<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 3, 1999
AQUA CLARA BOTTLING AND DISTRIBUTION, INC.
FLORIDA EIN 84-1352529
1315 Cleveland Street
Clearwater, Florida 33755-5102
(727) 446-2999
www.aquaclara.com
Indicate by check mark whether the Registrant (1) has filed all report required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The registrant had 22,295,707 shares of common stock, no par value,
outstanding as of July 3, 1999.
<PAGE> 2
Part I:
Financial Information
(Item 1)
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Consolidated Balance Sheet
July 3, 1999 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
Assets
Current assets:
Cash and cash equivalents $ 284,279
Accounts receivable, net of allowance for
doubtful accounts of $10,000 14,797
Inventories 81,444
Prepaid expenses 287,325
Other current assets 26,586
-----------
Total Current Assets 694,431
Property, plant, and equipment, net of accumulated depreciation 1,865,581
Other assets 1,506
-----------
$ 2,561,518
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, trade 327,666
Accrued expenses 11,998
Current maturities of long-term debt 18,149
Current obligation under capital lease 3,526
Due to stockholders 155,308
Other current liabilities 14,233
-----------
Total current liabilities 530,880
Long-term debt, less current maturities 1,088,037
Obligation under capital lease, less current portion 11,205
-----------
$ 1,630,122
Stockholders' equity:
Preferred stock; no par value, 5,000,000 shares
authorized; 1,521 shares issued and outstanding 1,134,695
Common stock; no par value, 50,000,000 shares
authorized; 22,295,707 shares issued and outstanding 4,544,504
Additional paid-in capital 1,417,391
Accumulated deficit (6,165,193)
-----------
$ 931,396
$ 2,561,518
</TABLE>
<PAGE> 3
Financial Information
(Item 3)
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Consolidated Statements of Operations
<TABLE>
<CAPTION>
3 months ended 3 months ended
July 3 '99 July 4 '98
(unaudited) (unaudited)
<S> <C> <C>
Sales $ 103,474 $ 19,111
Cost of sales 62,957 29,864
------------ ------------
Gross profit 40,517 (10,753)
General, administrative, and sales expenses 530,288 249,809
------------ ------------
Operating loss (489,771) (260,562)
Other income (expense):
Interest expense (14,063) (6,617)
Interest and other income 0 3,256
Gain (loss) on sale of assets (10,415) 0
Other expense 7,753 0
------------ ------------
Net other income (expense) (16,725) (3,361)
Net loss (506,497) (263,923)
Dividends on preferred stock:
Amortization of intrinsic value of conversion rights
Unpaid 8.0% cumulative dividend 49,863
Net loss applicable to common stock $ (506,496) $ (313,786)
Basic loss per share $ (0.03) $ (0.05)
Weighted average common shares outstanding 19,250,055 6,271,622
</TABLE>
<PAGE> 4
Part 1
Financial Information
(Item 4)
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Consolidated Statements of Stockholders' Equity
(unaudited)
<TABLE>
<CAPTION>
Additional Accumu- Sub-
Preferred Stock Common Stock Paid-In lated scription
Shares Amount Shares Amount Capital Deficit Receivable
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, April 3, 1999 1,676 1,250,284 16,160,523 3,670,870 1,417,391 (5,658,697) --
Conversion of preferred
stock 155 (115,589) 1,244,783 115,589 -- -- --
Issuance of common stock
for services 4,890,401 758,045 -- -- --
Net loss for period (482,385)
Balances, July 3, 1999 1,521 1,134,695 22,295,707 4,544,504 1,417,391 (6,141,082) --
</TABLE>
<PAGE> 5
Part 1
Financial Information
(Item 5)
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
3 months ended 3 months ended
July 3, 1999 July 4, 1998
(unaudited) (unaudited)
<S> <C> <C>
Operating activities:
Net Income (Loss) $ (506,496) $ (263,923)
Provided by Operations:
Depreciation 27,128 5,950
Issuance of Stock for Services 758,045 0
(Gain) Loss on Disposal of Assets 5,578 0
Allowance for Doubtful Accounts 0 0
Effect - Accounting Principle 0 0
Change in Assets & Liabilities:
(INC) Decrease in Accounts Receivable 33,288 (18,192)
(INC) Decrease in Employee Advances 0 0
(INC) Decrease in Inventories (18,715) (45,001)
(INC) Decrease in Prepaid Expenses (287,325) (3,518)
(INC) Decrease in Other Assets 0 0
INC (DEC) in Accounts Payable (98,817) 61,964
INC (DEC) in Accrued Expenses (236,350) 21,317
INC (DEC) in Other Liabilities (12,459) 0
INC (DEC) in Shareholder Accrual (214,758) 0
----------- -----------
Total Adjustments (44,385) 22,520
Net Cash Provided by Operation (550,882) (241,403)
Cash Flows from Investing
Acquisition of Equipment 0 (399,073)
Proceeds from Sale of Equipment 0 0
Purchases of Investments 0 0
Sales of Investments 0 0
INC (DEC) in Other Assets 0 30,019
----------- -----------
Cash Provided (USED) in Capital 0 (369,054)
Proceeds from Stock Issues 0 0
Proceeds from Debt 1,075,000 0
Payments on Debt (249,799) (4,170)
Proceeds from Due to Stockholders 0 0
----------- -----------
Cash Provided (USED) Investing 825,201 (4,170)
Net INC (DEC) in Cash & CE 274,319 (614,627)
Cash & CE at Begin of Year 9,960 733,618
Cash & CE at End of Year 284,279 108,991
</TABLE>
<PAGE> 6
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Notes To The (Unaudited) Consolidated Financial Statements
Interim Consolidated Financial Statements
The accompanying unaudited interim consolidated financial statements
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission for reporting on Form 10-QSB. Accordingly, certain
principles for complete financial statement are not included herein. The
financial statements are prepared on a consistent basis (including normal
recurring adjustments) and should be read in conjunction with the consolidated
financial statement and related notes contained in the Annual Report for the
fiscal year ended April 3, 1999.
The results of operations for the three-month period ended July 3,
1999 are not necessarily indicative of those to be expected for the entire
year.
Organization, Background, Sale of Assets, and Going Concern
On August 17, 1995, Pocotopaug Investment, Inc. (hereinafter referred
to as "Pocotopaug") was incorporated under the laws of Florida for the purpose
of raising capital to fund the development of products for subsequent entry
into the bottled water industry.
On July 29, 1996, Aqua Clara Bottling & Distribution, Inc.
(hereinafter referred to as "Aqua Clara" or the "Company") was incorporated
under the laws of Colorado for the purpose of raising capital to fund the
development of products for subsequent entry into the bottled water industry.
In December 1996, the stockholders of Pocotopaug gained control of
Aqua Clara and Aqua Clara acquired Pocotopaug in a business combination
accounted for as a reorganization of Pocotopaug. Pocotopaug became a wholly
owned subsidiary of Aqua Clara through the exchange of 1,690,122 shares of Aqua
Clara's common stock for all 1,000,000 shares of the outstanding stock of
Pocotopaug. The accompanying consolidated financial statements have been based
on the assumption that the Companies were combined for all periods presented.
During the year ended April 3, 1999 the Company began producing 20 oz.
bottles of oxygenated water. The Company will need to generate additional sales
or obtain additional financing to fund its operations. These factors, combined
with the fact that the Company has not generated any positive cash flows from
operations, raise substantial doubt about the Company's ability to continue as
a going concern. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded assets or amounts
and classifications of liabilities that might be necessary in the event the
Company cannot continue in existence.
In March 1999 the Company entered into an agreement with a major
distributor in the Northeastern United States for distribution of their 20 oz.
bottles of oxygenated water. Subsequent to April 3, 1999 the Company raised
$1,075,000 through the issuance of a Class B Preferred Debenture. Common stock
shares totaling 5,000,000 are held in an escrow account for when the debentures
are converted. The proceeds of this debenture were used to retire the mortgage
on the building and the 90-day note to stockholders. The remainder of the
proceeds will be used to fund operations.
<PAGE> 7
Significant Accounting Policies
The consolidated financial statements include the accounts of Aqua
Clara Bottling & Distribution, Inc. and its wholly owned subsidiary, Pocotopaug
Investments, Inc. All significant inter-company accounts and transactions have
been eliminated.
The financial statements for previous years reflected the Company as
being in the development stage. The accompanying financial statements present
the Company as no longer being in the development stage.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash equivalents consist of all highly liquid debt instruments
purchased with a maturity of three months or less.
Inventories are stated at the lower of cost (first-in, first-out) or
market.
Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the consolidated
financial statements carrying amounts of existing assets and liabilities and
their respective income tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized as income in the period that included the enactment date.
The Company charges to retained earnings and credits its additional
paid-in capital for the amortization of the intrinsic value of the conversion
feature of its preferred stock in accordance with the statements issued by the
Securities and Exchange Commission.
Shares of common stock issued for other than cash have been assigned
amounts equivalent to the estimated fair value of the service received until
the time the Company's stock began trading. At that time, the Company valued
the transactions based on quoted prices. The Company records shares as
outstanding at the time the Company becomes contractually obligated to issue
shares.
Property, plant, and equipment are recorded at cost. Depreciation is
calculated by the straight-line methods over the estimated useful lives of the
assets. Property under capital leases is amortized over the shorter of the
lease terms or the estimated economic life of the property.
Fair value estimates discussed herein are based upon certain market
assumptions and pertinent information available to management. The respective
carrying value of certain on-balance-sheet financial instruments approximated
their fair values. These financial instruments include cash, investment
securities, accounts payable, and accrued expenses. Fair values were assumed to
approximate carrying values for these financial instruments since they are
short-term in nature or they are receivable or payable on demand. The fair
value of the Company's long-term debt is estimated based upon the quoted market
prices for the same or similar issues or on the current rates offered to the
Company for debt of the same remaining maturities.
Basic loss per share is based on the weighted average number of common
shares outstanding during each period. The Company implemented SFAS No. 128
"Earnings Per Share" during the year ended April 4, 1998.
<PAGE> 8
In computing dilutive earnings per share, the following were excluded
because their effects were antidilutive.
Year ended April 3, 1999 - Preferred shares convertible into common
stock and 2,173,382 contingently issuable shares.
Year ended April 4, 1998 - Preferred shares convertible into common
stock, options on 250,000 shares and 600,000 contingently issuable
shares.
The Company's fiscal year ends with the first Saturday in April.
During 1998 the AICPA issued Statement of Position (SOP) 98-5 that
requires companies to write-off start-up expenses in the year incurred and any
previously capitalized expenditures in the year adopted.
The Company adopted SOP 98-5 during the year ended April 3, 1999 and
recorded a $23,194 cumulative effect of a change in accounting principle as
required by the SOP ($0 per share).
Inventories consist of the following at July 3, 1999:
Raw materials $66,993
Finished goods 14,451
-------
$81,444
Property, plant, and equipment consist of the following at July 3,
1999:
Land $ 90,000
Building 926,520
Machinery and equipment 959,423
Vehicles 22,393
----------
1,998,336
Less accumulated depreciation (132,755)
----------
$1,865,851
The Company has reviewed its long-lived assets for impairment and has
determined that no adjustments to the carrying value of long-lived assets is
required.
Prepaid expenses for this fiscal year consist of marketing,
advertising, promotion of the product and company and the board of director
fees.
Due to stockholders' consists of the following at July 3, 1999:
Notes payable to stockholders due on demand with
interest accrued at 5% to 10% $ 36,274
Deferred salaries with interest accrued at 5% 119,034
--------
$155,308
Long-term debt at July 3, 1999 consists of:
Note payable: Secured 8% Series "B" Convertible
Debenture was raised in June 1999. Interest is
to be paid quarterly @ 8% per annum, with the
first payment due on 8/1/99 for $12,832.
The note will be converted into common stock.
Series "B" Convertible Debenture $ 1,075,000
<PAGE> 9
Installment note payable; interest 10.5%;
payments $462 per month including interest;
collateralized by a vehicle 12,959
Installment note payable; interest 10.5%;
payments $627 per month including interest
[from five-gallon water business, will be
assumed in September]. 18,328
Long-term debt 1,106,186
Less current installments 18,149
Long-term debt, less current installments $ 1,088,037
During 1998, the Company sold the assets of their five-gallon water
business. The purchaser of these assets assumed the notes payable and
obligations under capital leases used by the Company to finance these assets.
The purchaser is responsible for making the payments on these notes payable and
obligations under capital leases, however, the Company remains contingently
liable. The principal payments required on these notes payable and obligations
under capital leases are approximately $45,487 at July 3, 1999.
At July 3, 1999 the Company is obligated under a long-term capital
lease for equipment. The following is a schedule by year of future minimum
lease payments under the capital lease.
2000 $ 4,439
2001 4,439
2002 4,439
2003 4,439
-------
Total lease payments 17,756
Less amount representing interest (6.5%) 2,165
-------
Present value of lease payments 15,591
Less current obligation 3,526
-------
Long-term capital lease obligation $12,065
At July 3, 1999 the Company rented vehicles and equipment under
operating leases. The following is a schedule by year of future minimum rental
payments required under operating leases that have an initial or remaining
noncancellable lease term in excess of one year as of July 3, 1999.
2000 $ 5,990
2001 4,998
2002 800
-------
$11,788
No provision for income taxes is recorded due to the amount of tax
losses incurred since inception. The Company had unused net operating loss
carryforwards to carry forward against future years' taxable income of
approximately $2,087,000, which begin to expire in years after 2011. Temporary
differences giving rise to the deferred tax assets consist primarily of the
deferral and amortization of start-up costs for tax reporting purposes.
Management has established a valuation allowance equal to the amount of the
deferred tax assets due to the uncertainty of the Company's realization of this
benefit.
The components of deferred tax assets consist of the following at
April 3, 1999:
Deferred tax assets:
Start up costs $ 530,000
Net operating loss carryforwards 785,000
<PAGE> 10
Gross deferred tax assets 1,315,000
Valuation allowance 1,315,000
----------
Total deferred tax assets $ --
Since inception, substantial changes of ownership of the Company have
occurred. Under federal tax law, these changes in ownership of the Company will
significantly restrict future utilization of the net operating loss
carryforwards. Other than the net operating losses, which have been limited
because of the change in ownership as described above, any other net operating
losses will expire if not utilized within beginning in years after 2011.
The Company has entered into agreements to issue stock subsequent to
April 3, 1999 for services to be performed during fiscal year 2000. The stock
to be issued is 1,165,000 shares at an estimated market value of approximately
$463,000.
<PAGE> 11
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Part II
Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
The Company's sales commenced in April, 1997, with the introduction of
its 5-gallon bottled water service. In the year ended April 4, 1998, the
Company had $135,710 in sales from this business. Revenues were comprised of
cooler rentals and water sales, which terminated in March, 1998. With the
proceeds from its offering of Series A Preferred Stock, the Company entered the
PET bottled water market. The sales for the fiscal year ending April 3, 1999,
are $184,952. The lower than expected sales amount is the result of the
Company's inability to find a major distributor to purchase large quantities of
product until March, 1999. This agreement was reached too late in the year to
significantly affect annual sales figures.
The Company's sales comparisons to previous years will not be an
indicator of any future growth patterns because the Company was still in the
development stage of launching its new product.
The Gross Profit for the period ended July 3, 1999, was $40,517. The
Selling and General Administrative expenses for the fiscal year were $530,288.
Non-recurring expenses included $200,000 for generation of funding the Series
"B" Debenture and the mortgage payoff of $264,097.
The Company does not intend to manufacture bottled water products
without firm orders in hand for its products. However, the Company intends to
expend costs over the next twelve months in advertising, marketing and
distribution, which amounts are expected to be expended prior to the receipt of
significant revenues. There can be no assurance as to when, if ever, the
Company will realize significant operating revenues or attain profitability.
LIQUIDITY AND CAPITAL RESOURCES
Subsequent to April 3, 1999, the Company raised $1,075,000 through the
issuance of a Class B Preferred Debenture. The proceeds of this raise were used
to retire the First Mortgage on the plant and real estate and the demand note
described in the above paragraph. The remainder of the raise will be used to
finance continued operation of the Company.
The Company has no plans or arrangements in place with respect to
additional capital sources at this time. The Company has no lines of credit
available to it at this time. There is no assurance that additional capital
will be available to the Company when or if required.
Although the Company expects to have continued losses in the 2nd
quarter of fiscal year 2000, management believes that the losses will continue
to decrease and a break-even point could be reached in the 3rd or 4th quarter
of this year. Inflation has not had a significant impact on the Company's
results of operations.
<PAGE> 12
BUSINESS AND PLAN OF OPERATION
GENERAL
Prior information pertaining to Aqua Clara Bottling & Distribution,
Inc. can be found in the Annual Report for the fiscal year ended April 3, 1999.
During the year ended April 4, 1998, the Company began its five-gallon
water business. In February, 1998, the Company sold this portion of the
business. The assets disposed of consist of certain receivables, a vehicle, and
various equipment used in the Company's bottled water business. The total sales
price was approximately $352,394, which included the assumption of installment
notes payable of approximately $149,782 by the acquiring company. The Company
recognized a gain of approximately $33,000 on this sale.
During the year ending April 3, 1999, the Company began producing
20 oz. bottles of oxygenated water packaged in a PET container. The Company's
oxygen enriched bottled water is made by combining super purified water and
oxygen. Through water purification processing the source water is reduced to
1-2 parts per million of total dissolved solids and then oxygen is introduced
through a unique proprietary process. As a point of reference, the Food and
Drug Administration's (FDA) definition of distilled water is no more than 5
parts per million of total dissolved solids. The Company's oxygen enriched
water contains approximately 40 parts per million of oxygen. Normal tap water
contains approximately 3 parts per million of dissolved oxygen. As such, the
company's oxygen enriched bottled water contains approximately 1200% more
oxygen.
INDUSTRY OVERVIEW
The Company's primary focus is the production/distribution of oxygen
enriched bottled water in small package, PET, containers ranging in size from
.5 liter to 1.5 liters. The points of purchase are super markets, convenience
stores, mass merchants, gas station markets, health spas and vitamin/health
food stores.
Oxygen is currently in the public view as an "additive" to a range of
consumer products. There are currently oxygen bars in Toronto, New York City
and the Los Angeles area. Oxygen in beverages has received recent widespread
media coverage through television, radio and print media.
PRODUCTS
Oxygen Enriched Bottled Water. The Company's primary focus will be the
production/distribution of oxygen enriched bottled water in small package, PET,
containers ranging in size from .5 liter to 1.5 liters. The points of purchase
will include super markets, convenience stores, mass merchants, gas station
markets, health spas and vitamin/health food stores.
The Company's oxygen enriched bottled water is made by combining super
purified water and oxygen. Through water purification processing the source
water will be reduced to 1-2 parts per million of total dissolved solids and
then oxygen is introduced through a unique, proprietary process. As a point of
reference, the Food and Drug Administration's (FDA) definition of distilled
water is 5 parts per million or less of total dissolved solids. As such, the
base water is of distilled quality, although the distillation process is not
used.
<PAGE> 13
The Company's market research, undertaken by a non-affiliated research
firm, has indicated that no specific medical claims have to be made to
consumers with regard to its product. According to this market research the
public will readily accept the necessity and benefits of both highly purified
water and oxygen. Oxygen is literally the breath of life; oxygen is a natural
energizer and body purifier. Oxygen is odorless and tasteless, as well as
non-carbonated. As such, the Company's water tastes like a fine premium bottled
water -- light and crisp. Oxygen does not produce the unhealthy "jolt"
associated with caffeine products. Rather, it is believed to create a feeling
of physical well being and mental clarity.
There is one significant competitor, Clearly Canadian, producing
oxygen enriched bottled water. The Company knows of eight other entities that
are attempting to produce and distribute oxygen enriched bottled water. Except
for Clearly Canadian, none of the well-established traditional bottled water
distributors has an oxygen enriched bottled water product.
The Company's oxygen enriched water contains approximately 40 parts
per million of oxygen. Normal water contains approximately 3 parts per million
of oxygen. As such, the Company's oxygen enriched bottled water will contain
approximately 800% or more oxygen than conventional bottled water products.
There can be no assurance that the Company's products will achieve consumer
acceptance. Consumer preferences are inherently subjective and subject to
change.
Initially, the Company will not carbonate or flavor its water. After
the successful introduction of the Company's oxygen enriched bottled water
product, the introduction of a new product with natural flavoring or
carbonation will be considered. Likewise, the Company will consider the
infusion of beneficial herbs. The Company will also consider the production of
super oxygen enriched sports drinks, providing even higher levels of oxygen, to
be marketed at a higher price. The Company utilizes a distinctive bottle and
label for its water products.
STRATEGY
The company's objective is to build product markets in Florida and
then expand nationally. Aspects of the Company's strategy include the
following.
The Company's oxygen enriched small package bottled water product will
primarily be sold through retail outlets, including super markets, convenience
stores, mass merchants, gas station markets, health spas and vitamin/health
food stores, and health spas. However, secondary distribution will be effected
through vending and private labeling. Neither vending nor private labeling have
the attendant costs of direct retailing, while they do have the benefit of
increasing the production volume and thereby increasing the production margins.
PRODUCTION
The Company currently operates out of a building with approximately
14,000 sq. ft. under roof with an exposed four-bay loading dock sitting on 2.1
acres in Clearwater, Florida. Approximately 2,400 sq. ft. is utilized for
office facilities and the rest is used for bottling and warehouse operations.
The remodeling of the building was completed in fiscal year 1999 for
approximately $600,000.
The Company finished installation and startup of a medium-sized
bottling facility during the fiscal year ended April 3, 1999, at a total cost
of approximately $750,000. The bottling line is rated at 160 bottles/min., or,
practically, 1,080 24-bottle cases of 20 oz. bottled water each shift.
Upon delivery to the Company's facilities, the source water is passed
through a number of filtration, ion exchange, and reverse osmosis processes by
which it is reduced to a very pure 1 - 2 parts per million of dissolved solids.
Water is oxygenated using the purest oxygen commercially available in a
proprietary process. The water is then treated with ultraviolet light, which
effectively kills bacteria and other micro-organisms before delivery to the
bottling area where the various products are filled and
<PAGE> 14
capped. The filling room is supplied with pressurized air from high-capacity,
high-efficiency particulate filters, resulting in a clean filling and capping
environment.
The manufacturing process is designed to be highly automated. Bottles
are mechanically de-palletized, cleaned, filled and capped. The filled bottles
are automatically coded, labeled, tamper-banded (if applicable), and packed in
cases. After palletizing and stretch-wrapping, the product is either loaded
directly onto a truck for immediate shipment or is stored in the warehouse
facility for future shipment. Most products are shipped within 48 to 72 hours
after production via common carriers.
The Company maintains exacting internal quality control standards.
Each shift's production is tested in Company laboratory facilities according to
FDA and IBWA standards, and random samples are submitted regularly to an
independent laboratory for confirmation testing.
WATER SOURCES
Under FDA guidelines, bottled water must contain fewer than 500 parts
per million ("ppm") of total dissolved solids. Varying amounts and types of
dissolved solids provide different tastes to water. The Company uses FDA and
International Bottled Water Association approved water sources.
COMPETITION
The bottled water industry is highly competitive. According to
"Beverage Marketing", there are approximately 350 bottled water filling
locations in the United States with sales increasingly concentrated among the
larger firms. According to "Beverage Marketing", the ten largest bottled water
companies accounted for approximately 58.4% of wholesale dollar sales in 1996.
Nearly all of the Company's competitors are more experienced, have greater
financial and management resources and have more established proprietary
trademarks and distribution networks than the Company. On a national basis, the
Company competes with bottled water companies such as The Perrier Group of
America, Inc. (which includes Arrowhead Mountain Spring Water, Poland Spring,
Ozarka Spring Water, Zephyrhills Natural Spring Water, Deer Park, Great Bear
and Ice Mountain) and Great Brands of Europe (which includes Evian Natural
Spring Water and Dannon Natural Spring Water). The Company also competes with
numerous regional bottled water companies located in the United States and
Canada. Aqua Clara has chosen to compete by focusing on a higher quality oxygen
enriched purified drinking water, innovative packaging and customer service.
SEASONALITY
The market for bottled water is seasonal, with approximately 70% of
sales taking place in the seven months of April through October inclusive. As a
result of seasonality, the Company's staffing and working capital requirements
will vary during the year.
TRADEMARKS
The Company has registrations in the U.S. Patent and Trademark Office
for the trademarks that it uses, including Aqua Clara. The Company believes
that its common law and registered trademarks have significant value and
goodwill and that some of these trademarks are instrumental in its ability to
create demand for and market its products. There can be no assurance that the
Company's common law or registered trademarks do not or will not violate the
proprietary rights of others, that they would be upheld if challenged or that
the Company would, in such an event, not be prevented from using the
trademarks, any of which could have an adverse effect on the Company.
<PAGE> 15
REGULATION
The Company's operations are subject to numerous federal, state and
local laws and regulations relating to its bottling operations, including the
identity, quality, packaging and labeling of its bottled water. The Company's
bottled water must satisfy FDA standards, which may be periodically revised,
for chemical and biological purity. The Company's bottling operations must meet
FDA "good manufacturing practices", and the labels affixed to the Company's
products are subject to FDA restrictions on health and nutritional claims. In
addition, bottled water must originate from an "approved source" in accordance
with federal and state standards.
State health and environmental agencies, such as the Florida
Department of Agriculture and Consumer Services, also regulate water quality
and the manufacturing practices of producers.
The Company's products satisfy all federal and state requirements and
the Company is proceeding with applications to obtain distribution permits in
all 50 states.
These laws and regulations are subject to change, however, and there
can be no assurance that additional or more stringent requirements will not be
imposed on the Company's operations in the future. Although the Company
believes that its water supply, products and bottling facilities are and will
be in substantial compliance with all applicable governmental regulations,
failure to comply with such laws and regulations could have a material adverse
effect on the Company.
<PAGE> 16
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Part II
Other Information
Item 1
Legal Proceedings
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings, except
as set forth below.
Civil litigation in the Circuit Court of the Sixth Judicial Circuit,
in and for Pinellas County, Florida, was filed by John S. McAvoy, Plaintiff vs.
Aqua Clara Bottling & Distribution, Inc., Olde Monmouth Stock Transfers, a New
Jersey Corporation, John. C. Plunkett, Rand L. Gray and Robert Guthrie,
Defendant, Case No. 99-004394-CI-011. The complaint is a multi part complaint
claiming Delcaratory Relief; Injunctive Relief; Breach of Fiduciary and
Statutory Duties; Breach of Contract Unpaid Promissory Notes; Breach of
Contract Unpaid Accrued Salary. The Plaintiff seeks removal of the restrictive
legends on stock held and $67,973.79 with regard to Notes and Accrued Salary.
The matter is pending arbitration. The matter is currently in settlement
discussions, with litigation pending.
<PAGE> 17
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Part II
Other Information
Item 2
Changes In Securities
Secured 8% Series "B" Convertible Debenture
The Company has issued 43 Secured 8% Series "B" Convertible Debenture
shares. The "B" Convertible Debenture is convertible at the option of the
holder at any time prior to payment in full of the principal balance of the
Debenture, to convert the Debenture in whole only, into fully paid and
non-assessable shares of Common Stock, no par value, of the Company (the
"Common Stock") at a conversion price equal to 65% of the three day average
closing bid price prior to the date of conversion. At the Corporation's option,
the amount of accrued and unpaid interest due as of the Conversion Date shall
not be subject to conversion but instead may be paid in cash as of the
Conversion Date. If the Corporation elects to convert the amount of accrued and
unpaid interest at the Conversion Date into Common Stock, the Common Stock
issued to the Holder shall be valued at the Conversion Price. The number of
shares of Common Stock due upon conversion shall be (i) the face amount of the
Debenture divided by (ii) the applicable Conversion Price.
The Company's Board of Directors has authority, without action by the
shareholders, to issue all or any portion of the authorized but unissued
preferred stock in one or more series and to determine the voting rights,
preferences as to dividends and liquidation, conversion rights, and other
rights of such series. The Company considers it desirable to have preferred
stock available to provide increased flexibility in structuring possible future
acquisitions and financing and in meeting corporate needs which may arise. If
opportunities arise that would make desirable the issuance of preferred stock
through either public offering or private placements, the provisions for
preferred stock in the Company's Articles of Incorporation would avoid the
possible delay and expense of a shareholder's meeting, except as may be
required by law or regulatory authorities. Issuance of the preferred stock
could result, however, in a series of securities outstanding that will have
certain preferences with respect to dividends and liquidation over the Common
Stock which would result in dilution of the income per share and net book value
of the Common Stock. Issuance of additional Common Stock pursuant to any
conversion right, which may be attached to the terms of any series of preferred
stock, may also result in dilution of the net income per share and the net book
value of the Common Stock. The specific terms of any series of preferred stock
will depend primarily on market conditions, terms of a proposed acquisition or
financing, and other factors existing at the time of issuance. Therefore, it is
not possible at this time to determine in what respect a particular series of
preferred stock will be superior to the Company's Common Stock or any other
series of preferred stock, which the Company may issue. The Board of Directors
may issue additional preferred stock in future financing, but has no current
plans to do so at this time.
The issuance of Preferred Stock could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding voting
stock of the Company.
<PAGE> 18
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Part II
Other Information
Item 3
Defaults Upon Senior Securities
(NONE)
<PAGE> 19
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Part II
Other Information
Item 4
Submission of Matter to a Vote of Security Holders
(NONE)
<PAGE> 20
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Part II
Other Information
Item 5
Other Information
Management
The following table sets forth the names, ages, and offices held with
the Company by its directors and executive officers, as of July 3, 1999:
<TABLE>
<CAPTION>
Name Position Director Since Age
- ---- -------- -------------- ---
<S> <C> <C> <C>
E. J. Mersis Chairman, Chief 1999 55
Executive Officer
John C. Plunkett President, Chief 1997 51
Operations Officer
Robert F. Guthrie Secretary, Director 1997 65
Renato P. Mariani Director 1999
John Thomas Director 1999
</TABLE>
All directors hold office until the next annual meeting of
stockholders and until their successors have been duly elected and qualified.
There are no agreements with respect to the election of directors. The Company
has compensated its directors for service on the Board of Directors through the
end of fiscal year 2000 by the awarding of 50,000 shares of registered common
stock to each director. Any non-employee director of the Company is reimbursed
for reasonable expenses incurred for attendance at meetings of the Board of
Directors and any committee of the Board of Directors. The Executive Committee
of the Board of Directors, to the extent permitted under Colorado law,
exercises all of the power and authority of the Board of Directors in the
management of the business and affairs of the Company between meetings of the
Board of Directors. Each executive officer serves at the discretion of the
Board of Directors.
The business experience of each of the persons listed above during the past
five years is as follows:
Mr. Emanuel J. Mersis is the Chairman, and Chief Executive Officer of
the Company. Mr. Mersis has over 27 years experience as a top performing CEO
and senior executive with strong domestic and international expertise in
consumer packaged goods. He served Westvaco Corporation, a $3 billion dollar
Fortune 500 paper, consumer packaging and chemical company since 1998. Mr.
Mersis was the President and CEO of Signature Brands LLC (a joint venture of
McCormick and Co., Inc. and Pioneer Products, Inc.) from 1987 to 1998.
John C. Plunkett is the President and Chief Operations Officer of the
Company. Mr. Plunkett has over 20 years experience in the engineering
consulting industry and 10 years experience in real estate management. Mr.
Plunkett has been associated with the Company as an officer and director since
its inception and became President in 1998. Mr. Plunkett is a graduate of the
U.S. Naval Academy with a degree in Naval Engineering.
Robert F. Guthrie has served as Director of the Company since May,
1997. Mr. Guthrie became the Secretary in December 1998. Mr. Guthrie is an
attorney licensed to practice in Florida with affairs in Seminole, Florida.
<PAGE> 21
Mr. Renato P. Mariani has served as Director of the Company since May,
1999. Mr. Mariani is the President of Eagle Diversified, Inc.
Mr. John Thomas has served as Director of the Company since June,
1999. Mr. Thomas is the President of FloTech, Inc.
The Company does not have a bonus, profit sharing, or deferred
compensation plan for the benefit of its employees, officers or directors.
Beginning with the fiscal year ending April 2, 2000, the Company began
compensating its directors.
CERTAIN TRANSACTIONS
The Company on February 11, 1999, received a loan from a group of the
Company's shareholders, who are neither officers nor directors. Under the loan
terms $250,000 was made available over ninety days. The 10% interest rate is
payable in cash or stock. A blanket Security Agreement on all of the Company's
assets, a UCC filing on the Company's non-realty assets, and a mortgage on the
Company's realty secures the note. The note, security agreement, UCC filing and
mortgage include any future advancements of additional funds. Messrs. Plunkett,
Gray, Guthrie and Berry/Davis subordinated their mortgages, where filed, to the
mortgage of the loaning shareholders.
Subsequent to April 3, 1999, the Company on June 25, 1999, paid off
the loan described above, retiring the note.
<PAGE> 22
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Part II
Other Information
Item 6
Exhibits and Reports
Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Articles of Incorporation (1)
3.2 Articles of Amendment for Series A Preferred Stock (1)
3.3 Bylaws (1)
4.1 Class B Debenture
10.1 Amended Employment Agreement with John McAvoy (1)
10.2 Amended Employment Agreement with John C. Plunkett (2)
10.3 Amended Employment Agreement with Rand L. Gray (3)
10.4 Lead Generation/Corporate Relations Agreement dated May 24, 1999 with
Corporate Relations Group, Inc.
10.5 Installment secured promissory notes (1)
10.6 Modification of Installment secured promissory notes (4)
16.1 Letter from BDO Seidman (3)
21.1 Subsidiaries
23.1 Letters from Pender Newkirk & Company (5)
23.2 Letters from Tedder, James, Worden & Associates, P.A. (5)
27 Financial Data Schedules
(b) Reports on Form 8-K:
5.0 Opinion Regarding Legality, dated May 13, 1999 (6)
23.0 Letter on Audited Financial Information, dated June 11, 1999 (6)
(1) Incorporated by reference to the original filing of the Registration
Statement on Form SB-2, File No. 333-44315 (the "Registration
Statement")
(2) Incorporated by reference to Amendment Number 1 of the Registration
Statement
(3) Incorporated by reference to Amendment Number 2 of the Registration
Statement
(4) Incorporated by reference to Amendment Number 4 of the Registration
Statement
(5) Incorporated by reference to Annual Report Form 10-KSB April 3, 1999
(6) Incorporated by reference to S-8 Filed June 11, 1999
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: September 23, 1999 AQUA CLARA BOTTLING & DISTRIBUTION, INC.
By: /s/ EMANUEL J. MERSIS
------------------------------------
Emanuel J. Mersis
Chairman, Chief Executive Officer
<PAGE> 1
Exhibit 4.1
AQUA CLARA BOTTLING AND DISTRIBUTION, INC.
SECURED 8% SERIES "B" CONVERTIBLE DEBENTURE
TOTAL ISSUED: $1,150,000
- --------------------------------------------------------------------------------
$25,000
- --------------------------------------------------------------------------------
THE SECURITIES SUBSCRIBED FOR BY THIS AGREEMENT AND ANY SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT OF 1993, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
THE SECURITIES SUBSCRIBED FOR BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF CERTAIN STATES
AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES SUBSCRIBED FOR BY THIS
AGREEMENT HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR
HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE
SECURITIES OFFERED BY THE COMPANY. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
Number ____ of Forty-Six
<PAGE> 2
AQUA CLARA BOTTLING AND DISTRIBUTION, INC.
A Colorado Corporation
$25,000
SECURED 8% SERIES "B" CONVERTIBLE DEBENTURE
$25,000.00 Clearwater, Florida
May 30, 1999
Aqua Clara Bottling and Distribution, Inc., a Colorado corporation (the
"Company"), the principal office of which is located at 1315 Cleveland Street,
Clearwater, Florida 33755, for value received hereby promises to pay to:
(Type Name)
----------------------
(Type Address)
----------------------
----------------------
(Type Fax Number),
----------------------
or its registered assigns, the sum of Twenty Five Thousand United States Dollars
(U.S. $25,000.00), or such lesser amount as shall then equal the outstanding
principal amount hereof and any unpaid accrued interest hereon, as set forth
below, shall be due and payable on the earlier to occur of (i) three hundred
sixty five days from the date of this debenture or (ii) when declared due and
payable by the Holder upon the occurrence of an Event of Default (as defined
below). Payment for all amounts due hereunder shall be made by mail to the
registered address of the Holder. This Note is issued in connection with the
transactions described in that certain Securities Purchase Agreement, between
the Company and the Holder, dated as of May 25, 1999 (the "Purchase Agreement")
of which all terms and conditions of said Purchase Agreement are incorporated as
if fully set forth herein. As security for the payment of this Debenture, the
Company has executed on this date a Trust Deed, Mortgage and Security Agreement,
and the Company has agreed to be bound by its terms and conditions, in addition
to the terms and conditions of this Debenture. This Debenture is one of the
Debentures referred to in the Purchase Agreement.
The following is a statement of the rights of the Holder of this
Debenture and the conditions to which this Note is subject, and to which the
Holder hereof, by the acceptance of this Debenture, agrees:
<PAGE> 3
1. DEFINITIONS. As used in this Debenture, the following terms,
unless the context otherwise requires, have the following meanings:
(a) "Company" includes any corporation that shall succeed to
or assume the obligations of the Company under this Debenture.
(b) "Holder," when the context refers to a holder of this
Debenture, shall mean any person who shall at the time be the
registered holder of this Debenture.
2. INTEREST. Commencing August 1, 1999, and on each November 1,
February 1 and May 1 thereafter until all outstanding principal and interest on
this Debenture shall have been paid in full, the Company shall pay interest at
the rate (the "Initial Interest Rate") equal to eight percent (8%) per annum on
the principal of this Debenture outstanding during the period beginning on the
date of issuance of this Debenture and ending on the date that the principal
amount of this Debenture becomes due and payable. If the principal amount of
this Debenture is not paid in full when such amount becomes due and payable,
interest at the same rate as the Initial Interest Rate plus ten (10%) shall
continue to accrue on the balance of any unpaid principal until such balance is
paid.
3. EVENTS OF DEFAULT. If any of the events specified in this
Section 3 shall occur (herein individually referred to as an "Event of
Default"), the Holder of the Debenture may, so long as such condition exists,
declare the entire principal and unpaid accrued interest hereon immediately due
and payable, by notice in writing to the Company:
(a) Default in the payment of the principal and unpaid accrued
interest of this Debenture when due and payable if such default is not
cured by the Company within fifteen (15) days after the Holder has
given the Company written notice of such default;
(b) The occurrence of an Event of Default any terms and
conditions of the Purchase Agreement, if such default is not cured by
the Company within fifteen (15) days after the Holder has given the
Company written notice of such default;
(c) The institution by the Company of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by it to
institution of bankruptcy or insolvency proceedings against it or the
filing by it of a petition or answer or consent seeking reorganization
or release under the United States Bankruptcy Code, or any other
applicable federal or state law, or the consent by it to the filing of
any such petition or the appointment of a receiver, liquidator,
assignee, trustee or other similar official of the Company, or of any
substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the taking of corporate action by the
Company in furtherance of any such action;
(d) If, within sixty (60) days after the commencement of an
action against
<PAGE> 4
the Company (and service of process in connection therewith on the
Company) seeking any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar relief under any present or future
statute, law or regulation, such action shall not have been resolved in
favor of the Company or all orders or proceedings thereunder affecting
the operations of the business of the Company stayed, or if the stay of
any such order or proceeding shall thereafter be set aside, or if,
within sixty (60) days after the appointment without the consent or
acquiescence of the Company of any trustee, receiver or liquidation of
the Company or all or any substantial part of the properties of the
Company, such appointment shall not have been vacated; or
(e) Any declared default of the Company under any Senior
Indebtedness (as defined below) that gives the holder thereof the right
to accelerate such Senior Indebtedness, and such Senior Indebtedness is
in fact accelerated by the holder.
(f) The Company shall fail to issue the common stock pursuant
to the conversion rights as provided for in Section 7, herein, within
five (5) business days.
4. SURVIVAL OF DEBT. The Company, for itself, its successors and
assigns, covenants and agrees, that the Company, upon an effective registration
of the securities available to a Holder upon conversion, will provide the holder
of the converted securities with the proper documentation, including but not
limited to opinions of counsel, that the shares registered are available for
resale, without restrictive legends. Therefore, in the event the Holder has
converted this debenture into common shares, and a registration is or has become
effective as to those shares, and the Company fails to provide documentation
that the shares may have any restrictive legends removed therefrom and the
actual legend is not removed, the obligation of this Debenture shall be revived,
and the Holder shall be able to pursue any remedy available consistent with the
terms of this Agreement, or any other agreement entered into in conjunction with
this transaction. In order to provide for the election of this remedy, upon the
Holder's election to convert this Debenture, the actual debenture will remain
with the Escrow Agent, and not be delivered to the Company, until such time as
the shares converted hereunder have been delivered or redelivered to the Holder
without restrictive legends. Upon the shares being delivered without restrictive
legends, the Escrow Agent shall then be authorized to mark the Debenture
"CANCELLED" and deliver same to the Company if, after a registration of the
converted shares becomes effective, and the legend(s) are not removed, the
Holder may notify the Escrow Agent, demand redelivery of this Debenture, and
pursue any remedies available under this Debenture, the Registration Agreement
or any other document entered into as part of this transaction providing for
remedies for any default.
5. UNDERTAKING. By its acceptance of this Note, the Holder agrees
to execute and deliver such documents as may be reasonably requested from time
to time by the Company or the lender of any Senior Indebtedness in order to
implement the subordination and subrogation provisions of this Debenture.
<PAGE> 5
6. PREPAYMENT. The Company shall not have the right to prepay
the obligation evidenced by this Agreement, unless written permission is
received from the Holder, hereof.
7. CONVERSION.
(a) Any Holder of this Debenture has the right, at the
Holder's option, at any time prior to payment in full of the principal
balance of this Debenture, to convert this Debenture, in accordance
with the provisions of Section 7(c) hereof, in whole only, into fully
paid and nonassessable shares of Common Stock, no par value, of the
Company (the "Common Stock") at a conversion Price equal to 65% of the
three day average closing bid price prior to the date of conversion as
provided for in the Security Purchase Agreement (the "Conversion
Price"). At the Corporations option, the amount of accrued and unpaid
interest due as of the Conversion Date shall not be subject to
conversion but instead may be paid in cash as of the Conversion Date.
If the Corporation elects to convert the amount of accrued and unpaid
interest at the Conversion Date into Common Stock, the Common Stock
issued to the Holder shall be valued at the Conversion Price. The
number of shares of Common Stock due upon conversion shall be (i) the
face amount of this Debenture divided by (ii) the applicable Conversion
Price.
(b) The entire principal amount of this Debenture shall be
automatically converted into shares of Common Stock at the Conversion
Price at the time in effect immediately prior to any consolidation or
merger of the Company with or into any other corporation or other
entity or person, or any other corporate reorganization in which the
Company shall not be the continuing or surviving entity of such
consolidation, merger or reorganization or any transaction or series of
related transactions by the Company in which in excess of 50% of the
Company's voting power is transferred, or a sale of all or
substantially all of the assets of the Company.
(c) Before the Holder shall be entitled to convert this
Debenture into shares of Common Stock pursuant to Section 7(a) of this
Debenture, it shall surrender this Debenture at the office of the
Escrow Company and shall give written notice by mail, postage prepaid,
to the Company at its principal corporate office, of the election to
convert the same pursuant to Section 7(a), and shall state therein the
name or names in which the certificate or certificates for shares of
Common Stock are to be issued. The Escrow Agent shall, as soon as
practicable thereafter, deliver at such office to the Holder of this
Debenture a certificate or certificates for the number of shares of
Common Stock to which the Holder of this Debenture shall be entitled as
aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such
surrender of this Debenture, and the person or persons entitled to
receive the shares of Common
<PAGE> 6
Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock as of
such date.
(d) The Company, upon execution of this document, and as a
condition precedent to the release of any funds from the sale of this
security, which terms shall be specifically included in instructions to
the Escrow Agent, shall instruct the Company's transfer agent to issue
a share certificate for Five Million (5,000,000) shares of fully paid
and nonassable common shares of the Company's securities to The
Delaware Escrow Company (EIN # 51-0382821), and deliver same to the
Delaware Escrow Company, by overnight courier to: The Delaware Escrow
Company, 301 Yamato Road, Suite 1200, Boca Raton, Florida 33431. The
above described shares are being issued in advance of any conversion of
this Debenture into the common shares of the Company in order to have
shares available in the event the Holder of this debenture, or any
other debenture of this series elects to exercise the right to convert
as provided for herein. The terms of the Escrow Agreement are set forth
in the "Share Deposit Escrow Agreement" dated March 19, 1999 between
the Company and the Delaware Escrow Company, which terms and conditions
are made a part hereof. In the event the total amount of shares due
converting note holders exceed Five Million (5,000,000), the Escrow
Agent is authorized to request from the Transfer Agent the issuance of
additional shares. The number of additional shares to be issued shall
be communicated to the Transfer Agent from the Escrow Agent by
delivering a written request. The request shall specify the balance of
the shares remaining in the Escrow Account, the total amount due on the
note(s) being converted, the "conversion price" and the number of
additional shares needed to satisfy the Company's obligation. Upon
receipt, the Transfer Agent shall deliver said shares, via overnight
courier, to the Escrow Agent. The Company irrevocably directs the
Transfer Agent to deliver said shares, without further inquiry. Shares
not delivered pursuant to a conversion shall be redelivered to the
Company upon the receipt of all Convertible Debentures of this series
by the Company, marked cancelled. A copy of the cancelled debenture(s)
shall be delivered to the Escrow Agent, who shall then cause the
remaining shares to be redelivered to the Company as provided herein.
In the event, for any reason, and regardless of fault, the holder of
this debenture fails to receive the shares of the Company's common
securities, after the proper Notice of Conversion has been delivered,
pursuant to this Agreement, said Holder shall, as prescribed for in
Section V (C) of the Securities Purchase Agreement, be entitled to all
remedies and penalties provided for therein.
(e) No fractional shares of Common Stock shall be issued upon
conversion of this Debenture. In lieu of the Company issuing any
fractional shares to the Holder upon the conversion of this Debenture,
the Company shall pay to the Holder cash in lieu of fractional shares
in the amount of outstanding principal that is not so converted. Upon
conversion of this Debenture, the Company shall be forever released
from all its obligations and liabilities under this Debenture, except
<PAGE> 7
that the Company shall be obligated to pay the Holder, within thirty
(30) days after the date of such conversion, any interest accrued and
unpaid on the converted amount of this Debenture (excluding any
interest that has itself been converted to Common Stock) to and
including the date of such conversion, and no more.
8. CONVERSION PRICE ADJUSTMENTS.
(a) In the event the Company should at any time or from time
to time after the date of issuance hereof fix a record date for the
effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of holders of Common Stock entitled
to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into,
or entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock (hereinafter referred to as "Common
Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable
upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend distribution, split or subdivision if no
record date is fixed), the Conversion Price of this Debenture shall be
appropriately decreased so that the number of shares of Common Stock
issuable upon conversion of this Debenture shall be increased in
proportion to such increase of outstanding shares.
(b) The Company warrants, that for so long as this
Debenture(s) shall remain outstanding, it shall not cause the shares of
the Company to be combined, without the specific written consent of
those Holders of not less than fifty one (51%) percent of the total
value of the then remaining outstanding principal balance due for the
series of debentures, herein. If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a
combination of the outstanding shares of Common Stock, after consent by
the holders, as set forth herein, then, following the record date of
such combination, the Conversion Price for this Debenture shall be
appropriately increased so that the number of shares of Common Stock
issuable on conversion hereof shall be decreased in proportion to such
decrease in outstanding shares.
(c) In the event of:
(1) Any taking by the Company of a record of the
holders of any class of securities of the Company for the
purpose of determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend payable out
of earned surplus at the same rate as that of the last such
cash dividend theretofore paid) or other distribution, or any
right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or
property, or to receive any other right; or
<PAGE> 8
(2) Any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of
the Company or any transfer of all or substantially all of the
assets of the Company to any other person or any consolidation
or merger involving the Company; or
(3) Any voluntary or involuntary dissolution,
liquidation of winding up of the Company, then the Company
will mail to the holder of this Debenture at least ten (10)
days prior to the earliest date specified therein, a notice
specifying:
(A) The date on which any such record is to
be taken for the purpose of such dividend,
distribution or right, and the amount and character
of such dividend, distribution or right; and
(B) The date on which any such
reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or
winding up is expected to become effective and the
record date for determining stockholders entitled to
vote thereon.
(d) If at any time the number of authorized but unissued
shares of Common Stock (and shares of its Common Stock for issuance on
conversion of such Common Stock) shall not be sufficient to effect the
conversion of the entire outstanding principal amount of this
Debenture, in addition to such other remedies as shall be available to
the holder of this Debenture, the Company will use its best efforts to
take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common
Stock (and shares of its Common Stock for issuance on conversion of
such Common Stock) to such number of shares as shall be sufficient for
such purposes.
9. REGISTRATION RIGHTS. Subject to all of the terms and
conditions herein, the Company and the Holder have entered into a "Registration
Rights Agreement" which terms and conditions shall be made a part of this
Agreement, as if they were fully set forth herein.
10. REDEMPTION RIGHTS. The Debenture(s) are redeemable, at the
option of the Company, from time to time, in whole or in part, at a redemption
price of 150% of the principal amount, plus accrued interest and unpaid on the
date of redemption. Notice of redemption shall be provided by the Corporation to
the Holder in writing (by registered mail or overnight courier at the Holder's
last address appearing in the Corporation's security registry) not less than ten
(10) nor more than fifteen (15) days prior to the Redemption Date, which notice
shall specify the Redemption Date. Notwithstanding the Company's Notice of
Redemption stated in paragraph 13, the Holder shall retain its rights to convert
into Common Stock under the terms and conditions of the conversion right
<PAGE> 9
stated in paragraph 7. Should the Holder fail to convert during the 5 business
day conversion period, the Company shall immediately wire the funds to the
Holder's bank account within 3 business days thereafter. The Holder shall notice
the Company concerning specific wiring instructions where the redemption process
shall be paid. If the Company does not have a sufficient number of Common Shares
to effect conversion, the Holder shall have the right to demand redemption on
the terms contained in this paragraph. If the Company elects such redemption the
Holder shall have the same conversion rights as described herein.
11. ASSIGNMENT. Subject to the restrictions on transfer described
in Section 13 below, the rights and obligations of the Company and the Holder of
this Debenture shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
12. WAIVER AND AMENDMENT. Any provision of this Debenture may be
amended, waived or modified upon the written consent of the Company and holders
of at not less than seventy-five (75) percent of the face amount of all then
outstanding Debentures.
13. TRANSFER OF THIS DEBENTURE OR SECURITIES ISSUABLE ON
CONVERSION HEREOF. With respect to any offer, sale or other disposition of this
Debenture or securities into which such Debenture may be converted, the Holder
will give written notice to the Company prior thereto, describing briefly the
manner thereof, together with a written opinion of such Holder's counsel, to the
effect that such offer, sale or other distribution may be effected without
registration or qualification (under any federal or state law then in effect).
Promptly upon receiving such written notice and reasonably satisfactory opinion,
if so requested, the Company, as promptly as practicable, shall notify such
Holder that such Holder may sell or otherwise dispose of this Debenture or such
securities, all in accordance with the terms of the notice delivered to the
Company. If a determination has been made pursuant to this Section 16 that the
opinion of counsel for the Holder is not reasonably satisfactory to the Company,
the Company shall so notify the Holder promptly after such determination has
been made. Each Debenture thus transferred and each certificate representing the
securities thus transferred shall bear a legend as to the applicable
restrictions on transferability in order to ensure compliance with the Act,
unless in the opinion of counsel for the Company such legend is not required in
order to ensure compliance with the Act. The Company may issue stop transfer
instructions to its transfer agent in connection with such restrictions.
14. TREATMENT OF DEBENTURE. To the extent permitted by generally
accepted accounting principles, the Company will treat, account and report the
Debenture as debt and not equity for accounting purposes and with respect to any
returns filed with federal, state or local tax authorities.
<PAGE> 10
15. NOTICES. Any notice, request or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or if telegraphed or mailed by registered or
certified mail, postage prepaid, at the respective addresses of the parties as
set forth herein. Any party hereto may by notice so given change its address for
future notice hereunder. Notice shall conclusively be deemed to have been given
when personally delivered or when deposited in the mail or telegraphed in the
manner set forth above and shall be deemed to have been received when delivered.
16. STOCKHOLDER RIGHTS. As an inducement for the debenture holder
to purchase this debenture, the Holder hereof shall be granted special voting
rights, consistent with the holders of common shares or preferred shares of the
Company, equal to the number of shares that would be issued pursuant to a
conversion on the date of any vote of the shareholders, as required by the laws
of the State of Colorado or the By-Laws of the Company. In addition, the Holder
of this debenture shall be entitled to receive notice of any proposed actions,
as a shareholder would, according to this paragraph, including the election of
directors, any change in capitalization, number of authorized shares, issuance
of special shares, changes or additions in voting rights, or any other action of
the Corporation which would result in a change in the corporate or financial
structure of the Company as of the date of this Debenture.
17. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado, excluding that
body of law relating to conflict of laws.
18. HEADING; REFERENCES. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Debenture.
Except where otherwise indicated, all references herein to Sections refer to
Sections hereof.
IN WITNESS WHEREOF, the Company has caused this Debenture to
be issued this ____ day of ______, 1999.
Aqua Clara Bottling and Distribution, Inc.
By:
----------------------------------------
Name: John C. Plunkett
Title: Chairman and CEO
Name of Holder:
-----------------------
Address:
-----------------------
-----------------------
<PAGE> 11
[FORM OF CONVERSION NOTICE]
TO:
--------------------------------------
--------------------------------------
--------------------------------------
The undersigned owner of this 8% Series B 8% Convertible Convertible
Debenture (the "Secured 8% Series "B" Convertible Debenture") issued by Aqua
Clara Bottling and Distribution, Inc. (the "Corporation") hereby irrevocably
exercises its option to convert _________ units of the Secured 8% Series "B"
Convertible Debenture into shares of the common stock, $.00l par value, of the
Corporation ("Common Stock"), in accordance with the terms of the Certificate of
Designations. The undersigned hereby instructs the Corporation to convert the
number of shares of the Secured 8% Series "B" Convertible Debenture specified
above into Shares of Common Stock Issued at Conversion in accordance with the
provisions of Article 6 of the Certificate of Designations. The undersigned
directs that the Common Stock issuable and certificates therefor deliverable
upon conversion, the Secured 8% Series "B" Convertible Debenture recertificated,
if any, not being surrendered for conversion hereby, together with any check in
payment for fractional Common Stock, be issued in the name of and delivered to
the undersigned unless a different name has been indicated below. All
capitalized terms used and not defined herein have the respective meanings
assigned to them in the Certificate of Designations.
<TABLE>
<S> <C>
Amount of Debenture Converted $25,000.00 x ___ (number of Units) = $___________
Conversion Price: _________
Total amount $_______________ divided by Conversion Price = ___________ (shares)
</TABLE>
Dated:
------------------------------
<PAGE> 12
- -----------------------------------
Signature
Fill in for registration of Secured 8% Series "B" Convertible Debenture:
Please print name and address
(Including zip code):
----------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 10.4
CORPORATE RELATIONS AGREEMENT
THIS CORPORATE RELATIONS GROUP, INC. (the "Agreement") is entered into
on this 24th day of May, 1999, between Corporate Relations Group, Inc., a
Florida corporation ("CRG"), and Aqua Clara Bottling & Distribution, a Florida
corporation ("Client").
WHEREAS, CRG is in the business of planning, developing and
implementing advertising, marketing and promotional campaigns for corporations
and other business entities ("Advertising and Promotional Services");
WHEREAS, the Client desires to retain CRG to provide the Advertising
and Promotional Services, and CRG desires to provide such Advertising and
Promotional Services to Client, pursuant to the terms, conditions and
provisions contained in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. ADVERTISING AND PROMOTIONAL SERVICES. Subject to Client's
compliance with each of the representations, warranties and covenants and
agreements made by Client in this Agreement, CRG agrees to provide to Client
the Advertising and Promotional Services identified on Exhibit A which is
attached hereto and incorporated herein by reference, for the period commencing
on the latter of (the "Effective Date") the date that this Agreement is
executed and delivered by Client or the date that CRG receives payment of its
fees as herein provided and expiring on the 365th day following the effective
date of this Agreement (the "Term").
2. OBLIGATIONS AND RESPONSIBILITIES OF CLIENT. As of the date hereof
and during the Term of this Agreement, Client agrees as follows.
1. REPRESENTATION AND WARRANTIES.
Client represents and warrants to CRG that:
(1) ORGANIZATION. Client is a corporation duly organized,
validly existing and in good standing under the laws of the State of its
incorporation and it is duly qualified to do business as a foreign corporation
in each jurisdiction in which it owns or leases property or engages in
business.
(2) FORMAL ACTION. Client has the corporate power and
authority to execute and deliver this Agreement and to perform each of its
obligations hereunder and this Agreement has been duly approved by Client's
Board of Directors.
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(3) VALID AND BINDING AGREEMENT. This Agreement has been duly
executed and delivered by Client and is the valid and binding obligation of
Client enforceable against it in accordance with its terms.
(4) NO VIOLATION. The execution, delivery and performance of
this Agreement does not and will not violate any provisions of the charter or
bylaws of Client or any agreement to which Client is a party or any applicable
law or regulation or order or decree of any court, arbitrator or agency of
government and no action of, or filing with, any governmental or public body or
authority is required in connection with the execution, delivery or performance
of this Agreement.
(5) LITIGATION. No action, suit or proceeding is pending
against or affecting the Client or any of its properties before any court,
arbitrator or governmental body or administrative agency and none of the
persons owning beneficially or of record more than 10% of the outstanding
capital stock of the Client or any of the directors or officers of Client is a
party to any action, suit or proceeding before any federal or state court,
arbitrator or governmental body or administrative agency (other than routine
traffic violations) and no such person has been a party to any such proceedings
for more than the past five years.
(6) ACCURACY OF INFORMATION. The information furnished by
Client to CRG regarding the business, operations, financial condition,
including financial statements, business plans and biographical information
regarding the Client's directors and officers (collectively referred to as the
"Information Package") is complete and accurate in all material respects and
does not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made
not misleading.
2. COVENANTS AND AGREEMENTS.
Client covenants and agrees to comply with the following covenants:
(1) CLIENT CERTIFICATION. Client acknowledges that it is
responsible for the accuracy and completeness of the Information Package and
for all other information furnished to CRG and for the accuracy and
completeness of the contents of all materials prepared by CRG for and on behalf
of Client. The Client hereby designates the individuals listed on Exhibit B
attached hereto and incorporated herein by reference as the duly authorized
representatives of Client for purposes of certifying to CRG the accuracy of all
documents, advertisements or other materials prepared by CRG for and on behalf
of Client. The Client agrees to promptly advise CRG in writing of any
condition, event, circumstance or act that would constitute a material adverse
change in the business, properties, financial condition or business prospects
of the Client or which would make any of the information contained in the
Information Package or in any report, advertorial or other document prepared by
CRG for and on behalf of Client misleading in any material respect. Client
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hereby agrees that CRG and its directors, officers, agents and employees may
rely on the Information Package and on all other information furnished by
Client, and on each and every certification provided by an authorized
representative of Client, until CRG is advised in writing by an authorized
representative of Client that the information previously furnished to CRG is
inaccurate or incomplete in any material respect. Client acknowledges that CRG
shall have no obligation to provide services hereunder until it has received a
written certificate from an authorized representative of Client as follows: CRG
shall prepare proofs and/or tapes of the agreed upon materials and information,
as set for dissemination, for the Client's review and approval and Client shall
sign and return such materials marking all corrections and changes that the
Client believes appropriate. Client acknowledges that CRG will make oral
representations based on the information furnished hereunder and the Client
authorizes such representations.
(2) BOOKS AND RECORDS. Client shall maintain true and complete
books, records and accounts in which true and correct entries shall be made of
its transactions in accordance with generally accepted accounting principles
consistently applied ("GAAP").
(3) FINANCIAL AND OTHER INFORMATION. Client agrees to furnish
to CRG the following information:
(i) ANNUAL FINANCIAL STATEMENTS. As soon as practicable,
and in any event within 90 days after the close of the Client's fiscal year,
annual financial statements including a balance sheet, an income statement, a
statement of cash flows, and a statement of stockholder's equity, and all notes
thereto prepared in accordance with GAAP and audited by an independent
certified public accountant.
(ii) QUARTERLY FINANCIAL STATEMENTS. As soon as
practicable, and in any event within 45 days after the end of each fiscal
quarter, quarterly financial statements, including a balance sheet, a quarterly
and year-to-date income statement, a statement of cash flows, and a statement
of stockholder's equity, prepared by Client in accordance with GAAP and
certified by the chief financial officer and chief executive officer of Client
as fairly presenting, subject to normal year-end audit adjustments, the
Client's financial position as of and for the periods indicated.
(4) CRG RELIANCE ON CLIENTS'S FULL DISCLOSURE. Client will
provide, or cause to be provided, to CRG all financial and other information
requested by CRG for the purpose of rendering its services pursuant to this
Agreement. Client recognizes and confirms that CRG will use such information in
performing the services contemplated by this Agreement without independently
verifying such information and that CRG does not assume any responsibility for
the accuracy or completeness of such information. The persons executing this
Agreement on behalf of Client certify that there is no fact known to them which
materially adversely affects or may (so far as the Client's senior management
can now reasonably foresee) materially adversely affect the business,
properties, condition (financial or other) or operations (present or
prospective) of the Client which has not been set forth in written form
delivered by Client to CRG. The persons executing this
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<PAGE> 4
Agreement on behalf of Client agree to keep CRG promptly informed of any facts
hereafter know to Client which materially adversely affects or may (so far as
the Client's senior management can now reasonably foresee) materially adversely
affect the business, properties, condition (financial or other) or operations
(present or prospective) of Client.
(5) LEGAL REPRESENTATION. Client acknowledges and agrees that
it has been and will continue to be, represented by legal counsel experienced
in corporate and securities laws and Client acknowledges that it has been
advised as to the obligations imposed on it pursuant to such laws and
understands that it will have the obligation and responsibility to see that all
such laws are complied with at all times during the Term of this Agreement.
3. COMPENSATION. In consideration of the Advertising and Promotional
Services to be performed by CRG hereunder, Client hereby agrees to compensate
CRG in the manner and in the amount specified in Exhibit C which is attached
hereto and incorporated herein by reference thereto. In addition to the
compensation to be paid to CRG as provided in Exhibit C, Client shall reimburse
CRG promptly after a written request therefor accompanied by appropriate
documentation, for all reasonable out-of-pocket expenses (including reasonable
fees and disbursements of CRG's counsel, if any) incurred in connection with
providing services hereunder or to the extent provided in Exhibit C.
4. INDEMNITY. Client acknowledges that it is responsible for the
accuracy of the Information Package and all other information provided to CRG
and for the contents of all materials, advertorials and other information
prepared by CRG for an on behalf of Client as provided herein and Client agrees
to indemnify CRG in accordance with the Indemnification Agreement set forth in
Exhibit D, which is attached hereto and incorporated herein by reference.
5. RELATIONSHIP OF THE PARTIES. This Agreement provides for the
providing of marketing, promotional and advertising services by CRG to Client
and the provisions herein for compliance with financial covenants, delivery of
financial statements, and similar provisions are intended solely for the
benefit of CRG to provide it with information on which it may rely in providing
services hereunder and nothing contained in this Agreement shall be construed
as permitting or obligating CRG to act as a financial or business advisor or
consultant to Client, as permitting or obligating CRG to participate in the
management of client's business, as creating or imposing any fiduciary
obligation on the part of CRG with respect to the provisions of services
hereunder and CRG shall have no such duty or obligation to client, as providing
or counseling Client as to the compliance by Client with any federal or state
securities or other laws effecting the services to be provided hereunder, or as
creating any joint venture, agency, or other relationship between the parties
other than as explicitly and specifically stated in this Agreement. The Client
acknowledges that it has had the opportunity to obtain the advice of
experienced counsel of its own choosing in connection with the negotiation and
execution of this Agreement, the provision of services hereunder and with
respect to all matters contained herein, including, without limitation, the
provisions of Section 4 hereof.
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<PAGE> 5
6. SURVIVAL OF CERTAIN PROVISIONS. The Client's obligations to pay
the fees and expenses of CRG pursuant to Section 3 of this Agreement and to
comply with the indemnification provisions pursuant to Section 4 shall remain
operative and in full force and effect regardless of any termination of this
Agreement and shall be binding upon, and shall inure to the benefit of, CRG
and, in the case of the indemnity agreement, the persons, agents, employees,
officers, directors and controlling persons referred to in the Indemnification
Agreement, and their respective successors and assigns and heirs, and no other
person shall acquire or have any right under or by virtue of this Agreement.
All amounts paid or required to be paid under Sections 3 and 4 of this
Agreement shall be fully earned on the Effective Date of this Agreement
notwithstanding prior termination of this Agreement.
7. TERMINATION. CRG shall have the right in its sole and absolute
discretion to terminate its obligations hereunder and to immediately cease
providing Advertising and Promotional Services pursuant to this Agreement if
CRG, in the exercise of its reasonable judgment, believes that the
representations and warranties made by Client hereunder are inaccurate in any
material respect or if Client breaches any of its covenants and agreements
contained herein or if any federal or state governmental agency or
instrumentality institutes an investigation or suit against Client or
pertaining to the services hereunder.
8. NON-SOLICITATION COVENANT. Client agrees that it will not directly
or indirectly during the term of this Agreement or for three years following
the termination or expiration of this Agreement, either voluntarily or
involuntarily, for any reason whatsoever, recruit or hire or attempt to recruit
or hire any employee of CRG or of any of its affiliates or subsidiaries, or
otherwise induce any such employees to leave the employment of CRG or of any of
its affiliates or subsidiaries or to become an employee of or otherwise be
associated with Client or any affiliate or subsidiary of Client. Client
acknowledges that CRG and its affiliates and subsidiaries have invested a
significant amount of time, energy and expertise in the training of their
employees to be able to provide Advertising and Promotional Services and Client
therefore agrees that this covenant is reasonable and agrees that the breach of
such covenant is very likely to result in irreparable injury to CRG, which is
unlikely to be adequately compensated by damages. Accordingly, in the event of
a breach or threatened breach by Client of this Section 8, CRG shall be
entitled to an injunction restraining Client and any affiliate, subsidiary or
director or officer thereof from recruiting, or hiring or attempting to recruit
or hire any employee of CRG or of any affiliate or subsidiary of CRG. Nothing
herein shall be construed as prohibiting CRG from pursuing any other remedies
available to CRG for such breach or threatened breach, including recovery of
damages from Client. The undertakings herein shall survive the termination or
cancellation of the Agreement for three years.
9. MISCELLANEOUS.
A. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Florida applicable to contracts executed and performed in the
Circuit Court, Orange County, in the State of Florida (without regard to the
principles of conflicts of laws).
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B. ENTIRE AGREEMENT. This Agreement and the Exhibits hereto
embody the entire agreement of the parties with respect to its subject matter.
There are no restrictions, promises, representations, warranties, covenants, or
undertakings other than those expressly set forth or referred to herein. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to its subject matter.
C. AMENDMENTS TO BE IN WRITING. This Agreement may be amended
only in a writing signed by all of the parties.
D. NO WAIVERS BY COURSE OF DEALING; LIMITED EFFECT OF WAIVERS. No
waiver shall be effective against any party unless it is in a writing signed by
that party. No course of dealing and no delay on the part of CRG in exercising
its rights shall operate as a waiver of that right or otherwise prejudice CRG.
CRG's failure to insist upon the strict performance of any provision of this
Agreement, or to exercise any right or remedy available to CRG, shall not
constitute a waiver by CRG of such provision. No specific waiver by CRG of any
specific breach of any provision of this Agreement shall operate as a general
waiver of the provision or of any other breach of the provision. Client shall
have no right to cure any breach except as specifically provided herein.
E. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
F. CUMULATION OF RIGHTS AND REMEDIES. No right or remedy of CRG
under this Agreement is intended to preclude any other right or remedy and
every right and remedy shall coexist with every other right and remedy now or
hereafter existing, whether by contract, at law, or in equity.
G. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the parties and their successors and assigns.
Client shall not have any right to assign any of its rights or delegate any of
its obligations or responsibilities under this Agreement except as expressly
stated herein.
H. PAYMENT OF FEES AND EXPENSES ON ENFORCING AGREEMENT. In the
event of any dispute between the parties arising out of or related to this
Agreement or the interpretation thereof, at the trial level or appellate level,
the prevailing party shall be entitled to recover from the non-prevailing party
all costs and expenses, including reasonable fees and disbursements of counsel
which may be incurred in connection with such proceeding, without limitation,
including any costs and expenses of experts, witnesses, depositions and other
costs.
I. NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing, and shall be delivered to
the parties at the addresses set forth below (or to such other addresses as the
parties may specify by due notice to the others). Notices
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or other communications shall be effective when received at the recipient's
location (or when delivered to that location if receipt is refused). Notices or
other communications given by facsimile transmission shall be presumed received
at the time indicated in the recipient's automatic acknowledgment. Notices or
other communications given by Federal Express or other recognized overnight
courier service shall be presumed received on the following business day.
Notices or other communications given by certified mail, return receipt
requested, postage prepaid, shall be presumed received 3 business days after
the date of mailing.
Client: Aqua Clara Bottling & Distribution
1315 Cleveland Street
Clearwater, FL 33755
Attn: E. J. Mersis, Chairman, CEO
Fax: 813-446-3999
Company: Corporate Relations Group, Inc.
1947 Lee Road
Winter Park, FL 32789
Attn: Kevin Price, President
Fax: (407) 628-0807
J. HEADINGS. The headings in this Agreement are intended solely
for convenience of reference. They shall be given no effect in the construction
or interpretation of this Agreement.
K. SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not impair the validity or enforceability of
any other provision.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Attest: Client: Aqua Clara Bottling & Distribution
By: By: /s/ John C. Plunkett
------------------------------ ----------------------------------
Secretary John C. Plunkett, President
[Corporate Seal] /s/ E.J. Mersis
----------------------------------
E.J. Mersis, Chairman, CEO
Attest: Company: Corporate Relations Group
By: By: /s/ Kevin Price
------------------------------ ----------------------------------
Secretary Kevin Price, President
[Corporate Seal]
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EXHIBIT A
ADVERTISING AND PROMOTIONAL SERVICES
The services to be provided are as follows:
A. GROWTH INDUSTRY REPORT - A minimum of four-page, two-color
follow-up mail pieces designed for additional informational
purposes, that is mailed to respondents, in addition to those
brokers requesting said information. A total of 10,000 will be
printed to satisfy CRG's responsibility to the Client. Any
additional Growth Industry Reports needed or requested by the
Client will be at the Client's expense.
B. THE LEAD DISTRIBUTION PROGRAM - CRG will contact retail brokers,
market makers and/or money managers and will arrange a meeting
between representative of the Client and interested retail brokers,
market makers, and money managers, which will include a show and
tell from the top management of the "Client" in disseminating
information to these interested parties. The aforementioned may be
accomplished by a Road Show.
This process will begin immediately upon CRG receiving the payment
as stipulated in Exhibit "C".
C. OTHER ADVERTISING AND PROMOTIONAL SERVICES.
1. Public relations exposure to newsletter writers, trade and
financial publications. The Client shall be totally responsible
for all travel expenses for the purpose of due diligence of the
Client by financial newsletter writers and/or brokers. The
Client will have total pre-approval rights on these trips. Road
Show(s) - Locations to be determined. Client will cover all
expenses of Road Show(s). Client will have prior approval of
those expenses. CRG will be responsible for CRG's own travel
expenses to support the show.
2. Preparation of a Broker Bullet Sheet to be sent to every broker
who indicates an interest in the Client.
3. Lead Tracking Summary maintained for all response leads
generated and provided to the "Client" monthly.
4. Press releases - Up to four (4) press releases - the first Press
Release shall announce the hiring of CRG by the "Client"; with
three Press Releases remaining which may be extended at the
option of the "Client", at the Client's expense, at a rate of
$1,000.00 per Press Release. Should the
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Client chose to publish their own Press Release, CRG shall be
mentioned as the Client's Public Relations firm.
5. CRG will distribute at its cost the due diligence packages to
all inquiring brokers only. The Client shall supply the
necessary materials for this package, if an Arrow Marketing
Contract is not entered into. In the event an Arrow Marketing
Contract is not entered into, the Client will provide CRG with
300 packages or in the alternative provide a master to CRG and
CRG will then charge the Client for the cost of reproduction.
6. CRG targets a minimum of 3% return of qualified investor leads
specifically generated for the Client.
D. PERFORMANCE BY CLIENT.
1. Client is required to do a Standard & Poor's listing at the
Client's expense.
2. Client is required to provide CRG with all S& P listings on
their attorney's stationary.
3. Client will provide its shareholder's with audited financials on
a yearly basis and unaudited financials on a quarterly basis.
4. Client agrees to send CRG, DTC sheets on a weekly basis.
5. Client agrees to provide CRG with a complete shareholders list
on a semi-annual basis.
6. Client will use its reasonable best efforts to register or
qualify any shares of common stock of Client under the
securities or blue sky laws of such jurisdictions as any broker
or market maker may reasonably request and do any and all other
acts and things which may be reasonably necessary or advisable
to enable such broker or market maker to consummate the
disposition in such jurisdictions of shares of common stock of
Client, provided that the Client will not be required to (1)
qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section
and (2) subject itself to taxation in any such jurisdiction or
(3) consent to general service of process in any such
jurisdiction.
7. Client will deliver 15 cases of Aqua Clara water monthly to CRG
at no cost to CRG.
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The parties hereto by signing this Exhibit in the space provided below
signify their agreement regarding the service to be provided by CRG under the
Agreement.
Client: Aqua Clara Bottling & Distribution
By: /s/ John C. Plunkett
----------------------------------------
John C. Plunkett, President
By: /s/ E.J. Mersis
----------------------------------------
E.J. Mersis, Chairman, CEO
Company: Corporate Relations Group, Inc.
By: /s/ Kevin Price
----------------------------------------
Kevin Price, President
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EXHIBIT B
Client hereby designates the following person or persons to act on its behalf
for the purposes set forth in Section 2.B.(1) of the Agreement.
- ------------------------------------ --------------------------------------
DIRECTOR (PLEASE SIGN) DIRECTOR (PLEASE PRINT)
- ------------------------------------ --------------------------------------
PRESIDENT (PLEASE SIGN) PRESIDENT (PLEASE PRINT)
- ------------------------------------ --------------------------------------
VICE PRESIDENT (PLEASE SIGN) VICE PRESIDENT (PLEASE PRINT)
<PAGE> 13
EXHIBIT C
COMPENSATION
1. Client agrees to issue CRG 300,000 shares of restricted Common Stock
in Client (the "Shares"), which Shares shall be duly and validly issued, fully
paid and nonassessable and shall not be issued in violation of any preemptive
right of any stockholders of client. The Shares shall be issued in compliance
with the exemption from the registration requirements of the Securities Act of
1933 (the "Act") provided by Section 4(2) of the Act and/or pursuant to Rules
505 or 506 of the General Rules and Regulation under the Securities Act of
1933.
2. If compensation is paid in shares, concurrently with the issuance of
the Shares, Client will execute and deliver the Registration Rights Agreement
attached hereto as Exhibit F under which the Client agrees to register the
Shares for sale in compliance with the Act as therein provided and to comply
with all conditions necessary or required to enable the Shares to be sold
pursuant to Rule 144 of the General Rules and Regulation under the Securities
Act of 1933.
3. Should the Company affect payment of this contract by the tender of
free-trading Client shares belonging to individuals, the Client assures and
guarantees CRG that the Client will not reimburse the individuals for shares
given CRG.
4. The Shares, if any, to be issued to CRG shall be approved for issuance
in accordance with the rules and regulations of any stock exchange on which the
Shares are listed for trading or by the NASDAQ if the shares are listed for
trading thereon and shall be issued in compliance with all appropriate federal
or state governmental rules and regulations.
5. Client acknowledges that the consideration to be paid to CRG shall be
fully earned on the date that CRG commences providing services under the
Agreement regardless of whether the Agreement is terminated as provided in the
Agreement prior to completion of all services.
6. Client agrees to pay or reimburse CRG for all expenses arising out of
or related to the provision of services by CRG under the Agreement to the
extent provided in the Agreement and/or in Exhibit A thereto.
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7. "Options" mean the Options issuable, in certain circumstances, pursuant to
the Agreement which are exercisable for Common Stock.
Client shall issue options to CRG as outlined below.
Amount Price Duration
------ ----- --------
0 shares at $______ One (1) year from the date of this Agreement
-----
0 shares at $______ Two (2) years from the date of this Agreement
-----
0 shares at $______ Three (3) years from the date of this Agreement
-----
0 shares at $______ Four (4) years from the date of this Agreement
-----
0 shares at $______ Five (5) years from the date of this Agreement.
-----
The parties hereto by signing this Exhibit in the space provided below
signify their agreement to the compensation provisions contained herein.
Client: Aqua Clara Bottling & Distribution
By: /s/ John C. Plunkett
----------------------------------------
John C. Plunkett, President
By: /s/ E.J. Mersis
----------------------------------------
E.J. Mersis, Chairman, CEO
Company: Corporate Relations Group, Inc.
By: /s/ Kevin Price
----------------------------------------
Kevin Price, President
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EXHIBIT D
INDEMNIFICATION
This Indemnification Agreement constitutes part of the Corporate
Relations Agreement (the Agreement) dated the 24th day of May, 1999, between
Client (as defined in the Agreement) and CRG.
Client acknowledges and agrees that if, in connection with the services
or matters that are the subject of or arise out of such Agreement, CRG becomes
involved (whether or not as a named party) in any action, claim or legal
proceeding (including any governmental inquiry or investigation), Client agrees
to reimburse CRG for its reasonable legal fees, disbursements of counsel and
other expenses (including the cost of investigation and preparation) as they
are incurred by CRG. Client also agrees to indemnify and hold CRG harmless
against any losses, claims, damages or liabilities, joint or several, as
incurred, to which CRG may become subject in connection with the services or
matters which are the subject of or arise out of the Agreement; provided,
however, that Client shall not be liable under the foregoing indemnity in
respect of any loss, claim, damage or liability to the extent that a court
having jurisdiction shall have determined by a final judgment that such loss,
claim, damage or liability is a consequence of intentional fraudulent acts
committed by CRG without the knowledge and/or consent of Client. In the event
that the foregoing indemnity is unavailable by operation of law, then Client
shall contribute to amounts paid or payable by CRG in respect of such losses,
claims, damages and liabilities in the proportion that Client's interest bears
to CRG's interest in the matters contemplated by the Agreement. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law, or otherwise, then Client shall contribute to such amount
paid or payable by CRG in such proportion as is appropriate to reflect not only
such relative interests but also the relative fault of Client on the one hand
and CRG on the other hand in connection with the matters as to which such
losses, claims, damages or liabilities relate and other equitable
considerations.
Promptly after CRG's receipt of notice of the commencement of any action
or of any claim, CRG will, if a claim in respect thereof is to be made against
Client under this Indemnity Agreement, notify Client of the commencement
thereof. In case any such action or claim is brought against CRG, Client will
be entitled to participate therein and, to the extent that Client may wish, to
assume the defense thereof, with counsel satisfactory to CRG. After notice from
Client to CRG of Client's election to so assume the defense thereof, Client
will not be liable to CRG for indemnification as provided in the preceding
paragraph for any legal fees, disbursements of counsel or other expenses
subsequently incurred by CRG in connection with the defense thereof other than
reasonable costs of investigation; provided that CRG shall have the right to
employ separate counsel if, in the reasonable judgment of CRG's counsel, it is
advisable for CRG to be represented by separate counsel or if in the reasonable
judgment of CRG's counsel, Client is not vigorously and actively
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defending against any such claim or claims, and in either such event the
reasonable legal fees and disbursements of such separate counsel shall be paid
by Client.
The foregoing agreements shall apply to any modification of the
Agreement, shall remain in full force and effect following the completion or
termination of CRG's engagement under the Agreement and shall be in addition to
any rights that CRG may have at common law or otherwise. The agreements in this
Indemnification Agreement shall extend to and inure to the benefit of each
person, if any, who may be deemed to control CRG, be controlled by CRG or be
under common control with CRG and to CRG's, and to each such other person's
respective affiliates, directors, officers, employees and agents. This
Indemnification Agreement shall be binding on any successor of Client.
Client represents that the Indemnification Agreement contained herein is
the legal, valid, binding and enforceable obligation of Client, enforceable
against Client according to its terms.
This Indemnification Agreement shall be governed by, and construed in
accordance with, the laws of the State of Florida without regard to principles
of conflicts of law, and the forum for resolution of legal and interpretative
issues shall be the Federal District courts in the State of Florida.
The parties hereto by signing this Exhibit in the space provided below
signify their agreement to the indemnification provisions contained herein.
Client: Aqua Clara Bottling & Distribution
By: /s/ John C. Plunkett
-----------------------------------
John C. Plunkett, President
By: /s/ E.J. Mersis
-----------------------------------
E.J. Mersis, Chairman, CEO
Company: Corporate Relations Group, Inc.
By: /s/ Kevin Price
-----------------------------------
Kevin Price, President
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EXHIBIT E
ABATEMENT CLAUSE
The parties to this contract understand and agree that Client is under a
federal mandate to become fully reporting and approved for listing by the
Securities and Exchange commission by a time certain or be delisted from the
Electronic Bulletin Board.
The Client and CRG understand and agree that should the Company be
delisted from the Bulletin Board such an event would unduly interfere with
CRG's ability to fulfill its contractual obligations.
WHEREFORE, the Client and CRG hereby agree that should the Client be
delisted from the Electronic Bulletin Board for any reason, CRG's obligations
under this contract shall be abated until such time as the Client is relisted
and resume trading on the Electronic Bulletin Board.
Should the Client fail to gain relisting within one hundred twenty (120)
days of being delisted, CRG may treat that even as a material breach of this
contract. In such event, CRG may declare the contract void through breach and
retain whatever payments have been made as liquidated damages.
Client: Aqua Clara Bottling & Distribution
By: /s/ John C. Plunkett
-----------------------------------
John C. Plunkett, President
By: /s/ E.J. Mersis
-----------------------------------
E.J. Mersis, Chairman, CEO
Company: Corporate Relations Group, Inc.
By: /s/ Kevin Price
-----------------------------------
Kevin Price, President
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EXHIBIT F
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Registration Agreement") is
made and entered into as of May 24th, 1999 by and between Corporate Relations
Group, Inc., a Florida corporation (CRG), and Aqua Clara Bottling &
Distribution, a Florida corporation (the Client).
WHEREAS, CRG concurrently with the execution of this Registration
Agreement is acquiring shares of the Client's common stock, par value $_____
per share ("Common Stock") and/or options to purchase shares of Common Stock;
and
WHEREAS, as a condition to such acquisition, the parties are willing to
enter into the agreements contained herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
and intending to be legally bound hereby, the parties hereto agree as follows:
Section 1. Definitions
"Affiliate" means, with respect to any Person, any other Person
which, directly or indirectly, controls, is controlled by or is under common
control with such Person.
"Agreement" means the Public Relations and Advertising Agreement
dated as of the date of this Registration Agreement between CRG and Client.
"Client" is defined in the Preamble to this Registration Agreement.
"Common Stock" is defined in the Recitals to this Registration
Agreement.
"CRG" is defined in the Preamble to this Registration Agreement.
"Holder" is defined in Section 2.1 hereof.
"Lock-Up Period" is defined in Section 2.1 hereof.
"Options" mean the Options issuable, in certain circumstances,
pursuant to the Agreement, which are exercisable for Common Stock.
"Other Holders" is defined in Section 4.3 hereof.
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"Permitted Transfer" is defined in Section 2.2 hereof.
"Person" means an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and government or any
department or agency thereof.
"Piggyback Notice" is defined in Section 4.1 hereof.
"Piggyback Registration" is defined in Section 4.1 hereof.
"Registrable Securities" means (i) the Common Stock issued to CRG
pursuant to the Agreement, (ii) any Common Stock issued to CRG pursuant to the
exercise of Options, and (iii) any securities issued or issuable with respect
to the Common Stock referred to in clauses (i) or (ii) by way of replacement,
share dividend, share split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
"Registration Agreement" is defined in the Preamble to this
Registration Agreement.
"Registration Expenses" is defined in Section 6.1 hereof.
"Restricted Securities" is defined in Section 2.1 hereof.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal law then in force.
"Transfer" is defined in Section 2.1 hereof.
Section 2. Restrictions on Transfer
2.1 Lock-Up Period. Without the express prior written consent of
the Client, CRG agrees that, except as set forth in Section 2.2 below, it will
not, directly or indirectly, offer, sell, contract to sell or otherwise dispose
of (or announce any offer, sale, contract of sale or other disposition of)
("Transfer") any Registrable Securities or Options (collectively, "Restricted
Securities") prior to the first anniversary following the date of this
Registration Agreement.
2.2 Permitted Transfers. The restrictions contained in this Section
2 will not apply with respect to any of the following transactions (each, a
"Permitted Transfer"):
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2.2.1 a natural person may Transfer Restricted Securities to
his or her spouse, siblings, parents or any natural or adopted children or
other descendants or to any personal trust in which such family members or such
transferee retains the entire beneficial interest;
2.2.2 CRG may (A) Transfer Restricted Securities to one or
more other entities that are wholly owned and controlled, legally and
beneficially, by CRG or an Affiliate, or (B) Transfer Restricted Securities by
distributing such Restricted Securities in a liquidation, winding up or
otherwise without consideration to the equity owners of such corporation,
partnership or business entity or to any other corporation, partnership or
business entity that is wholly owned by such equity owners; or (C) Transfer
Restricted Securities to a director, officer or key employee of CRG or an
Affiliate;
2.2.3 a transferee acquiring Restricted Securities in a
Permitted Transfer may Transfer Restricted Securities on his or her death or
mental incapacity to such Person's estate, executor, administrator or personal
representative or to such Person's beneficiaries pursuant to a devise or
bequest or by the laws of descent and distribution; or
2.2.4 CRG or any transferee acquiring Restricted Securities
in a Permitted Transfer may Transfer Restricted Securities pursuant to an
effective Registration Statement as provided herein or pursuant to an exemption
from the registration requirements of the Securities Act.
If any Person Transfers Restricted Securities as described in this Section 2.2,
such Restricted Securities shall remain subject to this Registration Agreement
and, as a condition of the validity of such Transfer, the transferee shall be
required to execute and deliver a counterpart of this Registration Agreement.
Thereafter, such transferee shall be deemed to be a Holder for purposes of this
Registration Agreement.
2.3 Rights of Subsequent Holder. Subject to the foregoing
restrictions, the Client and CRG hereby agree that any subsequent holder of
Registrable Securities shall be entitled to all benefits hereunder as a holder
of such securities.
Section 3. Demands for Registration.
3.1 Demand Period. From the date hereof, until the date which is
four years from the date hereof (the "Demand Period"), subject to the terms and
conditions set forth herein, CRG and the Permitted Transferees will have in the
aggregate three opportunities, in addition to other rights enumerated in this
Registration Agreement, to request registration under the Securities Act of all
or part of its Registrable Securities (a "Demand Registration"). The Holders of
50% or more of the Registrable Securities shall have the right to exercise the
registration rights under this Section 3.
3.2 Demand Procedure.
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3.2.1 Subject to Sections 3.2.2 and 3.2.4 below, during the
Demand Period any Holder or combination of Holders (the "Demanding
Shareholders") owning 50% or more of the Registrable Securities may deliver to
the Client a written request (a "Demand Registration Request") that the Client
register any or all of such Demanding Shareholders' Registrable Shares.
3.2.2 Holders, in the aggregate, may only make one Demand
Registration Request in each six-month period during the Demand Period (the
"Interim Demand Periods"). The Client shall only be required to file one
registration statement (as distinguished from supplements or pre-effective or
post-effective amendments thereto) in response to each Demand Registration
Request.
3.2.3 A Demand Registration Request from Demanding
Shareholders shall (i) set forth the number of Registrable Securities intended
to be sold pursuant to the Demand Registration Request (ii) disclose whether
all or any portion of a distribution pursuant to such registration will be
sought by means of an underwriting, and (iii) identify any managing underwriter
or managing underwriters proposed for the underwritten portion, if any, of such
registration.
3.2.4 If during any Interim Demand Period, the Client
receives a Demand Registration Request from Demanding Shareholders for the
registration of Registrable Securities having an aggregate market value of
$100,000 or greater, as determined according to the closing price of the Common
Stock on the NASDAQ National Market, on the Bulletin Board or in the Pink
Sheets on the date of such Demand Registration Request, then the Client shall,
subject to the limitations in Sections 3.2.5 and 3.2.6 hereof, (i) use its
reasonable best efforts to prepare and file within 30 days of receipt of the
Demand registration request with the SEC a registration statement under the
Securities Act with respect to all the Registrable Securities that the
Demanding Shareholders requested to be registered in the Demand Registration
Request, (ii) use its reasonable best efforts to cause such registration
statement to become effective within 75 days of receipt of the Demand
Registration Request, and (iii) if such registration can be accomplished by
means of a registration statement on Form S-3, keep such registration statement
effective until such time as the Demanding Shareholders shall have sold or
otherwise disposed of all of their Registrable Securities included in the
registration. If such registration cannot be accomplished by means of a
registration statement on Form S-3, the Client shall use its reasonable best
efforts to keep such registration statement effective for at least 180 days.
3.2.5 It is anticipated that the registration contemplated
under this Section 3 will be accomplished by means of the filing of a Form S-3,
and that registration on such form will allow for different means of
distribution, including sales by means of an underwriting as well as sales into
the open market. If the Demanding Shareholders desire to distribute all or part
of the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Client in writing in their initial
Demand Registration Request as described in Section 3.2.3 above. A
determination of whether all or part of the distribution will be by means of an
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underwriting shall be made by Demanding Shareholders holding a majority of the
Registrable Securities to be included in the registration. If all or part of
the distribution is to be by means of an underwriting, all subsequent decisions
concerning the underwriting which are to be made by the Demanding Shareholders
pursuant to the terms of this Registration Agreement, which shall include the
selection of the underwriter or underwriters to be engaged and the
representative, if any, of the underwriters so engaged, shall be made by the
Demanding Shareholders who hold a majority of the Registrable Securities to be
included in the underwriting, subject to approval by the Board of Directors of
the Client.
3.2.6 Upon the receipt by the Client of a Demand Registration
Request in accordance with Section 3.2.4 hereof, the Client shall, within ten
days following receipt of such Demand Registration Request, give written notice
of such request to all Holders. The Client shall include in such notice
information concerning whether all, part or none of the distribution is
expected to be made by means of an underwriting, and, if more than one means of
distribution is contemplated, may require Holders to notify the Client of the
means of distribution of their Registrable Securities to be included in the
registration. If any Holder who is not a Demanding Shareholder desires to sell
any Registrable Securities owned by such Holder, such Holder may elect to have
all or any portion of its Registrable Securities included in the registration
statement by notifying the Client in writing (a "Supplemental Demand
Registration Request") within 20 days of receiving notice of the Demand
Registration Request from the Client. The right of any Holder to include all or
any portion of its Registrable Securities in an underwriting shall be
conditioned upon the Client's having received a timely written request for such
inclusion by way of a Demand Registration Request or Supplemental Demand
Registration Request (which right shall be further conditioned to the extent
provided in this Registration Agreement). All Holders proposing to distribute
their Registrable Securities through an underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting.
3.2.7 Notwithstanding any other provision of this Section 3,
if an underwriter advises the Client in writing that marketing factors require
a limitation on the number of shares to be underwritten, then the number of
shares of Registrable Securities that may be included in the underwriting shall
be allocated among the Holders in proportion (as nearly as practicable) to the
respective amounts of Registrable Securities each Holder owns (or in such other
proportion as they shall mutually agree). Registrable Securities excluded or
withdrawn from the underwriting in accordance with this Section 3.2.7 shall be
withdrawn from the registration.
3.3 Priority on Request Registration. The Client will not include
in any Demand Registration any securities which are not Registrable Securities
without the prior written consent of the Holders of a majority of the shares
of Registrable Securities included in such registration. If a Demand
Registration is an underwritten offering and the managing underwriters advise
the Client in writing that in their opinion the number of Registrable
Securities and, if permitted hereunder, other securities requested to be
included in such offering exceeds the number of securities that can be sold in
an orderly manner in such offering within a price range acceptable to the
Holders of a majority of the shares of Registrable Securities initially
requesting
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registration, the Client will include in such registration prior to the
inclusion of any securities which are not Registrable Securities the number of
shares of Registrable Securities requested to be included that in the opinion
of such underwriters can be sold in an orderly manner within such acceptable
price range, pro rata among the respective Holders thereof on the basis of the
number of shares of Registrable Securities owned by each such Holder.
Section 4. Piggyback Registrations
4.1 Right to Piggyback. If the Client proposes to undertake an
offering of shares of Common Stock for its account or for the account of other
stockholders and the registration form to be used for such offering may be used
for the registration of Registrable Securities (a "Piggyback Registration"),
each such time the Client will give prompt written notice to all Holders of
Registrable Securities of its intention to effect such a registration (each, a
"Piggyback Notice") and, subject to Sections 4.3 and 4.4 hereof, the Client
will use its best efforts to cause to be included in such registration all
Registrable Securities with respect to which the Client has received written
requests for inclusion therein within 20 days after the date of sending the
Piggyback Notice.
4.2 Priority on Primary Registrations. If a Piggyback Registration
is an underwritten primary registration on behalf of the Client, and the
managing underwriters advise the Client in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number that can be sold in an orderly manner within a price range acceptable to
the Client, the Client will include in such registration (a) first, the
securities the Client proposes to sell and (b) second, the Registrable
Securities requested to be included in such registration and any other
securities requested to be included in such registration that are held by
Persons other than the Holders of Registrable Securities pursuant to
registration rights, pro rata among the holders of Registrable Securities and
the holders of such other securities requesting such registration on the basis
of the number of shares of such securities owned by each such holder.
4.3 Priority on Secondary. If a Piggyback Registration is an
underwritten secondary registration on behalf of holders of the Client's
securities other than the Holders of Registrable Securities (the "Other
Holders"), and the managing underwriters advise the Client in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number that can be sold in an orderly manner in such
offering within a price range acceptable to the Other Holders requesting such
registration, the Client will include in such registration (a) first, the
securities requested to be included therein by the Other Holders requesting
such registration and (b) second, the Registrable Securities requested to be
included in such registration hereunder, pro rata among the Holders of
Registrable Securities requesting such registration on the basis of the number
of shares of such securities owned by each such Holder.
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4.4 Selection of Underwriters. In the case of an underwritten
Piggyback Registration, the Client will have the right to select the investment
banker(s) and manager(s) to administer the offering.
Section 5. Registration Procedures Section. Whenever the Holders of
Registrable Securities have requested that any Registrable Securities be sold
pursuant to this Registration Agreement, the Client will use its reasonable
best efforts to effect the registration and the sale of such Registrable
Securities in accordance with the intended method of disposition thereof, and
pursuant thereto the Client will as expeditiously as possible:
5.1.1 Registration Statement. Prepare and file with the SEC a
registration statement with respect to such Registrable Securities and use its
reasonable best efforts to cause such registration statement to become
effective.
5.1.2 Amendments and Supplements. Promptly prepare and file
with the SEC such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for the period required by the intended method
of disposition and the terms of this Registration Agreement and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement.
5.1.3 Provision of Copies. Promptly furnish to each seller of
Registrable Securities the number of copies of such registration statement,
each amendment and supplement thereto, the prospectus included in such
registration statement (including each preliminary prospectus) and such other
documents as such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller.
5.1.4 Blue Sky Laws. Use its reasonable best efforts to
register or qualify such Registrable Securities under the securities or blue
sky laws of such jurisdictions as any seller reasonably requests and do any and
all other acts and things which may be reasonably necessary or advisable to
enable such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller, provided, that the Client will not
be required to (a) qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this Section 5.1.4, (b)
subject itself to taxation in any such jurisdiction or (c) consent to general
service of process in any such jurisdiction.
5.1.5 Anti-fraud Rules. Promptly notify each seller of such
Registrable Securities when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event as a result
of which the prospectus included in such registration statement contains an
untrue statement of a material fact or omits any material fact necessary to
make the statements therein not misleading, and in such event, at the request
of any such seller, the Client will promptly prepare a supplement or amendment
to such prospectus so that, as
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thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not
misleading, provided, that the Client will not take any action which causes the
prospectus included in such registration statement to contain an untrue
statement of material fact or omit any material fact necessary to make the
statements therein not misleading, except as permitted by Section 5.5.
5.1.6 Securities Exchange Listings. Use its reasonable best
efforts to cause all such Registrable Securities to be listed on each
securities exchange on which securities of the same class issued by the Client
are then listed and use its reasonable best efforts to qualify such Registrable
Securities for trading on each system on which securities of the same class
issued by the Client are then qualified.
5.1.7 Underwriting Agreements. Enter into such customary
agreements (including underwriting agreements in customary form) and take all
such other actions as the holders of a majority of the shares of Registrable
Securities being sold or the underwriters, if any, reasonably request in order
to expedite or facilitate the disposition of such Registrable Securities.
5.1.8 Due Diligence. Make available for inspection by any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
underwriter, all financial and other records, pertinent corporate documents and
properties of the Client, and cause the Client's officers, directors, employees
and independent accountants to supply all information reasonably requested by
any such underwriter, attorney, accountant or agent in connection with such
registration statement.
5.1.9 Earning Statement. Otherwise use its best efforts to
comply with all applicable rules and regulations of the SEC, and make available
to its security holders, as soon as reasonably practicable, an earning
statement covering the period of at least twelve months beginning with the
first day of the Client's first full calendar quarter after the effective date
of the registration statement, which earning statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.
5.1.10 Deemed Underwriters or Controlling Persons. Permit any
Holder of Registrable Securities which Holder, in such Holder's reasonable
judgment, might be deemed to be an underwriter or a controlling person of the
Client, to participate in the preparation of such registration or comparable
statement and to require the insertion therein of material in form and
substance satisfactory to such Holder and to the Client and furnished to the
Client in writing, which in the reasonable judgment of such Holder and its
counsel should be included.
5.1.11 Management Availability. In connection with
underwritten offerings, make available appropriate management personnel for
participation in the preparation
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and drafting of such registration or comparable statement, for due diligence
meetings and for "road show" meetings.
5.1.12 Stop Orders. Promptly notify Holders of the
Registrable Securities of the threat of issuance by the SEC of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceeding for that purpose, and make every reasonable effort to prevent
the entry of any order suspending the effectiveness of the registration
statement. In the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Registrable Securities included in such registration statement for sale in
any jurisdiction, the Client will use its reasonable best efforts promptly to
obtain the withdrawal of such order.
5.1.13 Opinions. At each closing of an underwritten offering,
request opinions of counsel to the Client and updates thereof (which opinions
and updates shall be reasonably satisfactory to the underwriters of the
Registrable Securities being sold) addressed to the underwriters covering the
matters customarily covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by such Holders or their
counsel.
5.1.14 Comfort Letter. Obtain a cold comfort letter and
related bring down letters from the Client's independent public accountants
addressed to the selling Holders of Registrable Securities in customary form
and covering such matters of the type customarily covered by cold comfort
letters as the Holders of a majority of the Registrable Securities being sold
reasonably request.
5.2 Further Information. The Client may require each Holder of
Registrable Securities to furnish to the Client in writing such information
regarding the proposed distribution by such Holder of such Registrable
Securities as the Client may from time to time reasonably request.
5.3 Notice to Suspend Offers and Sales. Each Investor severally
agrees that, upon receipt of any notice from the Client of the happening of any
event of the kind described in Sections 5.1.5 or 5.1.12 hereof, such Investor
will forthwith discontinue disposition of shares of Common Stock pursuant to a
registration hereunder until receipt of the copies of an appropriate supplement
or amendment to the prospectus under Section 5.1.5 or until the withdrawal of
such order under Section 5.1.12.
5.4 Reference to Holders. If any such registration or comparable
statement refers to any Holder by name or otherwise as the holder of any
securities of the Client and if, in the Holder's reasonable judgment, such
Holder is or might be deemed to be a controlling person of the Client, such
Holder shall have the right to require (a) the insertion therein of language in
form and substance satisfactory to such Holder and the Client and presented to
the Client in writing, to the effect that the holding by such Holder of such
securities is not to be construed as a recommendation by such Holder of the
investment quality of the Client's securities covered
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thereby and that such holding does not imply that such Holder will assist in
meeting any future financial requirements of the Client, or (b) in the event
that such reference to such Holder by name or otherwise is not required by the
Securities Act or any similar Federal statute then in force, the deletion of
the reference to such Holder; provided that with respect to this clause (b)
such Holder shall furnish to the Client an opinion of counsel to such effect,
which opinion and counsel shall be reasonably satisfactory to the Client.
5.5 Client's Ability to Postpone. Notwithstanding anything to the
contrary contained herein, the Client shall have the right twice in any twelve
month period to postpone the filing of any registration statement under
Sections 3 or 4 hereof or any amendment or supplement thereto for a reasonable
period of time (all such postponements not exceeding 90 days in the aggregate
in any twelve month period) if the Client furnishes the Holders of Registrable
Securities a certificate signed by the Chairman of the Board of Directors or
the President of the Client stating that, in its good faith judgment, the
Client's Board of Directors (or the executive committee thereof) has determined
that effecting the registration at such time would materially and adversely
affect a material financing, acquisition, disposition of assets or stock,
merger or other comparable transaction, or would require the Client to make
public disclosure of information the public disclosure of which would have a
material adverse effect upon the Client.
Section 6. Registration Expenses Section.
6.1 Expenses Borne by Client. Except as specifically otherwise
provided in Section 6.2 hereof, the Client will be responsible for payment of
all expenses incident to any registration hereunder, including, without
limitation, all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws, printing expenses, messenger and delivery
expenses, road show expenses, advertising expenses and fees and disbursements
of counsel for the Client and all independent certified public accountants and
other Persons retained by the Client in connection with such registration (all
such expenses borne by the Client being herein called the "Registration
Expenses").
6.2 Expenses Borne by Selling Securityholders. The selling
securityholders will be responsible for payment of their own legal fees (if
they retain legal counsel separate from that of the Client), underwriting fees
and brokerage discounts, commissions and other sales expenses incident to any
registration hereunder, with any such expenses which are common to the selling
securityholders divided among such securityholders (including the Client and
holders of the Client's securities other than Registrable Securities, to the
extent that securities are being registered on behalf of such Persons) pro rata
on the basis of the number of shares being registered on behalf of each such
securityholder, or as such securityholders may otherwise agree.
Section 7. Indemnification Section.
7.1 Indemnification by Client. The Client agrees to indemnify, to
the fullest extent permitted by law, each Holder of Registrable Securities and
each Person who controls
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(within the meaning of the Securities Act) such Holder against all losses,
claims, damages, liabilities and expenses in connection with defending against
any such losses, claims, damages and liabilities or in connection with any
investigation or inquiry, in each case caused by or based on any untrue or
alleged untrue statement of material fact contained in any registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading or arise out of any violation by the Client of any rules or
regulation promulgated under the Securities Act applicable to the Client and
relating to action or inaction required of the Client in connection with such
registration, except insofar as the same are (i) contained in any information
furnished in writing to the Client by such Holder expressly for use therein,
(ii) caused by such Holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto, or (iii)
caused by such Holder's failure to discontinue disposition of shares after
receiving notice from the Client pursuant to Section 5.3 hereof. In connection
with an underwritten offering, the Client will indemnify such underwriters,
their officers and directors and each Person who controls (within the meaning
of the Securities Act) such underwriters at least to the same extent as
provided above with respect to the indemnification of the Holders of
Registrable Securities.
7.2 Indemnification by Holder. In connection with any registration
statement in which a Holder of Registrable Securities is participating, each
such Holder will furnish to the Client in writing such information as the
Client reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, will indemnify the
Client, its directors and officers and each Person who controls (within the
meaning of the Securities Act) the Client against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue statement
of material fact contained in the registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading, but only to the
extent that such untrue statement or omission is contained in any information
so furnished in writing by such Holder expressly for use in connection with
such registration; provided that the obligation to indemnify will be individual
to each Holder and will be limited to the net amount of proceeds received by
such Holder from the sale of Registrable Securities pursuant to such
registration statement. In connection with an underwritten offering, each such
Holder will indemnify such underwriters, their officers and directors and each
Person who controls (within the meaning of the Securities Act) such
underwriters at least to the same extent as provided above with respect to the
indemnification of the Client.
7.3 Assumption of Defense by Indemnifying Party. Any Person
entitled to indemnification hereunder will (a) give prompt written notice to
the indemnifying party of any claim with respect to which it seeks
indemnification and (b) unless in such indemnified party's reasonable judgment
a conflict of interest between such indemnified and indemnifying parties may
exist with respect to such claim, permit such indemnifying party to assume the
defense of such claim with counsel reasonably satisfactory to the indemnified
party. If such defense is assumed,
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the indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to
such claim.
7.4 Binding Effect. The indemnification provided for under this
Registration Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any officer,
director or controlling Person of such indemnified party and will survive the
transfer of securities. The Client also agrees to make such provisions, as are
reasonably requested by any indemnified party, for contribution to such party
in the event the Client's indemnification is unavailable for any reason. Each
Holder of Registrable Securities also agrees to make such provisions, as are
reasonably requested by any indemnified party, for contribution to such party
in the event such Holder's indemnification is unavailable for any reason.
Section 8. Participation in Underwritten Registrations. No Person may
participate in any registration hereunder which is underwritten unless such
Person (a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements.
Section 9. Miscellaneous.
9.1 No Inconsistent Agreements. The Client will not hereafter enter
into any agreement with respect to its securities which violates the rights
granted to the Holders of Registrable Securities in this Registration
Agreement.
9.2 Remedies. Any Person having rights under any provision of this
Registration Agreement will be entitled to enforce such rights specifically to
recover damages caused by reason of any breach of any provision of this
Registration Agreement and to exercise all other rights granted by law. The
parties hereto agree and acknowledge that money damages may not be an adequate
remedy for any breach of the provisions of this Registration Agreement and that
any party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or other security) for
specific performance and for other injunctive relief in order to enforce or
prevent violation of the provisions of this Registration Agreement.
9.3 Term. Except for the provisions of Section 7 or as specifically
otherwise provided herein, the provisions of this Registration Agreement shall
apply until such time as all
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Registrable Securities have ceased to be Registrable Securities hereunder but
in no event later than three years from the date of this Registration
Agreement.
9.4 Amendments and Waivers. Except as otherwise specifically
provided herein, this Registration Agreement may be amended or waived only upon
the prior written consent of the Client and of the Holders of a majority of the
then outstanding shares of Registrable Securities.
9.5 Successors and Assigns. Subject to Section 2 hereof, all
covenants and agreements in this Registration Agreement by or on behalf of any
of the parties hereto will bind and inure to the benefit of (i) the respective
successors and assigns of the parties hereto whether so expressed or not and
(ii) the persons referred to in clause (iv) of the definition of Registrable
Securities. In addition, whether or not any express assignment has been made
but subject in any case to Section 2 hereof, the provisions of this
Registration Agreement which are for the benefit of CRG or Holders of
Registrable Securities are also for the benefit of, and enforceable by, any
subsequent holder of such securities so long as such securities continue to be
restricted securities, as that term is defined in Securities Act Rule 144.
9.6 Severability. Whenever possible, each provision of this
Registration Agreement will be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Registration
Agreement is held to be prohibited by or invalid under applicable law, such
provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Registration Agreement.
9.7 Counterparts. This Registration Agreement may be executed
simultaneously in multiple counterparts, any one of which need not contain the
signatures of more than one party, but all such counterparts taken together
will constitute one and the same Registration Agreement.
9.8 Descriptive Headings. The descriptive headings of this
Registration Agreement are inserted for convenience only and do not constitute
a part of this Registration Agreement.
9.9 Governing Law. All questions concerning the construction,
validity and interpretation of this Registration Agreement will be governed by
and construed in accordance with the domestic laws of the State of Florida,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Florida or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Florida.
9.10 Entire Agreement. This Registration Agreement is intended by
the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto with respect of the subject matter contained
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herein. This Registration Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
9.11 Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Registration
Agreement shall be in writing and shall be deemed to have been given when
delivered personally to the recipient, sent to the recipient by facsimile
transmission, sent to the recipient by reputable express courier service
(charges prepaid) or three business days after being mailed to the recipient by
certified or registered mail, return receipt requested and postage prepaid.
Such notices, demands and other communications will be sent to each Holder at
the address indicated on the records of the Client and to the Client at the
address set forth in the Agreement or to such other address or to the attention
of such other person as the recipient party has specified by prior written
notice to the sending party.
9.12 Confidentiality. The Client shall hold in strict confidence
and shall not disclose information with respect to sales of Common Stock by any
Holder, including the fact of such sales, the amount of such sales and the
timing of such sales, except as such information shall become public without
violation of this Section 9.12, as may be required by applicable law, rules or
regulations or with the express written consent of such Investor.
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Agreement as of the date first above written.
Client: Aqua Clara Bottling & Distribution
By: /s/ John C. Plunkett
-----------------------------------
John C. Plunkett, President
By: /s/ E.J. Mersis
-----------------------------------
E.J. Mersis, Chairman, CEO
Company: Corporate Relations Group, Inc.
By: /s/ Kevin Price
-----------------------------------
Kevin Price, President
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Exhibit 21.1
SUBSIDIARIES OF AQUA CLARA BOTTLING & DISTRIBUTION, INC.
The following is a subsidiary of Aqua Clara Bottling & Distribution, Inc., a
Colorado corporation:
1. Pocotopaug Investments, Inc., a Florida corporation, 100% owned by
Aqua Clara Bottling & Distribution, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-01-2000
<PERIOD-START> APR-04-1999
<PERIOD-END> JUL-03-1999
<CASH> 284,279
<SECURITIES> 0
<RECEIVABLES> 24,797
<ALLOWANCES> (10,000)
<INVENTORY> 81,444
<CURRENT-ASSETS> 694,431
<PP&E> 1,998,336
<DEPRECIATION> (132,755)
<TOTAL-ASSETS> 2,561,518
<CURRENT-LIABILITIES> 530,880
<BONDS> 0
0
1,134,695
<COMMON> 4,544,504
<OTHER-SE> (4,747,802)
<TOTAL-LIABILITY-AND-EQUITY> 2,561,518
<SALES> 103,474
<TOTAL-REVENUES> 103,474
<CGS> 62,957
<TOTAL-COSTS> 62,957
<OTHER-EXPENSES> 530,288
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,063
<INCOME-PRETAX> (506,497)
<INCOME-TAX> 0
<INCOME-CONTINUING> (506,497)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (506,497)
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
