGS.
(a) Regular meetings of the Board of Directors shall be held immediately
following the annual meeting of shareholders each year and on the first Monday
of each quarter thereafter, and other regular or special meetings may be held at
such times thereafter as the Board of Directors may fix, and at such other times
as called by the President of the corporation. Written notice of the time and
place of special meetings of the Board of Directors shall be given to each
director by either personal delivery, telegram, or facsimile transmission at
least two (2) days before the meeting, or by notice mailed to each director at
least five (5) days before the meeting.
(b) Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting (or upon the
director's arrival, if later), any objection to the transaction of business
because the meeting is not lawfully called or convened.
(c) Members of the Board of Directors may participate in a meeting of such
board by conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other at the same
time. Participation by a director by such means shall constitute presence in
person at a meeting.
SECTION 4.11. ACTION WITHOUT A MEETING. Any action required to be taken at
a meeting of the Board of Directors or at a meeting of a committee thereof, may
be taken without a meeting if a consent in writing, setting forth the action to
be so taken, signed by all of the directors, or all the members of the
committee, as the case may be, is filed in the minutes of the proceedings of the
board or of the committee. Action taken under such a consent shall effective
when the last director signs the consent (unless the consent provides a
different effective date), and shall have the same effect as a unanimous vote.
SECTION 4.12. DIRECTOR CONFLICTS OF INTEREST.
(a) No contract or other transaction between this corporation and one or
more of its directors or any other corporation, firm, association, or entity in
which one or more of the directors are directors or officers or are financially
interested, shall be either void or voidable because of such relationship or
interest or because such director or directors are present at the meeting of the
Board of Directors or a committee thereof which authorizes, approves, or
ratifies such contract or transaction or because his or their votes are counted
for such purpose, if:
(i) The fact of such relationship or interest is disclosed or known
to the Board of Directors or committee which authorizes, approves, or
ratifies the contract or transaction by a vote or consent sufficient for
the purpose without counting the votes or consents of such interested
directors; or
(ii) The fact of such relationship or interest is disclosed or known
to the shareholders entitled to vote and they authorize, approve, or
ratify such contract or transaction by vote or written consent; or
(iii) The contract or transaction is fair and reasonable as to the
corporation at the time it is authorized by the board, a committee or the
shareholders.
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(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction.
(c) For purposes of Subsection 4.12(a)(ii), a conflict of interest
transaction is authorized, approved, or ratified if it receives the vote of a
majority of the shares entitled to be counted under this Section 4.12. Shares
owned by or voted under the control of a director who has a relationship or
interest in the transaction described in section (a) may not be counted in a
vote of shareholders to determine whether to authorize, approve, or ratify a
conflict of interest transaction under Subsection 4.12(a)(ii). The vote of those
shares, however, shall be counted in determining whether the transaction is
approved under other Sections of these bylaws. A majority of the shares, whether
or not present, that are entitled to be counted in a vote on the transaction
under this Section 4.12 constitutes a quorum for the purpose of taking action
under this Section 4.12.
ARTICLE V
OFFICERS
SECTION 5.1. OFFICERS. This corporation shall have a Chief Executive
Officer, a President, a Vice President, a Secretary and a Chief Financial
Officer. Each officer shall be appointed by the Board of Directors at the first
meeting of the Board of Directors held following each annual meeting of the
shareholders, and shall serve until its successor is chosen and qualifies. All
other officers, agents and factors shall be chosen, serve for such terms and
have such duties as may be determined by the Board of Directors. Any person may
simultaneously hold two or more offices.
SECTION 5.2. DUTIES. The officers of this corporation shall have the
following duties:
(a) The CHIEF EXECUTIVE OFFICER AND/OR PRESIDENT shall have general and
active management of the business and affairs of the corporation subject to the
directions of the Board of Directors, and shall preside at all meetings of the
shareholders and Board of Directors.
(b) The VICE PRESIDENT shall, in the absence or disability of the
President, perform the duties and exercise the powers of the President. He also
shall perform whatever duties and have whatever powers the Board of Directors
may from time to time assign him. If more than one Vice President is elected,
one such Vice President shall be designated as Executive Vice President and
shall, r disability of the President, perform the duties and exercise the powers
of the President and each other Vice President shall only perform whatever
duties and have whatever powers the Board of Directors may from time to time
assign him.
(c) The SECRETARY shall have custody of, and maintain, all of the
corporate records except the financial records, shall record the minutes of all
meetings of the shareholders and the Board of Directors or its committees, shall
authenticate records of the corporation, shall send all notices of meetings, and
shall perform such other duties as may be prescribed by the Board of Directors
or the President.
(d) The CHIEF FINANCIAL OFFICER AND TREASURER shall have custody of all
corporate funds and financial records, shall keep full and accurate accounts of
receipts and disbursements and render accounts thereof at the annual meetings of
shareholders and whenever else required by the Board of Directors or the
President, and shall perform such other duties as may be prescribed by the Board
of Directors or the President.
SECTION 5.3. REMOVAL OF OFFICERS. Any officer or agent elected or
appointed by the Board of Directors may be removed by the board at any time with
or without cause.
SECTION 5.4. VACANCIES. Any vacancy, however occurring, in any office may
be filled by the Board of Directors.
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SECTION 5.5. COMPENSATION. The compensation of the President, Secretary,
Vice President, Treasurer, and such other officers elected or appointed by the
Board of Directors shall be fixed by the Board of Directors and may be changed
from time to time by a majority vote of such Board. The fact that an officer is
also a director shall not preclude such person from receiving compensation as
either a director or officer, nor shall it affect the validity of any resolution
by the Board of Directors fixing such compensation. The President shall have
authority to fix the salaries of all employees of the corporation other than
officers elected or appointed by the Board of Directors.
ARTICLES VI
STOCK CERTIFICATES
SECTION 6.1. AUTHORIZED ISSUANCE. This corporation may issue the shares of
stock authorized by its Articles of Incorporation and none other. Shares may be
issued only pursuant to a resolution adopted by the Board of Directors. No
shares may be validly issued or transferred in violation of any provision of
these bylaws or in violation of any agreement respecting the issuance or
transfer of shares to which the corporation is a party.
SECTION 6.2. ISSUANCE. Shares of stock of this corporation shall be
represented. The Board of Directors may authorize shares to be issued for
consideration consisting of any tangible or intangible property or benefit to
the corporation, including, without limitation, cash, promissory notes, services
performed, promises to perform services evidenced by a written contract or other
securities of the corporation. No certificates shall be issued for any shares
until the Board of Directors has determined that the consideration received or
to be received for such shares is adequate. The Board of Directors'
determination as to the adequacy of consideration for the issuance of shares
shall be conclusive as to whether the shares are validly issued, fully paid and
nonassessable. When the corporation receives the consideration for which the
Board of Directors authorized the issuance of shares, the shares issued therefor
shall be fully paid and nonassessable. Consideration in the form of a promise to
pay money or a promise to provide future services is received at the time of the
making of the promise, unless the agreement specifically provides otherwise.
SECTION 6.3. SIGNATURES. Certificates representing shares in this
corporation shall be signed, either manually or in facsimile by the President or
Vice President, and the Secretary (or an Assistant Secretary, if one is
appointed), and may be sealed with the seal of this corporation or a facsimile
thereof.
SECTION 6.4. FORM. Each certificate representing shares shall state upon
the face thereof: the name of this corporation; that this corporation is
organized under the laws of Florida; the name of the person or persons to whom
issued; the number and class of shares, and the designation of the series, if
any, which such certificate represents; and the par value of each share
represented by such certificate, or a statement that the shares are without par
value. Any restriction on the transfer or registration of transfer of shares, if
applicable, shall be noted conspicuously on the front or back of each
certificate. Each certificate shall otherwise comply, in all respects, with the
requirements of applicable law.
SECTION 6.5. TRANSFER OF STOCK. The corporation shall register a transfer
of shares if the certificate representing such shares is properly endorsed by
the holder of record or by his duly authorized attorney. The corporation or its
transfer agent may require the signature of such person to be guaranteed by a
commercial bank or trust company or by a member of the New York or American
Stock Exchanges.
SECTION 6.6. LOST. STOLEN OR DESTROYED CERTIFICATES. The corporation shall
issue a new stock certificate in the place of any certificate previously issued
if the holder of record of the certificate: (a) makes proof in affidavit form
that it has been lost, destroyed, or wrongfully taken; (b)requests the issue of
a new certificate before the corporation has notice that the certificate has
been acquired by a purchaser for value
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in good faith and without notice of any adverse claim; (c) gives bond in such
form as the corporation may direct, to indemnify the corporation, the transfer
agent, and registrar against any claim that may be made on account of the
alleged loss, destruction, or theft of the certificate; and (d) satisfies any
other reasonable requirements imposed by the corporation.
ARTICLE VII
BOOKS AND RECORDS
SECTION 7.1. BOOKS AND RECORDS.
(a) This corporation shall keep accurate accounting records, and shall
keep, as permanent records, (i) minutes of all meetings of its shareholders,
Board of Directors and committees of directors and (ii) a record of all actions
taken by the shareholders and Board of Directors without a meeting.
(b) This corporation shall keep at the registered office of the
corporation, at the corporation's principal office or at the office of the
transfer agent or registrar of the corporation, a record of its shareholders,
giving the names and addresses of all shareholders, and the number, class, and
series, if any, of the shares held by each.
(c) This corporation shall keep a copy of the following records: (i) its
articles of incorporation and all amendments currently in effect; (ii) its
bylaws and all amendments currently in effect; (iii) resolutions, if any,
adopted by the Board of Directors creating one or more classes or series of
shares and fixing all of their rights, preferences and limitations, if shares
issued pursuant to those resolutions are outstanding; (iv) the minutes of all
shareholders' meetings and records of all action taken by the shareholders
without a meeting for the past three (3) years; (v) written communications to
all shareholders within the past three (3) years, including financial statements
furnished to shareholders for the past three (3) years; (vi) a list of the names
and business street addresses of the corporation's current officers and
directors; and (vii) the corporation's most recent annual report delivered to
the Department of State.
(d) Any books, records, and minutes may be in written form or in any other
form capable of being converted into written form within a reasonable time.
SECTION 7.2. SHAREHOLDERS' INSPECTION RIGHTS.
(a) Any shareholder of this corporation is entitled to inspect and copy,
during regular business hours at the corporation's principal office, any of the
records of the corporation described in Subsection 7.1(c) above, if he gives the
corporation written notice of his demand at least five (5) business days before
the date on which he wishes to inspect and copy.
(b) Any shareholder ion is entitled to inspect and copy, during regular
business hours at a reasonable location specified by the corporation, any of the
following records of the corporation if the shareholder meets the requirements
of Subsection (c) below and gives the corporation written notice of his demand
at least five (5) business days before the date on which he wishes to inspect
and copy:
(i) Excerpts from minutes of any meeting of the Board of
Directors, records of any action of a committee of the Board of Directors
while acting in place of the Board of Directors on behalf of the
corporation, minutes of any meeting of the shareholders, and records of
action taken by the shareholders or Board of Directors without a meeting,
to the extent not subject to inspection under Subsection (a) above;
(ii) Accounting records of the corporation;
(iii) The record of shareholders; and
(iv) Any other books and records.
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(c) A shareholder may inspect and copy the records described in Subsection
(b) only if:
(i) His demand is made in good faith and for a proper purpose;
(ii) He describes with reasonable particularity his purpose and the
records he desires to inspect; and
(iii) The records are directly connected with this purpose.
SECTION 7.3. FINANCIAL INFORMATION.
(a) Unless modified by resolution of the shareholders within one hundred
and twenty (120) days after the close of each fiscal year, this corporation
shall furnish its shareholders with annual financial statements that include a
balance sheet as of the end of the fiscal year, an income statement for that
year, and a statement of cash flows for that year. If the financial statements
are reported upon by a public accountant, his report shall accompany the
financial statements. If the financial statements are not reported upon by a
public accountant, the financial statements shall be accompanied by a statement
of the corporation's President or other person responsible for the corporation's
financial records (i) stating such person's reasonable belief that the financial
statements were prepared on the basis of generally accepted accounting
principles, or, if not, describing the basis of preparation and (ii) describing
any respects in which the financial statements were not prepared on a basis of
accounting consistent with the financial statements prepared for the preceding
fiscal year.
(b) Upon the written request of any shareholder who was not mailed the
financial statements, the corporation shall mail to such shareholder the latest
annual financial statements.
SECTION 7.4. OTHER REPORTS TO SHAREHOLDERS.
(a) If the corporation indemnifies or advances expenses to any officer or
director (as provided in Section 11.1), other than by court order, by
shareholder action or by an insurance carrier pursuant to insurance maintained
by the corporation, the corporation shall report the indemnification or advance
in writing to the shareholders with or before the notice of the next
shareholders' meeting, or prior to such meeting if the indemnification or
advance occurs after the giving of notice but prior to the time of the meeting,
which report shall specify the persons paid, the amounts paid and the nature and
status at the time of such payment of the litigation or threatened litigation.
(b) If the corporation issues or authorizes the issuance of shares for
promises to render services in the future, the corporation shall report in
writing to the shareholders the number of shares authorized or issued, and the
consideration received by the corporation, with or before the notice of the next
shareholders' meeting.
ARTICLE VIII
DIVIDENDS
SECTION 8.1. DISTRIBUTIONS. The Board of Directors of this corporation
may, from time to time, declare and the corporation may pay, dividends as
permitted by law on its shares in cash or property, except if, after giving
effect to the distribution, (a) the corporation would not be able to pay its
debts as they became due in the ordinary course of business or (b) the
corporation's total assets would be less than the sum of its total liabilities
plus the amount that would be needed, if the corporation were to be dissolved at
the time of the distribution, to satisfy the preferential rights upon
dissolution of shareholders whose preferential rights are superior to those
receiving the distribution. The record date for shareholders entitled to a
distribution shall be fixed by the Board of Directors, or, if not so fixed,
shall be the date the Board of Directors authorizes the distribution (except in
the case of distributions involving a purchase, redemption or other acquisition
of the corporation's shares).
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<PAGE>
SECTION 8.2. SHARE DIVIDENDS. The Board of Directors may, from time to
time, declare and issue shares pro rata and without consideration to the
corporations' shareholders. Shares of one class or series may not be issued to
shareholders of another class or series unless: (a) authorized by the Articles
of Incorporation; (b) a majority of the votes entitled to be cast by the class
or series to be issued approves the issue; or (c) there are no outstanding
shares of the class or series to be issued. The record date for shareholders
entitled to a share dividend shall be fixed by the Board of Directors, or, if
not so fixed, shall be the date the Board of Directors authorizes the share
dividend.
ARTICLE IX
CORPORATE SEAL
SECTION 9.1. FORM. The Board of Directors shall provide a corporate seal
which shall have the name of the corporation inscribed thereon, and may be
facsimile, engraved, printed or an impression seal.
ARTICLE X
AMENDMENT
SECTION 10.1. POWER TO AMEND. These bylaws may be altered, amended or
repealed, and new bylaws may be adopted, by either the Board of Directors or the
shareholders; provided, however, that the Board of Directors may not alter,
amend or repeal any bylaw adopted by the shareholders if the shareholders
specifically provide that such bylaw is not subject to amendment or repeal by
the Board of Directors.
SECTION 10.2. REQUISITES FOR AMENDMENT BY SHAREHOLDERS. These bylaws
(including any bylaw that may be amended by the Board of Directors) may be
amended or repealed, wholly or in part, by a majority of the shareholders
entitled to vote thereon present at any shareholders' meeting if notice of the
proposed action was included in the notice of the meeting or is waived in
writing by a majority of the shareholders entitled to vote thereon.
SECTION 10.3. BYLAWS INCREASING QUORUM OR VOTING REQUIREMENTS FOR
DIRECTORS. A bylaw that fixes a greater quorum or voting requirement for the
Board of Directors may be amended or repealed (a) if originally adopted by the
shareholders, only by the shareholders, or (b) if originally adopted by the
Board of Directors, either by the shareholders or by the Board of Directors. A
bylaw adopted or amended by the shareholders that fixes a greater quorum or
voting requirement for the Board of Directors may provide that it may be amended
or repealed only by a specified vote of either the shareholders or the Board of
Directors. Action by the Board of Directors to adopt or amend a bylaw that
changes the quorum or voting requirement for the Board of Directors must meet
the same quorum requirement and be adopted by the same vote required to take
action under the quorum and voting requirement then in effect or proposed to be
adopted, whichever is greater.
ARTICLE XI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
INDEMNIFICATION OF DIRECTORS AND OFFICERS. This corporation shall
indemnify each of its directors and officers and former directors and officers
to the full extent permissible under applicable law. Any such director or
officer shall be entitled to indemnification by the corporation in any action,
suit or proceeding (including any appeal thereof) resulting from the fact that
he is or was a director or officer of this corporation or is or was serving at
the request of this corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, if
he acted in good faith and in a manner which he reasonably believed to be in, or
not opposed to, the best interests of the corporation and, with respect to any
criminal action or proceedings, had no reasonable cause to believe his conduct
was unlawful. The determination of whether the applicable standard of conduct
has been met shall be made: (a) by the Board of Directors by a majority vote of
a quorum of directors who were not parties to the action, suit or proceeding;
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(b)if such a quorum is not obtainable or, even if obtainable, by majority vote
of a committee duly designated by the Board of Directors (in which directors who
are parties may participate) consisting solely of two or more directors not at
the time parties to the proceeding; (c) by the written opinion of independent
legal counsel, selected by the Board of Directors prescribed in (a) above or the
committee prescribed in (b) above, or, if a quorum of directors cannot be
obtained as provided in (a) above and a committee cannot be designated as
provided in (b) above, selected by a majority vote of the full Board of
Directors (in which directors who are parties may participate); or (d) by the
shareholders by a majority vote of a quorum consisting of shareholders who were
not parties to such proceeding, or, if no such quorum is obtainable, by a
majority vote of shareholders who were not parties to such proceeding.
SECTION 11.2 FURTHER INDEMNIFICATION. In addition to any indemnification
provided for in Section 11.1 above, this corporation may make such other and
further indemnification or advancement of expenses of any of its directors,
officers, employees, or agents as may be approved from time to time by the Board
of Directors.
/s/ SHAWN M CASEY
Secretary
April 12, 1995
Dated
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EXHIBIT 4.2
[LOGO] SUCCESS
DEVELOPMENT
INTERNATIONAL
NUMBER SHARES
INCORPORATED UNDER THE LAWS OF THE CUSIP XXXXXX XX X
STATE OF SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF SPECIMEN
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $.01 PAR VALVE, OF
SUCCESS DEVELOPMENT INTERNATIONAL
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized Attorney upon surrender of this certificate properly
endorsed. This certificate is not valid until countersigned by the Transfer
Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
/s/ VICKI SESSIONS /s/ SHAWN M CASEY
Vice President of Administrations Chief Executive Officer
<PAGE>
SUCCESS DEVELOPMENT INTERNATIONAL
A full statement of the designations and any preferences, conversion, and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the stock of each
class which the Corporation is authorized to issue, and the differences in
the relative rights and preferences between the shares of each series to the
extent they have been set and the authority of the Board of Directors to set
the relative rights and preferences of subsequent series, will be furnished
by the Corporation to any stockholder on request and without charge.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ______Custodian_______ TEN
"LOCK-IN" AGREEMENT - as tenants by the entireties (Cust) (Minor) JT TEN - as
joint tenants with the right of under Uniform Gifts to Minors
survivorship and not as tenants
in common Act ____________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received,________________hereby sell(s), assign(s)and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS. INCLUDING ZIP CODE. OF ASSIGNEE(S)
================================================================================
- --------------------------------------------------------------------------------
of the Shares of capital stock represented by the within Certificate an
irrevocably constitute and appoint______________________________ Attorney to
transfer the said Shares on the books of the within named Corporation with full
power of substitution in the premises.
Dated ____________________ ___________________________________________
-------------------------------------------
NOTE:The signature to this assignment must
correspond with the name as written upon
the face of the certificate in every
particular, without alteration or
enlargement or any change whatever.
Signature must be guaranteed.
Signature(s) Guaranteed
By___________________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE l7Ad.15.
EXHIBIT 5
[DREW FIELD LETTERHEAD]
December 5, 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 (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, when all
required registrations with state securities regulators shall have become
effective, and when the Shares shall have been duly issued and delivered to the
purchasers against 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,
/s/ DREW FIELD
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.
<PAGE>
(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 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.
2
<PAGE>
(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.
(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.
3
<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.
By: SHAWN M. CASEY
Its: President
________________________________________________
optionee
Address:________________________________________
________________________________________
________________________________________
4
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
<PAGE>
$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
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.
2
<PAGE>
(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.
(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.
3
<PAGE>
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.
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:__________________________________
__________________________________
__________________________________
4
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
<PAGE>
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.
(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
2
<PAGE>
(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
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
3
<PAGE>
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.
IN WITNESS WHEREOF, the Company has caused this
Agreement be executed on its behalf by its duly authorized officer
and the
4
<PAGE>
Recipient has executed this Agreement to be effective as of the day
and year first above written.
SUCCESS DEVELOPMENT INTERNATIONAL, INC.
By:______________________
Its:______________________
__________________________
Employee
5
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.
(c) VACATION AND SICK LEAVE. Employee shall be entitled to twenty
(20) days of vacation and sick leave per annum.
<PAGE>
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
Page 2 of 5
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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
(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.
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<PAGE>
(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 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.
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<PAGE>
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.
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
Page 5 of 5
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.
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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 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.
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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 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.
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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.
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.
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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.
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.
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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.
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.
6
<PAGE>
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
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.
7
<PAGE>
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 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.
8
<PAGE>
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.
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.
9
EXHIBIT 10.6
INFOMERCIAL/SEMINAR MARKETING AGREEMENT
THIS AGREEMENT, dated this 24th day of June, 1997, is by and between the
Guthy-Renker Corporation, a Delaware corporation (hereinafter "GRC") and The
LeGrand Group, Inc., a Florida corporation (hereinafter "Company") for, among
other things, the services of Ron LeGrand (hereinafter "Artist").
RECITALS
A. Whereas GRC is in the business of, among other things, marketing various
products and services by way of television commercials and related methods;
B. Whereas Company operates successful workshop/seminar which promotes methods
of real estate related business opportunities and further, owns and controls all
rights to the marketing services of Artist;
C. Whereas GRC desires to engage Company to furnish the services of Artist, and
Company desires to accept such engagement, in the production of certain direct
response television commercials (collectively, "Infomericals") to sell the
"Products" (defined in Paragraph D below); and
D. Whereas GRC and Company collectively desire to market and distribute those
products described on EXHIBIT "A" (collectively, the "Products") attached
hereto and incorporated herein by this reference through all global channels of
distribution except the fields of seminars/workshops.
NOW THEREFORE in consideration of the mutual covenants and promises herein
contained, and intending to be legally bound hereby, the parties hereto hereby
agree as follows:
1. Process.
a) GRC and Company presently intend to create and sell Product via
Infomercials, inbound and outbound telemarketing methods and such other
channels of distribution, excluding seminars, as GRC shall determine:
b) GRC and Company shall mutually agree upon the Product configuration
to be sold.
2. GRC's Functions.
a) GRC shall fund the Infomercials.
b) GRC shall purchase media for the Infomericals.
c) GRC shall source and fund the manufacturing of Products.
d) GRC shall cause the initial inbound and outbound telemarketing to cause
product sales.
3. COMPANY'S FUNCTIONS.
a) Company shall fund and complete all Product development so that the
Product is final, turn-key and can be sold directly to the consumer by
GRC without further revision or expense.
b) Company shall make the Artist available for the Infomercial.
4. COMPENSATION
a) ROLL-OUT. If GRC deems the Test Marketing of the Infomercial successful
(I.E., Roll-Out), then it shall pay Company a fifty thousand dollar
($50,000) non-returnable advance, which advance shall be applied against
the royalties earned by Company from GRC's distribution of the Product.
b) ROYALTY. During the Term, as defined in Paragraph 8 of this
Agreement, GRC shall pay Company a royalty of five percent (5%) of
the "Gross Receipts" collected by GRC (or on its behalf). "Gross
Receipts" shall mean the revenue GRC collects from the sale of the
Product less returns, refunds, credit card chargebacks and fees,
declines, cancels and taxes incurred by GRC and shall not include
costs or revenues associated with shipping and handling of the
Product.
c) TRAVEL REIMBURSEMENTS. If Artist is required to travel, at
GRC's request, more than one hundred (100) miles from Artist's
then principal place of residence to participate in the
Infomercial production or to attend the shopping channels, then
Artist shall be entitled to receive the following from GRC, in
addition to the amounts described above, during such travel
period: (a) a pro ratable
<PAGE>
weekly allowance (at 1/7 thereof per day) of $1,400 per week;
(b) one (1) first class round-trip air transportation; and (c)
reasonable lodging (room & taxes only) and ground
transportation.
5. GRANT OF RIGHTS.
a) GRANT. Artist hereby agrees to (i) participate in the production of the
Infomercial, the voice-overs, pickups and similar post-production requirements,
as well as a brief rehearsal, (ii) attend the shopping channels to make Product
sales up to six (6) times per year if and when GRC is able to secure such
opportunities, (iii) use best efforts to help GRC complete a saleable Product
(including all associated packaging materials, etc.), subject to GRC's
reasonable approval, and (iv) grant GRC the exclusive global right to
manufacture, market and distribute the Product. If "Corrective Action" (as
defined in Paragraph 9(b) below) is required, Artist agrees to provide
additional on-camera services at no additional cost. Artist also grants GRC the
worldwide right to use Artist's name, photograph, voice and likeness in the
Infomercial, and the Product, as GRC deems commercially reasonable during the
Term.
b) CHANNELS OF DISTRIBUTION. GRC shall have the exclusive right to market
and distribute the Product in all worldwide channels of distribution if it
believes it can successfully distribute them including without limitation in:
(a) All forms of direct response television which include 800/900 (and similar)
telephone numbers; (b) Print media; (c) Outbound telemarketing; (d) Package
inserts; (e) Catalogs; (f) Direct Sales; (g) Radio; (h) Televised shopping; (i)
Credit card syndication; (j) Direct mail; (k) Internet; and (l) Retail. Unless
otherwise agreed to, neither party may distribute the Product via
workshop/seminars.
6. STATEMENTS. Company shall be paid its royalties on a Calendar quarterly
basis within thirty (30) days after the completion of each quarter. GRC
shall provide Company monthly statements describing Product sales and media
expenditures.
7. AUDIT RIGHTS. At any time within one (1) year after a payment is made
hereunder, Company may review GRC's books and records to determine the
accuracy of the statements prepared by it. This examination shall be
conducted during normal business hours at the place where the applicable
books and records are maintained, and at the Company's sole cost and
expense. Any determination that GRC has underpaid shall not be deemed a
breach of this Agreement unless GRC fails to pay the agreed upon shortfall
within ten (10) business days. If both parties agree that the examination
revealed more than a five percent (5%) discrepancy between what was paid and
what was actually owed, then GRC shall reimburse Company for its reasonable
audit costs and expenses (not including travel costs).
8. TERM. The "Term" of this Agreement shall be three (3) years following the
full execution of this Agreement. If GRC has paid Company at least one
million dollars ($1,000,000) during the initial term or any term thereafter,
then GRC shall thereafter have the right, but not the obligation, to renew
the Agreement for successive three (3) year terms.
9. TEST PERIOD.
a) TEST. GRC shall conduct test marketing of the Product by airing the
Infomercial, at its own expense, during a period of not less than three
(3) days and not more than one [unreadable text] the Infomercial on such
cable and broadcast television networks and stations and at such times
as GRC, in its sole judgment, determines are likely to draw favorable
response rates ("Test Marketing"). GRC shall evaluate the results of
Test Marketing and determine, in its sole judgment, how much media to
spend (i.e., if the Infomercial results are poor, GRC shall not be
required to spend additional money after the initial media buying test
if it believes success cannot be achieved), whether the Product return
rate is sufficiently low and whether Test Marketing has been successful.
A determination that Test Marketing has been successful shall be deemed
"Roll-out." Such determination shall be based on volume of Product
sold, ratio of advertising costs to sales revenues and such other
factors as GRC shall deem relevant.
b) TEST DETERMINATION. If GRC determines that Test Marketing has been
unsuccessful, then GRC shall, within thirty (30) days following the
conclusion of such Test Marketing, either (i) terminate this
Agreement, or (ii) take appropriate corrective action. For purposes
of this Agreement, "Corrective Action" shall mean such steps GRC
may propose to alter the Infomercial or the pricing of the Products
or otherwise stimulate sales of the Products.
<PAGE>
10. PRODUCT.
a) GRC. GRC shall fund and either exclusively license or own the Product
including, but not limited to, its copyrights, trademarks, patents and
other related intellectual property rights. GRC shall also fund and own
the (i) Infomercial, (ii) any customer list generated by the
Infomercial, and (iii) all packaging, print material and other material
related to the Infomercial including but not limited to the copyrights,
trademarks, patents and other related intellectual property rights.
Notwithstanding the foregoing, Company shall have the right without
royalty to GRC to sell or give away at Company's expense any element of
the Product as long as such element is not packaged to resemble its
presence as part of the Product.
b) ARTIST. Artist agrees to use best efforts to assist GRC in
connection with the creation and development of the Product.
11. GRC OPTION. Within twelve (12) months of the full execution of this
Agreement, GRC shall have the right to extend the rights in the Product and
Artist's service in a seminar/workshop program on the terms to be
negotiated in good faith between the parties.
12. INSURANCE. GRC shall obtain customary (i) commercial general liability and
media liability insurance for the Infomercial (and shall name Company and
Artist as an additional insured on such policies), and (ii) author's
liability insurance for the Product. During the Term, the parties agree to
maintain at least one million dollars ($1,000,000) per occurrence and two
million dollars ($2,000,000) in the aggregate for such insurance policies.
13. AFTRA. GRC represents and warrants that it is a signatory in good standing
to the current AFTRA Agreement. GRC shall pay the required union pension
and health fund payments directly to the pension and health fund of AFTRA,
which payments shall be in addition to any other payments provided for
herein.
14. APPROVALS. Unless otherwise set forth herein, GRC shall have all final
approval rights and controls with respect to the Product and the
Infomercial; however, Artist shall have final approval rights over the
portion of the script read by Artist and the use of Artist's name, likeness
and appearance in connection with the Infomercial. To the extent GRC makes
a written approval request from Artist, Artist agrees to respond, in
writing, within five (5) business days. Artist's election not to respond in
such manner shall be deemed an approval of such request; the parties
acknowledge that catalogs will, typically, not give final copy approval to
its merchant-clients.
15. NOTICE. Any notice, approval, consent, or other written communication to be
given hereunder shall be given in writing and delivered personally,
transmitted by confirmed facsimile, or sent by overnight express service to
the recipient at the address set forth below. Any notice so transmitted,
delivered or mailed shall be deemed to be given on the date it is received
or delivered personally.
If to Company: The LeGrand Group, Inc.
Attn: Mr. Curt Geisler
9799 Old St. Augustine Road
Jacksonville, FL 33257
Fax: (904) 880-2776
If to GRC: Guthy-Renker Corporation
Attn: Ben Van de Bunt
41-550 Eclectic Street, Suite 200
Palm Desert, CA 92260 USA
Fax: (760) 773-9016
16. TAXES. GRC and Company agree that each shall be responsible, without
liability to the other, for the timely payment of all taxes and other
withholdings, deductions and payments required by law with respect to its
own operations and employees.
17. EXCLUSIVITY.
a) Subject to 17(b) below, during the Term, Artist will not market any
other similar product which is competitive with Product via television;
however, nothing shall preclude Company and/or Artist from advertising
promoting and marketing its workshop/seminars in all other venues.
<PAGE>
b) Notwithstanding the foregoing, GRC shall not have the right to use
Artist's services in the field of seminars. GRC acknowledges that
during the Term, Artist shall be free to speak at or participate in
one or more seminar/workshop programs which market one or more
products in the field of real estate business opportunities
provided that the product(s) being marketed at such seminar
workshop programs will be in different form, under a different
title, and in different packaging from the materials being offering
by GRC as the Product hereunder.
c) GRC shall have the exclusive right to product a sequel with
Artist upon the same terms as this Agreement.
d) Regardless of the length of the Term hereunder, the
exclusivity shall be for a period of six (6) months from
the date the initial Infomercial is first broadcast and
shall continue thereafter until GRC has failed to expend at
least on average One Hundred Thousand Dollars ($100,000)
per month for consecutive three month periods.
e) The foregoing exclusivity provisions of this Paragraph
17 shall not apply to any test involving seminars in
which the parties hereto are involved.
18. ASSIGNMENT. GRC shall have the right to assign its rights in this
Agreement upon receipt of Company's prior written approval which shall not
be unreasonably withheld.
19. LAW TO GOVERN. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
20. REPRESENTATIONS AND WARRANTIES.
a) Artist and Company, respectively, represent and warrant that they (i)
have not entered into any oral or written contract which would impair
the rights granted to GRC or limit the effectiveness of this Agreement,
(ii) have no knowledge of any claims or actions which may limit or
impair any of the rights granted to GRC or any other right of any third
party, and (iii) have no knowledge of any adverse fact (or negative
information) which, if disclosed to GRC, may reasonable cause GRC to
not enter into this Agreement. Company further represents it has the
right to cause Artist to honor his obligations described herein.
b) Each party represents and warrants that (i) it has no knowledge of
any pending or threatened claims which would impair or diminish any
of the rights it has granted to the other herein, (ii) it has the
right and power to enter into this Agreement, and (iii) the
execution and delivery of this Agreement will not result in a
breach of, or default under, any other agreement, law or
regulation.
21. FIDUCIARY. No fiduciary duty obligations shall be created as a result of
this Agreement.
22. INDEMNITY. GRC shall defend, indemnify and hold Company and Artist
harmless from and against any and all damages, liabilities, costs, losses,
expenses, claims and/or judgments, including legal costs and reasonable
attorneys' fees which may result in connection with the Infomercial, the
Product and/or the marketing and distribution of the Product, unless
resulting directly from Company's or Artist's material breach of this
Agreement or Company's or Artist's gross negligence or willful misconduct.
23. TERMINATION. If after execution of this Agreement, GRC determines in the
course of production of the Infomercials that the marketing and/or
distribution of the Product may not be profitable or may yield only a
marginal profit, then GRC shall have the right to terminate this Agreement
by providing Company with written notice of termination and shall
thereafter have no further obligation to Company except provided the
production is completed, to make the payment recited in Paragraph 2(a). In
the event GRC shall terminate under this provision, Company may elect on
its own or with third parties to continue to produce direct response
advertisements to promote and distribute the Product. Upon request, GRC
will share all of its work product up to the point of termination and
provide its actual out of pocket costs on the project. If Company elects to
continue production and further elects to use GRC's work product, then
Company will pay GRC seven and one-half percent (7.5%) of Gross Receipts
until GRC has recouped its costs.
24. PROMOTIONS. Artist agrees to participate in a video-promotion (I.E., not
for broadcast) of GRC, subject to Artist's professional availability.
<PAGE>
25. ENTIRE AGREEMENT. The terms of this Agreement as set forth in the numbered
Paragraphs hereof are contractual and not mere recitals. Each party has
executed this Agreement without reliance upon any promise, representation
or warranty other than those expressly set forth herein. Each party
acknowledges that (i) it has carefully read this Agreement; (ii) it has had
the assistance of legal counsel of its choosing (and such other
professionals and advisors as it has deemed necessary) in the review and
execution hereof; (iii) the meaning and effect of the various terms and
provisions hereof have been fully explained to it by such counsel; (iv) it
has conducted such investigation, review and analysis as it has been
necessary to understand the provisions of this Agreement and the
transactions contemplated hereby; and (v) it has executed this Agreement of
its own free will.
Please signify Company's approval of the foregoing terms and conditions by
signing in the space provided below so that when countersigned by GRC, this
document shall constitute a binding agreement with respect to the matters herein
contained.
GUTHY-RENKER CORPORATION, THE LEGRAND GROUP, INC.
a Delaware Corporation a Florida corporation
By: BEN VAN DE BUNT By: SHAWN M. CASEY
Ben Van de Bunt, its President
Executive Vice President
I have read the foregoing terms of Agreement dated as of June 24, 1997, and to
the extent such terms apply to me as an individual, I agree to be bound as if I
had personally signed such Agreement. Further, I agree that for the
services to be provided by me pursuant to said Agreement, I am an employee
of and The LeGrand Group, Inc. and shall look to that entity for
compensation for said services and not to Guthy-Renker Corporation.
RON LEGRAND
Ron LeGrand
<PAGE>
EXHIBIT "A"
THE PRODUCT
The Product shall consist of such books (2-4), pamphlets (1-2), audiotapes
(2-4) and other materials (?) as the parties shall mutually agree to hereafter.
The Product will be sold for $79 or such other price to which the parties
may hereafter agree.
<PAGE>
ADDENDUM
This Addendum is made this 24th day of June, 1997 by and the Guthy-Renker
Corporation, The LeGrand Group, Inc., and Ron LeGrand.
WHEREAS, the parties hereto have entered into a certain Infomercial/Seminar
Marketing Agreement (hereinafter "Agreement") dated June 24, 1997; and
WHEREAS, the parties hereto wish to clarify certain provisions in the
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained, and intending to be legally bound hereby, the parties agree as
follows:
1. Notwithstanding anything in the Agreement, the Agreement is not
intended to include any rights in favor of Guthy-Renker Corporation with regard
to the courses, boot camps and other products and services currently sold by The
LeGrand Group, Inc. and Ron Legrand.
IN WITNESS WHEREOF, we have set our hands on the day and date first set
forth above.
GUTHY-RENKER CORPORATION, THE LEGRAND GROUP, INC.
a Delaware Corporation a Florida Corporation
By: /s/ BEN VAN DE BUNT By: /s/ SHAWN M. CASEY
Ben Van de Bunt, its Shawn M. Casey,
Executive Vice President its President
RON LEGRAND
Ron LeGrand
<PAGE>
EXHIBIT B
RESTRICTED SHARES
Dan Pena 900,000
Shawn Casey 750,000
Emerson Brantley 215,000
Ross Wager 90,000
Vicki Sessions 125,000
Ray Rach 250,000
Angela Gilman 25,000
Jennifer Adams 25,000
Crystal LeGrand 25,000
Lee Vaughn 25,000
David Montgomery 25,000
David Hawk 25,000
Steve Garizio 25,000
Nelson Fielding 25,000
Robert Fuller 25,000
Linda Coursen 25,000
Scott Johnston 25,000
Todd Rach 25,000
Jean McCormick 25,000
EXHIBIT 23.1(a)
[JAMES MOORE & CO,, P.L. LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
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 23.1(b)
[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/A) and related Prospectus of Success Development
International, Inc.
James Moore & Co.
Holly Hill, Florida
February 13, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE INDEPENDENT AUDITORS CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 43,925
<SECURITIES> 0
<RECEIVABLES> 942,867
<ALLOWANCES> (529,807)
<INVENTORY> 75,218
<CURRENT-ASSETS> 395,961
<PP&E> 1,229,639
<DEPRECIATION> (153,179)
<TOTAL-ASSETS> 1,702,964
<CURRENT-LIABILITIES> 3,788,202
<BONDS> 0
0
0
<COMMON> 10,355
<OTHER-SE> 266,759
<TOTAL-LIABILITY-AND-EQUITY> 1,702,964
<SALES> 5,778,301
<TOTAL-REVENUES> 5,905,480
<CGS> 1,155,660
<TOTAL-COSTS> 8,111,876
<OTHER-EXPENSES> 10,160
<LOSS-PROVISION> 524,152
<INTEREST-EXPENSE> 153,905
<INCOME-PRETAX> (2,370,461)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,370,461)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 99.1
SHARE PURCHASE AGREEMENT
TO SUCCESS DEVELOPMENT INTERNATIONAL, INC., 9799 OLD ST. AUGUSTINE ROAD,
JACKSONVILLE, FLORIDA 32257
Please issue shares of Success Development International, Inc.'s Common
Stock in the amount(s) and name(s) shown below. My signature acknowledges that I
have received and had an opportunity to read the Prospectus by which the shares
are offered, that I am purchasing for investment, that I am capable of
evaluating the merits and risks of the prospective investment, because of my
knowledge and experience in financial and business matters and that the amount
of my investment is not more than 10% of my net worth.
Signature: _________________________ Date: ____________________________
Enclosed is payment for _________________ (minimum 200) shares, at $5.50 per
share, totaling $_________________.
Register the shares in the following name(s) and amount(s):
Name(s) Number of shares
As (check one):
Individual Joint Tenants Trust
Tenants in Common Corporation Other
For the person(s) who will be registered shareowner(s):
Mailing Address:
City, State & Zip Code:
Telephone Number: Business: ( ) Home: ( )
Social Security or Taxpayer ID Number:
(PLEASE ATTACH ANY SPECIAL MAILING INSTRUCTIONS OTHER THAN SHOWN ABOVE)
NO SUBSCRIPTION IS EFFECTIVE UNTIL ACCEPTANCE
(YOU WILL BE MAILED A SIGNED COPY OF THIS AGREEMENT TO
RETAIN FOR YOUR RECORDS.)
Subscription accepted by Success Development International, Inc.:
Shawn M. Casey, Chief Executive Officer Date
EXHIBIT 99.2
IMPOUND AGREEMENT
This agreement dated December 17, 1997 is between First Union National
Bank (the "Impound Agent") and Success Development International, Inc., a
Florida corporation (the "Company").
The Company proposes to offer directly for sale to investors (the
"Offering") up to 500,000 shares of its Common Stock (the "Shares") at a price
of $5.50 per share (the "Proceeds") as described in its Prospectus. The Company
desires to establish an escrow account in which funds received from subscribers
will be deposited pending completion of the escrow period. First Union National
Bank, agrees to serve as Impound Agent in accordance with the terms and
conditions of this agreement and certifies that it is not affiliated with the
Company.
1. ESTABLISHMENT OF ESCROW ACCOUNT. Effective as of the date of the
commencement of the Offering, the Company will establish an interest bearing
escrow account with the Impound Agent, entitled "First Union National Bank.
ESCROW ACCOUNT NO. 4072864055" (the "Escrow Account"). The Impound Agent shall
invest all funds received in the escrow account only in investment permissible
under SEC Rule 15c2-4.
2. IMPOUND PERIOD. The Impound Period shall begin with the commencement of
the Offering and shall terminate upon the earlier to occur of: (a) subject to
paragraph 4B the date upon which the Impound Agent has received in the Escrow
Account gross proceeds of $550,000 in deposited funds (the "Minimum"), (b) three
months after the date of the Prospectus, or (c) the date upon which a
determination is made by the Company in writing to the Impound Agent to
terminate the offering prior to the sale of the Minimum.
During the escrow period the Company is aware and understands that it is
not entitled to any funds received into escrow, such funds are not assets of the
Company and no amounts deposited in the Escrow Account shall become property of
the Company or any other entity, or be subject to the debts of the Company of
any other entity.
3. DEPOSITS INTO THE ESCROW ACCOUNT. Subscribers shall make all checks
payable to the Impound Agent and the Company agrees that it shall properly
deliver, by noon the next business day, all monies received from subscribers for
the payment of the Shares to the Impound Agent for deposit in the Escrow
Account, accompanied with a copy of the attached form of "Share Purchase
Agreement," executed by the Company and the investor. All payments to the
Company by reason of credit card purchases of the Shares shall be forwarded by
the Company in the form of a check to the Impound Agent for deposit into the
Escrow Account. The Company shall date and number-stamp each Share Purchase
Agreement and shall also provide the Escrow Agent with, and maintain for its own
records, a copy of the form of consideration.
4. DISBURSEMENTS FROM THE ESCROW ACCOUNT. A. In the event the Impound
Agent does not receive the Minimum deposits totaling $550,000 prior to the
termination of the Impound Period, the Impound Agent shall promptly refund to
each subscriber the amount received from such subscriber, without deduction,
penalty or expense to such subscriber, and the Impound Agent shall notify the
Company of such distribution. The purchase money returned to each subscriber
shall be free and clear of any and all claims of the Company or any of its
creditors.
B. In the event the Impound Agent receives the Minimum prior to the
termination of the Impound Period, the Escrow Amount will not be released to the
Company until such amount is received by the Impound Agent in collected funds.
For purposes of this Agreement, the term "collected funds" shall mean all funds
received by the Impound Agent which have cleared normal banking channels and are
in the form of cash, plus any interest accrued on such funds. The Minimum may be
met by funds that are deposited from the effective date of the offering up to
and including the date on which the contingency must be met.
<PAGE>
5. COLLECTION PROCEDURE. The Company agrees that if a deposited check is
returned unpaid for any reason, the Impound Agent may charge the Escrow Account
for the amount of the check. However, the Impound Agent may represent a returned
check for payment by the financial institution on which it is drawn, but the
Impound Agent is not required to do so. The Impound Agent may represent the
check without notifying the Company that it is doing so or that the check was
not paid. Any check returned unpaid to the Impound Agent shall be returned to
the Company.
6. INTEREST ON ESCROW AMOUNT. Refunds to subscribers pursuant to paragraph
4A shall include each subscriber's pro-rata share of any interest earned while
the subscriber's funds were on deposit.
7. RECORDS TO BE MAINTAINED BY THE IMPOUND AGENT. Records and accounts of
the transactions kept bent shall include records of all transactions in the
Escrow Account and copies of all Share Purchase Agreements. The Company shall
maintain the original Share Purchase Agreements and copies of all checks, along
with any other records of transactions for a period of five years after the
termination of the Impound Period.
8. COMPENSATION OF IMPOUND AGENT. The Company shall pay the Impound Agent
a fee for its escrow services in an amount of $2,000.00. If it is necessary for
the Impound Agent to return funds to subscribers, the Company shall pay to the
Impound Agent an additional amount sufficient to reimburse it for its actual
cost for disbursing such funds.
9. LIABILITY OF THE IMPOUND AGENT. The Impound Agent may conclusively rely
on, and shall be protected, when it acts in good faith upon, any statement,
certificate, notice, request, consent, order or other document which it believes
to be genuine and which has been signed by the proper party. Provided it uses
due care, the Impound Agent shall have no duty or liability to verify any such
statement, certificate, notice, request, consent, order or other document and
its sole responsibility shall be to act only as expressly set forth in this
Agreement. The Impound Agent shall be under no obligation to institute or defend
any action, suit or proceeding in connection with the Agreement unless it is
indemnified to its satisfaction. The Impound Agent may consult counsel in
respect of any questions arising under this Agreement and the Impound Agent
shall not be liable for any action taken, or omitted, in good faith upon advise
of such counsel.
10. This Agreement shall be binding upon, and inure to, the benefit of the
parties hereto, their heirs, successors and assigns.
11. This agreement shall terminate in its entirety when all the Escrow
Amount has been distributed as provided in paragraph 4., above.
12. All statements and other notices produced by the Impound Agent related
to the Escrow Account shall be mailed to the Company as follows:
Success Development International, Inc.
9799 Old St. Augustine Road
Jacksonville, Florida 32257
Attn: Shawn M. Casey, Chief Executive Officer
Except for deposits, which shall be made at the Jacksonville office only,
all notices and other communications from the Company shall be made to the
Impound Agent as follows:
First Union National Bank
Corporate Trust Group
225 Water Street
Jacksonville, FL 32202
Attn: Kevin Dobrava
13. The Impound Agent shall be entitled to rely on all notices and
instructions received from the Company.
<PAGE>
14. The Company hereby agrees to defend, indemnify, and to hold the
Impound Agent harmless against, any loss, liability or expense incurred without
gross negligence or bad faith on the part of Impound Agent arising out of or in
connection with its entering into this Agreement and carrying out its duties
hereunder, including the cost and expense of defending itself against any claim
or liability.
15. In the event the Impound Agent shall be uncertain as to its duties or
rights hereunder or it shall receive instructions, claims or demands from any of
the parties hereto or from third parties with respect to the property held
hereunder, which, in its opinion, are in conflict with any provision of this
Agreement, it shall be entitled to refrain from taking any action (other than to
keep safely the funds in the Escrow Account) until it shall be directed to act
by order or judgment of a court of competent jurisdiction.
16. This Agreement shall be governed by Florida law and any action or
proceeding, including arbitration, arising in connection with this Agreement
shall be brought and held in Florida.
FIRST UNION NATIONAL BANK SUCCESS DEVELOPMENT
INTERNATIONAL, INC.
By:/s/ KEVIN DOBRAVA By:/s/ SHAWN M. CASEY
Kevin Dobrava Shawn M. Casey
Vice President Chief Executive Officer
EXHIBIT 99.3
Lock-in Agreement for Shares of the Common Stock
of Success Development International, Inc.
By this Lock-in Agreement, all officers, directors and post-offering 5%
shareholders (the "Shareholders") of Success Development International, Inc.
(the "Company") agree not to sell or otherwise transfer any shares of the
Company's common stock which are held or come to be held by them (the "Shares")
for one year after the effectiveness of the pending registration statement with
the United States Securities and Exchange Commission (the "Lock-in Period".)
1. This Lock-in Agreement shall cover all Shares, whether held
beneficially or of record, which presently are held or shall come to be held
during the Lock-in Period by virtue of the exercise of any options, warrants or
other rights (including a right of conversion), by the Shareholders, except any
Shares to be purchased in the offering being registered.
2. The Shareholders will cause:
A. A copy of this Lock-in Agreement to be available from the Company or
its transfer agent upon request and without charge.
B. A notice to be placed on the face of each stock certificate covered by
the terms of this Lock-in Agreement stating that the transfer of the Shares
evidenced by the certificate is restricted in accordance with the conditions set
forth on the reverse side of the certificate.
C. A typed legend to be placed on the reverse side of each stock
certificate representing stock covered by the Lock-in Agreement which states
that the sale or transfer of the shares evidenced by the certificate is subject
to certain restrictions until the date upon which the Lock-in Period ends,
pursuant to an agreement between the Shareholder and the Company, which
agreement is on file with the Company and the stock transfer agent from which a
copy is available upon request and without charge.
3. A manually signed k-in Agreement will be filed as part of the
registration documents.
SUCCESS DEVELOPMENT INTERNATIONAL, INC., by __________________, December__, 1997
Shawn M. Casey, its
Chief Executive Officer
OFFICERS, DIRECTORS AND SHAREHOLDERS:
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____________________ December , 1997 ___________________ December , 1997
DANIEL S. PENA, SR. JARRELL D. ORMAND
____________________ December , 1997 ___________________ December , 1997
SHAWN M. CASEY HUGH L. CAREY
____________________ December , 1997 ___________________ December , 1997
RALPH E. VROMAN, JR. PATRICIA D. CASEY
____________________ December , 1997 ___________________ December , 1997
RAYMOND RACH VICKI L. SESSIONS
____________________ December , 1997
RONALD F. LEGRAND
</TABLE>
<PAGE>
BEFORE THE PENNSYLVANIA SECURITIES COMMISSION
DIVISION OF CORPORATION FINANCE
FURTHER AGREEMENT BY SHAREHOLDERS
The terms and conditions contained in the accompanying Lock-in Agreement may
only be modified (including premature termination of the Lock-in agreement) in
extremely rare circumstances and then, only with the approval of the
Pennsylvania Securities Commission.
SUCCESS DEVELOPMENT INTERNATIONAL, INC., by __________________, December__, 1997
Shawn M. Casey, its
Chief Executive Officer
Shareholders:
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____________________ December , 1997 ___________________ December , 1997
DANIEL S. PENA, SR. JARRELL D. ORMAND
____________________ December , 1997 ___________________ December , 1997
SHAWN M. CASEY HUGH L. CAREY
____________________ December , 1997 ___________________ December , 1997
RALPH E. VROMAN, JR. PATRICIA D. CASEY
____________________ December , 1997 ___________________ December , 1997
RAYMOND RACH VICKI L. SESSIONS
____________________ December , 1997
RONALD F. LEGRAND
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REPRESENTATIONS OF THE ISSUER
Success Development International, Inc. (the Issuer), in connection with
its application for registration of an offering and sale of shares of its common
stock (the "Shares") by coordination under Section 205 of the Pennsylvania
Securities Act, has executed a Lock-In Agreement and hereby represents that:
The Issuer will provide copies of the Lock-in Agreement and a statement of
the per share initial public offering price to the Issuer's stock transfer
agent.
Executed on behalf of the Issuer on December __, 1997.
Success Development International, Inc.
By: ______________________________
Shawn M. Casey, its Chief Executive
Officer
