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OMB APPROVAL
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OMB No.: 3235-0419
Expires: March 31, 2000
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
ENDLESS YOUTH PRODUCTS, INC.
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[Name of Small Business Issuer in its Charter]
NEVADA 93-215736
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[State or other jurisdiction of [I.R.S. Employee Identification No.]
incorporation or organization]
6767 N. Tropicana Blvd., #206, Las Vegas, NV 89103
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[Address of principal executive offices] [Zip Code]
Issuer's telephone number: (702) 248 - 1005
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Securities to be registered under Section 12(b) of the Act:
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NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
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Securities to be registered under Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.001 PER SHARE
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[Title of class]
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[Title of class]
POTENTIAL PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF
INFORMATION CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND
UNLESS THE FORM DISPLAYS A CURRENTLY VALID OMB CONTROL NUMBER.
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
ALL REFERENCES TO SHARES AND PER-SHARE AMOUNTS IN THIS REGISTRATION FORM
HAVE BEEN ADJUSTED TO REFLECT A ONE-FOR-FIVE REVERSE STOCK SPLIT OF THE
COMPANY'S COMMON STOCK IN MAY 1998.
ITEM 1. DESCRIPTION OF BUSINESS.
FORWARD-LOOKING STATEMENTS
This registration statement on Form 10-SB contains forward-looking
statements that involve risks and uncertainties. The actual results of
Endless Youth Products, Inc. (the "COMPANY") may differ materially from those
discussed in such forward-looking statements. Such statements include,
without limitation, the Company's expectations and estimates as to
introduction of new products and expansion into markets; future financial
performance, including growth in net sales and earnings; the effect on sales
of political or economic conditions in the Company's markets; the Company's
estimate of restructuring activities, costs and benefits; cash flows from
operations; information system upgrades; the Company's plan to address the
Year 2000 issue, the costs associated therewith and the results of Year 2000
non-compliance by the Company or one or more of its customers, suppliers or
other strategic business partners; capital expenditures; or the availability
of funds from future securities sales. Readers are urged to consider that
statements which use the terms "believes," "does not believe," "no reason to
believe," "expects," "plans," "intends," "estimates," "anticipated,"
"anticipates" and similar expressions, as they relate to the Company or the
Company's management, are intended to identify forward-looking statements.
Such statements reflect the current views of the Company with respect to
future events and are subject to certain risks, uncertainties and
assumptions. In addition to factors that may be described in the Company's
filings with the Securities and Exchange Commission (the "COMMISSION"),
including this filing, the following factors, among others, could cause the
Company's actual results to differ materially from those expressed in any
forward-looking statements made by the Company: (i) difficulties or delays in
developing and introducing new products or failure of customers to accept new
product offerings; (ii) changes in consumer preferences, including reduced
consumer demand for the Company's vitamins and other current products; (iii)
difficulties or delays in the Company's continued expansion into certain
markets and development of new markets; (iv) effects of and changes in
political and/or economic conditions, including inflation and monetary
conditions; (v) actions by competitors, including business combinations,
technological breakthroughs, new product offerings and marketing and
promotional successes; or (vi) combinations among significant customers or
the loss, insolvency or failure to pay its debts by a significant customer or
customers.
GENERAL
The Company engages in the business of developing and distributing
dietary supplements and personal care products with a focus on the anti-aging
product demands of an aging population. The Company's initial product is the
Endless Youth Longevity System, a combination package of
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vitamins and supplements formulated in separate "AM" and "PM" packets. The
System has been sold pursuant to a Company produced thirty minute infomercial
program through a marketing agreement with a division of Guthy-Renker Corp.
The Company is completing production of its next 30-minute infomercial for
its first skin care product, "Le Solution Derma System," a skin care device
that delivers specially formulated products in a proprietary appliance that
both heats the products and provides a small electric charge, both of which
lead to increased absorption.
As reported by industry sources, the annual domestic retail market for
vitamins, nutritional supplements and minerals is growing. However, no
assurances can be given as to future industry growth rates. In the last
several years, public awareness of the positive effects of vitamins and
nutritional supplements on health has been heightened by widely publicized
reports of scientific findings supporting such claims. Recent studies have
indicated a correlation between the regular consumption of selected vitamins
and nutritional supplements and reduced incidences of a wide range of
conditions including cancer, heart disease, stroke, arthritis, osteoporosis,
mental fatigue and depression, declining immune function, macular
degeneration, memory loss and neural tube birth defects. The Company believes
that the rise of alternative medicine and the holistic health movement has
also contributed to increased sales of nutritional supplements.
The Company expects that the aging of the United States population,
together with a corresponding increased focus on preventative health
measures, will result in increased demand for vitamins and nutritional
supplement products. According to the United States Census Bureau, through
2010, the 35-and-older age group of consumers, which represents a substantial
majority of regular users of vitamin and nutritional supplements, is expected
to grow significantly faster than the general United States population. Based
on a national survey indicating that approximately 38 percent of Americans
consumed vitamins and nutritional supplements on a regular basis in 1997, the
Company believes that there is a large untapped domestic market for vitamins
and nutritional supplements. Industry sources also report that vitamin
consumers are taking more vitamins and nutritional supplements per day than
in the past.
With respect to the personal care and skin care industry segment, the
Company operates in a market with many different products, which include an
extensive array of glamorous, exciting and innovative cosmetics and skin
care. The Company's vision is to provide excitement and innovation through
unique, high quality products at affordable prices.
The address of the Company's executive offices is: 6767 West Tropicana
Blvd., Suite 206, Las Vegas, NV 89103; Telephone: (702) 248-1005. The Company
was incorporated in Nevada in July 1996. On June 29, 1999, the Company's
shareholders authorized the Company's Chief Executive Officer, at his
discretion, to change the name of the Company to "EndlessYouth.Com, Inc."
DISTRIBUTION
The Company's vitamin and nutritional supplement product, the Endless
Youth Longevity System, is distributed through a nationally broadcast
infomercial program. Sales are made direct to
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the customers, who call a toll-free telephone number that accompanies the
broadcast program. Endless Youth's infomercial is broadcast pursuant to an
agreement with the Vendor Services group of Guthy-Renker Corp. Vendor
Services is responsible for providing and paying for all media, inventory,
fulfillment, customer service and other activities on behalf of the Company
with respect to the marketing of the Endless Youth Longevity System. Vendor
Services receives a fixed percentage of sales receipts for providing of these
services.
Building upon the brand name recognition being created by national
broadcasts of its vitamin program, the Company has entered into a funding
agreement with Infomercial Development Systems, a television production
group. An infomercial program has been developed to directly market the
Company's next product in the skin care market segment, Le Solution Derma
System, through a distribution channel similar to that being used to market
the Endless Youth Longevity System. The infomercial program will be fully
funded by Infomercial Development Systems, which will receive a percentage of
sales revenues derived from the infomercial program. Le Solution is an
innovative electronic device developed by Endless Youth to provide skin
improvement. In addition to the infomercial program, other direct marketing
channels and retail distribution for the Le Solution Derma System, both
domestic and international, are anticipated to be developed.
Through the national broadcast of the Company's infomercial programs,
the Company believes that increasing consumer awareness of the "Endless
Youth" brand name is being generated. The Company believes that such strong
and sustainable national recognition will provide opportunities to develop
other product categories within the anti-aging market segment that the
Company is focused upon, as well as enter into potential licensing
arrangements.
INTERNET COMMERCE
Pursuant to the broadcasts of the Endless Youth Longevity System
infomercial, the Company realized substantial traffic to its Web site,
www.endlessyouth.com. The Company is now in the process of redeveloping its
site into a subject-specific, demographically-targeted Web site focused on
anti-aging and the needs of an aging baby boomer market segment.
The Company will stress its e-commerce activities with the sale of its
proprietary "Endless Youth" brand products. The vitamin and nutritional
supplement product line will be expanded. Additional Endless Youth products
will be introduced to help in the prevention of health problems for an aging
population. Cutting-edge skin care products will provide the latest topical
systems to protect the skin from aging. All products will be sold under the
Endless Youth trade name.
Complementing the sale of product, www.endlessyouth.com shall provide
cutting edge news, features, interviews and regular columnists on specific
anti-aging topics. The Company believes that original content and highly
regarded interactive communities coupled with ongoing direct response
broadcast marketing activities will allow the Company to attract and retain
its targeted market which is more affluent, better educated and more likely
to make online purchases than typical Internet users. The Company believes
that www.endlessyouth.com will be a valuable media property for
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advertisers and retailers who are increasingly allocating marketing resources
to target consumers online.
GROWTH IN INTERNET USAGE. The Internet is fast becoming one of the most
important mediums for global communication and business, allowing millions of
people to gather and transfer information instantly. International Data
Corporation, a market research firm, predicts that worldwide Internet use
will grow to 319.8 million users in 2002 from 68.7 million users in 1997,
representing 366% growth over this period. The growth in Internet users is
driven by numerous factors, including:
- increased public awareness of the Internet;
- the growing base of personal computers and improved Internet access;
- increased quantity and quality of Web content; and
- growing selection and acceptance of electronic commerce.
The Internet provides a unique opportunity for content providers to
reach a broad base of readers on a real-time basis with a diverse body of
information. Unlike traditional media, the Internet permits dissemination of
content without geographic limits, print production costs or broadcast
capacity constraints.
GROWTH IN ONLINE ADVERTISING. The Internet is an attractive medium for
advertisers because it allows more flexibility, interactivity and measurement
capabilities than traditional media, including print, television and radio,
and provides users with immediate access to information about advertisers and
their products. For example, the Internet allows advertisers to change
messages frequently in response to market developments or current events. The
Internet also allows advertisers to gather demographic information about
users and to deliver targeted messages to specific consumer groups. According
to Jupiter Communications, an independent industry research firm, total
Internet advertising revenues grew from $300 million in 1996 to $1.9 billion
in 1998. Jupiter Communications projects total Internet advertising revenues
will grow to $7.7 billion in 2002, representing an average annual growth rate
of 45 percent from 1998 to 2002.
According to International Data Corporation ("IDC"), of the $187 billion
spent on advertising in 1997, 0.3 percent was spent on Internet media. In
1998, 0.8 percent of all dollars spent on advertising were spent on Internet
media. The Company believes that the potential to shift advertising spending
away from traditional media to the Internet presents a significant growth
opportunity for Internet advertising.
GROWTH IN ELECTRONIC COMMERCE. The growing popularity of the Internet
represents a substantial opportunity for companies to take advantage of the
potential for conducting commercial
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transactions online, or "electronic commerce." IDC estimates that commerce
over the Internet will increase from over $12 billion worldwide at the end of
1997 to approximately $425 billion worldwide by the end of 2002. Jupiter
Communications predicts that by 2002, 44 percent of Internet users will make
purchases online, as compared to the 22 percent who did so in 1998.
THE NEED FOR COMPELLING INTERNET DESTINATIONS. As Internet companies
compete to attract and retain users, unique content has become increasingly
valuable. The Company believes compelling, original content produced by
talented editorial staff is a principal feature that distinguishes Web sites
from each other.
Web sites built around focused, proprietary content provide advertisers
with targeted channels for reaching their desired market. To date, online
advertisers and retailers have spent most of their marketing budgets on Web
sites with the highest traffic volume, including "portals," which bring
together and organize a wide variety of content, and "search engines," which
allow users to search for specific information. As Internet advertising and
electronic commerce mature, however, the Company believes online advertisers
and retailers will increasingly spend their marketing dollars on more focused
Web sites to reach specific demographic groups, as has occurred in
traditional advertising media.
According to a 1998 study by Forrester Research, a market research firm,
a major shift in online advertising spending will occur as advertisers move
media campaigns from generalized portals toward more narrowly targeted Web
sites. Targeted sites provide content on designated topics, and therefore
attract users looking for subject-specific information. Because targeted
sites are usually the direct source of information the user wants, rather
than simply a gateway to other collections of information like a portal or
search engine, these sites are frequently referred to as "destination sites."
Forrester estimates that portals currently receive 59 percent of all Internet
advertising dollars while only accounting for 15 percent of Web traffic.
However, Forrester predicts that by 2002, destination sites will attract 70
percent of online advertising dollars. Destination sites are attractive to
advertisers and retailers because these sites allow more seamless integration
of marketing campaigns and product sales with related content, and more
effectively target the advertisers' and retailers' most likely customers. In
addition, destination sites tend to have longer use periods, or "stickiness,"
further enhancing marketing and retailing opportunities.
To address the perceived lack of compelling content available through
portals, a number of skillfully produced destination sites have been
developed to target specific demographic groups. Examples of such sites
include technology-oriented sites such as C/Net and ZDNet, financial news
sites including MarketWatch.com and TheStreet.com, sports-related sites such
as Sportsline.com and ESPN.com and women-oriented sites including iVillage
and Women.com, and health related sites such as DrKoop.com and WebMD.Com.
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THE COMPANY'S INTERNET STRATEGY:
The Company's Internet strategy includes the following elements:
- Expand direct response marketing programs for branded Endless Youth
anti-aging products. Such marketing avenues include 30-minute
infomercial programs, 30- and 60-second short form television
commercials, and radio spots. All marketing shall focus on direct sale
of Endless Youth products as well as drive visits to
www.endlessyouth.com.
- Expand the Company's revenue base in advertising and electronic
commerce by targeting the more than 4,000 companies that currently
advertise online. The Company intends to increase its revenue from
advertising and electronic commerce through new editorial, marketing
and technological initiatives.
- Expand content and communities with regular introduction of new
editorial categories in the anti-aging area that will draw and retain
new users and advertisers.
- Develop extensive distribution and affiliate relationships with
numerous partners, including major portals as well as more focused
non-competitive sites. Position www.endlessyouth.com as the leading
and most recognized Internet destination site for anti-aging
information and products.
- Grow the Company's brand recognition through advertising and
syndication of its anti-aging content.
- Enhance the Company's technology to improve production, user
experience, advertising delivery and circulation analysis by investing
in personnel and venturing with third-party organizations to develop
software tools to create a state-of-the-art online publishing system.
This system is designed to optimize the www.endlessyouth.com network's
user experience and advertising performance.
BUSINESS STRATEGY
The Company's business strategy is to:
- Strengthen and broaden core brands through marketing and advertising,
product development and manufacturing;
- Develop and introduce technologically advanced, innovative products
that set new trends;
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- Expand the Company's presence in all markets in which it competes and
enter new markets where the Company identifies opportunities for
growth;
- Continue to reduce costs and improve operating efficiencies, customer
service and product quality and carefully managing working capital;
and
- Continue to expand market share and product lines through possible
strategic acquisitions, joint ventures and licensing arrangements.
CONTRACTS WITH SUPPLIERS AND MANUFACTURERS
The Company has established relationships with several suppliers and
manufacturers of its products. While the Company anticipates that it will
enter into contracts with some of these manufacturers and suppliers, there is
a risk that any of the Company's suppliers or manufacturers could discontinue
selling their products to the Company for any reason. Although the Company
believes that it could establish alternate sources for most of its products,
any delay in locating and establishing relationships with other sources could
result in product shortages and back orders for the products, with resulting
loss of revenues to the Company. The Company relies on the Vendor Services
group of Guthy-Renker Corp. to market and distribute its Endless Youth
Longevity System pursuant to the infomercial broadcasts. Vendor Services is
also responsible for the manufacturing, packaging and shipping of product.
Any disruption of these activities by Vendor Services will cause delays in
the marketing of this product, which would result in loss of revenues to the
Company. Furthermore, infomercial programs are both seasonal and have a
limited life on the air, and which require the possible production of sequel
programs. Such seasonal sensitivity and non-broadcast periods would result in
a loss of revenues for this product to the Company.
There can be no assurance that another company will not replicate one or
more of the Company's products. In addition, certain manufactures may retain
ownership of certain product formulations and manufacturing processes
relating to the Company's products. If the Company's relationship with these
manufacturers were impaired, there can be no assurance that the product
formulations and manufacturing process owned by these manufacturers could be
replicated by the Company or another manufacturer, or that these
manufacturers would not assert that such replication infringed upon its
proprietary rights. Accordingly, the Company's sales and earnings could be
adversely affected if its relationship with these manufacturers were impaired.
LICENSES, TRADEMARKS AND PATENTS
The Company does not own the rights to the Endless Youth trademark.
These rights are licensed from Neal K. Wallach, the Chairman and Chief
Executive Officer of the Company and a principal stockholder. See "Item 7 --
Certain Relationships and Related Transactions." Mr. Wallach has registered
the Endless Youth trademark with the U.S. Patent and Trademark Office. The
Company has an application pending for the Le Solution Derma System trademark.
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The Company regards these trademarks and other proprietary rights as
valuable assets and believes they have significant value in the marketing of
its products. The Company vigorously protects its trademarks against
infringement.
The Company is in the process of filing a patent application with
respect to the Le Solution Derma System device.
PRODUCT LIABILITY
Although the Company does not engage in the actual manufacture of any of
the products that it markets and distributes, as a marketer of dietary
supplements and skin care products that are ingested by consumers or applied
to their bodies, the Company may be subjected to various product liability
claims, including among other things that its products contain contaminants
or include inadequate instructions as to use or inadequate warnings
concerning side effects and interactions with other substances. Although the
Company has obtained product liability insurance that it believes is suitable
for its present needs, there can be no assurance that such insurance will
continue to be available at commercially reasonable rates, that the Company
will not be subject to claims in the future, that its insurance coverage will
be adequate or that widespread claims and the resultant adverse publicity
could adversely affect the Company.
ABSENCE OF CLINICAL STUDIES AND SCIENTIFIC REVIEW; FAILURE TO CONSUME AS
SUGGESTED
In general, the Company's products consist of dietary supplements and
personal care products about which the Company makes no therapeutic claims
and that the Company believes do not require approvals from the Food and Drug
Administration (the "FDA") or other regulatory agencies prior to sale.
Accordingly, the Company does not intend to conduct clinical studies of its
products or otherwise subject them to scientific review. In addition, the
Company's products consist of herbs, vitamins, minerals and other ingredients
that the Company regards as safe when taken as suggested by the Company.
However, because the Company will be dependent upon consumers' perception of
the safety and quality of its products as well as similar products
distributed by other companies, the Company could possibly be adversely
affected in the event any of the Company's products or any similar products
distributed by other companies should prove or be asserted to be harmful to
consumers. In addition, adverse effects resulting from consumers' failure to
consume the Company's products as suggested by the Company or other misuse or
abuse of the Company's products or any similar products distributed by other
companies, could have a material adverse impact on the Company.
The Company believes the nutritional supplement market is affected by
national media attention regarding the consumption of nutritional
supplements. There can be no assurance that future scientific research or
publicity will be favorable to the nutritional supplement market or any
particular product, or consistent with earlier favorable research or
publicity. Future research reports or publicity that are perceived as less
favorable or that question such earlier research or publicity could have a
material adverse effect on the Company. Because of the Company's dependence
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consumer perceptions, adverse publicity, whether or not accurate, associated
with illness or other adverse effects resulting from the consumption of the
Company's products or any similar products distributed by other companies
could have a material adverse effect on the Company. Such adverse publicity
could arise even if the adverse effects associated with such products
resulted from consumers' failure to consume such products appropriately.
COMPETITION
The dietary supplement and skin care markets are highly competitive. It
is not possible to estimate accurately the number of competitors, since the
industry is fragmented with many public as well as privately held companies.
Brand recognition, together with product quality, performance and price and
the extent to which consumers are educated on product benefits, have a marked
influence on consumers' choices among competing products and brands.
Advertising, promotion, merchandising and packaging, and the timing of new
product introductions and line extensions, also have a significant impact on
buying decisions, and the structure and quality of the sales force affect
product reception, in-store position, permanent display space and inventory
levels in retail outlets. The Company competes in its product categories
against many companies that have substantially greater resources than the
Company.
The market for Internet content is relatively new, rapidly changing and
intensely competitive. Traditional media companies, such as television
broadcasters, magazine publishers and radio stations, are constantly refining
their content and strategies to increase their audiences and advertising and
sponsorship revenues. Additionally, the number of Web sites competing for the
attention and spending of users, advertisers and sponsors has increased, and
the Company expects it to continue to increase, particularly because there
are so few barriers to entry on the Internet.
GOVERNMENT REGULATION
The Company is subject to regulation by the Federal Trade Commission
("FTC") and the FDA in the United States, as well as the Consumer Product
Safety Commission, the U.S. Department of Agriculture and the Environmental
Protection Agency, and by various agencies of the states and localities and
foreign countries in which the Company's products may be sold. Compliance
with federal, state, local and foreign laws and regulations pertaining to
discharge of materials into the environment, or otherwise relating to the
protection of the environment, has not had, and is not anticipated to have, a
material effect upon the capital expenditures, earnings or competitive
position of the Company. State and local regulations in the United States
that are designed to protect consumers or the environment have an increasing
influence on product claims, contents and packaging.
In particular, the FDA, pursuant to the Federal Food, Drug, and Cosmetic
Act ("FDCA") regulates the production, packaging, labeling and distribution
of dietary supplements, including vitamins, minerals and herbs. In addition,
the FTC has jurisdiction to regulate advertising of dietary
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supplements, while the U.S. Postal Service regulates advertising claims with
respect to such products sold by mail order.
The FDCA has been amended several times with respect to dietary
supplements, most recently by the Dietary Supplement Health and Education Act
of 1994 ("DSHEA") and the Nutrition Labeling and Education Act of 1990
("NLEA"). DSHEA, enacted on October 15, 1994, introduced a new statutory
framework governing the composition and labeling of dietary supplements. With
respect to composition, DSHEA creates a new class of "dietary supplements,"
dietary ingredients consisting of vitamins, minerals, herbs, amino acids and
other dietary substances for human use to supplement the diet, as well as
concentrates, metabolites, extracts or combinations of such dietary
ingredients. Generally, under DSHEA, dietary ingredients that were on the
market before October 15, 1994 may be sold without FDA pre-approval and
without notifying the FDA. On the other hand, a new dietary ingredient (one
not on the market before October 15, 1994) requires proof that it has been
used as an article of food without being chemically altered, or evidence of a
history of use or other evidence of safety establishing that it is reasonably
expected to be safe. The FDA must be supplied with such evidence at least 75
days before the initial use of a new dietary ingredient. There can be no
assurance that the FDA will accept the evidence of safety for any new dietary
ingredients that the Company may decide to use, and the FDA's refusal to
accept such evidence could result in regulation of such dietary ingredients
as food additives requiring FDA pre-approval prior to marketing.
As for labeling, DSHEA permits "statements of nutritional support" for
dietary supplements without FDA pre-approval. Such statements may describe
how particular dietary ingredients affect the structure, function or general
well-being of the body, or the mechanism of action by which a dietary
ingredient may affect body structure, function or well-being (but may not
state that a dietary supplement will diagnose, mitigate, treat, cure or
prevent a disease). A company making a statement of nutritional support must
possess substantiating evidence for the statement, disclose on the label that
the FDA has not reviewed that statement and that the product is not intended
for use for a disease, and notify the FDA of the statement within 30 days
after its initial use. However, there can be no assurance that the FDA will
not determine that a given statement of nutritional support that the Company
makes is not adequately substantiated as required by DSHEA, or is a drug
claim rather than an acceptable nutritional support statement requiring the
Company's submission and the FDA's approval of a new drug application
("NDA"). Either determination could entail costly and time-consuming clinical
studies and in either situation the Company may have to delete or modify the
statement or claim involved. In addition, DSHEA allows the dissemination of
"third party literature," publications such as reprints of scientific
articles linking particular dietary ingredients with health benefits. Third
party literature may be used in connection with the sale of dietary
supplements to consumers at retail or by mail order. Such a publication may
be so distributed if, among other things, it is not false or misleading, no
particular manufacturer or brand of dietary supplement is mentioned, and a
balanced view of available scientific information on the subject matter is
presented. There can be no assurance, however, that all pieces of third party
literature that may be disseminated in connection with the Company's products
will be determined by the FDA to
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satisfy each of these requirements, and any such failure could subject the
product involved to regulation as a new drug.
Management anticipates that the FDA may promulgate good manufacturing
practice ("GMP") regulations authorized by DSHEA, which are specific to
dietary supplements. GMP regulations would require supplements to be
prepared, packaged and held in compliance with such rules, and may require
similar quality control provisions contained in the GMP regulations for
drugs. The Company currently uses manufacturers that produce its vitamins and
nutritional supplement products pursuant to the applicable food GMP rules.
There can be no assurance that, if the FDA adopts GMP regulations specific to
dietary supplements, such manufacturers will be able to comply with such GMP
rules upon promulgation or without incurring material expense to do so.
The FDA has finalized regulations to implement certain labeling
provisions of DSHEA. In addition, further DSHEA labeling regulations are
expected to be proposed by the FDA once the agency receives the final report
of the expert Commission on Dietary Supplement Labels, established by DSHEA
to provide recommendations on labeling claims for supplements. The Commission
on Dietary Supplements issued its final report in November 1997. It is
uncertain when the FDA will propose further regulations based on this report.
The Company cannot determine what effect such regulations, when promulgated,
will have on its business in the future. There can be no assurance that such
regulations will not require expanded or different labeling for the Company's
vitamins and nutritional products or, among other things, require the recall,
reformulation or discontinuance of certain products, additional record
keeping, warnings, notification procedures and expanded documentation of the
properties of certain products and scientific substantiation regarding
ingredients, product claims, safety or efficacy.
The FDA has broad authority to enforce the provisions of the FDCA
applicable to dietary supplements, including the power to seize adulterated
or misbranded products or unapproved new drugs, to request their recall from
the market, to enjoin their further manufacture or sale, to publicize
information about a hazardous product, to issue warning letters and to
institute criminal proceedings. Although the regulation of dietary
supplements is less restrictive than that imposed upon drugs and food
additives, there can be no assurance that dietary supplements will continue
to be subject to the less restrictive statutory scheme and regulations
currently in effect. Further, there can be no assurance that, if more
stringent statutes are enacted or regulations are promulgated, the Company
will be able to comply with such statutes and regulations without incurring
material expense to do so.
The FTC, which exercises jurisdiction over the advertising of dietary
supplements, has in the past several years instituted enforcement actions
against several dietary supplement companies for false and misleading
advertising of certain products. These enforcement actions have resulted in
consent decrees and the payment of fines by the companies involved. In
addition, the FTC has increased its scrutiny of infomercials. Further, the
U.S. Postal Service has issued cease and desist orders against certain mail
order advertising claims made by dietary supplement manufacturers.
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The Company may be subject to additional laws or regulations
administered by the FDA or other federal, state or foreign regulatory
authorities, the repeal of laws or regulations that considers favorable, such
as DSHEA, or more stringent interpretations of current laws or regulations,
from time to time in the future. The Company is unable to predict the nature
of such future laws, regulations, interpretations or applications, nor can it
predict what effect additional governmental regulations or administrative
orders, when and if promulgated, would have on its business in the future.
These regulations could, however, require the reformulation of certain
products to meet new standards, the recall or discontinuance of certain
products not able to be reformulated, imposition of additional record keeping
requirements, expanded documentation of the properties of certain products,
expanded or different labeling, or scientific substantiation. Any or all of
such requirements could have a material adverse effect on the Company's
results of operations and financial condition.
RESEARCH AND DEVELOPMENT
The Company has incurred and research and development expenditures in
connection with the development of its Endless Youth Longevity System and its
Le Solution Derma System products. The Company estimates that in the fiscal
years ended June 30, 1997 and 1998, it expended $25,000 and $125,000
respectively on research and development activities.
EMPLOYEES
As of June 30, 1999, the Company had one full-time employee. Employees
are not represented by any collective bargaining organizations.
DEPENDENCE ON KEY PERSONNEL
The Company's continued success will largely depend on the efforts and
abilities of its Chief Executive Officer, Neal K. Wallach. The Company's
operations could be adversely affected if, for any reason, Mr. Wallach did
not remain with the Company.
YEAR 2000
In connection with and as part of the Company's business process
enhancement program, certain information technology systems have been and
will continue to be upgraded to be Year 2000 compliant. The Company has
identified and contacted and continues to identify and contact key suppliers,
both inventory and non-inventory, key customers and other strategic business
partners, such as banks, pension trust managers and marketing data suppliers,
either by soliciting written responses to questionnaires and/or by meeting
with certain of such third parties. The parties from whom the Company has
received responses to date generally have indicated that their systems are or
will be Year 2000 compliant. The Company does not expect that incremental
out-of-pocket costs of its Year 2000 program (which do not include costs
incurred in connection with the Company's comprehensive business process
enhancement program) will be material.
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<PAGE>
The Company believes that at the current time it is difficult to
identify specifically the most reasonably likely worst case Year 2000
scenario. As with all manufacturers and distributors of products such as
those sold by the Company, a reasonable worst case scenario would be the
result of failures of third parties (including, without limitation,
governmental entities and entities with which the Company has no direct
involvement, as well as the Company's suppliers of goods and services and
customers) that continue for more than a brief period in various geographic
areas where the Company's products are produced or sold at retail or in areas
from which the Company's raw materials and components are sourced. In
connection with functions that represent a particular Year 2000 risk,
including the production, warehousing and distribution of products and the
supply of raw materials and components, the Company is considering various
contingency plans. Continuing failures in key geographic areas in the United
States and in certain European, South American and Asian countries that limit
the Company's ability to produce products, its customers' ability to purchase
the Company's products or consumers' ability to shop, would be likely to have
a material adverse effect on the Company's results of operations, although it
would be expected that at least part of such lost sales eventually would be
recouped. The extent of such deferred or lost revenue cannot be estimated at
this time.
The Company's Year 2000 efforts are ongoing and its overall plan, as
well as the consideration of contingency plans, will continue to evolve as
new information becomes available. While the Company currently anticipates
continuity of its business activities, that continuity will be dependent upon
its ability, and the ability of third parties upon which the Company relies
directly, or indirectly, to be Year 2000 compliant. There can be no assurance
that the Company will eliminate potential Year 2000 issues in a timely manner
or as to the ultimate cost of doing so.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION.
Management's discussion and analysis should be read in conjunction with
the Company's financial statements and the notes thereto set forth in this
Form 10-SB commencing on page 29.
GENERAL
The following discussion is based on the financial statements contained
elsewhere in this report. The financial statements have been prepared in
conformity with generally accepted accounting principals.
RESULTS OF OPERATIONS
NET SALES. Net sales for the nine months ended March 31, 1999 increased
by $2,621,942 compared to the comparable nine-month period in the prior
fiscal year. Net sales increased as a result of the nationwide rollout of the
Company's "Endless Youth" infomercial in January of 1999. The Company
currently has an agreement with Vendor Services Inc., in which it is to pay
Vendor Services Inc., 91 percent of net sales for all costs associated with
the production, distribution and marketing of the "Endless Youth" vitamin
products through infomercial sales.
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<PAGE>
Net sales for the three months ended March 31, 1999 increased by
$2,548,507 compared to the comparable three-month period in the prior fiscal
year. Net sales increased as a result of the nationwide rollout the Company's
"Endless Youth" vitamin products.
COST OF SALES. Cost of sales for the nine months ended March 31, 1999
increased $2,363,026. The increase in cost of sales can be attributed to the
increase in net sales discussed above and an increase in media spending and
air time of the infomercials. Cost of sales as a percentage of net sales
during the nine months ended March 31, 1999 was 88 percent compared to 50
percent during the nine-month period ended March 31, 1998. The percentage
increase is attributed to the Company's agreement with Vendor Services Inc.
Cost of sales for the three-months ended March 31, 1999 increased
$2,403,625. The increase in cost of sales can be attributed to the increase
in sales discussed above and an increase in media spending and air time of
the infomercials. Cost of sales as a percentage of net sales during the three
months ended March 31, 1999 was 94 percent compared to 52 percent during the
three-month period ended March 31, 1998. The percentage increase is
attributed to the Company's agreement with Vendor Services Inc.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $126,188 in the nine-month period ended
March 31, 1999 compared to the comparable nine-month period in the prior
fiscal year. This decrease was primarily due to an overall decrease in
startup related expenses. The Company's management continues to pursue cost
reduction measures consistent with the level of business wherever
opportunities can be identified.
Selling and administrative expenses decreased $115,468 in the
three-month period ended March 31, 1999 compared to the comparable
three-month period in the prior fiscal year. The decrease was primarily due
to an overall decrease in startup related expenses.
LIQUIDITY AND CAPITAL RESOURCES. Although the Company has a negative
working capital and equity, it believes it has sufficient resources to fund
the Company's operations and capital requirements for the 1999 fiscal year
due to its recent sales volume and its contract with Vendor Services, which
pays for the production, distribution and marketing of its product.
Prepaid advertising was $121,758 and $0 at June 30, 1998 and March 31,
1999, respectively. The decrease in 1999 resulted from the amortization of
the remaining infomercial costs.
Accounts receivable was $0 and $22,828 at June 30, 1998 and March 31,
1999, respectively. The increase in 1999 resulted from the increased sales of
the Company's "Endless Youth" product and the agreement with Vendor Services
Inc.
The Company believes that cash flow from infomercial related sales will
be sufficient to meet its anticipated cash needs for at least the next 12
months. However, any projections of future cash
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needs and cash flows are subject to substantial uncertainty. There can be no
assurance that financing will be available in amounts or on terms acceptable
to the Company, if at all.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company's executive headquarters are located at 6767 West Tropicana
Blvd., Suite 206, Las Vegas, NV 89103 and are leased on a month-to-month
basis. The Company believes its facilities are adequate to provide its needs.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following information with respect to the outstanding shares of the
Company's common stock beneficially owned by (i) each director of the
Company, (ii) the chief executive officer, (iii) all beneficial owners of
more than five percent of common stock known to the Company and (iv) the
directors and executive officers as a group, is furnished as of June 30,
1999, except as otherwise indicated.
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<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS (1)
<S> <C> <C>
Neal K. Wallach 2,034,963 (2) 61.8%
6767 W. Tropicana Blvd., #206
Las Vegas, NV 89103
EYP International LLC 1,135,000 35.0%
6767 W. Tropicana Blvd., #206
Las Vegas, NV 89103
James Hembree
4620 Jupiter Drive
Salt Lake City, UT 84124 1,525,000 (3) 44.4%
Gene Scher (4)
November Lazar Scher, Inc.
3575 Cahuenga Blvd., W., #330
Los Angeles, CA 90068 189,334 (5) 5.7%
Carl B. Wallach, M.D.
32 Chelsea Drive
Randolph, NJ 07869 50,000 (6) 1.5%
All Officers and Directors as a Group
(four persons) 2,474,963 (2), (3), (5), (6) 70.4%
</TABLE>
- ----------------------
(1) Unless otherwise indicated below, each director, executive officer
and five percent shareholder has sole voting and investment power with
respect to all shares beneficially owned.
(2) Includes 1,135,000 shares owned by EYP International LLC, a Nevada
limited liability company ("EYP INTERNATIONAL"), of which Mr. Wallach
beneficially owns 54.0 percent of the equity interest; includes warrants to
purchase 49,500 shares, all of which are currently exercisable; excludes
options to purchase 360,000 shares of Common Stock granted to Mr. Wallach
under the Company's 1996 Stock Option Plan, none of which are presently
exercisable or exercisable within 60 days.
(3) Includes 1,135,000 shares owned by EYP International, of which Mr.
Hembree beneficially owns 3.0 percent of the equity interest; includes
options to purchase 50,000 shares of common stock granted to Mr. Hembree
under the Company's 1996 Stock Option Plan, all of which are presently
exercisable; includes presently exercisable warrants to purchase 140,500
shares; includes presently exercisable warrants to purchase 3,000 shares
owned by Joyce Hembree, Mr. Hembree's wife. Mr. Hembree disclaims beneficial
ownership of the warrants owned by his wife.
(4) Mr. Scher was removed as a director on June 1, 1999. The number of
shares indicated is based on the number of shares originally issued by the
Company to Mr. Scher and his affiliates; the
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<PAGE>
Company has no information concerning whether any such shares were
subsequently sold or additional shares were purchased in the public market.
(5) Includes shares held by November Lazar Scher, Inc. and affiliates
thereof, all of which are affiliates of Mr. Scher; includes options to
purchase 30,000 shares of common stock granted to Mr. Scher under the
Company's 1996 Stock Option Plan, all of which are presently exercisable.
(6) Includes options to purchase 40,000 shares of common stock granted
to Mr. Wallach under the Company's 1996 Stock Option Plan, all of which
options are presently exercisable.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
DIRECTORS AND OFFICERS
Set forth below are the names and other relevant information regarding
the executive officers and directors of the Company as of June 1, 1999.
<TABLE>
<CAPTION>
COMMENCEMENT YEAR
NAME AGE POSITION OF TERM OF OFFICE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Neal K. Wallach 47 Chairman, Chief Executive 1996
Officer and a Director
James Hembree 70 Director 1997
Carl B. Wallach, M.D. 43 Director 1997
</TABLE>
Neal K. Wallach is Chairman, Chief Executive Officer and a director of
the Company. He is responsible for developing the corporate direction and
implementation of business strategies, including product development,
compensation plans, financial planning, inventory management and forecasting.
Mr. Wallach also oversees the company's marketing strategies along with the
development of promotional campaigns. Mr. Wallach has more than 20 years of
professional and international management consulting experience with an
emphasis on national distribution networks. With a Juris Doctor degree from
the University of Virginia School of Law, Mr. Wallach has held positions with
several major national law firms. During the past 10 years, he has served as
General Counsel for a large multinational manufacturer and Managing Director
of an international management consulting organization. Additionally, during
this period, Mr. Wallach served as Executive Vice-President of a national
retailer, where he developed and oversaw its international franchise store
network. The development of this network required Mr. Wallach to oversee all
aspects of start-up, marketing, and operations of the franchise program.
Significant hands-on experience was achieved in cost and quality control,
organizational development, and productivity. Mr. Wallach is a member in good
standing of the State Bar of California and holds a Bachelor of Arts degree
(International Studies) from Tufts University.
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<PAGE>
James Hembree, is retired from over 35 years at Dow Chemical, where he
was President and CEO of Dow Chemical Canada; former director of Dow Chemical
Canada; Dowell-Sclumberger Canada; and several other public companies.
Dr. Carl Wallach, is an internal medicine physician specializing in
gastroenterology, with a private practice in New Jersey.
BOARD OF DIRECTORS
All directors serve for a term of one year and until their successors
are duly elected. All officers serve at the discretion of the Board of
Directors. None of the Company's directors is a director of any company with
class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, or of any company registered under the
Investment Company Act of 1940, as amended. There are no family relationships
among any members of the Board of Directors or the executive officers or
significant employees of the Company except that Carl Wallach, M.D., a
director, is the brother of Neal K. Wallach, the Chairman, Chief Executive
Officer and a director of the Company.
ITEM 6. EXECUTIVE COMPENSATION.
EMPLOYMENT CONTRACT
In July 1996 the Company entered into an employment agreement with Neal
K. Wallach. The agreement was amended in June 1999. The term of Mr. Wallach's
employment agreement is five years. The agreement is automatically extended
for consecutive periods of one year each unless either the Company or Mr.
Wallach elects not to renew the agreement by delivering written notice
thereof to the other party not less than 30 days prior to the expiration of
the current term. Mr. Wallach receives a salary of $120,000 per year. Mr.
Wallach will receive a bonus based on a formula tied into the Company's net
operating income and is eligible to receive additional bonuses from time to
time at the sole discretion of the Board of Directors. The employment
agreement is terminable by the Company at any time with cause. In connection
with entering into the employment agreement, Mr. Wallach was granted 200,000
options at an exercise price of $1.50 per share. The grant was made under the
Company's 1996 Stock Option Plan. These options vest at the rate of 40,000
options per year of employment completed. In March 1998 Mr. Wallach was
granted 200,000 additional options at $0.625 per share and in December 1998
was granted an additional 200,000 options at $0.75 per share. These two
option grants also vest at the rate of 40,000 options per year.
1996 STOCK OPTION PLAN
In July 1996 the Company adopted the 1996 Stock Option Plan to provide
for the grant of incentive and non-qualified stock options to selected
employees, officers and directors. The Plan was amended as of June 2, 1999 to
increase the number of shares available thereunder. The Plan
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<PAGE>
currently allows for the issuance of options to purchase up to 1,250,000
shares of common stock. The vesting schedule of the Plan allows for the
exercise of a portion of the options granted beginning after one year with
full exercisability of all options granted not more then ten years after the
date of grant. As of June 30, 1999, options to purchase 240,000 shares of
common stock had been exercised, and options to purchase 480,000 shares of
common stock were outstanding at an average exercise price of $1.11 per
share. Of that amount, 120,000 options are or will become exercisable within
60 days. As of June 30, 1999, 405,000 shares of common stock were available
for future grants under the Plan.
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation paid or distributed
during the fiscal years ended June 30, 1997 and 1998 for services rendered by
the Chief Executive Officer of the Company:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION AWARDS OF
NAME AND PRINCIPAL COMMON STOCK ALL OTHER
POSITION YEAR SALARY (1) BONUSES UNDERLYING OPTIONS COMPENSATION (2)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Neal K. Wallach,
Chairman and Chief
Executive Officer 1997 $96,000 -0- 200,000 $11,500
1998 $96,000 -0- 200,000 $11,500
</TABLE>
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(1) Includes stock received in lieu of salary.
(2) Represents car allowance and medical insurance premiums paid by the
Company.
No other annual compensation, stock appreciation rights, long-term
restricted stock awards, or long-term incentive plan payouts were awarded to,
earned by or paid to the named executive officer during any of the Company's
last three fiscal years.
OPTION GRANTS TABLE
The following table sets forth certain information concerning grants of
options to the named executive officer during the fiscal year ended June 30,
1998:
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<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES % OF TOTAL
OF COMMON STOCK OPTIONS GRANTED
UNDERLYING TO EMPLOYEES
NAME OPTIONS GRANTED EACH FISCAL YEAR EXERCISE PRICE EXPIRATION DATE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Neal K. Wallach 200,000 (1) 87.0% $0.625 March 27, 2008
</TABLE>
- --------------
(1) Such options vest at the rate of 40,000 per year.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION TABLE
The following table sets forth certain information concerning options
exercised and outstanding as of the end of the fiscal year ended June 30,
1998:
<TABLE>
<CAPTION>
NO. OF SHARES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE AT FY-END (#) AT FY-END ($)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/ UNEXERCISABLE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Neal K. Wallach 40,000 $0 (1) 0 / 320,000 $0 / $0 (2)
</TABLE>
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(1) Based on the closing bid price of the Company's common stock on
December 31, 1997, the date of exercise, of $0.20 per share, which
was less the exercise price of $1.50 per share.
(2) Based on the closing bid price of the Company's common stock on
June 30, 1998 of $0.90 per share, which was less the applicable
exercise prices (120,000 options at $1.50 per share and 200,000
options at $0.625 per share).
DIRECTOR COMPENSATION
Directors are not paid any cash compensation for serving on the board.
Directors who are not officers or employees of the Company are eligible to
receive grants of non-qualified options under the Company's 1996 Stock Option
Plan.
During the fiscal year ended June 30, 1998, James Hembree, a director of
the Company, was granted 30,000 non-qualified options under the Company's
1996 Stock Option Plan. See "Item 7 -- Certain Relationships and Related
Transactions." No other non-employee director received options during such
fiscal year.
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<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On June 30, 1996, Neal K. Wallach entered into a license agreement with
the Company pursuant to which he licensed to the Company the rights to the
trademarks "Endless Youth," "Power Certified," "Anti-Aging Formulations" and
"Life is SupHerb." The term of the license is five years, and will be
extended for an additional five years unless the Company or Mr. Wallach
notifies the other of its intent not to extend the term. Mr. Wallach receives
a royalty equal to three percent of the Company's gross sales, with a
guaranteed annual minimum of $50,000. Mr. Wallach is also entitled to receive
40 percent of the gross revenues of any sublicense by the Company. The
Company is required to pay all costs and expenses of maintaining current and
effective registrations for the trademarks.
In April 1997 the Company entered into a consulting agreement with James
Hembree. Mr. Hembree is a director of the Company. At the time he entered
into the agreement, Mr. Hembree purchased 25,000 shares of common stock for
$2.00 per share, and was granted warrants to purchase an additional 25,000
shares at $3.50 per share. These warrants expire on August 4, 2002. In
consideration of serving as a director, Mr. Hembree was granted the following
incentive stock options under the Company's 1996 Stock Option Plan, all of
which expire on March 27, 2003: 10,000 options at $2.00 per share; 5,000
options at $3.00 per share; 10,000 options at $3.75 per share; and 5,000
options at $4.50 per share. To date, none of such options have been
exercised. Mr. Hembree's wife, Joyce Hembree, was also retained as a
consultant and was granted warrants to purchase 3,000 shares of common stock
at $2.00 per share. These warrants expires on August 4, 2002. The Consulting
Agreement was amended as of June 18, 1999. Pursuant to such amendment, in
exchange for expanding his consulting services Mr. Hembree received warrants
to purchase 64,000 shares at the exercise price of $0.625 per share and
warrants to purchase 24,000 shares at an exercise price of $0.9375 per share.
ITEM 8. LEGAL PROCEEDINGS.
The Company is not a party to any currently pending legal proceedings or
governmental authority proceedings, and the Company is aware of no
contemplated proceedings.
The Company has not been materially affected by nor has it incurred any
significant cost related to compliance with federal, state or local
environmental laws, and does not anticipate any such material effect.
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock trades on the OTC Bulletin Board of the
National Association of Securities Dealers, Inc. The following is the high
and low bid price for the common stock for each quarter within the last two
fiscal years and the subsequent interim quarters.
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<PAGE>
<TABLE>
<CAPTION>
QUARTER ENDED HIGH BID LOW BID
<S> <C> <C>
March 31, 1997 1.50 1.25
June 30, 1997 1.50 1.25
September 30, 1997 1.25 1.00
December 31, 1997 .90 .60
March 31, 1998 1.00 .90
June 30, 1998 1.25 1.50
September 31, 1998 1.25 .75
December 31, 1998 1.00 .75
March 31, 1999 2.25 1.00
</TABLE>
As of June 9, 1999 there were 47 holders of record of the Company's
common stock.
DIVIDEND POLICY
The Company has never paid dividends on its common stock. The Company
currently intends to retain all future earnings to fund operations and the
expansion of its business. The determination of payment of dividends in the
future will be within the discretion of the Company's Board of Directors and
will depend on the earnings, capital requirements and operating and financial
condition of the Company, among other factors.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
NOTE: SOME OF THE TRANSACTIONS SET FORTH BELOW MAY QUALIFY FOR OTHER
REGISTRATION EXEMPTIONS UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES
ACT") IN ADDITION TO THE EXEMPTIONS SPECIFICALLY MENTIONED.
On July 24, 1996, the Company issued 1,135,000 shares of common stock to
EYP and 90,000 shares to Neal K. Wallach, in connection with the initial
incorporation and organization of the Company. The purchase price was cash in
the amount of $0.005 per share. The shares were issued under Section 4(2) of
the Securities Act.
On July 31, 1996, the Company issued 200,000 stock options to Neal K.
Wallach under its 1996 Stock Option Plan. Such options vest at the rate of
40,000 per year, and had an excessive price of $1.50 per share. Such options
were issued pursuant to Rule 701 under the Securities Act.
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<PAGE>
On January 13, 1997, the Company issued an aggregate of 470,667 shares
of common stock to approximately 30 purchasers. Two of the purchasers,
representing 98,925 shares, received stock in consideration for services
previously rendered to the Company. The purchasers of the remaining 371,742
shares paid a cash consideration of $1.50 per share, for aggregate proceeds
to the Company of $557,613. All of these shares were issued under Rule 504
under the Securities Act. No underwriter or sales agent was used.
On March 14, 1997, the Company issued 168,000 shares at $1.50 per share
to an investor, for aggregate proceeds to the Company of $252,000 in cash.
The shares were issued under Rule 504 under the Securities Act.
On April 18, 1997, the Company issued an aggregate of 27,920 shares of
common stock to eight persons who had previously rendered services to the
Company. Such shares were valued at $1.50 per share. These sales were made
under Rule 504 under the Securities Act. In addition, warrants to purchase an
aggregate of 7,200 shares of common stock at exercise prices ranging from
$1.50 to $2.50 per share were issued to five persons who had previously
rendered services to the Company. These warrants were issued under Section
4(2) of the Securities Act and Rule 506 thereunder.
On August 12, 1997, the Company issued an aggregate of 27,158 shares of
common stock to six persons in consideration of services previously rendered
to the Company. The shares were valued at $1.50 per share. The shares were
issued under Rule 504 under the Securities Act.
On August 20, 1997, James Hembree, a director of the Company, purchased
25,000 shares at $2.00 per share, for a total consideration of $50,000. Such
shares were issued under Rule 504 under the Securities Act. Also on that
date, Mr. Hembree was issued warrants to purchase 25,000 shares at an
exercise price of $3.50 per share. The warrants were issued under Rule 701
under the Securities Act. See "Item 7 -- Certain Relationships and Related
Transactions."
On September 30, 1997, a single purchaser was issued warrants to
purchase 7,000 shares of common stock at $2.50 per share. These warrants were
issued in consideration of services provided to the Company. The warrants
were issued under Section 4(2) of the Securities Act.
On December 17, 1997, the Company issued warrants to purchase an
aggregate of 22,000 shares with an exercise price of $0.625 per share to
three persons, including James Hembree, a director of the Company. Such
warrants were issued for services previously provided to the Company. The
warrants were issued under Section 4(2) of the Securities Act. See "Item 7 --
Certain Relationships and Related Transactions."
On December 22, 1997, the Company issued to James Hembree, a director of
the Company, 10,000 shares of its common stock in connection with his
consulting agreement. Such shares were issued under Rule 504 under the
Securities Act. See "Item 7 -- Certain Relationship and Related Transactions."
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<PAGE>
On December 27, 1997, as consideration for a loan made by James Hembree
and two other persons to the Company, the Company issued warrants to purchase
an aggregate 38,500 shares of common stock at an exercise price of $0.625 per
share. Such warrants were issued under Section 4(2) of the Securities Act.
On March 5, 1998, the Company issued 13,333 shares of its common stock
to a person who had provided services to the Company. Such shares were issued
under Rule 903 of Regulation S under the Securities Act.
On March 27, 1998, the Company issued an aggregate of 188,000 shares of
common stock to eleven persons who had previously provided services to the
Company. 10,000 of these shares were issued to Neal K. Wallach in lieu of
salary. Such shares were issued under Rule 504 under the Securities Act. In
addition, the Company issued an aggregate of 7,500 shares to two other
persons who had provided services to the Company. These shares were issued
under Section 4(2) under the Securities Act. Also on that date, the Company
issued warrants to purchase an aggregate of 105,500 shares of common stock at
exercise prices ranging from $0.625 to $3.75 per share. These included 30,000
warrants issued to Gene Scher, a director of the Company. Such warrants were
issued under Section 4(2) under the Securities Act. Also on that date, the
Company issued: (i) stock options to Neal K. Wallach, vesting at a rate of
40,000 per year, having an exercise price of $0.625 per share, and (ii)
30,000 options to James Hembree, vesting immediately, at exercise prices
ranging from $2.00 to $4.00 per share. All of such options were issued
pursuant to Rule 701 under the Securities Act.
On June 29, 1998, the Company issued an aggregate of 25,000 shares of
common stock to two persons who provided services to the company. In
addition, the Company issued 12,000 shares to a person who had previously
loaned $5,000 to the Company, and who agreed to convert such loan into shares
of the Company's common stock and to purchase for cash an additional $4,000
worth of common stock for cash. Also on that date, the Company issued 110,266
shares of common stock to Neal K. Wallach, as repayment of a loan by Mr.
Wallach to the Company of $42,500 plus interest, and in lieu of a further
$40,200 owed as compensation under Mr. Wallach's employment contract with the
Company for services rendered through May 30, 1998. All such shares were
issued under Rule 504 under the Securities Act.
On July 7, 1998, in lieu of paying certain royalties to a person who had
provided services to the Company, the Company issued to such person 80,000
shares of its common stock. Such shares were issued under Rule 504 under the
Securities Act.
On October 6, 1998, the Company issued an aggregate of 114,000 shares of
its common stock to three persons who had provided services to the Company.
Such shares were issued under Rule 504 under the Securities Act. Also on that
date, the Company issued warrants to purchase an aggregate of 55,000 shares
of common stock to two persons who had provided services to the Company. The
exercise prices ranged from $0.75 to $1.75 per share. Such warrants were
issued under Section 4(2) under the Securities Act.
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<PAGE>
On December 22, 1998, the Company issued an aggregate of 155,200 shares
of common stock to various persons who had provided services to the Company.
In addition, the Company issued 360,197 shares to Neal K. Wallach, in lieu of
$199,800 in compensation owed for a portion of the period July 1, 1996
through December 31, 1998 and for $34,328 in unpaid licensing fees. All of
such shares were issued under Rule 504 under the Securities Act. In addition,
the Company issued 26,666 shares of common stock to a person that rendered
services to the Company. Such shares were issued under Rule 903 of Regulation
S under the Securities Act. Also, the Company issued a warrant to purchase
7,500 shares of common stock at an exercise price of $0.625 per share in
connection with services rendered to the Company. Such shares were issued
under Section 4(2) under the Securities Act. Also on that date, the Company
issued 30,000 options to each of Gene Scher and Carl Wallach, vesting
immediately, at exercise prices ranging from $0.75 to $2.00 per share. Such
options were issued pursuant to Rule 701 under the Securities Act.
On December 31, 1998, the Company issued 200,000 stock options to Neal
K. Wallach, vesting 40,000 per year, at an exercise price of $0.75 per share.
Such options were issued pursuant to Rule 701 under the Securities Act.
On January 27, 1999, the Company issued 16,500 shares of its common
stock in connection with the exercise of a warrant. Such shares were issued
under Rule 903 of Regulation S under the Securities Act.
On June 2, 1999 the Company's Board of Directors authorized the issuance
of an aggregate of 39,367 shares of common stock to five persons who had
previously rendered services to the Company. Such shares were issued under
Rule 504 under the Securities Act. Also on that date, Neal K. Wallach was
issued 40,000 shares in lieu of salary through May 30, 1999. Such shares were
issued under Rule 701 under of the Securities Act. Also on that date, the
Company issued warrants to purchase an aggregate of 46,667 shares at exercise
prices ranging from $1.50 to $1.75 per share to two persons who had provided
services to the Company. Such warrants were issued under Section Rule 701
under the Securities Act. Also on that date, the Company issued 10,000
options to each of James Hembree and Carl Wallach at an exercise price $1.50
per share. Such options vest immediately and expire on June 1, 2004. Such
options were issued pursuant to Rule 701 under the Securities Act.
On June 18, 1999 the Company's Board of Directors authorized the
issuance of 7,000 shares to The Investor Relations Company Limited in
connection with consulting services to be provided to the Company. Such
shares were issued under Rule 701 under the Securities Act. Also on that
date, Neal K. Wallach was issued 240,000 shares on account of previous option
exercises under the 1996 Stock Option Plan. Such shares were also issued
under Rule 701 under the Securities Act. Also on that date, in connection
with the modification of his consulting agreement (see "Item 7 -- Certain
Relationships and Related Transactions"), the Company issued to James Hembree
warrants to purchase 64,000 shares at an exercise price of $0.625 per share
and warrants to purchase 24,000 shares at an exercise price of $0.9375 per
share. All of such warrants expire on June 18, 2001, and were issued pursuant
to Rule 701 under the Securities Act. Also on that date, James Hembree was
-26-
<PAGE>
awarded an additional 10,000 nonqualified options under the 1996 Stock Option
Plan. Such options have an exercise price of $1.50, vest immediately, and
expire on June 1, 2004. Such options were issued pursuant to Rule 701 under
the Securities Act.
ITEM 11. DESCRIPTION OF THE SECURITIES.
COMMON STOCK
The Company is authorized to issue 10,000,000 shares of Common Stock. A
total of 3,242,374 shares of Common Stock have been issued. This amount does
not include 480,000 shares of common stock issuable upon exercise of options
and 402,367 shares subject to outstanding warrants. Accordingly, there are
5,875,259 authorized shares of Common Stock which are not issued or reserved
for issuance. These shares may be issued at the discretion of the Board of
Directors of the Company in accordance with the Nevada General Corporation
Law (the "NEVADA LAW"). Unless otherwise required by Nevada law, as in the
case of certain extraordinary actions, stockholder approval will not be
required for the issuance of additional shares of Common Stock.
The holders of Common Stock are entitled to cast one vote for each share
held at all stockholder meetings for all purposes, including the election of
directors, and to share equally on a per share basis in such dividends as may
be declared by the Board of Directors out of funds legally available
therefor. Upon liquidation or dissolution, each outstanding share of Common
Stock will be entitled to share equally in the assets of the Company legally
available for distribution to stockholders, after the payment of all debts
and other liabilities. No holder of Common Stock has a preemptive or
preferential right to purchase or subscribe for any unissued or additional
authorized stock or any securities of the Company convertible into shares of
its Common Stock.
The Common Stock does not have cumulative voting rights, which means
that the holders of more than 50 percent of the Common Stock voting for the
election of directors can elect 100 percent of the directors of the Company
if they choose to do so. The By-Laws of the Company require that a majority
of the issued and outstanding shares of the Company be represented to
constitute a quorum and transact business at a stockholders' meeting.
PREFERRED STOCK
The Board of Director has the authority, without further action by the
shareholders, to issue up to 1,000,000 shares of Preferred Stock in one or
more series and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, conversions rights, voting rights, terms
of redemption, liquidation preferences, sinking fund terms and the number of
shares constituting any series or the designation of such shares, without
further vote or actions by stockholders. The Board has not designated any
shares of Preferred Stock. Therefore, the full 1,000,000 shares of Preferred
Stock are available for issuance in series. The issuance of Preferred Stock
could adverse affect the voting power of holders of Common Stock and the
likelihood that such holders would receive dividends and dividend payments
and payments upon liquidation could have the effect of delaying,
-27-
<PAGE>
deferring or preventing a change of control in the Company. The Company has
no present plan to issue any shares of Preferred Stock.
TRANSFER AGENT
The Transfer Agent and Registrar for the Common Stock is U.S. Stock
Transfer Company.
ANTI-TAKEOVER PROVISIONS
The Company is subject to Sections 78.411 - .444 of the Nevada Law, an
anti-takeover law, which may discourage certain types of transactions
involving an actual or potential change in control of the Company, including
transactions in which the stockholders might otherwise receive a premium for
their shares over the current prices, and may limit the ability of the
stockholders to approve a transaction that they may deem to be in their best
interests.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation provide that no director or
officer shall have any personal liability to the Company or its stockholders
for damages for breach of fiduciary duty as a director or officer, except
that liability will not be eliminated or limited for a director or officer
for (i) acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law, or (ii) the payment of distributions in violation
of Section 78.300 of the Nevada Law.
The Company maintains director and officer liability insurance. There
are no pending claims for indemnification, nor is the Company aware of any
pending or threatened claims which would result in a claim for
indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to director, officers and controlling persons of the
Company under the foreign provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
-28-
<PAGE>
ITEM 13. FINANCIAL STATEMENTS.
Beckman Kirkland & Whitney
Certified Public Accountants
5210 Lewis Road, Suite 14
Agoura Hills, CA 91301
October 8, 1998
Board of Directors and Shareholders
Endless Youth Products, Inc.
Las Vegas, Nevada
We have audited the accompanying balance sheets of Endless Youth Products,
Inc. (a development stage Nevada corporation), as of June 30, 1998 and 1997,
and the related statements of operations, shareholders' (deficit) equity, and
cash flows for the year ended June 30, 1998 and for the period from July 24,
1996 through June 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Endless Youth Products,
Inc., as of June 30, 1998 and 1997, and the results of its operations and
cash flows for the periods indicated, in conformity with generally accepted
accounting principles.
Beckman Kirkland & Whitney
-29-
<PAGE>
ENDLESS YOUTH PRODUCTS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1999 June 30, 1998
-------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 39,162 $ 471
Prepaid advertising (Notes 1 & 2) 0 121,758
Accounts receivable 22,828 0
----------- -----------
TOTAL CURRENT ASSETS 61,990 122,229
Property and Equipment
net of accumulated depreciation (Notes 1 & 3) 10,448 13,448
OTHER ASSETS 46,150 0
----------- -----------
TOTAL ASSETS $ 118,588 $ 135,677
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS'
(DEFICIT) EQUITY
CURRENT LIABILITIES
Accounts payable $ 182,480 $ 204,305
Advances from shareholders (Note 5) 48,000 97,113
----------- -----------
TOTAL LIABILITIES 230,480 301,418
SHAREHOLDERS' (DEFICIT) EQUITY
Common stock, $.001 par value.
Authorized 4,000,000 shares;
issued and outstanding 2,916,011,
2,016,178, and 1,891,587 at March 31, 1999,
June 30, 1998, and June 30, 1997
respectively (Note 6 & 7) 2,916 2,017
Additional paid-in capital 1,053,852 952,881
Retained deficit (1,168,660) (1,120,639)
----------- -----------
Total shareholders' (Deficit) equity (111,892) (165,741)
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDER'S (DEFICIT) EQUITY $ 118,588 $ 135,677
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements
-30-
<PAGE>
ENDLESS YOUTH PRODUCTS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended For The Year Ended
March 31, March 31, June 30,
---------------------------- ----------------------------- ------------------
1999 1998 1999 1998 1998
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Gross Receipts $ 3,517,307 $ 40,586 $ 3,672,377 $ 122,221 $ 225,896
Less: Returns and allowances 928,214 0 928,214 0 14,077
----------- ----------- ----------- ----------- -----------
Net Sales 2,589,093 40,586 2,744,163 122,221 211,819
Cost of Sales 2,424,695 21,070 2,424,695 61,669 70,059
----------- ----------- ----------- ----------- -----------
Gross Profit 164,398 19,516 319,468 60,552 141,760
Selling, General and Administrative
Expenses 62,483 177,951 367,489 493,677 681,366
----------- ----------- ----------- ----------- -----------
Income (Loss) from Operations 101,915 (158,435) (48,021) (433,125) (539,606)
Other Income and (Expenses)
Interest Income 0 0 0 340 340
Interest Expense 0 (420) 0 (420) (8,392)
----------- ----------- ----------- ----------- -----------
Income (Loss) before income taxes 101,915 (158,855) (48,021) (433,205) (547,658)
Provision for income taxes - (Note 4) 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Net income (Loss) $ 101,915 $ (158,855) $ (48,021) $ (433,205) $ (547,658)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Loss per share amounts:
Basic:
Net income (loss) $ 0.03 $ (0.08) $ (0.02) $ (0.22) $ (0.28)
Diluted:
Net income (loss) $ 0.03 $ (0.08) $ (0.02) $ (0.22) $ (0.28)
Weighted average common and
common equivalent shares:
Basic 2,907,759 1,984,962 2,466,095 1,953,833 1,953,833
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Diluted 3,013,833 1,984,962 2,572,169 1,953,833 1,980,108
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to financial statements
-31-
<PAGE>
ENDLESS YOUTH PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
For the nine months ended,
<TABLE>
<CAPTION>
March 31, June 30,
------------------------- -------------------------
1999 1998 1998 1997
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ (48,021) $(433,205) $(547,658) $(572,981)
Adjustments to reconcile net income to
net cash provided by operating activites:
Amortization - $ - $ 147,339 $ 18,678
Depreciation 3,000 0 3,267 1,343
Increase in accounts receivable (22,828) 0 0 0
Increase in accounts payable 0 0 76,647 127,658
(Increase)/Decrease in inventory 0 35,903 35,903 (35,903)
(Increase)/Decrease in prepaid advertising 121,758 85,016 0 (287,775)
Increase in other assets (46,150) 0 0 0
Increase (Decrease) in accounts payable (21,825) 87,590 0 0
---------- --------- --------- ---------
NET CASH USED IN OPERATING ACTIVITIES (14,066) (224,696) (284,502) (748,980)
---------- --------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipement 0 (3,865) (10,090) (7,968)
---------- --------- --------- ---------
NET CASH PROVIDED BY INVESTING ACTIVITIES 0 (3,865) (10,090) (7,968)
---------- --------- --------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 101,870 79,642 169,612 785,286
Advances from (Repayments to) shareholders (49,113) 112,587 83,600 13,513
---------- --------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 52,757 192,229 253,212 798,799
---------- --------- --------- ---------
NET CHANGE IN CASH 38,691 (36,332) (41,380) 41,851
CASH AT BEGINNING OF YEAR 471 41,851 41,851 -
---------- --------- --------- ---------
CASH AT END OF YEAR $ 39,162 $ 5,519 $ 471 $ 41,851
---------- --------- --------- ---------
---------- --------- --------- ---------
Interest expense paid during the period was: $ - $ 420 $ (8,392) $ -
</TABLE>
See accompanying notes to financial statements
-32-
<PAGE>
ENDLESS YOUTH PRODUCTS, INC.
(A Development Stage Company)
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Accumu- Net
Common Stock paid in lated Shareholders'
Shares Amount Capital Deficit Equity
--------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1998 2,016,178 $ 2,017 $ 952,881 $(1,120,639) $ (165,741)
--------- ----------- ----------- ----------- -----------
Stock issued for cash 889,833 899 100,971 101,870
Net loss (48,021) (48,021)
--------- ----------- ----------- ----------- -----------
Balance at March 31, 1999 2,906,011 $ 2,916 $ 1,053,852 $(1,168,660) $ (111,892)
--------- ----------- ----------- ----------- -----------
--------- ----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to financial statements
-33-
<PAGE>
ENDLESS YOUTH PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Endless Youth Products, Inc., (the Company) incorporated July of 1996 in the
State of Nevada. The Company engages in the business of developing, marketing
and distributing proprietary vitamins, nutritional, skin care, personal care,
and other anti-aging products under the "Endless Youth" trade name.
CASH EQUIVALENTS
The Company considers all highly liquid certificates of deposit with an
original maturity of three months or less to be cash equivalents.
INVENTORY
Inventory consists of finished goods stated at cost, which is not in excess
of market. Cost is determined by the first in, first out method.
DEPRECIATION AND AMORTIZATION
Depreciation of property and equipment is computed using the straight-line
method based on estimated useful lives ranging as follows:
<TABLE>
<S> <C>
Furniture and Fixtures 7 years
Computer Equipment 5 years
</TABLE>
PREPAID ADVERTISING COST
Production costs related to the Company's direct response advertising
programs are capitalized and amortized based on the ratio that current period
revenues bear to the total of current and estimated future period revenues
for that direct-response-advertising cost pool.
REVENUE RECOGNITION
Revenue from product sales is recognized upon shipment.
-34-
<PAGE>
ENDLESS YOUTH PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
INCOME TAXES
Provisions (benefits) for federal and state income taxes are calculated on
reported financial statement income (loss) based on current tax law and also
include the cumulative effect of any changes in tax rates from those used
previously in determining deferred tax assets and liabilities. Such
provisions (benefits) differ from the amounts currently payable because
certain items of income and expense, known as temporary differences, are
recognized in different tax periods for financial reporting purposes than for
income tax purposes.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities 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.
NOTE 2 - PREPAID ADVERTISING COST
Prepaid advertising cost consists of infomercial production cost, which are
capitalized and amortized based on current and estimated future revenues.
Amortization expense was $121,758 and $147,339 for the nine months ended
March 31, 1999 and the year ended June 30, 1998, respectively.
Prepaid advertising cost consists of infomercial production cost, which are
capitalized and amortized based on current and estimated future revenues.
During the year ended June 30, 1997, $287,775 was capitalized for infomercial
production cost. Amortization expense was $147,339 and $18,678 for the years
ended June 30, 1998 and 1997, respectively.
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment consist of the following at:
<TABLE>
<CAPTION>
March 31, 1999 June 30, 1998
-------------- -------------
<S> <C> <C>
Furniture and Fixtures $ 2,986 $ 2,986
Computer Equipment 15,072 15,072
less accumulated depreciation (7,610) (4,610)
-------- --------
$ 10,448 $ 13,448
-------- --------
-------- --------
</TABLE>
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Furniture and Fixtures $ 2,986 $ 3,386
Computer Equipment 15,072 4,582
less accumulated depreciation (4,610) (1,343)
-------- --------
$ 13,448 $ 6,625
-------- --------
-------- --------
</TABLE>
-35-
<PAGE>
ENDLESS YOUTH PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - INCOME TAXES
There is no current or deferred income tax expense for the nine months ended
March 31, 1999 and the year ended June 30, 1998. The Company incurred net
operating losses of $48,021 and $547,658 for the nine months ended March 31,
1999 and the year ended June 30, 1998, respectively. As of March 31, 1999,
the Company has net operating loss carryforwards of $1,130,000. These losses
will expire in 2012 and 2013 if not utilized.
There is no current or deferred income tax expense for the years ended June
30, 1998 and 1997. The Company incurred net operating losses of $547,658 and
$572,981 for the years ended June 30, 1998 and 1997 respectively. As of June
30, 1998, the Company has net operating loss carryforwards of $1,120,639.
These losses will expire in 2012 and 2013 if not utilized.
SFAS 109 requires that the future tax benefit of net operating loss
carryforwards be recorded as an asset using current tax rates to the extent
that management assesses the utilization of such carryforwards to be more
likely then not. Since the Company is in the development stage, the Company
has recorded a deferred tax asset of $393,000 with a valuation allowance of
$393,000.
The following reconciles the federal statutory income tax rate to the
effective rate of the provision for income taxes.
<TABLE>
<CAPTION>
March 31, 1999 June 30, 1998
-------------- -------------
<S> <C> <C>
Federal Statutory rate 34% 34%
Valuation allowance adjustment (34)% (34)%
---- ----
Effective rate 0% 0%
---- ----
---- ----
</TABLE>
<TABLE>
<CAPTION>
June 30,
---------------------------
1998 1997
-------- --------
<S> <C> <C>
Federal Statutory rate 34% 34%
Valuation allowance adjustment (34)% (34)%
---- ----
Effective rate 0% 0%
---- ----
---- ----
</TABLE>
-36-
<PAGE>
ENDLESS YOUTH PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company has a license agreement with one of its officers that is also a
director and shareholder. Under the terms of the agreement, the Company
retains the sole right to market goods and services under the Endless Youth
trade name throughout the World. The licensor extended such worldwide rights
to the company following the initial domestic-only grant of these rights. The
Company is to pay the licensor a royalty of 3% of gross sales with a minimum
royalty of $50,000 per year. The licensor is to receive 40% of any revenues
generated from any sublicense or similar agreements.
The Company has a license agreement with one of its officers that is also a
director and shareholder. Under the terms of the agreement, the Company
retains the sole right to market goods and services under the Endless Youth
trade name throughout the World. The licensor extended such worldwide rights
to the company following the initial domestic-only grant of these rights. The
Company is to pay the licensor a royalty of 3% of gross sales with a minimum
royalty of $50,000 per year. The licensor is to receive 40% of any revenues
generated from any sublicense or similar agreements. The Company paid
royalties of $47,330 and $48,064 for the years ended June 30, 1998 and 1997,
respectively relating to this agreement. The agreement expires in June of
2001.
The Company had advances from various shareholders of $48,000 and $97,113 as
of March 31, 1999 and June 30, 1998, respectively, with interest payable at
10 percent annually. In July of 1998, $62,113 of advances were converted to
stock.
The Company had advances from various shareholders of $97,113 and $13,513 as
of June 30, 1998 and 1997, respectively, with interest payable at 10 percent
annually. In July of 1998, $62,113 of advances were converted to stock.
-37-
<PAGE>
ENDLESS YOUTH PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - SHAREHOLDERS' EQUITY
During the year-ended June 30, 1998, the Company granted 200,000 incentive
stock options to employees which vest at 40,000 options per year. During the
nine months ended March 31, 1999, an additional 200,000 incentive stock
options were granted which vest at 40,000 per year. As of March 31, 1999,
400,000 incentive stock options were outstanding with an exercise price of
between $.63 and $.75. During the nine months ended March 31, 1999, 60,000
non-qualified options with immediate vesting were issued with exercise prices
ranging from $.75 to $2.00.
The Company issued warrants to purchase 205,200 and 109,167 shares of common
stock to outside consultants during the year ended June 30, 1998 and the nine
months ended March 31, 1999, respectively. The exercise price of the warrants
range from $.625 to $3.75 and expire between April 2000 and December 2004.
In 1996, the Company established an Incentive Stock Option Plan for its
employees as approved by the shareholders. Under the terms of the plan,
options to purchase 500,000 shares of stock may be granted to employees. The
purchase price of each share shall be 100% of the_! fair market value of a
share on the date the Incentive Stock Option is granted. The maximum term of
options granted under the Plan is 10 years. During the years ended June 30,
1998 and 1997, 40,000 options were granted under this plan each year with an
exercise price of $.60. During the year ended June 30, 1998, the entire
80,000 options were exercised. The Company has adopted FASB 123, however, no
compensation expense has been recorded relating to these options as the
assumptions necessary to determine a fair value for these options could not
be determined due to the development stage of the Company.
In addition to the Incentive Stock Option Plan, the Company issued warrants
to purchase 205,2000 shares to outside consultants during the year ended June
30, 1998. The exercise price of the warrants range from $.60 to $3.50 and
expire between April 2000 and March 2003.
-38-
<PAGE>
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements filed as part of the registration
statement: see pages 29-37.
(b) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
3.1 Articles of Incorporation, as amended.
3.2 Bylaws.
10.1 License Agreement dated as of June 30, 1996 between the
Company and Neal K. Wallach.
10.2 Letter Agreement dated as of March 17, 1998 between Vendor
Services and Neal K. Wallach, as amended by a First
Amendment dated as of December 28, 1998, and a Second
Amendment dated March 19, 1999.
10.3 Agreement dated December 1, 1997 between the Company and
Schulberg Media Works, Inc. and letter agreement amending
such agreement dated March 11, 1998.
10.4 Agreement dated January 21, 1999 between the Company and
Infomercial Development Services, Inc.
10.5 Amended and Restated Employment Agreement dated as of June
2, 1999 between Neal K. Wallach and the Company.
10.6 1996 Stock Option Plan.
10.7 Amendment No. 1 to Stock Option Plan.
10.8 Amendment No. 2 to Stock Option Plan.
10.9 Consulting Agreement dated August 4, 1997 between the
Company and James Hembree.
10.10 Amendment No. 1 to Hembree Consulting Agreement.
10.11 Consulting Agreement dated June 25, 1999 between the
Company and The Investor Relations Company Limited.
-39-
<PAGE>
10.12 Stock Warrant Agreement dated June 14, 1999 between the
Company and The Investor Relations Company Limited.
10.13 Letter, dated January 27, 1999, from Company to Brian
Kelly, regarding financing for Le Solution Derma System.
10.14 Agreement, dated October 1, 1997, between the Company and
Leonard Sands.
11.1 Statement re: calculation of per-share earnings.
23.1 Consent of Beckman Kirkland & Whitney.
27.1 Financial Data Schedule.
</TABLE>
-40-
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized.
ENDLESS YOUTH PRODUCTS, INC.
[REGISTRANT]
Date: June 30, 1999 By: /s/ Neal K. Wallach
-----------------------------------
Neal K. Wallach, Chairman and
Chief Executive Officer
<PAGE>
EXHIBIT 3.1
[STAMP]
ARTICLES OF INCORPORATION
OF
ENDLESS YOUTH PRODUCTS, INC.
The undersigned natural person acting as incorporator of a corporation
(the "Corporation") under the provisions of Chapter 78 of the Nevada Revised
Statutes, adopt(s) the following Articles of Incorporation.
ARTICLE 1
NAME
The name of the Corporation is ENDLESS YOUTH PRODUCTS, INC.
ARTICLE 2
INITIAL RESIDENT AGENT AND REGISTERED OFFICE
The name of the initial resident agent of the Corporation, a corporate
resident of the State of Nevada, whose business address is 1700 Bank of
America Plaza, 300 South Fourth Street, Las Vegas, Clark County, Nevada 89101
is LIONEL SAWYER & COLLINS.
ARTICLE 3
AUTHORIZED SHARES
The aggregate number of shares of all classes of stock which the
Corporation is authorized to issue is 21,000,000 shares, consisting of (i)
20,000,000 shares of common stock ("Common Stock"), par value of $0.001 per
share, and (ii) 1,000,000 shares of preferred stock, par value $0.001 per
share ("Preferred Stock").
The Board of Directors is authorized, subject to any limitations
prescribed by law, to provide for the issuance of the shares of Preferred
Stock in series, and by filing a certificate pursuant to the applicable law
of the State of Nevada, to establish from time to time the number of shares
to be included in each such series, and to fix the designation, powers,
preferences and rights
<PAGE>
of the shares of each such series in any qualifications, limitations or
restrictions thereof, and to increase or decrease the number of shares of any
such series to the extent permitted by the Nevada Revised Statutes, as
amended from time to time.
ARTICLE 4
DATA RESPECTING DIRECTORS
Section 4.01 STYLE OF GOVERNING BOARD. The members of the governing
board of the Corporation shall be styled Directors.
Section 4.02 INITIAL BOARD OF DIRECTORS. The initial Board of
Directors shall consist of one (1) member.
Section 4.03 NAMES AND ADDRESSES. The names and addresses of the
person who is to serve as Director until the first annual meeting of the
shareholders, or until his successors shall have been elected and qualified,
is as follows:
NAME ADDRESS
Neal Wallach 132 South Rodeo Drive
Suite 303
Beverly Hills, California 90212
Section 4.04 INCREASE OR DECREASE OF DIRECTORS. The number of
Directors of the Corporation may be increased or decreased from time to time
as shall be provided in the Bylaws of the Corporation.
ARTICLE 5
LIABILITY OF DIRECTORS AND OFFICERS
No director or officer shall have any personal liability to the
Corporation or its stockholders for damages for breach of fiduciary duty as a
director or officer, except that this Article FIVE shall not eliminate or
limit the liability of a director or officer for (i) acts or omissions which
involve intentional misconduct, fraud or a knowing violation of law, or (ii)
the payment of distributions in violation of Section 78.300 of the Nevada
Revised Statutes.
2
<PAGE>
ARTICLE 6
DATA RESPECTING INCORPORATORS
The name and address of the incorporator of the Corporation is as
follows:
NAME ADDRESS
Neal Wallach 132 South Rodeo Drive
Suite 303
Beverly Hills, California 90212
EXECUTED this 22nd day of July, 1996.
/s/ Neal K. Wallach
-----------------------------------------
NEAL WALLACH
ACKNOWLEDGMENT
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On July 22, 1996, before me, the undersigned, a Notary Public,
personally appeared Neal Wallach, personally known to me/proved to me on the
basis of satisfactory evidence to be the person whose name is subscribed to
the within instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
[SEAL] /s/ Nicole A. Wade
-------------------------------
NOTARY PUBLIC
<PAGE>
[STAMP]
CERTIFICATE OF ACCEPTANCE
OF
APPOINTMENT AS RESIDENT AGENT
In the matter of Endless Youth Products, Inc.
LIONEL SAWYER & COLLINS hereby certifies that on the 24th day of July,
1996, it accepted the appointment as Resident Agent of the above-entitled
corporation in accordance with Nevada Revised Statute 78.030.
LIONEL SAWYER & COLLINS further certifies that the office of the
Resident Agent for Service of Process in this State of said corporation is
located at 1700 Bank of America Plaza, 300 South Fourth Street, Las Vegas,
Nevada 89101.
Dated: July 24 1996
----------------,
LIONEL SAWYER & COLLINS
By: /s/ Mark H. Goldstein
------------------------------
Mark H. Goldstein, Esq.
<PAGE>
[STAMP]
CERTIFICATE REGARDING
REVERSE STOCK SPLIT
NEAL K. WALLACH HEREBY CERTIFIES AS FOLLOWS:
1. He is the duly appointed and acting President and Secretary of
Endless Youth Products, Inc., a Nevada corporation (the "COMPANY").
2. This Certificate is being executed in accordance with the
requirements of Section 78.209 of the Nevada Revised Statutes with respect to
a five-to-one reverse stock split pursuant to Section 78.207 of the Nevada
Revised Statutes approved by the Board of Directors on May 7, 1998.
3. The current number of authorized shares and the par value of each
class and series of shares before such reverse stock split are as follows:
20,000,000 shares of Common Stock, par value $0.001 per share, and 1,000,000
shares of Preferred Stock, par value $0.001 per share.
4. The number of authorized shares and the par value of each class of
shares after such reverse stock split are as follows: 4,000,000 shares of
Common Stock, par value $0.001 per share, and 1,000,000 of Preferred Stock,
par value $0.001 per share.
5. Each issued and outstanding share of Common Stock shall be
exchanged for 0.2 shares of Common Stock in connection with such reverse
stock split.
<PAGE>
6. The approval of the stockholders of the Company is not required
pursuant to Section 78.209(1) of the Nevada Revised Statutes.
7. The changes reflected in this Certificate shall become effective
on the opening of business on May 26, 1998.
8. The record date for such reverse stock split shall be May 22, 1998.
In accordance with Section 78.209(1) of the Nevada Revised Statutes,
Article 3 of the Company's Articles of Incorporation shall be deemed to be
amended as provided in this Certificate effective as of the date set forth in
paragraph 7.
Dated: May 7, 1998 /s/ Neal K. Wallach
-----------------------------
Neal K. Wallach, President and Secretary
ACKNOWLEDGMENT
State of California
County of Los Angeles
On May 7, 1998, before me, a Notary Public, personally appeared NEAL K.
WALLACH, personally known to be (or proved to me on the basis of satisfactory
evidence) to be the person) whose name is subscribed to the within instrument
and acknowledged to me that he executed the same in his authorized capacity,
and that by his signature on the instrument the person, or the entity upon
behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Mary Anne Brown [SEAL]
- ----------------------------------------------
-2-
<PAGE>
[STAMP]
CERTIFICATE OF CORRECTION
NRS 78.0295
SB 297
1. The name of the corporation for which correction is being made:
ENDLESS YOUTH PRODUCTS, INC.
2. Description of the original document for which correction is being made:
CERTIFICATE REGARDING REVERSE STOCK SPLIT.
3. Filing date of the original document:
MAY 8, 1998.
4. Description of the incorrect statement and the reason it is incorrect
or the manner in which the execution or other authentication was
defective:
PARAGRAPH 5 OF SUCH CERTIFICATE INCORRECTLY DESCRIBES THE TREATMENT OF
FRACTIONAL SHARES.
5. Correction of the incorrect statement or defective execution or
authentication:
PARAGRAPH 5 AS CORRECTED READS AS FOLLOWS:
"EACH ISSUED AND OUTSTANDING SHARE OF COMMON STOCK SHALL BE
EXCHANGED FOR 0.2 SHARES OF COMMON STOCK IN CONNECTION WITH SUCH
REVERSE STOCK SPLIT; PROVIDED, HOWEVER, THAT IN LIEU OF THE
ISSUANCE OF FRACTIONAL SHARES TO ANY STOCKHOLDER, THE NUMBER OF
SHARES TO BE ISSUED TO SUCH STOCKHOLDER IN SUCH EXCHANGE SHALL BE
ROUNDED UP TO THE NEXT HIGHEST WHOLE NUMBER OF SHARES."
6. Corporate officer's signature:
/s/ Neal K. Wallach
-------------------------------------------
Neal K. Wallach, President and Secretary
<PAGE>
[STAMP]
CERTIFICATE REGARDING
AMENDMENT OF ARTICLES OF INCORPORATION
NEAL K. WALLACH HEREBY CERTIFIES AS FOLLOWS:
1. He is the duly appointed and acting President and Secretary of
Endless Youth Products, Inc., a Nevada corporation (the "COMPANY").
2. This Certificate is being executed in accordance with the
requirements of Section 78.390 of the Nevada Revised Statutes with respect to
an amendment of the Company's Articles of Incorporation approved by the Board
of Directors on June 1, 1999.
3. The first paragraph of Article 3 of the Articles of Incorporation
of the Company are amended to read as follows:
The aggregate number of shares of all classes of stock which the
Corporation is authorized to issue is 11,000,000 shares, consisting
of (i) 10,000,000 shares of Common Stock ("Common Stock"), par value
$0.001 per share, and (ii) 1,000,000 shares of Preferred Stock, par
value $0.001 per share ("Preferred Stock").
4. The foregoing amendment to the Articles of Incorporation were
approved by the Directors and by Stockholders holding a majority of the
outstanding shares of Common Stock.
/s/ Neal K. Wallach
Dated: June 7, 1998 aka /s/ Neal Kevin Wallach
----------------------------------
Neal K. Wallach, President and
Secretary
<PAGE>
ACKNOWLEDGEMENT
State of California
County of Los Angeles
On June 7, 1998, before me, Emily E. Brown, a Notary Public, personally
appeared NEAL K. WALLACH, personally known to be (or proved to me on the
basis of satisfactory evidence) to be the person) whose name is subscribed to
the within instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Emily E. Brown [SEAL]
- -------------------------
-2-
<PAGE>
EXHIBIT 3.2
CODE OF BYLAWS
OF
ENDLESS YOUTH PRODUCTS, INC.
ARTICLE I
IDENTIFICATION
Section 1.01. NAME. The name of the corporation is Endless Youth
Products, Inc.
Section 1.02. REGISTERED OFFICE AND RESIDENT AGENT. The address of the
registered office of the corporation is 1700 Bank of America Plaza, 300 South
Fourth Street, Las Vegas, Nevada 89101; and the name of the resident agent at
this address is LIONEL SAWYER & COLLINS.
Section 1.03. FISCAL YEAR. The fiscal year of the corporation shall
begin on the 1st day of July in each year and end on the 30th day of June
next following.
ARTICLE II
STOCK
Section 2.01. ISSUANCE OF SHARES. Shares of stock may be issued for
labor, services, personal property, real estate or leases thereof or for
money from time to time by the Board of Directors at the date and time
designated by the Board of Directors. Treasury shares may be disposed of by
the corporation for such consideration as aforesaid from time to time by the
Board of Directors.
Section 2.02. PAYMENT OF SHARES. The consideration for the issuance of
shares may be paid in whole or in part, in money, in other property, as
aforesaid, or in labor or services actually performed for the corporation.
When payment of the consideration for which shares are to be issued shall
have been received by the corporation, such shares shall be deemed to be
fully paid and nonassessable. Future services shall not constitute payment
or part payment for shares of the corporation. In the absence of fraud in
the transaction, the judgment of the Board of Directors as to the value of
the consideration received for shares shall be conclusive. No certificate
shall be issued for any share until the share is fully paid.
Section 2.03. CERTIFICATES REPRESENTING SHARES. Each holder of the
shares of stock of the corporation shall be entitled to a certificate signed
by the President or a Vice President and the Secretary or an Assistant
Secretary of the corporation, certifying the number of shares owned by him in
the corporation.
<PAGE>
Section 2.04. TRANSFER OF STOCK. The corporation shall register a
transfer of a stock certificate presented to it for transfer if:
(a) ENDORSEMENT. The certificate is properly endorsed by the
registered holder or by his duly authorized attorney;
(b) WITNESSING. The endorsement or endorsements are witnessed by
one witness unless this requirement is waived by the Secretary of the
corporation;
(c) ADVERSE CLAIMS. The corporation has no notice of any adverse
claims or has discharged any duty to inquire into any such claims;
(d) COLLECTION OF TAXES. There has been compliance with any
applicable law relating to the collection of taxes.
ARTICLE III
THE SHAREHOLDERS
Section 3.01. PLACE OF MEETINGS. Meetings of the Shareholders of the
corporation shall be held at the office of Messrs. Lionel Sawyer & Collins,
legal counsel to the corporation, 1700 Bank of America Plaza, 300 South
Fourth Street, Las Vegas, Nevada, 89101, or at any other place within or
without the State of Nevada as may be designated in the notice thereof.
Section 3.02. ANNUAL MEETINGS. The annual meeting of the Shareholders
shall be held each year at a location designated by the Board of Directors at
the date and time designated by the Board of Directors. Failure to hold the
annual meeting at the designated time shall not work a forfeiture or
dissolution of the corporation.
Section 3.03. SPECIAL MEETINGS. Special meetings of the Shareholders
may be called by the President, the Board of Directors, or by the Secretary
at the written request (stating the purpose or purposes for which the meeting
is called) of the holders of not less than one-tenth of all the shares
entitled to vote at the meeting.
Section 3.04. NOTICE OF MEETINGS; WAIVER. Written notice stating the
place, day, and hour of the meeting and, in case of a special meeting the
purpose or purposes for which the meeting is called, shall be delivered not
less than ten (10) nor more than sixty (60) days before the date of the
meeting, either personally or by mail, by or at the direction of the
President, the Secretary, or the officer or persons calling the meeting, to
each registered holder entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States
mail addressed to the registered holder at his address as it appears on the
stock transfer books of the corporation, with postage on it prepaid. Waiver
by a Shareholder in writing of notice of a
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<PAGE>
Shareholders' meeting shall constitute a waiver of notice of the meeting,
whether executed and/or delivered before or after such meeting.
Section 3.05. QUORUM. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
the Shareholders. The Shareholders present at a duly organized meeting may
continue to do business until adjournment, notwithstanding the withdrawal of
enough Shareholders to leave less than a quorum. The act of a majority of
the shares entitled to vote at a meeting at which a quorum is present shall
be the act of the Shareholders, unless a greater number is required by
applicable law.
Section 3.06. PROXIES. A Shareholder may vote either in person or by
proxy executed in writing by the Shareholder or by his duly authorized
attorney-in-fact. No proxy shall be valid after six months from the date of
its creation, unless otherwise provided in the proxy.
Section 3.07. ACTION WITHOUT A MEETING. Any action that may be taken
at a meeting of the Shareholders, or of a committee, may be taken without a
meeting if a consent in writing, setting forth the actions taken, shall be
signed by the Shareholders, or the members of the committee, holding at least
a majority of the voting power, unless a greater proportion of voting power
is required for such an action at a meeting, as the case may be.
ARTICLE IV
THE BOARD OF DIRECTORS
Section 4.01. NUMBER AND QUALIFICATIONS. The business and affairs of
the corporation shall be managed by a Board of four Directors. The number
of Directors may be increased or decreased from time to time and at any time
by the Shareholders, or Board of Directors.
Section 4.02. ELECTION. Members of the initial Board of Directors
shall hold office until the first annual meeting of Shareholders and until
their successors shall have been elected and qualified. At the first annual
meeting of Shareholders and at each annual meeting thereafter, the
Shareholders shall elect Directors to hold office until the next succeeding
annual meeting. Each Director shall hold office for the term for which he is
elected and until his successor shall be elected and qualified.
Notwithstanding anything herein to the contrary, any Director may be removed
from office at any time by the vote or written consent of Shareholders
representing not less than two-thirds of the issued and outstanding stock
entitled to vote.
Section 4.03 VACANCIES. Any vacancy occurring in the Board of
Directors may be filled by the affirmative vote of the majority of the
remaining Directors though less than a quorum of the Board of Directors. A
Director elected to fill a vacancy shall be elected for the unexpired term of
his predecessor in office, subject to removal as aforesaid.
Section 4.04. PLACE OF MEETING. The Board of Directors, annual,
regular or special, may be held either within or without the State of Nevada.
3
<PAGE>
Section 4.05. ANNUAL MEETINGS. Immediately after the annual meeting of
the Shareholders, the Board of Directors may meet each year for the purpose
of organization, election of officers, and consideration of any other
business that may properly be brought before the meeting. No notice of any
kind to either old or new members of the Board of Directors for this annual
meeting shall be necessary.
Section 4.06. OTHER MEETINGS. Other meetings of the Board of
Directors may be held upon notice by letter, telegram, facsimile, cable, or
radiogram, delivered for transmission not later than during the third day
immediately preceding the day for the meeting, or by word of mouth,
telephone, or radiophone received not later than during the second day
preceding the day for the meeting, upon the call of the President or
Secretary of the corporation at any place within or without the State of
Nevada. Notice of any meeting of the Board of Directors may be waived in
writing signed by the person or persons entitled to the notice, whether
before or after the time of the meeting. Neither the business to be
transacted at, nor the purpose of, any meeting of the Board of Directors need
be specified in the notice or waiver of notice of the meeting.
Section 4.07. QUORUM. A majority of the number of Directors holding
office shall constitute a quorum for the transaction of business. The act of
the majority of the Directors present at a meeting at which a quorum has been
achieved shall be the act of the Board of Directors unless the act of a
greater number is required by applicable law.
Section 4.08. ACTION WITHOUT A MEETING. Any action that may be taken
at a meeting of the Directors, or of a committee, may be taken without a
meeting if a consent in writing, setting forth the actions taken, shall be
signed by all of the Directors, or all of the members of the committee, as
the case may be.
Section 4.09. LOANS. The Board of Directors shall have the following
power with respect to the lending of funds:
(a) LOAN OF FUNDS, GENERALLY. To lend money in furtherance of any of
the purposes of the corporation; to invest the funds of the corporation from
time to time; and to take and hold any property as security for the payment
of funds so loaned or invested; but to make no loans secured by the shares of
the corporation.
(b) LOAN TO EMPLOYEES. To lend money to its employees, other than its
officers and Directors, and to otherwise assist its employees, officers, and
Directors; but to make no loans secured by the shares of the corporation.
ARTICLE V
THE OFFICERS
Section 5.01. OFFICERS. The officers of the corporation shall consist
of a President, Secretary and Treasurer, and may also include a Chairman of
the Board, one or more Vice Presidents, Assistant
4
<PAGE>
Secretaries, Assistant Treasurers, or such other officers or assistant
officers or agents as may be provided herein, or otherwise deemed necessary,
from time to time by the Board of Directors. Officers need not be Directors
of the corporation. Each officer so elected shall hold office until his
successor is elected and qualified, but shall be subject to removal at any
time by the vote or written consent of a majority of the Directors.
Section 5.02. VACANCIES. Whenever any vacancies shall occur in any
office by death, resignation, increase in the number of offices of the
corporation, or otherwise, the same shall be filled by the Board of
Directors, and the officer so elected shall hold office until his successor
is elected and qualified, subject to removal as aforesaid.
Section 5.03. THE CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of
the Board of Directors shall preside at all meetings of the Directors,
discharge all duties incumbent upon the presiding officer, and perform such
other duties as the Board of Directors may prescribe.
Section 5.04. THE PRESIDENT. The President shall have active executive
management of the operations of the corporation, subject, however, to the
control of the Board of Directors. He shall preside at all meetings of
Shareholders, discharge all the duties incumbent upon a presiding officer,
and perform such other duties as this Code of Bylaws provides or the Board of
Directors may prescribe. The President shall have full authority to execute
proxies in behalf of the corporation, to vote stock owned by it in any other
corporation, and to execute powers of attorney appointing other corporations,
partnerships, or individuals the agent of the corporation.
Section 5.05. THE VICE PRESIDENT. The Vice President shall perform all
duties incumbent upon the President during the absence or disability of the
President, and shall perform such other duties as this Code of Bylaws may
provide or the Board of Directors may prescribe.
Section 5.06. THE SECRETARY. The Secretary shall attend all meetings
of the Shareholders and of the Board of Directors, and shall keep a true and
complete record of the proceedings of these meetings. He shall be custodian
of the records of the corporation. He shall attend to the giving of all
notices and shall perform such other duties as this Code of Bylaws may
provide or the Board of Directors may prescribe.
Section 5.07. THE TREASURER. The Treasurer shall keep correct and
complete records of account, showing accurately at all times the financial
condition of the corporation. He shall be the legal custodian of all moneys,
notes, securities, and other valuables that may from time to time come into
the possession of the corporation. He shall immediately deposit all funds of
the corporation coming into his hands in some reliable bank or other
depositary to be designated by the Board of Directors, and shall keep this
bank account in the name of the corporation. He shall furnish at meetings of
the Board of Directors, or whenever requested, a statement of the financial
condition of the corporation, and shall perform such other duties as this
Code of Bylaws may provide or the Board of Directors may prescribe. The
Treasurer may be required to furnish bond in such amount as shall be
determined by the Board of Directors.
5
<PAGE>
Section 5.08. TRANSFER OF AUTHORITY. In case of the absence of any
officer of the corporation, or for any other reason that the Board of
Directors may deem sufficient, the Board of Directors may transfer the powers
or duties of that officer to any other officer or to any Director or employee
of the corporation, provided a majority of the full Board of Directors
concurs.
ARTICLE VI
NEGOTIABLE INSTRUMENTS, DEEDS, AND CONTRACTS
Section 6.01. All checks, drafts, notes, bonds, bills of exchange, and
orders for the payment of money of the corporation; all deeds, mortgages, and
other written contracts and agreements to which the corporation shall be a
party; and all assignments or endorsements of stock certificates, registered
bonds, or other securities owned by the corporation shall, unless otherwise
required by law, or otherwise authorized by the Board of Directors as
hereinafter set forth, be signed by the President or by anyone of the
following officers: Vice President, Secretary, or Treasurer. The Board of
Directors may designate one or more persons, officers or employees of the
corporation, who may, in the name of the corporation and in lieu of, or in
addition to, those persons hereinabove named, sign such instruments; and may
authorize the use of facsimile signatures of any of such persons. Any shares
of stock issued by any other corporation and owned or controlled by the
corporation may be voted at any Shareholders' meeting of the other corporation
by the President of the corporation, if he be present; or, in his absence, by
the Secretary of the corporation and, in the event both the President and
Secretary shall be absent, then by such person as the President of the
corporation shall, by duly executed proxy, designate to represent the
corporation at such Shareholders' meeting.
ARTICLE VII
INDEMNIFICATION OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS: INSURANCE
Section 7.01. The corporation shall indemnify, to the maximum extent
permitted by the law, any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, except
an action by or in the right of the corporation, by reason of the fact that he
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonable incurred by him
in connection with such action, suit or proceeding if he acted in good faith
and in a manner which he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonable believed to be in or not opposed to
the best interests of the
6
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corporation, and that, with respect to any criminal action or proceeding, he
had reasonable cause to believe that his conduct was unlawful.
Section 7.02. The corporation shall indemnify, to the maximum extent
permitted by the law, any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses, including
attorneys' fees, actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith
and in a manner which he reasonably believed to be in or not opposed to the
best interests of the corporation, but no indemnification shall be made in
respect of any claim, issue or matter as to which such person has been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the corporation unless and only to the extent that the court in which
such action or suit was brought determines upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
as the court deems proper.
Section 7.03. To the extent that a director, officer, employee or agent
of the corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in sections 1 and 2, or in
defense of any claim, issue or matter therein, he shall be indemnified by the
corporation against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with such defense.
Section 7.04. Any indemnification under sections 1 and 2, unless
ordered by a court, shall be made by the corporation only as authorized in
the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in sections 1 and 2. Such
determination shall be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum
consisting of directors who were not parties to such act, suit or proceeding;
(c) If such a quorum of disinterested directors so orders, by
independent legal counsel in a written opinion; or
(d) If such a quorum of disinterested directors cannot be
obtained, by independent legal counsel in a written opinion.
Section 7.05. Expenses incurred in defending a civil or criminal
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding as authorized by the
board of directors in the specific case upon receipt of an undertaking by or
on
7
<PAGE>
behalf of the director, officer, employee or agent to repay such amount
unless it is ultimately determined that he is entitled to be indemnified by
the corporation as authorized in this section.
Section 7.06. The indemnification provided by this section:
(a) Does not exclude any other rights to which a person
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office; and
(b) Shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 7.07. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or as serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this section.
8
<PAGE>
ARTICLE VIII
AMENDMENTS
Section 8.01. The power to alter, amend, or repeal this Code of Bylaws,
or adopt a new Code of Bylaws, is vested in the Board of Directors, but the
affirmative vote of a majority of the Board of Directors holding office shall
be necessary to effect any such action.
I hereby certify that the foregoing Bylaws are a true and correct copy
of the Bylaws of Endless Youth Products, Inc. as adopted on the 24th day of
July, 1996.
/s/ Neal K. Wallach
--------------------------------
Neal K. Wallach, Secretary
9
<PAGE>
EXHIBIT 10.1
LICENSE AGREEMENT
This Agreement made and entered into as of this 30th day of June, 1996,
by and between NEAL WALLACH, a citizen of the United States (hereinafter
"Licensor"), and ENDLESS YOUTH PRODUCTS, INC., a Nevada corporation
(hereinafter "Licensee").
WHEREAS, Licensor is the owner of certain Proprietary Rights (as
hereinafter defined); and
WHEREAS, Licensor wishes to grant to Licensee and Licensee wishes to
acquire certain rights and licenses in connection with the Proprietary Rights;
NOW, THEREFORE, in consideration of the mutual covenants,
obligations and undertakings set forth hereinafter, the parties do hereby
agree as follows:
1. DEFINITIONS.
1.1 The term "Marks" shall mean the designations set forth on
the attached Exhibit "A", as may be amended from time to time upon mutual
agreement by the parties.
1.2 The term "Proprietary Rights" shall mean any and all
applications and registrations secured and to be secured for the Marks; the
good will associated therewith; and any and all other rights and privileges
provided under the trademark, unfair competition and other laws of the United
States, the individual states thereof and jurisdictions foreign thereto with
respect to the Marks.
1.3 The term "Licensed Goods/Services" shall mean those goods
and services set forth on attached Exhibit "B", as may be amended from time
to time upon mutual agreement by the parties.
1.4 The term "Territory" shall mean the entire world.
<PAGE>
2. GRANT.
2.1 Licensor hereby grants to Licensee and Licensee hereby
accepts a license during the Term (as defined below) solely to use the marks
under the proprietary rights in connection with the provision of licenses
goods/services all in accordance with the terms and provisions of this
Agreement.
2.2 During the Term, Licensor reserves to itself, its agents,
affiliates, distributors, representatives, licensees, franchisees and
customers and their successors and assigns. The right to use the marks for
any and all purposes not inconsistent with Licencee's rights provided herein.
2.3 No trademark other than the marks shall be used or shall be
affixed by Licensee to any of the licensed goods/services without the prior
written consent of Licensor which consent may be granted or withheld by
Licensor in the exercise of its good faith subjective discretion.
3. ROYALTIES.
3.1 Upon execution hereof by Licensee, Licensee shall pay to
Licensor the sum of $10.00.
3.2 As additional consideration for the rights granted by
Licensor to Licensee hereunder, Licensee shall pay to Licensor three percent
(3%) of Licensee's gross sales for each monthly period at the times and in
the manner hereinafter set forth. In connection therewith, Licensee
guarantees Licensor a minimum royalty in the amount of $50,000 per year
during the Term which shall be due and payable each year on the anniversary
date of this Agreement. In addition, Licensee shall reimburse Licensor for
its ongoing expenses incurred in connection with maintaining current and
effective registrations of the Marks. In the event Licensor consents to the
grant by
-2-
<PAGE>
Licensee of any sublicense or similar arrangement by which Licensee's revenue
is dependent on a percentage or minimum fee arrangement with another party,
which such sublicense or arrangement must be approved by Licensor (which
approval may be granted or withheld by Licensor in the exercise of its good
faith subjective discretion), the parties agree to share in any gross revenue
and any other revenues generated by such sublicenses or arrangements forty
percent (40%) to Licensor and sixty percent (60%) to Licensee.
3.3 The royalties payable by Licensee to Licensor hereunder
shall be paid monthly in arrears by check drawn on a bank acceptable to
Lessor within twenty-five (25) days after the end of each calender month (or
partial calendar month) during the Term and within twenty-five (25) days
after the date of expiration of termination of this Agreement.
3.4 Licensee shall provide Licensor monthly, simultaneously
with the payment of the royalties due Licensor, with a written report in such
detail as Licensor shall reasonably request disclosing the sources and amount
of Licensee's sales during the preceding month and the royalties due with
respect to such sales pursuant to the terms of this Agreement.
4. QUALITY CONTROL.
4.1 The parties acknowledge that the quality of goods/services
provided by Licensee in connection with the Marks is controlled by Licensor.
Licensee shall adhere to the quality control provisions hereunder. In
addition, Licensee shall require its sublicensees to adhere to all of the
terms and conditions of this Agreement, including the quality control
provisions hereunder. Any right of Licensor hereunder shall apply with the
same force and effect with respect to any sublicensee.
-3-
<PAGE>
4.2 Upon request by Licensor, Licensee shall immediately submit
to Licensor samples of any and all advertising, marketing, and promotional
materials to be used by Licensee in connection with the provision of Licensed
Goods/Services, for purposes of inspection and approval and to determine if
such materials meet the standards of quality acceptable to Licensor.
4.3 Licensee shall use the Marks on marketing, advertising, and
promotional materials only in the manner of display illustrated in the
attached Exhibit "A" or in a manner of display otherwise approved in writing
by Licensor prior to use by Licensee. Licensor shall have the right to alter
the required manner of display of the Marks by Licensee at any time during
the continuance hereof.
4.4 Licensee shall permit Licensor, at regular business hours,
upon reasonable notice and acting through such agents or representatives as
Licensor may designate, to inspect Licensee's facilities to insure that
Licensed Goods/Services are being rendered in conformity with standards of
quality acceptable to Licensor.
4.5 Licensee shall not use the Marks or any variation thereof
in any advertising or promotional material in a manner which may detract from
or impair the integrity, character, or dignity of the Marks or reflect
unfavorably upon Licensor.
4.6 Should Licensee or one or more of its sublicensees fail to
comply with any one or more of the provisions hereunder, or fail, to the
satisfaction of Licensor, to meet the standards of quality with respect to
Licensed Goods/Services established by Licensor, Licensor shall have the
right to terminate this Agreement in accordance with the provisions of
Section 6.2.1, which termination shall automatically terminate any
sublicenses granted by Licensee.
5. OWNERSHIP.
-4-
<PAGE>
5.1 Licensee recognizes and acknowledges the validity of
Licensor's rights in and to the Proprietary Rights and any and all
applications and registrations secured and to be secured therefor, and
Licensee further agrees not to challenge the validity of the Proprietary
Rights, and not to oppose or petition to cancel any applications filed or
registrations received in respect of such rights.
5.2 All rights created by or arising from use of the Marks by
Licensee shall be and remain the sole and exclusive property of Licensor, and
Licensee does hereby waive and renounce any and all claims to such rights.
6. TERM.
6.1 Unless this Agreement is sooner terminated as provided
herein, it shall remain in force throughout an initial period of five (5)
years from the date first stated above and shall be automatically renewed for
an additional five-year period unless either party gives written notice to
the contrary prior to the date of expiration of such initial or subsequent
periods.
6.2 Without prejudice to any other right, Licensor shall have
the right to terminate this Agreement upon written notice to Licensee if:
(a) Licensee shall have committed a breach of any
obligation on its part hereunder and such breach shall remain
uncured for thirty (30) days after notice of such breach to
Licensee; or
(b) Licensee becomes insolvent, assigns for the benefit of
creditors or is subject to any bankruptcy or receivership
proceedings.
-5-
<PAGE>
6.3 Termination of this Agreement for any reason shall be
without prejudice to any rights of either party against the other which may
have accrued before the date of such termination.
6.4 After termination of this Agreement, Licensee shall have no
further express authorization or consent from Licensor to advertise, market,
promote or provide License Goods/Services or any other product or service in
connection with the Marks.
6.5 Termination of the rights and licenses granted herein to
Licensee shall automatically terminate any sublicenses created by Licensee.
7. MISCELLANEOUS.
7.1 RELATIONSHIP OF THE PARTIES. Nothing in this Agreement
shall be construed to place the parties in the relationship of partners,
joint venturers or agents. Neither Licensee nor Licensor shall have the power
to obligate or bind the other in any manner whatsoever. Licensor in no way
represents itself as guarantor of the quality of any product or service
manufactured, marketed, provided or sold by Licensee.
7.2 NOTICE. Any communication or notice relating to this
Agreement shall be in writing and shall be given by sending the same by
confirmed facsimile transmission, in pre-paid certified mail, or by
delivering the same by hand at the address of the receiving party as given
hereinafter, and any notice so given shall be deemed to have been served
three (3) days after it has been deposited in the U.S. mail, or as the case
may be, at the time it is delivered by facsimile transmission or by hand:
-6-
<PAGE>
If to Licensor:
Neal Wallach
c/o Heenan Blaikie
9401 Wilshire Boulevard, Suite 1100
Beverly Hills, CA 90212
If to Licensee:
Endless Youth Products, Inc.
6767 West Tropicana, Suite 206
Las Vegas, NV 89103
7.3 INTEGRATION. This Agreement supersedes and cancels any and
all previous agreements and understandings between the parties pertaining to
the subject matter hereof, and this instrument comprises the complete and
final expression of the rights, obligations, duties and undertakings of the
parties and sets forth all consideration, covenants, understandings and
inducements pertaining hereto. This Agreement may be modified only in a
writing signed by the duly authorized representatives of both parties.
7.4 APPLICABLE LAW. Construction and performance of this
Agreement shall be governed by the laws of the State of Nevada.
7.5 ASSIGNABILITY. This Agreement and all rights, duties,
obligations, and undertakings shall be binding upon and inure to the benefit
of the successors and assigns of the parties; provided, however, that this
Agreement and all rights, duties, obligations and undertakings set forth
herein are personal to Licensee, whereby Licensee shall not assign or
otherwise transfer, including by way of sublicense, any of such rights,
duties, obligations or undertakings to any third parties without the prior
written consent of Licensor, and any attempt at such assignment or transfer
without such prior consent shall be without effect.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by the authorized representatives.
Dated: 6/30/96 Licensor:
---------------------
/s/ Neal Wallach
---------------------------------------
NEAL WALLACH
Dated: 6/30/96 Licensee:
---------------------
ENDLESS YOUTH PRODUCTS, INC.
By /s/ Neal Wallach
------------------------------------
Its: Chief Executive Officer
----------------------------------
-8-
<PAGE>
EXHIBIT A
MARKS
ENDLESS YOUTH
POWER CERTIFIED
ANTI-AGING FORMULATION
LIFE IS SUBHERB
YOUR HEALTH IS OUR WORLD
-9-
<PAGE>
EXHIBIT 10.2
DATE: March 17, 1998
TO: Neal Wallach (Via Fax #310-277-1477)
FROM: Brian Kelly
SUBJECT: Endless Youth
- -------------------------------------------------------------------------------
This agreement ("Agreement") is by and among Vendor Services, a California
general partnership ("Vendor") on the one hand and Neal Wallach, a Nevada
resident and owner of certain proprietary rights and Endless Youth Products,
Inc., a Nevada corporation (hereinafter collectively referred to as "Owners")
on the other hand regarding certain services which Vendor shall provide Owner
in connection with Owners' vitamin product ("Product") more specifically
defined on Exhibit "A" attached hereto.
RECITALS
a. Owners own the Product and a direct response commercial
("Infomercial") designed to sell the Product.
b. Owners would like to receive certain vendor services in connection
with the marketing and distribution of the Product.
c. Owners have already conducted successful preliminary tests of the
Infomercial and Product and are choosing between various vendors to provide
it media and other services.
d. Owners desire to cause Vendor to provide them certain services, more
particularly described below.
The parties agree as follows:
1. MEDIA BUYING AND OTHER VENDOR SERVICES. Owners shall provide Vendor
with a master of the Infomercial and cause Vendor to purchase media and test
the Infomercial's ability to sell Product. Vendor shall purchase media for
Owners and shall be entitled to compensation (described below). Vendor shall
also provide Owners other vendor services as more fully described in Exhibit
"B".
2. ROYALTIES. Owners shall be fully responsible for paying royalties
and fees to all third parties related to the sale of the Product and the
airing of the Infomercial (except Lenny Sands).
1
<PAGE>
3. INDEMNITY. Owners shall defend and indemnify Vendor, at Owners'
cost, with legal counsel selected by Vendor, for any liability Vendor may
incur (including, but not limited to, trademark, patent and false advertising
claims) as a result of its sale of the Product, its airing of the Infomercial
or any other matter related to this project; however, Owners shall have no
duty to defend and indemnify Vendor for liability Vendor incurs due to its
own gross negligence or wilful misconduct. To the extent Vendor is required
to pay any amount to a third-party as a result of Owners' breach hereunder,
Vendor may pay such amount directly (or escrow same) in lieu of paying Owners
amounts otherwise due hereunder.
4. INFOMERCIAL AIRINGS.
4.1 INITIAL TEST. Owners hereby grant Vendor the exclusive right to
air the Infomercial for fifteen (15) days as an initial media test. Vendor
shall commence this media test as soon as possible, but in no event later
than March 28, 1998.
4.2 SECOND TEST. If the initial test is deemed successful by
Vendor, Owners shall grant Vendor the exclusive right to air the Infomercial
for another one hundred and one hundred and twenty (120) days.
4.3 ROLL-OUT. If the second test is deemed successful by Vendor,
Owners shall grant Vendor the exclusive right to air the Infomercial during
the "Term".
5. REPRESENTATIONS. Owners represent and warrant that (a) they are the
sole Owners of the Product and Infomercial and all rights related thereto,
(b) the use and sale of the existing Product and Infomercial, and the
titles, logos and references made therein, are permitted and do not infringe
upon the rights of any third-party, (c) the Product and Infomercial comply
with any and all Federal, State, local laws and regulations as well as all
NIMA guidelines, (d) Owners have not entered into any oral or written
contract which would impair the rights granted to Vendor or limit the
effectiveness of this agreement, nor is Vendor aware of any claims or actions
which may limit or impair any of the rights granted to Vendor hereunder, (e)
Owners shall not devise, produce or sell any products or infomercials similar
to the Product or Infomercial during the term (or any renewal) of this
agreement without providing Vendor the right to provide vendors services as
described herein (however, Owners shall sell the Product at Endless Youth
Longevity Centers only), and (f) the full exercise of the rights granted
Vendor hereunder shall not violate or infringe upon any intellectual property
rights or any other right of any third party. Owners recognizes that Vendor
has been presented with a completed Infomercial and has had no responsibility
in its creation, including any and all claims made therein.
6. CUSTOMER LIST. Vendor shall compile and exclusively maintain a
list of names and addresses of those ordering the Product.
2
<PAGE>
7. CONTROL. Subject to this agreement, Owners shall own and maintain
all rights in and to the Infomercial and the Product; however, Owners grants
Vendor the exclusive right to act as Owners's agent to air the Infomercial and
sell the Product, including the right to provide vendor services on any
sequel project on terms no less favorable than set forth herein. Owners
further agrees that once it has granted an approval to Vendor on a particular
matter, such approval shall not be required by Vendor thereafter.
8. INSURANCE. Owners shall obtain errors and omissions and general
commercial and product liability insurance with policy limits of not less
than one million dollars ($1,000,000) per occurrence and two million dollars
($2,000,000) in the aggregate customarily maintained by Product Owners. The
parties agrees that (i) the deductible on any insurance policy acquired
hereunder shall not exceed ten thousand dollars ($10,000), (ii) the other
party shall be named as an additional insured on the applicable insurance
policies, (iii) the insurance policies shall be endorsed to provide no less
than ten (10) days notice to all named insureds if any insurance benefit
decreases, and (iv) all insurances shall have no less than an "A" rating (or
equivalent thereof) in the Best Guide.
9. PAYMENTS.
9.1 TESTING PAYMENTS. Upon agreement of the fulfillment process for
the initial test phase of the Infomercial and the full execution of this
Agreement, Owners shall receive fifteen thousand dollars ($15,000). If the
initial test is deemed successful, Vendor shall, at its election, on the
first day of each month of this second test phase either (i) cause Owner to
receive thirty thousand dollars ($30,000) as an advance applied against
Owners' Gross Receipts, or (ii) purchase twenty thousand dollars ($20,000)
worth of registered and immediately tradeable stock from Owners at $.22 per
share and cause Owners to receive ten thousand dollars ($10,000) which ten
thousand dollars ($10,000) shall be treated as an advance applied against
Owners's Gross Receipts. This test period shall continue for up to one
hundred twenty (120) days. Vendor may terminate the test upon five (5) days
written notice.
9.2 OWNERS. Owners shall cause Vendor to be paid for the services it
provides hereunder out of Product revenues. Vendor, on behalf of Owners,
shall collect all revenues in trust. Owners shall be remitted "Gross
Receipts" which is defined as nine percent (9%) of "unadjusted sales
revenue". provided, however, that once Owners have retained $2,250,000 in one
year, then Owners shall thereafter be able to retain an additional one
percent (1%) of Unadjusted Sales Revenue until the end of such year.
"Unadjusted Sales Revenue" is defined as the revenue collected from Product
sales, less returns/refunds, credit card fees (not to exceed two and one-half
percent (2 1/2%)) and chargebacks, declines, cancellations, bad debt and sales
taxes and shall not include costs and revenues associated with shipping and
handling.
3
<PAGE>
9.3 VENDOR'S EXCLUSIVITY. Vendor shall maintain its rights hereunder
so long as Vendor pays Owners at least one hundred thousand dollars
($100,000) per quarter year beginning after the second test marketing Period;
however, if Vendor has paid Owners an average of over $100,000 over any two
(2) consecutive quarters, then this quota shall be deemed satisfied for the
applicable two (2) quarters (by way of example, if Vendor pays Owners
$125,000 in quarter one and $75,000 in quarter two, the quota shall be deemed
satisfied for quarter one and quarter two). If this quota is not met, then
Owners may give Vendor notice of same and Vendor shall have the right to
either (i) cure by paying Owners the difference between what was actually
paid and the minimum amount within thirty (30) days, or (ii) maintain all
rights described hereunder to continue to provide Vendor services, but on a
non-exclusive basis only.
10. INDEPENDENT. Owners and Vendor are dealing with the other as
independent contractors, and each shall be responsible, without liability to
the other, for the timely payment of all taxes and other withholdings,
deductions and payments required by law with respect to its own operations
and employees.
11. LAW. This agreement shall be governed by the laws of the State of
California, applicable to agreements made and to be performed entirely within
such State.
12. FIDUCIARY. Not withstanding anything to the forgoing, no fiduciary
duty obligations shall be created as a result of this Agreement.
13. TERM. The term of this Agreement shall be so long as Owners receive
at least (i) $400,000 in year one, (ii) $600,000 in year 2, (iii) $700,000 in
year 3 and (iv) $800,000 thereafter. If Owners fail to receive such minimum
amounts in any full year, then Owners may give Vendor notice of same and
Vendor shall have thirty (30) days to cure by paying Owners the difference
between what was actually paid and the minimum amount. If Owners do not
receive such amount from Vendor after such thirty (30) day period, then
Owners may terminate Vendor's exclusive rights hereunder. Upon termination
of this Agreement, Vendor may sell off any remaining Product it has in
inventory and honor any commitments made prior to termination.
14. ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties with respect to the subject matter hereof and supersedes in
their entirety all prior agreements and understandings between the parties
with respect to the subject matter hereof, whether oral or written, which
shall have no further force or effect. Each party has executed this
Agreement without reliance upon any promise, representation or warranty other
than those expressly set forth herein. Each party acknowledges that (i) it
has carefully read this Agreement; (ii) it has had the assistance of legal
counsel of its choosing (and such other professionals and advisors as it has
deemed necessary) in the review and execution hereof; (iii) the meaning and
effect of the various terms and provisions hereof have been fully explained
to it by such counsel; (iv) it has conducted such investigation, review and
analysis as it has been necessary to understand the provisions of this
Agreement and the transactions contemplated hereby; and (v) it has executed
this Agreement of its own free will.
4
<PAGE>
If the terms described herein are acceptable to you, please sign your
name below, keep one original for your files and return the other to me.
Vendor Services, a general partnership
By: /s/ [ILLEGIBLE]
--------------------------------
AfterMarket, Inc.,
a California corporation, its
general partner
AGREED AND ACCEPTED THIS
17 DAY OF MARCH, 1998
Neal Wallach, a Nevada resident
By: /s/ Neal K. Wallach
----------------------------
An Individual
Endless Youth Products, Inc., a
Nevada corporation
By: /s/ Neal K. Wallach
----------------------------
Its: President
5
<PAGE>
EXHIBIT "A"
Product Definition
For purposes of this agreement, Product shall be defined as:
Endless Youth Vitamins and herbal supplements provided by Owners
6
<PAGE>
EXHIBIT "B"
1. RESPONSIBILITIES OF EACH PARTY
RESPONSIBLE PARTY
<TABLE>
<CAPTION>
VENDOR OWNERS ITEM
- ------ ------ ----
<C> <C> <S>
- -- X Write, finance and produce completed
Infomercial (including generic end tag,
applicable credit card notations, shipping
and handling, taxes and addresses),
Product and Product "welcome letter"
- -- X Provide master of Products and edited
Infomercial
- -- X Payment of actually owed royalties to
third parties other than Lenny Sands
X -- Purchase all media and receive and
process mail orders; obtaining direct
response phone numbers and causing
order fulfillment to occur.
</TABLE>
7
<PAGE>
FIRST AMENDMENT
This "First Amendment" is by and among Vendor Services, Inc., a Delaware
corporation ("Vendor") on the one hand and Neal Wallach, a Nevada resident
and owner of certain propriety rights and Endless Youth Products, Inc., a
Nevada corporation (collectively, "Owner"), on the other hand.
RECITALS
A. Owner and Vendor entered into a certain agreement dated March 1, 1998
("Agreement"); and
B. Owner and Vendor desire to amend certain portions of the Agreement.
THE PARTIES AGREE AS FOLLOWS:
1. ASSIGNMENT. Vendor Services, a California general partnership has
transferred all of its rights, obligations, opportunities and
liabilities to Vendor Services, Inc., a Delaware corporation.
2. PARAGRAPH 9.2 Paragraph 9.2 of the Agreement is hereby deemed deleted
and replaced with the following:
"Owners shall cause Vendor to be paid for the services it provides
hereunder out of Product sale revenues. Vendor, on behalf of
Owners, shall collect all sales revenues in trust. Owners shall be
remitted "Gross Receipts" which is defined as revenues collected in
trust by Vendor less payments to Vendor for required services,
which shall be in an amount equal to ninety-one percent (91%) of
such collected revenues; provided, however, that once Owners have
retained $2,250,000 in one year, then Owners shall thereafter be
able to retain an additional one percent (1%) of Unadjusted Sales
Revenue until the end of such year. Further, revenue collected by
Vendor from Product sales is an amount equal to all revenues
collected by Vendor less returns/refunds, credit card fees (not to
exceed two and one-half percent (2 1/2%)), chargebacks, declines,
cancellations, bad debts and sales taxes, and shall not include
cost and revenues associated with shipping and handling."
3. CONFLICT. Any conflict between this First Amendment and the Agreement
shall be controlled by this First Amendment.
<PAGE>
If the terms described herein are acceptable to you, please sign your name
below, keep one original for your files and return the other to me.
Vendor Services, Inc., a Delaware corporation
/s/ B. Van de Bunt
- ------------------------
By: Ben Van de Bunt
Its Corporate Secretary
AGREED AND ACCEPTED THIS DECEMBER 28, 1998.
Neal Wallach, a Nevada resident
/s/ Neal Wallach
- -------------------------
By: Neal Wallach
Endless Youth Products, Inc., a Nevada corporation
/s/ Neal Wallach
- --------------------------
By: Neal Wallach
Its Chairman and President
<PAGE>
SECOND AMENDMENT
This "Second Agreement" dated March 19, 1999 is by and among Vendor
Services, Inc., a Delaware corporation ("Vendor") on the one hand and Neal
Wallach, a Nevada resident and owner of certain proprietary rights and
Endless Youth Products, Inc., a Nevada Corporation (hereinafter collectively
referred to as "Owner"), on the other hand.
RECITALS
A. Vendor and Owners are parties to an Agreement dated March 17, 1998
("Agreement") and a First Amendment dated December 28, 1998 ("First
Amendment").
B. The parties wish to modify the terms of the Agreement upon the
terms described below.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS. All capitalized words herein shall be defined herein as in
the Agreement and First Amendment.
2. TERM OF AGREEMENT. The parties agree that the Term of the Agreement is
deemed to have started on August 15, 1998. The parties further agree
that if Vendor pays Owner at least four hundred thousand dollars
($400,000) between August 15, 1998 and August 14, 1999, then the minimum
amount Vendor was required to pay to cause the Agreement to be renewed
for a second year will have been met pursuant to paragraph 13 of the
Agreement, however, the parties agree that any advances which are paid
by VS to Owner prior to August 14, 1999 but are recouped after August
14, 1999 will not apply to the annual minimum requirements to renew the
Term for the next one (1) year period.
3. NEW ADVANCES. Beginning on August 15, 1999 and for the entire second
year, Vendor shall pay to Owner a monthly advance of fifty thousand
dollars ($50,000). So long as Vendor desires to renew the Agreement
thereafter, it shall continue to pay Owner this fifty thousand dollar
($50,000) per month advance. Except for the one hundred thousand dollar
($100,000) advance described in paragraph 6 below, which will be
recouped as described in paragraph 6, any and all other advances paid by
Vendor to Owner shall be applied against amounts remitted to Owner
("Remitted Amount"), as described in Paragraph 9.2 of the First
Amendment.
4. ADDITIONAL STOCK. Prior to August 15, 1998, Vendor paid Owner one
hundred thirty-five thousand dollars ($135,000). In exchange, Owner
agrees to provide Vendor additional warrants to purchase Owner's stock
based on the amount of media Vendor purchases, in its sole discretion,
for the Endless Youth infomercial during the 1999 calendar year.
Specifically, Owner shall provide Vendor warrants to purchase the
following shares of stock:
<PAGE>
4.1 Thirty thousand (30,000) shares of Owners' publicly traded stock at
one dollar and seventy-five cents ($1.75) per share if Vendor
purchases two million two hundred fifty thousand ($2,250,000) or
more dollars of media between January 1, 1999 and April 30, 1999;
4.2 Thirty thousand (30,000) shares of Owners' publicly traded stock at
two dollars and twenty-five cents ($2.25) per share if Vendor
purchases one million five hundred thousand ($1,500,000) or more
dollars of media between May 1, 1999 and August 31, 1999; and
4.3 Thirty thousand (30,000) shares of Owners' publicly traded stock at
two dollars and seventy-five cents ($2.75) per share if Vendor
purchases two million two hundred fifty thousand ($2,250,000) or
more dollars of media between September 1, 1999 and December 31,
1999.
5. EXERCISE OF WARRANTS. If Vendor elects to execute the warrants
described in paragraph 4.1-4.3 within one hundred and eighty days (180)
from the date of its grant which shall be May 1, 1999, September 1, 1999
and January 1, 2000. The shares Vendor receives will be held a 120 day
trading restriction following this period, the shares shall be freely
transferable by Vendor.
6. TREATMENT OF PRIOR ADVANCES. The parties agree that as of March 15,
1999 for sales through January 1999, Vendor has paid Owner $266,666
(i.e., $33,333 for each of the eight months of August 15, 1998 through
March 15, 1999). The parties agree that $141,494 of this amount shall
be treated as an advance against future Remitted Amounts due Owner under
the Agreement for the period ending August 14, 1999. Owner has
requested, and Vendor has agreed, to cause this $141,494 to be recouped
in four equal payments of $35,373 each. Specifically, Remitted Amounts
otherwise payable to Owner on April 15, May 15, June 15 and July 15,
1999 (for sales with respect to February, March, April, and May 1999,
respectively) shall be reduced by $35,373 each month, as long as the
minimum monthly Remitted Amount is equal to or greater than $33,333. To
the extent Remitted Amounts during these months are insufficient to
cause Vendor to recoup any portion of these $35,373 payments, then
Vendor shall apply any unrecouped payments toward subsequent months
Remitted Amounts.
7. ADVANCES. On April 15, 1999 and through July 15, 1999, Vendor agrees to
pay Owner, each month, the greater of (a) a thirty-three thousand three
hundred thirty-three dollars ($33,333) advance, or (b) the nine percent
(9%) Remitted Amount described in paragraph 9.2 of the First Amendment
agreement. All such payments made shall be treated as fully recoupable
advances, as long as minimum quarterly Remitted Amounts are paid to
Owner, pursuant to paragraphs 9.3 and 13 of the Agreement as clarified
below in paragraph 9 of this Second Amendment. (For example, in month
12 of year 2 the minimum monthly
<PAGE>
Retained Amount of $50,000 is greater than the 9% Remitted Amount
based on sales Vendor has already paid Owner $1 million in the prior
eleven months of year 2 and Vendor has the right to renew the Agreement
for year 3. Vendor can treat such portion of the $50,000 it paid to
Owner in month 12 of year 2 which is greater than the 9% Remitted Amount
that would have been owing based on sales as an advance in year 3
against Remitted Amounts. This advance shall not apply against the
minimum quarterly amounts payable pursuant to paragraphs 9.3 and 13 of
the Agreement.)
8. BANK ACCOUNT. Vendor hereby confirms that it has set up a separate bank
account for the Endless Youth infomercial project and shall not
co-mingle funds from other projects in the Endless Youth account. In
addition, Vendor shall pay and provide Endless Youth with financial
statements within, approximately, forty-five days (45) of the closing of
a month. By way of example, if Vendor closes its financial books for
January at the end of February, then it shall send its royalty payments
and financial statements within fifteen days (15) from the end of such
month, or on or around March 15th.
9. CLARIFICATION. Pursuant to paragraphs 9.3 and 13 of the Agreement, the
parties agree that Owner shall continue to have the right to convert
this Agreement into a non-exclusive agreement, pursuant to paragraphs
9.3 and 13 of the Agreement, if Vendor fails to pay Owner an average of
at least $100,000 during year ending August 14, 1999 and $150,000 for
year ending August 14, 2000 (and subsequent minimums based on paragraph
13 of the Agreement), either through a 9% Remitted Amount or advance,
for any two consecutive quarters. Two consecutive quarters is clarified
in paragraph 9.4 of the Agreement which provided that as long as in the
first quarter payments exceed the required minimum amount, then the
quarters can be averaged. The first quarter amounts, not second quarter
payments, must be greater than the minimum for this formula to have
application. (For example, if $150,000 is paid in quarter three of the
year ending August 14, 1999, then for Vendor to retain exclusive rights
$50,000 is required to meet the minimum of the exclusivity clause.) If
Vendor fails to make these minimum payments to Owner, then Owner shall
give Vendor notice of same and Vendor shall have the right to either
cure by paying to Owner the difference between what was actually paid
and the minimum amount to retain exclusivity, or maintain all its rights
hereunder, but on a non-exclusive basis only.
10. OTHER ISSUES. The parties are currently unaware of any issue which
would cause one party to pursue a legal action against the other.
Notwithstanding the foregoing, nothing in this paragraph 10 shall limit
the legal rights of either party to pursue a legal claim in the future.
<PAGE>
11. OTHER TERMS. Any conflict between this Second Amendment, the First
Amendment and the Agreement shall be interpreted to reflect the terms
described herein. All other terms of the Agreement and First Amendment
shall remain in full force and effect. The parties agree to sign this
Second Amendment in counterparts, all of which together shall constitute
one and the same executed agreement.
The parties have reflected their agreement to the terms described herein by
signing below.
VENDOR SERVICES, INC., a
Delaware corporation
By:/s/ B. Van de Bunt
-------------------------
Ben Van de Bunt, its
Corporate Secretary
ENDLESS YOUTH PRODUCTS, INC., a
Nevada corporation
By:/s/ Neal K. Wallach
------------------------------
Neal K. Wallach, its President
NEAL K. WALLACH, a Nevada resident
By:/s/ Neal K. Wallach
------------------------------
Neal K. Wallach
<PAGE>
EXHIBIT 10.3
AGREEMENT
This Agreement is effective this 1st day of December, 1997 at Las Vegas,
Nevada, by and between Endless Youth Products, Inc., a Nevada Corporation
("EY") located at 6767 W. Tropicana Blvd., Suite 206 Las Vegas, NV 89103 and
Schulberg MediaWorks, Inc., a California Corporation ("SMW") located at 69
Green Street, San Francisco, CA 94111 and is made with reference to the
following facts:
RECITALS
A) SMW is a company specializing in the development, implementation, and
management of strategic marketing plans and direct response multimedia
marketing campaigns.
B) EY is a manufacturing and distribution company that currently owns all
rights and interests in the name of "Endless Youth -TM-" in North America;
and
AGREEMENT
NOW THEREFORE, for mutual consideration, the sufficiency of which is hereby
agreed, EY hereby engages SMW and SMW hereby accepts such engagement, to
provide marketing assistance to EY, on all the terms and conditions specified
herein and the parties hereto agree as follows:
--------------------
ARTICLE 1: SERVICES
--------------------
1.1. In consideration for the compensation to be paid by EY pursuant to
section Article 2: of this Agreement, SMW shall provide:
(a) MARKETING SERVICES. SMW shall provide good faith, best efforts
marketing services to EY in connection with EY's business of selling the
Products through the Infomercial and direct response marketing which is
related to the infomercial (the "Campaign").
(b) SUPPORT FUNCTIONS. SMW will assist EY in establishing inbound
telemarketing and product fulfillment subcontractors and SMW will continue to
act as liaison to these sub-contractors. SMW shall be responsible for
oversight of the EY's inbound telemarketing and fulfillment for Infomercial
sales and other agreed products which shall include but not be limited to
the auditing of bills, customer lists, shipping records, and credit card
deposit records in order to insure their accuracy.
(c) RE-EDIT. SMW shall cause the Infomercial to be re-edited, and deliver
to EY a videotape master of the finished Infomercial.
(d) SMW will develop a strategy and implement a media test (the
"Infomercial Test") for a roll-out of the Infomercial. EY shall provide a
minimum of twenty thousand dollars ($20,000) for such test.
-1-
<PAGE>
(e) SMW will arrange for the continued airing of the Infomercial including
working with a media Placement agency. Such airings shall be approved by EY.
(f) SMW will work with EY to develop other products and avenues to sell
existing and new products.
1.2 CAMPAIGN COSTS. Other than costs associated with the re-editing and
duplication tape of the Informercial for broadcast, EY shall be responsible
for other costs or expenses related to the Campaign.
------------------------
ARTICLE 2: COMPENSATION
------------------------
EY shall pay to SMW the following fees under this Agreement. Such fees
shall be earned upon receipt.
2.1 MARKETING FEE. For a period of five years from the date of the signing of
this agreement, SMW shall receive a Marketing Fee of seven percent (7%) of
the Gross Sales Revenue generated by EY, from customers of EY who were
obtained from the informercial, or by any other media arranged by SMW in
support of the informercial or other approved marketing programs.
2.2 GROSS SALES REVENUE. As used herein, "Gross Sales Revenue" shall be
defined as the sum of all gross receipts generated from sales of EY's
Products to customers who were obtained directly from the Informercial or
such other approved marketing programs or through sources arranged by SMW in
support of such programs. PROVIDED however, that Gross Sales Revenue shall
be reduced for any applicable returns and allowances, the cost of shipping
and handling, and the cost of telemarketing services.
2.3 STOCK BONUS. Fifteen days after the end of each quarter, SMW shall
receive stock bonuses as follows:
a) Provided that the average Media Ratio (which shall be defined as the
gross dollars earned divided by the gross media buy) generated during the
quarter on all media dollars spent is greater than .85 but less than 1.00,
for every $100,000 in media placed during the quarter. SMW shall receive
2,000 warrants to purchase EY's common stock at a price equal to the greater
of 85% of the last traded stock price or $.50.
b) Provided that the Media Ratio generated during the quarter on all media
dollars spent is equal to or greater than 1.0, for every $100,000 in media
placed during the quarter, SMW shall receive 10,000 warrants to purchase EY's
common stock at a price equal to the greater of 85% of the last traded stock
price or $.50.
2.4 TIMING OF PAYMENTS. The Marketing Fee shall be paid monthly, within
fifteen (15) days of the end of each month. All other fees under this
agreement shall be paid as specified herein.
-2-
<PAGE>
2.5 AUDIT. EY shall keep, maintain and preserve for at least three (3)
years from their creation, complete and accurate records and accounts
including, without limitation, invoices, correspondence, banking,
financial and other records relating to its sales, revenues, costs, and
related data concerning Products and Other Products. Such records and
accounts shall be available for inspection and audit and any time or times
during or after the term of this Agreement during reasonable business hours
and upon reasonable notice by SMW or its nominees. During such inspections
and audits, SMW shall have the right as it deems necessary, to take
extracts and/or make copies of EY's records relating to this Agreement.
Further, in the event that any such audit reveals that EY has understated
Gross Sales Revenue by more than five percent (5%), EY shall bear the full
cost of such audit.
-----------------------
ARTICLE 3: TERMINATION
-----------------------
3.1 TERMINATION: EY shall have the option to terminate this agreement upon
the occurrence any of the following events:
a) TERMINATION FOR PERFORMANCE:
i. The failure by SMW to select Informercial Test broadcast times by
December 30, 1997.
ii. The failure by SMW to have a re-edited Infomercial ready for airing
with broadcast duplicates by January 6, 1998.
iii. The failure by SMW to commence Informercial Test by January 10, 1998.
iv. The failure by SMW to achieve a Media Ratio equal to or greater than
.75 during the Infomercial Test.
v. The failure by SMW in any one month to place, if asked to place in
writing by EY, a minimum of $150,000 per month in media and to obtain
a Media Ratio of .75 for media so placed.
b) MUTUAL AGREEMENT. The mutual agreement of all parties.
c) NON-DEFAULTING PARTY. By the non-defaulting party in the event of a
material breach of this Agreement by the defaulting party and the failure by
the defaulting party to cure such breach within fifteen (15) days of notice
by the non-defaulting party.
-3-
<PAGE>
- -------------------------------------------------------------------------------
ARTICLE 4: INDEMNIFICATION
- -------------------------------------------------------------------------------
4.1 INDEMNIFICATION. EY and SMW agree to a reciprocal indemnification and
hold each other and their respective employees, agents and affiliates
harmless from and against any and all loss, claim damage, liability and
expense (including without limitation, costs of investigations, legal
and other fees and expenses incurred in connection with and any
amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which each party may become subject under any
applicable statute or regulation of any jurisdiction, or at common law
(whether tort, contract or any other basis), or otherwise, insofar as
such loss, claim, damage, liability or expense arises from or is based
upon the fact that performed services to EY hereunder, provided,
however, that either party shall not be entitled to indemnification
hereunder for any act or omission constituting negligence, willful
misconduct or material breach of this Agreement by such party.
- -------------------------------------------------------------------------------
ARTICLE 5: NONCIRCUMVENTION AND CONFIDENTIALITY
- -------------------------------------------------------------------------------
5.1 CONFIDENTIALITY. The parties agree to maintain as confidential, and not
to disclose to any third party without the prior consent of the other
party, any information of a proprietary nature which one party learns
from the other party as part of the necessary process of performing
their services and obligations under this Agreement, other than
information (a) which was already public knowledge at the item it was
learned by the party, or which subsequently came into the public domain
through no fault of the receiving parties; (b) which is necessary or
appropriate to disclose in order to comply with applicable laws, rules
and regulations or enable a party to comply with this Agreement; (c)
which was lawfully received by the receiving party from a third party
free of an obligation of confidence to such third party; (d) which was
already in the possession of the receiving party prior to the receipt of
thereof, directly or indirectly, from the disclosing party; or (e) which
is required to be disclosed in a judicial or administrative proceeding
after all reasonable legal remedies for maintenance of such information
in confidence have been exhausted including, but not limited to giving
the originator of the Confidential information as much advance notice of
the possibility of such disclosure as practical so the originating party
may attempt to obtain a protective order concerning such disclosure.
- -------------------------------------------------------------------------------
ARTICLE 6: GENERAL
- -------------------------------------------------------------------------------
6.1 RELATIONSHIPS. EY and SMW are independent companies and nothing in this
agreement shall be construed as conferring any agency, association,
joint venture, general or limited partnership or employer relationship.
6.2. AUTHORIZATION. The parties hereto represent that they are authorized
to execute this Agreement.
-4-
<PAGE>
6.3 SUBJECT HEADINGS. The subject headings of the paragraphs of this
Agreement are included for purposes of convenience only and shall not
affect the construction or interpretation of any of its provisions.
6.4 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties pertaining to the subject matter contained in it and
supersedes all prior and contemporaneous agreements, representations,
and understandings of the parties. No supplement, modification, or
amendment of this Agreement shall be binding unless executed in writing
by all parties. Any waiver of any of the provisions of this Agreement
shall be deemed, or shall constitute, a waiver of any other provisions,
whether or not similar, nor shall any waiver constitute a continuing
waiver. Any waiver shall be binding unless executed in writing by the
party making the waiver.
6.5 PARTIES. This Agreement shall be binding on and shall inure to the
benefit of the parties to it and their respective heirs, legal
representatives, successors, and assigns.
6.6 SEVERABILITY. The provisions of this Agreement are severable and, if
any clause or provision shall be held invalid or unenforceable in whole
or in part, in any jurisdiction, then such invalidity or
unenforceability shall effect only such clause or provision, or part
thereof, in such jurisdiction and shall not in any manner effect such
clause or provisions in any other jurisdiction, and in respect of the
jurisdiction in which such clause or provision is effected, the parties
agree to substitute therefore a provision which most closely
approximates the relative rights and obligations intended by the parties.
6.7 COUNTERPARTS. This Agreement may be signed in counterparts with the
same effect as if the signatories hereto and thereto were upon the same
instrument.
6.8 JURISDICTION. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada applicable to contracts
made and performed in that State.
This Agreement has been executed by the parties hereto as of the date
first above written.
Endless Youth Products, Inc. ("EY") Schulberg MediaWorks, Inc. ("SMW")
/s/ Neal Wallach /s/ Jon Schulberg
- ---------------------------------- ----------------------------------
Neal Wallach, Chairman/CEO Jon Schulberg, President
-5-
<PAGE>
[LOGO]
ENDLESS YOUTH
PRODUCTS, INC.
- --------------------------------------------------------------------------------
To : Jon Schulberg
Company : Schulberg MediaWorks
Facsimile No. : 415.362.5390
From : Neal K. Wallach
Telephone No. : +1.702.248.1005
Facsimile No. : +1.702.248.1082
Date : March 11, 1998 Pages: One
This facsimile may contain certain information which is privileged,
confidential and protected from disclosure. If you are not the intended
recipient of this transmission or the person responsible for its delivery to
the addressee, please immediately notify our office on receipt.
- -------------------------------------------------------------------------------
Dear Jon,
Pursuant to yesterday's telephone conversation, this memorandum sets forth
the specific details of our working relationship in connection with any
transactions that shall involved the Guthy-Renker organization. These
details amend our December 1, 1997 agreement only with respect to
Guthy-Renker. All other aspects of the December 1, 1997 Agreement remain in
effect.
1. You will receive 1.75% of Unadjusted Sales Revenue derived from Endless
Youth product sales to customers derived from the infomercial.
Unadjusted Sales Revenue is defined as the revenue collected from Endless
Youth product sales, less returns/refunds, credit card fees (with a cap of
2.5%) and charge backs, declines, cancellations, bad debt and sales taxes and
shall not include costs and revenues associated with shipping and handling.
2. In addition, you will receive .75% of all other product sales made or
arranged by the Guthy-Renker organization or any of its affiliates in which
Endless Youth Products, Inc. is entitled to receive a percentage payment from
Guthy-Renker.
As we discussed, all other marketing avenues and new product development of
the original December 1, 1997 agreement remains in effect and I hope that we
can rapidly achieve new opportunities.
Warm regards,
/s/ Neal
<PAGE>
EXHIBIT 10.4
DATE: January 21, 1999
TO: Neal Wallach, President
Endless Youth Products, Inc.
FROM: Benjamin S. Gage, President
Infomercial Development Services, Inc.
SUBJECT: "Le Solution Derma System" Marketing and Distribution Agreement
- ------------------------------------------------------------------------
Dear Neal:
This Marketing and Distribution Agreement ("Agreement") is between Endless
Youth Products Inc., a Nevada corporation ("EY") and Infomercial Development
Services, Inc., a California corporation ("IDS"), regarding the marketing and
distribution of the LE SOLUTION DERMA SYSTEM ("the Product"). The Product
which is the subject of this Agreement is defined on the attached Exhibit
"A".
1. PREVIOUS AGREEMENT. Effective as of November 17, 1998, EY and IDS
entered into a Letter of Intent regarding the subject of this Agreement. It
is the express intention of the parties that this Agreement shall supercede
the previous Letter of Intent between them and that this Agreement shall
serve as the sole and complete agreement between EY and IDS.
2. OWNERSHIP OF PRODUCT. EY is the owner of all of the worldwide patent,
trademark, and other intellectual property rights related to the Product. As
specified herein, IDS grants to EY the exclusive right to use the Infomercial
to market and sell the Product in all media, worldwide, during the term of
this Agreement. EY shall be solely responsible for defending, indemnifying,
and holding IDS harmless against any patent, trademark, or infringement
claims related to the Product which may be brought against IDS. However,
during the Term of this Agreement, EY and IDS shall jointly determine the
appropriate action to be taken against any person or entity who may infringe
on the Product of the rights granted hereunder and the costs of any such
action shall be either paid or reimbursed from the proceeds resulting from
the sale of the Product. If EY and IDS mutually agree to take and equally
pay for legal action due to an infringement, they shall equally share in the
proceeds resulting from any such action. Notwithstanding the foregoing,
either IDS or EY may individually take action against a party to protect
rights granted hereunder and if either party proceeds individually, it shall
incur all costs and recover all proceeds related to such action.
3. PRODUCTION OF INFOMERCIAL. IDS and EY shall be jointly responsible for
the coordination of all activities related to the production of the 30 minute
infomercial or other form(s) or direct response television commercial(s)
promoting the Product("the Infomercial"). IDS shall be solely responsible
for the payment of the cost of production of the Infomercial in accordance
with the production budget, the payment of the cost of the production of the
Infomercial in accordance with the production budget, approved in advance and
in writing by IDS, which shall be attached to the Production Agreement
between IDS and the Infomercial Producer jointly selected by IDS and EY. It
is agreed by EY and IDS
<PAGE>
that the total cost and budget for all aspects of the production of the
Infomercial shall not exceed $230,000. Any production funds not expended for
the production of the Infomercial may be allocated for either editing of the
Infomercial or the media test of the Infomercial as shall be jointly
determined by IDS and EY. Except for the script review, approvals and the
substantiation of IDS specified in Section 3.1 below, EY shall have full
creative control over the content of the Infomercial.
As Infomercial Production Agreement between IDS, EY, and Monte-Brooks
Productions, the anticipated Producer of the Infomercial, is currently in
negotiation. The Production Agreement provides for progress payments which
total $145,000 to the Producer at specified periods during the production of
the Infomercial. IDS and EY agree that the timely payment of such amounts
are of the essence for this Agreement. Therefore, if the Producer terminates
the Production Agreement due to a payment default by IDS, EY shall have the
option of terminating this Agreement.
3.1 IDS APPROVALS. EY shall provide IDS with a copy of the Infomercial
script for IDS' reasonable approval prior to commencing production of the
Infomercial. Additionally, EY and IDS shall jointly (i) cause an infomercial
substantiation expert jointly selected by EY and IDS to review and approve
the Infomercial and the Product, as evidenced by an unqualified opinion
letter from such expert setting forth such approval, and (ii) obtain all
contracts, claims, substantiation materials, trademark confirmation, patent
confirmation, and similar information as reasonably necessary to evidence
such matters for this project. All participants in the Infomercial shall
sign a release satisfactory to IDS in the form indicated on the attached
Exhibit "B" and incorporated herein by reference.
3.2 IDS ASSISTANCE. On an "as requested" basis, IDS has agreed to
provide EY with assistance regarding certain aspects of the production of the
Infomercial. Such matters may include: creation of a budget; selection of a
producer; oversight of the production; and participation in editing. All
such services shall be provided subject to the availability of IDS personnel
and without charge to EY.
3.3. OWNERSHIP OF INFOMERCIAL AND MARKETING MATERIALS. IDS shall be the
sole owner or exclusive licensee of all testimonials, raw footage, and all
other elements of the Infomercial and all other promotional and/or marketing
materials related to the Infomercial. EY shall be the sole owner of all
promotional and/or marketing materials related to the Product. During the
term of this Agreement, EY shall exclusively license the right to use all of
these Product marketing materials to IDS for the sole purpose of the
production of the Infomercial. Upon the termination of this Agreement, all
rights of EY to broadcast, exhibit, or otherwise utilize the Infomercial for
any purposes whatsoever shall immediately cease and all rights of IDS to use
the promotional and/or marketing materials related to the Product shall
immediately cease.
4. INFOMERCIAL TESTING AND ROLL OUT Upon completion of the production and
editing of the Infomercial, EY shall schedule, coordinate, and/or pay for a
media test of the Infomercial to test the effectiveness of the Infomercial
for the sale of the Product. The media test shall be in the minimum amount
of $10,000 and for not less than three (3) days nor more than sixty (60) days
on such cable and broadcast television networks and stations and at such
times as EY and IDS jointly determine will draw favorable response rates for
the sale of the Product. On a weekly basis during the media test and on a
monthly basis thereafter, EY shall provide IDS with written reports
containing complete information regarding the media ratio. If the initial
media test yields a ratio of Product orders to media expenditures equal to or
greater than 2 TO 1, (the "media ratio") and no more than 15% returns, EY
shall immediately
2
<PAGE>
schedule, coordinate, and/or pay for sufficient television media for a full
"roll out" of the Infomercial for exhibition throughout the United States and
Canada. For the purpose of this Agreement, "roll out" shall mean the usual
and customary purchase of sufficient media and broadcast of the Infomercial
in a manner which will sustain no less than 2:1 media ratio with no more than
15% returns in accordance with EY's reasonable projections related thereto.
5. TERM. Unless sooner terminated as specified herein, the Initial Term of
this Agreement and the rights granted to EY for the exhibition of the
Infomercial for the sale of the Product within the United States and Canada
shall begin upon the date of this Agreement and shall continue for thirty-six
(36) months after roll out of the Infomercial. It is expressly agreed by EY
and IDS that the Term of this Agreement shall continue for the longer of (i)
the broadcast of the Infomercial; (ii) the broadcast of any "Sequel
Infomercials" (as defined in Section 8 below) and (iii) the marketing and/or
sale of the Product and "Sequel Product" (as defined in Section 8 below).
Upon termination of this Agreement and subject to EY's full payment of all
amounts due IDS, EY shall have the right to continue to accept and process
orders for Products which were placed via the Infomercial prior to the date
of termination. The representations and indemnifications of the parties
shall survive the termination of this Agreement.
6. GRANT OF RIGHTS. During the term of this Agreement and any extension
thereof, IDS grants to EY the exclusive right to exhibit the Infomercial to
market and distribute product through all media now known or hereafter
devised worldwide. Such rights shall include the associated rights related
to the Infomercial including without limitation trademarks, music rights, and
copyrights related thereto. The respective duties of EY and IDS regarding
the Infomercial and the Product are described on the attached Exhibit "C".
Any use of the trademarks, tradenames, likenesses, quotes, personal
appearances, or other intellectual property related to the Infomercial shall
require the approval of IDS, not to be unreasonably withheld, and once EY has
received approval for a particular matter further approval for similar uses
will not be required. IDS's approval shall be deemed given if EY makes a
written request for approval from IDS and IDS fails to respond to such
request within ten (10) days from the date of IDS's receipt of the request.
7. ROYALTIES AND PAYMENTS. In conjunction with the marketing and sale of the
Product, EY shall pay IDS the following amounts with respect to the sale of
the Product through the below described media and marketing methods:
7.1. DOMESTIC INFOMERCIAL SALES. During the Term and any extensions
thereof, as indicated and defined below on the chart of "media ratios" and
"gross royalty" numbers, on the basis of the media ratios for the Infomercial
EY shall pay to IDS payments equal to the percentage "Gross Receipts" from
the sale of the Product, and any upsell products, via the Infomercial only,
and within the United States and Canada.
MEDIA RATIO GROSS ROYALTY
- ----------- -------------
2:1 or less 5% of Gross Receipts
2.01:1 - 2.5:1 6% of Gross Receipts
2.51:1 - 3:1 7% of Gross Receipts
3.01:1 - 3.5:1 8% of Gross Receipts
3.51:1 - 4:1 9% of Gross Receipts
4.01:1 or higher 10% of Gross Receipts
3
<PAGE>
For the purpose of this Agreement, "Gross Receipts" shall mean all revenue
or cash equivalents EY receives for sales of Product and upsell products,
less only returns, refunds, credit card chargebacks and fees, declines,
cancels, bad debt and sales taxes which are directly related to the Product
and upsell product(s) and shall not include shipping and handling revenues
and costs.
For the purpose of this Agreement, "Media Ratio" shall mean the fraction,
which EY shall calculate quarterly, the numerator of which shall equal Gross
Receipts from Infomercial sales and the denominator of which shall equal the
gross cost of media, including a 15% media commission, related to the
exhibition of the Infomercial. Gross Royalty payments due IDS for the sale
of Product via Domestic Infomercials shall be calculated and paid within
thirty-five (35) days of the end of each 30 day period of the Term of this
Agreement.
7.2. DOMESTIC NON-INFOMERCIAL SALES OF THE PRODUCT. EY shall pay to IDS
four percent (4%) of the Gross Receipts from all Domestic Non-Infomercial
sales of the Product.
7.3. INTERNATIONAL OF THE PRODUCT. EY shall pay to IDS five percent (5%)
of the Gross Receipts from all International sales of the Product from any
and all media.
7.4. HOME SHOPPING SALES. EY shall pay to IDS five percent (5%) of the
Gross Receipts (less only mutually approved payments to third-party talent)
from all sales of the product by way of home shopping.
7.5. CONTINUITY SALES. EY shall pay to IDS four percent (4%) of all Gross
Receipts from all sales of a "Continuity Product" (as defined below).
For the purposes of this Agreement, a "Continuity Product" shall mean a
product offered as a part of a program whereby there is an automatic shipment
of additional products or a re-order of the same product first ordered,
usually on a monthly basis, following the shipment of the initial order of
the Product.
8. SEQUEL INFOMERCIAL(S) AND SEQUEL PRODUCT(S). In the event EY and IDS
elect to produce one or more "Sequel Infomercials" for the marketing of the
Product or a "Sequel Product", the following shall be the terms of such
relationship: (i) EY shall be solely responsible for the coordination and
costs of the production of any Sequel Infomercial(s) and/or Sequel Products;
(ii) IDS shall receive compensation for all sales of the Product resulting
from a Sequel Infomercial as specified in Section 7.6 above; (iii) IDS shall
receive compensation for all sales of any Sequel Product(s) resulting from
the broadcast of a Sequel Infomercial equal to one-half of the compensation
rate due for sales resulting from the initial Infomercial produced hereunder
and (iii) the compensation due IDS shall be paid by EY for the entire term of
the broadcast of any Sequel Infomercial of the sale of any Sequel Product.
For the purposes of this Agreement, "Sequel Infomercial" shall mean an
Infomercial produced and exhibited for the sale of the Product or Sequel
Product after the production and/or exhibition of the Infomercial produced
under this Agreement. For the purposes of this Agreement, a "Sequel Product"
shall mean a product which is based upon, has the same characteristics of,
uses the same name or marketing materials, or is an improvement or derivative
of the Product.
9. PRODUCT MANUFACTURE, PACKAGING AND DELIVERY. EY shall be responsible to
coordinate all activities related to the manufacture and delivery of the
Product to EY or to the fulfillment center(s)
4
<PAGE>
designated by EY. In the event the media test of the Infomercial is
successful, EY as specified herein shall be responsible to coordinate all
aspects of the creation of and payment for the molds, Product packaging, and
other costs related to the marketing and sale of the Product and EY shall
coordinate and determine responsibility for all aspects of the manufacture
and delivery of the Product.
10. CUSTOMER LIST. During the term of this Agreement, EY shall compile and
maintain a list of names, addresses, and other information for the persons
who inquire about and/or order the Product. EY shall own this Customer List.
EY shall have the right to rent the Customer List for fair market value to
any party (including IDS or EY) for the marketing of any products which are
not directly competitive with the Product. All Net Profits received from the
rental of the Customer List shall be divided equally between EY and IDS.
11. ACCOUNTING; REPORTS, PAYMENTS; INSPECTION. EY and its sublicensees and
subsidiaries shall keep complete and accurate books of account relating to
the marketing, distribution and sale of the Product and any Sequel
Product(s). During the term of this Agreement for each month in which there
are sales of the Product or Sequel Product(s), within thirty-five (35) days
after the end of the month EY shall provide IDS with a report containing
complete information regarding sales of the Product or Sequel Product(s) and
as required hereunder the calculation of Royalties and/or Net Profits as
specified herein including therewith a payment of any Royalties and/or Net
Profits due IDS for the prior month activities. Such books of account and
supporting data shall be available for inspection by IDS during EY's regular
business hours for a period of two (2) years following the end of the fiscal
year to which they pertain.
In the event the inspection of EY's books and records reveals that any annual
payment to IDS was understated by five percent (5%) or more, EY shall be
responsible to pay for the reasonable costs of inspection. Additionally, any
amount due IDS which is unpaid shall accrue interest at the rate of ten
percent (10%) per annum until the total amount due, including interest, is
paid in full. Any determination of underpayment shall not be a breach of
this Agreement unless the full amount due remains unpaid for a period
exceeding ten (10) days after receipt of written payment demand.
12. REPRESENTATIONS
12.1 REPRESENTATIONS OF IDS. IDS represents and warrants that (a) they
are the sole owner of the Infomercial and all rights related thereto; (b) the
use of the Infomercial, and the titles, logos, and references made therein
are permitted and do not infringe upon the rights of any third-party; (c) the
distribution of the Infomercial is not restricted to or prohibited by any
Federal, State, local law or ERA guideline; (d) IDS has not entered into any
oral or written contract which would impair the rights granted to EY or limit
the effectiveness of this Agreement, nor is IDS aware of any claims or
actions which would impair or limit the rights granted to EY hereunder; (e)
IDS acknowledges that the sale of Products through infomercials and other
direct response media is a high risk activity without guarantee of success or
return of invested capital and (f) the entry into this Agreement by IDS will
not violate any agreements to which IDS is a party.
12.2. REPRESENTATIONS OF EY. EY represents and warrants that (a) they are
the sole owners the Product and all rights related thereto; (b) the use and
sale of the Product as contemplated herein is permitted and does not infringe
upon the rights of any third-party; (c) the distribution of the Product is
not restricted or prohibited by any Federal, State, local law or ERA
guideline; (d) EY has not entered into any oral or written contract which
would impair the rights granted to IDS or limit the effectiveness
5
<PAGE>
of this Agreement, nor is EY aware of any claims or actions which would
impair or limit the rights granted to IDS hereunder; (e) the undersigned
representative of EY has the right and power to enter into this Agreement and
(f) the execution and performance of this Agreement by EY will not violate
any agreements to which EY is a party.
13. INDEMNITY
13.1 IDS'S INDEMNITY OF EY. IDS shall hold harmless, indemnify, and
defend EY, at IDS's expense with counsel selected by EY, against any and all
claims, demands, liability, or other harm incurred by EY (including without
limitation claims of trademark, copyright, patent, or false advertising)
resulting from the exhibition of the Infomercial or the promotion or sale of
the Product or the negligent acts or actions of IDS.
13.2 EY'S INDEMNITY OF IDS. EY shall hold harmless, indemnify, and
defend IDS, at EY's expense and with counsel selected by IDS, against any and
all claims, demands, liability, or other harm incurred by IDS as a result of
the negligent acts or actions of EY.
14. INSURANCE. In the event "roll out" of the Infomercial occurs, during the
Term of this Agreement IDS shall maintain media liability insurance of the
type typically maintained by distributors of infomercials and infomercial
products and EY shall acquire for each Product products liability insurance
coverage of the type typically maintained by sellers of infomercial products.
Each such policy of insurance shall be in an amount of no less than $1
million per occurrence and $2 million in the aggregate and shall have the
following conditions: (i) a deductible not exceeding $10,000; (ii) a rating
of no less than B+ in the Best Guide; (iii) each party shall be named as an
additional insured on the other party's policy; (iv) no less than ten (10)
days written notice to the other party shall be required to decrease the
policy benefits or cancel the policy and (v) each party shall provide the
other party with a copy of certificate evidencing compliance with these
requirements within thirty (30) days of the date of this Agreement.
15. INDEPENDENT CONTRACTORS. It is expressly agreed that EY and IDS are
dealing with each other as independent contractors. Each party shall be
solely responsible, without liability to the other, for the timely reporting
and payment of all taxes and other withholdings, deductions and payments
required by law with respect to its own operations and employees.
16. DISPUTE RESOLUTION. In the event of any dispute regarding this Agreement
or the respective rights of the parties under this Agreement, the parties
agree to submit such dispute to binding arbitration in Orange County,
California before a professional arbitrator selected by the parties or, if
the parties cannot agree on an arbitrator, appointed by the court. Any such
arbitration shall be commenced within fifteen (15) days and completed within
forty-five (45) days of selection of the arbitrator and the discovery rules
contained in the California Code of Civil Procedure shall apply to all such
proceedings. The arbitrator shall have the right to order all remedies and
award attorney's fees and costs to the prevailing party; and any such orders
may be entered into a court of competent jurisdiction. This Agreement shall
be governed by and construed under the laws of the State of California.
6
<PAGE>
17. NOTICE All notices under this Agreement shall be in writing and
effective when confirmed delivered by personal service, telefax, overnight
delivery or other method to the addresses indicated below or otherwise later
designated in writing by the parties:
TO IDS: TO EY:
Infomercial Development Services, Inc. Endless Youth Products, Inc.
9255 Towne Centre Drive, Suite 500 6767 W. Tropicana Bl. Suite 206
San Diego, CA 92121 Las Vegas, NV 89103
Attn: Benjamin S. Gage Attn: Neal Wallach
Fax (619) 622-7878 Fax (702) 248-1082
18. GENERAL PROVISIONS This Agreement represents the entire understanding
of the parties and no modification of the terms contained herein shall be
effective unless in writing and signed by the parties. Time is of the
essence for all performance under this Agreement. Neither party shall have
the right to assign this Agreement without the prior written consent, not be
unreasonably withheld, of the other party. No failure to enforce or waiver
shall constitute a waiver of future performance. In the event any provision
of this Agreement is found to be unenforceable, that provision shall be
severed from this Agreement and the remaining provisions shall remain in full
force and effect. This Agreement may be executed in counterparts which may
be taken together to constitute the original of this Agreement. Each party
to this Agreement has been represented by independent counsel and each party
has fully participated in the drafting of this Agreement so as to eliminate
any issue of interpretation against the preparer of this Agreement.
AGREED TO AND ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN
ENDLESS YOUTH PRODUCTS, INC. INFOMERCIAL DEVELOPMENT SYSTEMs,
INC., A NEVADA CORPORATION INC., A CALIFORNIA CORPORATION
By: /s/ Neal Wallach
----------------------------- By: /s/ Benjamin S. Gage
Neal Wallach, President -------------------------------
Benjamin S. Gage, President
7
<PAGE>
EXHIBIT "A"
PRODUCT DEFINITION
For the purposes of this Agreement, the Product shall be defined as the
following:
[omitted]
8
<PAGE>
EXHIBIT "B"
FORM INFOMERCIAL PARTICIPANT RELEASE
[omitted]
9
<PAGE>
EXHIBIT "C"
RESPECTIVE DUTIES OF THE PARTIES
For the purposes of this Agreement, the following shall be the respective
duties and responsibilities of EY and IDS:
RESPONSIBLE PARTY
EY IDS DUTY AND/OR RESPONSIBILITY
X Finance and produce completed Infomercial
- --- --- (including generic end tag and applicable notations
for credit cards, shipping and handling, taxes, phone
number and addresses as designated by EY),
X Produce completed Product, Product packaging and
- --- --- Product "welcome letter".
X Assist with the Infomercial script and production
- --- --- (including pre-production and post-production) and
coordinate development of molds, packaging and
marketing materials for the Product.
X Obtain all direct response phone numbers and
- --- --- addresses and customize the Infomercial with
appropriate direct response ordering information.
X Select inbound telemarketing company, create
- --- --- inbound telemarketing scripts and manage all aspects
of inbound telemarketing process.
X Coordinate all aspects of Product order processing
- --- --- including receipt of orders, credit card authorization
and deposits, order shipping, processing of Product
returns and refunds and all related matters.
X Coordinate the collection, reporting and payment of
- --- --- all appropriate taxes (including sales, excise,
inventory, etc.) related to Product sales.
X Coordinate duplication of Infomercial sub-master
- --- --- tapes and distribution of sub-masters to television
stations.
X Select, manage, purchase and place all media for
- --- --- exhibition of the Infomercial and marketing of the
Product in all media and markets.
X Coordinate the manufacture of sufficient quantities
- --- --- of the Product, at the designated price and quality,
to meet orders.
X Select and manage all aspects of the receipt and
- --- --- processing of Product orders by the designated
fulfillment center(s).
10
<PAGE>
EXHIBIT "C" (cont)
RESPECTIVE DUTIES OF THE PARTIES
EY IDS DUTY AND/OR RESPONSIBILITY
X Coordinate the delivery of the Product to the
- --- --- designated fulfillment center(s).
X Manage all aspects of the marketing and sale of the
- --- --- Product in all designated media and markets throughout
the term of the Agreement.
11
<PAGE>
EXHIBIT 10.5
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "AGREEMENT")
is entered into as of June 2, 1999, by and between ENDLESS YOUTH PRODUCTS,
INC., A NEVADA CORPORATION ("COMPANY"), and NEAL K. WALLACH ("EMPLOYEE"), to
amend and restate the Employment Agreement dated as of July 31, 1996 betwen
the Company and Employee, and is entered into with reference to the following
facts:
Company and Employee wish to enter into this Agreement to assure Company
of the services of Employee and to set forth the rights and duties of the
parties.
NOW THEREFORE, the parties agree as follows:
1. EMPLOYMENT.
(a) Company hereby employs Employee as its Chief Executive
Officer, and Employee hereby accepts and agrees to said employment by the
Company for the purpose of rendering on behalf of Company services as a Chief
Executive Officer, upon the terms and conditions set forth herein.
(b) Employee shall perform such services and duties with the
Company as are usually associated with the position of Chief Executive
Officer and as otherwise decided upon by the Board of Directors of the
Company. Employee shall report directly to the Board of Directors of Company.
Employee further agrees that, except during vacation periods or in accordance
with Company's personnel policies covering leaves of absence and reasonable
periods of illness or other incapacitation, Employee shall devote sufficient
time and services to the business and interests of the Company. Employee
shall also be permitted to serve on the boards of directors of other business
corporations and may participate in charitable, cultural, professional, civic
and business association activities. Employee shall perform the duties of his
position and those assigned to him by the Company's Board of Directors with
fidelity, to the best of his ability, in the best interests of the Company,
in a professional manner and at all times in compliance with all laws, rules
and regulations. Employee agrees that to the best of his ability and
experience he will at all times loyally and conscientiously perform all of
the duties and obligations required of him either expressly or implicitly by
the terms of this Agreement. Additionally, Employee agrees to comply with
corporate policies, standards and regulations adopted by the Company from
time to time to the extent the same are reasonable and not in violation of
law.
2. TERM OF EMPLOYMENT. Employee's term ("TERM") of employment by the
Company as set forth herein shall commence as of the date of this Agreement,
June 2, 1999 (the "EFFECTIVE DATE") and shall continue thereafter for a
period of five years unless otherwise terminated pursuant to the provisions
of Section 7 below. Notwithstanding the foregoing, upon expiration of each
year of the Term, the Term shall automatically be renewed, upon the same
terms and conditions contained herein, for consecutive periods of one year
each (a "RENEWAL TERM"), such that there shall be at all such times five
years remaining in the Term, unless and until either party elects not to so
renew this Agreement by delivering written notice to the other party not less
than thirty (30) days prior to the expiration of the then year of the Term,
or any then existing
<PAGE>
Renewal Term, as the case may be. Nothing in this Section shall be deemed or
construed as limiting or waiving any of the rights of Company or Employee set
forth in Section 7.
3. COMPENSATION.
(a) FIXED COMPENSATION - Upon the Effective Date, the Company
shall pay Employee a base salary ("BASE SALARY") at the annual rate equal to
One Hundred Twenty Thousand Dollars ($120,000). Employee's Base Salary shall
be paid pursuant to Company's normal payroll practices. Company shall have
the right to deduct from the compensation due to Employee hereunder any and
all sums required for social security and withholding taxes, and for any
other federal, state or local charge and/or tax which may now be in effect or
is hereafter enacted or required as a charge on the compensation of Employee.
Employee has the option to take all or part of his monthly salary in stock of
the Company to be valued at the average "Bid" price of the shares for such
period.
(b) CONTINGENT COMPENSATION - In addition to Base Salary,
Employee shall be paid, as additional compensation, a bonus based upon the
annual gross operating income of Company during each 12 month period during
the Term in accordance with the schedule attached hereto as Schedule 1 and
made a part hereof.
(c) BENEFITS - Employee shall be entitled to the following
benefits provided by the Company: (i) a suitable office and furnishings
commensurate with Employee's position and such related facilities as are
necessary for the performance of Employee's duties,(ii) life, medical,
accident and dental insurance, and any short term, long-term or permanent
disability programs and plans, providing coverage on terms no less beneficial
than those afforded other senior executives employed by the Company, (iii) an
automobile allowance (which includes lease payment, insurance, repairs,
gasoline) in the amount of $1000 per month, (iv) membership dues in an
athletic and country club facility of Employee's choice (v) five weeks of
paid vacation per year, and (vi) minimum three weeks paid sick-leave for
illness (additional paid sick leave shall be afforded to Employee for any
illness). Any unused vacation or minimum three week sick-leave period may be
carried over from year to year hereunder and all such unused vacation and/or
sick leave at the end of the Term shall not be forfeited by Employee but
Employee shall be paid for such vacation and/or sick leave by Company based
upon Employee's then current Base Salary. Employee acknowledges and agrees
that some of the benefits provided to Employee by Company hereunder may be
taxable to Employee, and that Company may be required to make payroll
withholdings in respect of such taxable benefits.
(d) BONUSES - Employee shall be entitled to receive bonuses from
time to time in such amounts, as the Company's Board of Directors may
determine in its sole and absolute discretion.
4. EMPLOYEE EXPENSES. Subject to Company's prior approval, and upon
submission of a detailed accounting supported by receipts, Company shall
reimburse Employee for all expenses incurred by Employee at Company's
specific request or as are reasonably incurred in the performance of
Employee's duties herein described. Company shall pay Employee a monthly
amount up to $2000 to defray expenses of hotel/food, if Employee performs
Company business in the best interest of the Company at a facility separate
from Company's corporate office for extended periods of time.
-2-
<PAGE>
5. TERMINATION.
(a) Company may terminate this Agreement and Employee's
employment at any time prior to the expiration of the Term or any Renewal
Term for cause. For the purposes of this Agreement, "CAUSE" shall mean:
(i) Employee's continued willful and habitual neglect of
his duties following notification of such neglect by Company's Board of
Directors and failure by Employee to cure such neglect within 30 days after
such notification.
(ii) Employee's conviction, after the date hereof, of a
felony which, by its nature, would materially injure the reputation of
Company as determined by Company's Board of Directors acting in good faith
and upon reasonable grounds.
(iii) Death of the Employee.
(b) Company shall have no right to terminate Employee's
employment for any reason other than for cause as defined hereinabove.
(c) At any time during the Term or any Renewal Term, and
notwithstanding anything to the contrary contained herein (including the
length of time of the Term or a Renewal Term), Employee may terminate this
Agreement for any reason whatsoever, with or without cause, upon thirty (30)
days written notice to Company.
(d) If during the term of this Agreement, there shall be a change
in control of the Company, and Employee elects to terminate this agreement
pursuant to Section 5(b) within 30 days after such change in control, then
the Employee shall be entitled to receive a cash termination payment equal to
ten times the Base Salary. Such payment shall be made in cash within 10 days
after Employee notifies the Company of his election to terminate. A "CHANGE
IN CONTROL" shall be demed to occur if any person or group of persons (within
the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as
amended) shall acquire beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under such Act) of 20
percent or more of the outstanding shares of common stock of the Company; or,
during any period of twelve consecutive calendar months, individuals who were
directors of the Company on the first day of such period shall cease to
constitute a majority of the board of directors of the Company.
6. REASONABLENESS. The parties recognize that this Agreement
contains conditions, covenants, and time limitations that are reasonably
required for the protection of the confidential information, trade secrets
and business of the parties or a particular party. If any limitation,
covenant or condition shall be deemed to be unreasonable and unenforceable by
a court or arbitrator of competent jurisdiction, then this Agreement shall
thereupon be deemed to be amended to provide for modification of such
limitation, covenant and/or condition to such extent as the court or
arbitrator shall find to be reasonable and such modification shall not affect
the remainder of this Agreement.
7. RESTRICTIONS. Employee covenants not to disclose to or use with any
third party, any technical, commercial, financial, legal or other information
of a confidential nature obtained about the
-3-
<PAGE>
Company during the course of the Employee's employment, except for such
information, if any, which becomes part of the public record.
8. INDEMNIFICATION. Subject to the provisions of all applicable
laws, the Company, hereby agrees to indemnify and save the Employee harmless
from and against all reasonable costs, charges and expenses including,
without limitation, (i) any amount paid to settle an action or satisfy a
judgment, reasonably incurred by him in respect of any civil, criminal or
administrative action or proceeding to which the Employee is made a party by
reason of having been a director or officer of the Company and (ii) all
reasonable fees and disbursements of attorneys and other advisors incurred by
Employee by reason of his having been a director or officer of the Company.
To the extent permitted by applicable law, the Company will do, execute,
file, or will cause to be done, executed and filed, all such further acts,
documents and things as the Employee may reasonably require for purposes of
giving effect to the provisions of this Section including, without
limitation, the amendment of any and all certificates of Incorporation and
by-laws of the Company to comply with all applicable laws. The Company hereby
represents and warrants that the provisions of this Section do not violate or
conflict with any such applicable laws or the respective Certificate of
Incorporation and by-laws of the Company.
9. REMEDIES. No remedy conferred by any of the specific provisions
of this Agreement is intended to be exclusive of any other remedy given
hereunder or hereafter existing at law or in equity. The election of any one
or more remedies by any party shall not constitute a waiver of the right to
pursue other available remedies.
10. SEVERABLE PROVISIONS. The provisions of this Agreement are
severable, and if any one or more provisions may be determined to be
judicially unenforceable, in whole or in part, the remaining provisions shall
nevertheless be binding and enforceable.
11. BINDING AGREEMENT. The rights and obligations of the parties under
this Agreement shall inure to the benefit of and shall be binding on their
successors and assigns. Notwithstanding the foregoing, Employee may not
assign his rights or obligations hereunder.
12. NOTICES. Any notice to be given to the Company under the terms of
this Agreement shall be addressed to the Company at the address of its
principal place of business, and any notice to be given to Employee shall be
addressed to him at his home address last shown on the records of the
Company, or at such other address as either party may hereafter designate in
writing to the other. All notices shall be in writing and shall be delivered
personally, sent by United States certified or registered mail, return
receipt requested, first class postage prepaid, or by private messenger or
courier service. Any such notice shall be deemed to have been received on the
earlier of (i) five (5) business days after it is mailed or (ii) the date it
is actually received.
13. WAIVER. Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision, or prevent that party thereafter from enforcing each and
every other provision of this Agreement.
14. TITLE AND HEADINGS. Titles and headings to sections in this
Agreement are for the purpose of reference only and shall in no way limit,
define, or otherwise affect the provisions of it.
-4-
<PAGE>
15. ATTORNEYS' FEES AND COSTS OF LITIGATION. In any action at law or
in equity to enforce any of the provisions or rights under this Agreement,
the unsuccessful party, as determined by the court in a final judgment or
decree, shall pay the successful party all costs, expenses and attorneys'
fees actually incurred by the successful party (including, without
limitation, the costs, expenses and attorneys fees on any appeal) and if the
successful party shall recover a judgment in any such action or proceeding,
the costs, expenses and attorneys' fees shall be included as part of the
judgment.
16. GOVERNING LAW. The parties hereto agree that it is their intention
and covenant that this Agreement and performance under it, and all suits and
special proceedings that may ensue from its breach, be construed in
accordance with and under the laws of the State of Nevada, and that in any
action, special proceeding, or other proceeding that may be brought arising
out of, in connection with, or by reason of this Agreement, the laws of the
State of Nevada shall be applicable and shall govern to the exclusion of the
law of any other forum, without regard to the jurisdiction in which any
action or special proceeding may be instituted.
17. ENTIRE AGREEMENT. No party has made any representations,
warranties, covenants or promises relating to the subject matter of this
Agreement except as set forth herein, and any prior agreements or
understandings not specifically set forth herein shall be of no force or
effect. This Agreement constitutes the entire agreement of the parties
relative to the subject matter hereof.
18. AMENDMENTS. This Agreement may not be amended, modified or altered
except by a written instrument executed by all parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"COMPANY" ENDLESS YOUTH PRODUCTS, INC., A
NEVADA CORPORATION
BY: /s/ Neal K. Wallach
-----------------------------------
NAME: Neal K. Wallach
TITLE: Chief Executive Officer
"EMPLOYEE"
/s/ Neal K. Wallach
---------------------------------------
NEAL K. WALLACH
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<PAGE>
SCHEDULE "1"
BONUS TO NEAL WALLACH
<TABLE>
<CAPTION>
Annual Gross Operating Income Bonus
- ----------------------------- -----
<S> <C>
$1,000,000 - $1,499,999 $84,000
$1,500,000 - $1,999,999 $144,000
$2,000,000 - $2,999,999 $174,000
$3,000,000 - $3,999,999 $264,000
$4,000,000 - $4,999,999 $354,000
$5,000,000 - $5,999,999 $454,000
$6,000,000 - $6,999,999 $524,000
$7,000,000 - $7,999,999 $594,000
$8,000,000 - $8,999,999 $684,000
$9,000,000 - $9,999,999 $764,000
$10,000,000 - $10,999,999 $824,000
$11,000,000 - $11,999,999 $874,000
$12,000,000 - $12,999,999 $1,004,000
$13,000,000 - $13,999,999 $1,104,000
$14,000,000 - $14,999,999 $1,204,000
$15,000,000 - $15,999,999 $1,304,000
$16,000,000 - $16,999,999 $1,404,000
$17,000,000 - $17,999,999 $1,504,000
$18,000,000 - $18,999,999 $1,604,000
$19,000,000 - $19,999,999 $1,704,000
$20,000,000 - $23,399,999 $1,804,000
$24,000,000 - $26,999,999 $2,104,000
$27,000,000 - $29,999,999 $2,704,000
$30,000,000 $2,804,000
</TABLE>
For each $1,000,000 over $30,000,000, said bonus to increase by $100,000
-6-
<PAGE>
EXHIBIT 10.6
ENDLESS YOUTH PRODUCTS, INC.
1996 STOCK OPTION PLAN
SECTION I
PURPOSES
ENDLESS YOUTH PRODUCTS, INC., A NEVADA CORPORATION, believes that its
continued growth and success will depend upon its ability to obtain and
retain the services of key employees of the highest skills and competence. In
order to obtain and retain such employees, and in order to provide incentives
for effective service and high-level performance, this corporation desires to
adopt this 1996 Stock Option Plan. The purpose of this plan is to provide a
means whereby this corporation can continue to attract, motivate, and retain
key employees who can contribute materially to this corporation's growth and
success and to facilitate the acquisition of common shares of this
corporation by key employees pursuant to options meeting the requirements of
the Internal Revenue Code, so that such key employees will more closely
identify their interests with those of this corporation and its shareholders.
SECTION II
DEFINITIONS
Unless the context clearly indicates otherwise, the following terms,
when used in the Plan, shall have the meanings set forth in this SECTION II.
(a) "BOARD" shall mean the board of directors of Corporation.
(b) "CODE" shall mean the Internal Revenue Code of 1986, and the
regulations promulgated thereunder, as the same may be amended from time to
time.
(c) "COMMITTEE" shall mean those members of the Board who are elected
by the Board to administer the Plan. The Committee shall consist of 2 or more
members of the Board who are not eligible to participate in the Plan and who,
within 1 year prior to their appointment had not been eligible to participate
in the Plan or any other plan of Corporation entitling the participants
therein to acquire stock, options, or stock appreciation rights of
Corporation or any of its subsidiaries; provided, however, that as long as
the Board consists of only one member, said member shall comprise the
Committee, regardless of said member's eligibility to participate in the Plan.
(d) "CORPORATION" shall mean Endless Youth Products, Inc., a Nevada
corporation.
<PAGE>
(e) "ELIGIBLE EMPLOYEE" shall mean any person who is, at the time of
grant of any Option, an officer (including any officer who is also a member of
the Board) or key employee of Corporation or any subsidiary thereof.
(f) "FAIR MARKET VALUE" or "MARKET VALUE PER SHARE" shall mean, at any
date, the value determined by the Committee by any fair and reasonable means,
including: (a) if the security is not listed for trading on a national
securities exchange but is traded in the over-the-counter market, the mean of
the highest and lowest bid prices for such security on the date in question,
or if there are not such bid prices for such security on such date, the mean
of the highest and lowest bid prices on the first day prior thereto on which
such prices appear; or (b) if the security is listed for trading on one or
more national securities exchanges, the mean of the high and low sales prices
on such principal exchange on the date in question, or if such security shall
not have been traded on such principal exchange on such date, the mean of the
high and low sales prices on such principal exchange on the first day prior
thereto on which such security was so traded.
(g) "FISCAL QUARTER ENDING DATE" shall mean March 31, June 30,
September 30 and December 31 or such other dates as may be designated by the
Board as the ending dates of Corporation's fiscal quarterly periods.
(h) "GRANTEE" shall mean an employee granted an Incentive Stock Option
or a Non-Qualifying Option.
(i) "INCENTIVE STOCK OPTION" shall mean an Option granted pursuant to
the Plan to purchase Shares upon terms and conditions which qualify as an
incentive award under the Code.
(j) "INCENTIVE STOCK OPTIONEE" shall mean the Grantee of an Incentive
Stock Option.
(k) "INCOMPETENT" or "INCOMPETENCE" shall mean having been determined
to be incompetent to manage one's self or one's affairs by reason of age,
mental or physical illness, or otherwise, by an order, decree, or declaration
of a judicial, administrative, or other court, agency, or board with
jurisdiction over the subject matter, upon petition or application of the
incompetent or another.
(l) "LEGAL REPRESENTATIVE" shall mean the executor, administrator,
Committee, or other personal representative of any employee appointed after
such employee's Incompetence or death or any legatee or distributee of such
employee.
(m) "MARKET SHARES" shall mean Common Stock, whether or not such shares
were acquired pursuant to the Plan. Market Shares shall
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<PAGE>
include any Shares issued in respect of any Market Shares by reason of stock
dividends thereon or splits, combinations, or reclassifications thereof.
(n) "NON-QUALIFYING OPTION" shall mean any Option, other than an
Incentive Stock Option, granted pursuant to the Plan to purchase Shares.
(o) "NON-QUALIFYING OPTIONEE" shall mean the Grantee of a
Non-Qualifying Option.
(p) "OPTION" shall mean, at any time, an option to purchase Common
Stock granted by Corporation pursuant to this Plan or heretofore or hereafter
granted by another corporation and assumed by Corporation hereafter in
connection with the acquisition of the business of such other corporation and
deemed to be an Option granted by Corporation pursuant to this Plan whether
or not such Option is exercisable at the time of such acquisition, to the
extent that such Option has not been exercised at such time and has not
terminated.
(q) "PLAN" shall mean the Endless Youth Products, Inc. 1996 Stock
Option Plan as set forth herein and as amended from time to time.
(r) "SHARES" or "COMMON STOCK" shall mean authorized shares of common
stock of Corporation, whether or not issued, outstanding or treasury.
(s) "SUBSIDIARY" shall mean any subsidiary corporation, as defined in
the Code.
SECTION III
SHARES RESERVED FOR THE PLAN
The total number of Shares which may be made the subject of Options
pursuant to this Plan shall not exceed 2,500,000 shares of Common Stock,
except to the extent adjusted pursuant to SECTION VIII. Shares which are made
the subject of Options under the Plan may be Shares now or hereafter
authorized but unissued, or Shares that were issued and subsequently
reacquired by Corporation by purchase or surrender. As Shares are repurchased
by Corporation under the Plan, if any, shall again be made available for the
purpose of the Plan (unless the sale of Shares under the Plan shall have been
discontinued) but such repurchase or surrendered Shares shall not be deemed
to increase the total number of Shares specified above to be reserved for
purposes of the Plan.
-3-
<PAGE>
SECTION IV
ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Committee. The Committee
shall have full authority to (i) determine, after receiving the
recommendations of the management of Corporation, the employees of
Corporation or any of its present or future subsidiaries who shall
participate in the Plan and the extent and terms of such participation; (ii)
prescribe the form or forms of the stock option and repurchase agreements
evidencing any sale of rights under the Plan (which forms shall be consistent
with the Plan); (iii) adopt, amend, and rescind such rules and regulations
as, in its opinion, may be advisable in the administration of the Plan; and
(iv) construe and interpret the Plan, the rules and regulations and the
instruments and repurchase agreements utilized under the Plan and to make all
other determinations deemed necessary or advisable for the administration of
the Plan. The Committee's interpretation and construction of any provision of
the Plan or any instrument or repurchase agreement utilized thereunder and
any determination by the Committee pursuant to any provision of the Plan or
any such instrument or repurchase agreement shall be final and conclusive
unless overruled by the Board, upon which the determination of the Board
shall be final and conclusive; provided, however, that the Board may not
increase the number of Shares subject to Options determined by the Committee
to be offered to any employee or to grant Options to any employee not
selected by the Committee.
(b) Any Option granted shall be in writing and shall be made to
Eligible Employees who, in the opinion of the Committee, have contributed or
will contribute materially to the success of Corporation. However, nothing in
the Plan shall be deemed to require the Committee to grant any right to
purchase any Shares to any particular officer or employee, except as may be
selected by the Committee. All decisions, determinations, and implementations
by the Committee shall be final and binding unless otherwise determined by
the Board.
(c) The Committee shall hold meetings at such times and places as it
may determine. The Committee may request advice or assistance or employ such
other persons as is necessary for proper administration of the Plan. A quorum
of the Committee shall consist of a majority of its members and the Committee
may act by vote of a majority of its members at a meeting at which a quorum
is present, or without a meeting by a written consent to the action taken
signed by all members of the Committee. The Board may, from time to time,
appoint members to the Committee in substitution of members previously
appointed and may fill vacancies, however caused, in the Committee.
-4-
<PAGE>
SECTION V
GRANTING OF INCENTIVE STOCK OPTIONS
The Committee may, from time to time and upon such terms and conditions
as it may determine, authorize the granting of Incentive Stock Options to
Eligible Employees. Each such grant may utilize any or all of the Shares
authorized to be issued under the Plan, and shall be subject to all of the
following:
(a) The purchase price of each Share subject to an Incentive Stock
Option shall be 100% of the Fair Market Value of a Share on the date the
Incentive Stock Option is granted.
(b) No Incentive Stock Option shall be exercisable more than 10 years
from the date the Incentive Stock Option was granted. No Incentive Stock
Option shall be exercisable (to the extent that the employee was entitled to
exercise prior to termination of employment) after the expiration of 12
months from the date of termination of employment of the Optionee by
Corporation by reason of death or disability or after the expiration of 3
months from the date of termination for any other reason.
(c) The Committee shall determine and designate from time to time those
employees who are to be granted Incentive Stock Options and specify the
number of Shares subject to each Incentive Stock Option.
(d) If the employee, at the time the Incentive Stock Option is granted,
owns stock representing more than 10% of the voting power of all classes of
the outstanding stock of Corporation and any subsidiary of Corporation, the
purchase price shall be at least 110% of the Fair Market Value of the Shares
subject to the Incentive Stock Option and the Option shall not be exercisable
more than 5 years from the date the Incentive Stock Option was granted.
(e) Notwithstanding other provisions hereof, the aggregate Fair Market
Value (determined as of the time the Incentive Stock Option is granted) of
the Shares for which any employee may be granted Incentive Stock Options in
any calendar year shall not exceed $100,000.
(f) The Committee, in its sole discretion, shall determine whether any
particular Incentive Stock Option shall become exercisable in one or more
installments, specify the installment dates, and, within the limitations
herein provided, determine the total period during which the Incentive Stock
Option is exercisable. Further, the Committee may make such other provisions
as may appear generally acceptable or desirable to the Committee or necessary
to qualify its grants under the applicable provisions of the Code. The
Committee may also, in its sole discretion, authorize acceleration of the
exercise of an Option or installment.
-5-
<PAGE>
The Option will provide for acceleration in the event of an acquisition. An
acquisition of Corporation for the purposes of the Plan, shall be deemed to
have been made if Corporation shall merge into another company, other than a
wholly owned subsidiary, which shall continue as the surviving corporation,
or if a majority of Corporation's then outstanding Common Stock entitled to
elect a majority of the Board, shall have been purchased by another company.
(g) The Committee may grant at any time new Incentive Stock Options to
an employee who has previously received Incentive Stock Options or other
Options whether or not such prior Incentive Stock Options or other Options
are still outstanding, whether they have previously been exercised in whole
or in part, or whether they are canceled in connection with the issuance of
new Incentive Stock Options. However, any new Incentive Stock Option granted
shall not be exercisable until any previously granted Incentive Stock Option
is exercised in full or expires by reason of lapse of time. The purchase
price of the new Incentive Stock Options shall be 100% of the Fair Market
Value of a Share on the date the new Incentive Stock Option is granted.
(h) Each Incentive Stock Option shall be evidenced by a written
instrument containing such terms and conditions, not inconsistent with this
Plan, as the Committee shall approve. The granting of an Incentive Stock
Option in any year shall not give the Grantee any right to similar grants in
future years or any right to be retained in the employ of Corporation, and
all employees shall remain subject to discharge to the same extent as if the
Plan were not in effect.
(i) No employee, and no beneficiary or other person claiming under or
through such employee, shall have any right, title, or interest by reason of
any Incentive Stock Option to any particular assets of Corporation, or any
Shares allocated or reserved for the purposes of the Plan or subject to any
Incentive Stock Option except as set forth herein.
(j) No right under the Plan shall be subject to anticipation, sale,
assignment, pledge, encumbrance, or charge except by will or the laws of
descent and distribution, and an Incentive Stock Option shall be exercisable
during the Grantee's lifetime only by the Grantee or Legal Representative.
(k) Notwithstanding any other provision of the Plan or agreements made
pursuant thereto, Corporation shall not be required to issue or deliver any
certificate or certificates for Shares under this Plan prior to fulfillment
of all of the following conditions: (i) the listing, or approval for listing
upon notice of issuance, of such Shares on any national securities exchange
on which the Common Stock may then be listed; (ii) any registration or other
qualification of such Shares under any state or federal law
-6-
<PAGE>
or regulation, or the maintaining in effect of any such registration or other
qualification which the Committee shall, in its absolute discretion upon the
advice of counsel, deem necessary or advisable; and (iii) the obtaining of
any other consent, approval, or permit from any state or federal governmental
agency which the Committee shall, in its absolute discretion upon the advice
of counsel, deem necessary or advisable.
(l) All payments to Grantees or to their Legal Representatives shall be
subject to any applicable tax, community property, or other statutes or
regulations of the United States or of any state having jurisdiction thereof.
(m) Upon the exercise of any Incentive Stock Option, the Grantee shall
pay the Option Price of the Shares exercised in cash, or in any other mode
provided for in the particular Incentive Stock Option agreement governing
such Option; provided that the Committee may, in its discretion, provide for
payment to be in stock or any other mode it deems acceptable.
(n) It is the specific intent of Corporation that any Incentive Stock
Option granted under this Plan shall be an "incentive stock option" as
defined in Section 422(b) of the Code. If for any reason it is determined
that any Incentive Stock Option shall, by reason of any provision(s) herein
contained, not qualify under the provisions of Section 422 of the Code, then
this Plan shall be construed and enforced as if such provision(s) had never
comprised a part of this Plan; and the remaining provisions of this Plan will
remain in full force and effect and will not be affected by the
non-qualifying provision(s) or by its severance from this Plan. Furthermore,
in lieu of such provision(s), there will be added automatically as a part of
this Plan provision(s) as similar in terms to such non-qualifying
provision(s) as may be possible and be legal, valid, and enforceable to
qualify the Plan under Section 422 of the Code.
SECTION VI
GRANTING OF NON-QUALIFYING OPTIONS
The Committee may, from time to time and upon such terms and conditions
as it may determine, authorize the granting of Non-Qualifying Options to
Eligible Employees. Each such grant may utilize any or all of the Shares
authorized to be issued under the Plan, and shall be subject to all of the
following:
(a) Each Non-Qualifying Option shall specify the number of Shares to
which it pertains or a method for determining such number.
-7-
<PAGE>
(b) Each Non-Qualifying Option shall specify that the exercise price
per Share shall be not less than the Market Value Per Share on the date of
grant of such Non-Qualifying Option.
(c) Successive grants may be made to the same Eligible Employee whether
or not any Non-Qualifying Option or portions thereof previously granted to
such Eligible Employee remain unexercised. No Eligible Employee may, however,
be permitted to purchase in the aggregate pursuant to this Plan more than
2,000,000 Shares (whether pursuant to the exercise of Incentive Stock Options
or Non-Qualifying Options), subject to adjustment pursuant to Section VIII of
this Plan.
(d) The date of grant of each Non-Qualifying Option shall be the date
of its authorization by the Committee. No Non-Qualifying Option shall be
exercisable more than 10 years from such date of grant or after the
expiration of 12 months from the date of termination of employment of the
Non-Qualifying Optionee by Corporation by reason of death, disability, or
retirement or after the expiration of 3 months from the date of termination
for any other reason. Each Non-Qualifying Option granted may be exercised in
whole or in part, at any time and from time to time.
(e) Upon exercise of a Non-Qualifying Option, the exercise price shall
be payable either (i) in cash, (ii) at the sole discretion of the
Non-Qualifying Optionee, by delivery to Corporation of Market Shares then
owned by the Non-Qualifying Optionee having a value equal to the total
exercise price, or (iii) by a combination of such methods of payment. In
determining the value of the Shares delivered pursuant to sub-clause (ii) or
(iii) of this clause (f), Market Shares shall be valued at the Fair Market
Value on the business day immediately preceding such delivery. A
Non-Qualifying Option or any portion thereof may be exercised only by payment
in full of the exercise price on the day of exercise.
(f) Each grant of a Non-Qualifying Option shall be evidenced by a
written instrument executed on behalf of Corporation by any officer
designated by the Committee for this purpose and delivered to and accepted by
the Eligible Employee and shall contain such terms and provisions, consistent
with this Plan, as the Committee may approve.
(g) No Non-Qualifying Optionee shall have any rights or privileges of a
shareholder of Corporation in respect of any of the Shares issuable upon
exercise of the Non-Qualifying Option unless and until certificates
representing such Shares shall have been issued and delivered to such
Non-Qualifying Optionee.
-8-
<PAGE>
SECTION VII
SUBSTITUTION OF OPTIONS
In the event of a corporate merger or consolidation, or the acquisition
by Corporation or any reorganization or other transaction, the Committee may
substitute options under this Plan for options under the plan of the acquired
corporation provided (i) the excess of the aggregate Fair Market Value of the
Shares subject to Option immediately after the substitution over the
aggregate option price of such Shares is not more than the similar excess
immediately before such substitution, and (2) the new Option does not give
the employee additional benefits, including any extension of the exercise
period.
SECTION VIII
ADJUSTMENT PROVISIONS
(a) If the Shares outstanding are changed in number or class by reason
of a split-up, merger, consolidation, reorganization, reclassification, or
any capital adjustment, including a Common Stock dividend, or if any
distribution is made to the holders of stock other than a cash dividend, then
(i) the aggregate number and class of shares or other securities that may be
issued or transferred pursuant to SECTION III, (ii) the number and class of
shares or other securities which are payable under outstanding Incentive
Stock Options, and (iii) the purchase price to be paid per Share under
outstanding Incentive Stock Options shall be adjusted as provided hereon.
(b) Adjustments under this SECTION VIII shall be made in an equitable
manner as determined by the Committee, whose determination as to what
adjustments shall be made, and the extent thereof, shall be final, binding,
and conclusive.
(c) Subject to any required action by the stockholders of Corporation,
if Corporation shall be the surviving or resulting corporation in any merger
or consolidation, any Incentive Stock Option, any Non-Qualifying Option and
any repurchase agreement under the Plan shall cover the Shares which the
employee receives upon the merger or consolidation in respect of the Shares
covered by the Option or repurchase agreement, as the case may be. In the
event of a change in Corporation's authorized Common Stock which is limited
to a change in the designation thereof or a change of authorized Shares with
par value into the same number of Shares with different par value or into the
same number of Shares without par value, the Shares resulting from any such
change shall be deemed to be Common Stock within the meaning of the Plan. In
the event of any other change affecting the Common Stock, including any
merger or consolidation in which Corporation shall not be the surviving or
resulting corporation, such adjustment shall be made
-9-
<PAGE>
as may be deemed equitable by the Committee to give proper effect to such
event.
SECTION IX
RIGHTS NOT TRANSFERABLE
No Incentive Stock Option or Non-Qualifying Option granted under the
Plan are assignable or transferable by an employee except to such employee's
Legal Representative or to such employee's legatees or distributees by will
or the applicable laws of descent and distribution.
SECTION X
TAX LITIGATION
Corporation shall have the right to contest, at its expense, any tax
ruling or decision, administrative or judicial, on an issue which is related
to the Plan or any repurchase agreement and which the Committee believes to
be important to Eligible Employees, and to conduct any such contest or any
litigation arising therefrom to a final decision.
SECTION XI
AMENDMENT OF THE PLAN
Corporation reserves the right through the Board, from time to time, to
alter, amend, modify, suspend or discontinue the Plan or alter or amend any
or all of the repurchase agreements entered into hereunder; provided,
however, that without the approval of the holders of a majority of all
outstanding Shares entitled to vote thereon, no material change shall be made
in (i) the maximum number of Shares which may be sold under the Plan (other
than adjustments made pursuant to SECTION VIII), (ii) the requirements as to
eligibility for participation in the Plan or (iii) the benefits accruing to
participants in the Plan. No amendment or modification of the Plan or of any
repurchase agreement shall operate to affect adversely any employee with
respect to Incentive Stock Options or Non-Qualifying Options previously
granted and with respect to Shares already purchased by the employee upon
exercise of any Incentive Stock Option or Non-Qualifying Option without the
consent of such employee. No amendment without the approval of a majority of
the stockholders of Corporation shall materially increase the benefits
accruing to Grantees under the Plan or change the class of employees eligible
to receive options under the Plan.
SECTION XII
GOVERNMENT AND OTHER REGULATIONS
The Plan, the grant of Incentive Stock Options and Non-Qualifying
Options hereunder, and the sale of Shares hereunder,
-10-
<PAGE>
and Corporation's obligation to repurchase or exchange Shares, shall be
subject to all applicable federal and state laws, rules, and regulations, and
to such approvals by any regulatory or governmental agency which may, in the
opinion of counsel for Corporation, be required.
SECTION XIII
INDEMNIFICATION OF COMMITTEE
Service on the Committee shall constitute such service as a director of
Corporation so that members of the Committee shall be entitled to
indemnification and reimbursement as directors of Corporation pursuant to its
certificate of incorporation, bylaws, resolutions of the Board or
stockholders, or applicable law.
SECTION XIV
WITHHOLDING
The delivery of Shares upon the exercise of any Option shall be subject
to the requirement that the Non-Qualifying Optionee make adequate
arrangements with Corporation to effect any required withholding taxes or
other sums required by law to be deducted.
SECTION XV
EFFECTIVE DATE AND DURATION OF PLAN
The provisions set forth herein shall become effective upon approval by
the holders of a majority of all outstanding Shares entitled to vote thereon.
This Plan shall terminate at the close of business on July 31, 2006 and no
Incentive Stock Option or Non-Qualifying Option may be granted under the Plan
thereafter, but such termination shall not affect any Incentive Stock Option
or Non-Qualifying Option theretofore granted.
-11-
<PAGE>
AMENDMENT NO. 1
ENDLESS YOUTH PRODUCTS, INC.
1996 STOCK OPTION PLAN
The Board of Directors of Endless Youth Products, Inc. (the "Company")
hereby adopts the following amendment to the Company's 1996 Stock Option Plan
(the "Plan"), pursuant to Article XII thereof:
1. Section II, Paragraph (e) of the Plan is modified to read as follows:
(e) "ELIGIBLE EMPLOYEE" shall mean any person who is, at the time
of grant of any Option, an officer (including any officer who is
also a member of the Board) or any key employee of the Corporation
or any subsidiary thereof or, with respect to Non-Qualified Options
only, any person who is a member of the Board.
DATED: December 30, 1997
<PAGE>
AMENDMENT NO. 2 TO
ENDLESS YOUTH PRODUCTS, INC. 1996 STOCK OPTION PLAN
The Board of Directors of Endless Youth Products, Inc. (the "COMPANY")
hereby adopts the following amendment to the Company's 1996 Stock Option Plan
(the "PLAN") pursuant to Article XII thereof:
1. The first sentence of Section III of the Plan is amended to read as
follows:
"The total number of Shares which may be made the subject of Options
pursuant to this Plan shall not exceed 1,250,000 shares of common stock
(which number takes into account the one-for-five reverse stock split
occurring in May 1998), except to the extent adjusted pursuant to
SECTION VIII."
2. This Amendment shall become effective upon its approval by
holders of a majority of the outstanding shares of common stock, in accordance
with Section IX of the Plan.
Dated: June 2, 1999
<PAGE>
EXHIBIT 10.9
ENDLESS YOUTH PRODUCTS, INC.
6767 WEST TROPICANA BOULEVARD, SUITE 207
LAS VEGAS, NEVADA 89103
August 4, 1997
James Hembree
4620 Jupiter Drive
Salt Lake City, UT 84124
Re: CONSULTING ARRANGEMENTS
Dear Jim:
This letter is intended to set forth our agreement concerning your
becoming a director of and consultant to Endless Youth Products, Inc. (the
"COMPANY").
1. You hereby agree to purchase for the sum of $50,000 cash 125,000
shares of the common stock of the Company. In connection with this sale, you
will execute and return to the Company an investor representation in the form
of EXHIBIT A hereto. Such shares shall be issued by the Company's transfer
agent upon the Company's receipt of the purchase price. The shares will be
issued pursuant to Rule 504 under the Securities Act of 1933, and will not be
subject to resale restrictions under Rule 144 thereunder (other than those
applicable to you by reason of your being a director of the Company).
2. As additional consideration, the Company will issue to you warrants
to purchase 125,000 shares of common stock of the Company. The exercise price
of the warrants will be $0.70 per share. The warrants will expire on August
4, 2002. The form of the warrants will be as set forth in EXHIBIT B.
3. In consideration of your agreeing to join the Board of Directors of
the Company, you will receive an additional bonus of 150,000 options to
purchase shares of the Company's common stock. These options will be issued
under the Company's 1996 Stock Option Plan as incentive stock options. The
options will expire on August 4, 2002 and will have the following terms and
vesting schedule:
<TABLE>
<CAPTION>
NO. OF OPTIONS PURCHASE PRICE VESTING DATE
<S> <C> <C>
50,000 $0.40 August 4, 1997
25,000 $0.60 August 4, 1997
50,000 $0.75 August 4, 1997
25,000 $0.90 August 4, 1997
</TABLE>
<PAGE>
James Hembree
June 30, 1999
Page 2
4. In consideration of her agreeing to act as a consultant to the
Company, Joyce Hembree will be issued warrants to purchase 15,000 shares of
the Company's common stock at $0.40 per share. These options will expire on
August 4, 2002.
5. As a member of the Board of Directors, you will also be entitled to
receive compensation for attending Board meetings and serving as a director
as may be agreed by the Board.
If you agree to the foregoing, please so indicate by signing a copy of
this letter and returning it to us.
Sincerely,
ENDLESS YOUTH PRODUCTS, INC.
By: /s/ Neal K. Wallach
--------------------------------------
Neal K. Wallach, Chairman and
Chief Executive Officer
AGREED TO THIS 4th DAY OF August, 1997.
--- ------
/s/ James Hembree
- ------------------------------------
James Hembree
<PAGE>
EXHIBIT 10.10
AMENDMENT NO. 1 TO CONSULTING AGREEMENT
This Amendment No. 1 to Consulting Agreement, dated as of June 18, 1999
(this "AGREEMENT"), is between James Hembree ("THE CONSULTANT") and Endless
Youth Products, Inc., a Nevada Corporation (the "COMPANY").
The Consultant and the Company wish to amend their Consulting Agreement
dated August 4, 1997 (the "CONSULTING AGREEMENT"), as follows:
1. Consultant shall continue to provide consulting services from time
to time to the Company. In particular, Consultant shall provide consulting
services with respect to design, manufacturing and marketing the Company's
supplement, skin care and other products; introductions to potential vendors,
consultants and financing sources; marketing consulting, including without
limitation consulting with respect to the Company's internet site; and other
consulting services with respect to the Company's business.
2. In addition to the compensation set forth in the original Consulting
Agreement, Consultant shall be entitled to receive warrants to purchase
64,500 shares of the Company's Common Stock at a purchase price of $0.625 per
share and warrants to purchase 24,000 shares of Common Stock at a purchase
price of $0.9375 per share. Such warrants shall be issued as of the date of
this Amendment, and expire on June 29, 2001.
3. In consideration of Consultant continuing to serve on the Board of
Directors of the Company, the Consultant shall be entitled to receive
nonqualified options under the Company's 1996 Stock Option Plan to purchase
20,000 shares of Common Stock per year at a purchase price equal to the
market price of the Common Stock on the date of grant. Such options will
expire five years from the date of grant and shall vest immediately.
4. All warrants, shares of Common Stock and options issued to the
Consultant pursuant to this Amendment No. 1, to the extent they so qualify,
shall be issued under Rule 701 under the Securities Act of 1933.
5. Except as set forth in this Agreement, the Consulting Agreement
shall remain in full force and effect.
IN WITNESS WHEREOF, the Company and the Consultant have executed this
Amendment No. 1 as of the date first written above.
ENDLESS YOUTH PRODUCTS, INC.,
By: /s/ Neal K. Wallach /s/ James Hembree
-------------------------------- ------------------------------------
Neal K. Wallach, Chief James Hembree
Executive Officer
<PAGE>
EXHIBIT 10.11
CONSULTING AGREEMENT
THIS AGREEMENT is made and dated for reference this 25th day of June, 1999.
BETWEEN:
IRC, THE INVESTOR RELATIONS COMPANY LIMITED., of
Suite 1450-409 Granville Street
Vancouver, B.C. V6C 1T2
CANADA
(the "Contractor")
AND:
ENDLESS YOUTH PRODUCTS INC.
Suite 206-6767 West Tropicana Blvd.
Las Vegas, Nevada
USA 89103
(the "Company")
WHEREAS:
A. The Company wishes to engage the Contractor and the Contractor is willing
to accept such engagement to perform consulting services for the Company
subject to the terms and conditions herein;
B. The Contractor shall be an independent contractor and not an employee or
agent of the Company, provided that the Contractor shall be the agent of
the Company for the limited purpose of carrying out the obligations set
forth in this Agreement.
C. The Company is listed on the Nasdaq OTC Bulletin Board (the "Exchange").
NOW THEREFORE THIS AGREEMENT WITNESSES, in consideration of the mutual
covenants and agreements contained herein, the receipt and sufficiency of
which the parties hereto acknowledged, the parties agree as follows:
COMPENSATION OF CONTRACTOR AND TERM OF AGREEMENT
1. The Company hereby engages the Contractor:
a) to perform consulting services as set out on paragraph 2 herein, and
the Contractor hereby accepts such engagement to provide those consulting
services to the Company, in a faithful and diligent manner, for a period
of one year by mutual consent; and
b) upon signing of this agreement the Company shall pay the Contractor
US$40,000 to commence the consulting program; and
c) as compensation to the Contractor for the consulting services
rendered, as set out in paragraph 2 herein, the Company agrees to pay the
Contractor a fee consisting of Seven Thousand Five Hundred (7,500)
dollars worth of Endless Youth Products Inc. stock (based on average bid
price for the previous thirty day period) per month, payable as set out
in subparagraph 1(c) herein; and
d) the Contractor shall submit an invoice on the first business day of
each month; and
CONSULTING SERVICES
2. The parties agree that the Contractor shall perform the following
services:
a) assist with the corporate and investor relations of the Company;
b) assist with developing appropriate presentation material, corporate
mailing pieces, brochures, shareholder communications materials and other
collateral material for the Company;
c) make presentations to the investment brokerage industry and to
potential investors and present a monthly report on these activities with
reference to specific contact information;
<PAGE>
d) do all such acts and things as may be reasonably required to foster and
enhance the positive reputation of the Company in the market place and
on the Exchange;
e) assist in arranging media coverage or reporting on the Company;
f) perform any other services or functions reasonably required by the
Company and within the general scope of the Contractor's duties as set
forth in this Agreement, and otherwise operate and manage the investor
relations of the Company in accordance with and as limited by this
Agreement;
g) provide a monthly summary of expenditures; and
h) funding of all consulting fees shall be derived from the exercising of
warrants pursuant to the stock warrant agreement;
CONTRACTOR SERVICES
3. In performing the Services, the Contractor will:
a) in all circumstances refrain from providing and covenants and agrees
with the Company that it will not provide any investment advice or
recommendations regarding the Company to any person, whether voluntarily
or upon request;
b) make no representations concerning the Company that are not authorized
by the Company in writing and the Company shall incur no liability
whatsoever in respect of any unauthorized representations made by the
contractor; and
c) comply in all respects with the securities and other applicable laws of
Canada and the United States and each applicable province or state, as
the case may be, therein.
NEWS RELEASE AND FILING
4. The Contractor acknowledges that as the result of entering into this
Agreement it will be a "person in a special relationship", as that
expression is defined in the securities laws of various provinces of
Canada, with the Company, and that as such it may receive information
concerning material changes in or material facts concerning the business
and affairs of the Company that has not been generally disclosed and it
covenants and agrees that it will not purchase or sell securities of the
Company until such information has been generally disclosed.
The Company will not be liable to the contractor or to any person or
entity that may claim any right due to its relationship with the
Contractor for any acts or omissions in the performance of the
Contractor's services under this Agreement or on the part of the agents
or employee's of the Contractor, except when such acts or omissions are
the result of the Company's willful misconduct or gross negligence. The
Contractor will indemnify the Company from and against any and all
liabilities (including, without limitation, claims, judgments and
attorney's fees) arising out of or in any way connected with the services
rendered to the Company pursuant to this Agreement, except when the same
arises due to their willful misconduct or gross negligence of the
Company, its agents or employees. This section shall survive any
termination of this Agreement.
REPRESENTATION AND WARRANTIES
5. The Contractor covenants with the Company that:
a) it will fully comply with the requirements of all applicable
securities laws in all matters relating to the performance of this
Agreement, and the Contractor acknowledges that it is not relying on
advice from the Company in complying hereto; and
b) it will keep informed of the business and affairs of the Company in
order to be able to factually inform interested parties about the
business and affairs of the Company.
<PAGE>
CONTINUOUS DISCLOSURE
6. The Company agrees to keep the Contractor informed as to all material
changes in its affairs and to provide such other information as the
Contractor requests in a reasonable and timely manner.
TERMINATION
7. This Agreement may be terminated:
a) by the Company immediately upon written notice to the Contractor if,
at any time, the Contractor, while in performance of the Services,
commits fraud, is grossly negligent or is guilty of willful misconduct,
provided that such notice shall specify the cause for termination in
reasonable detail;
b) by the Contractor immediately upon the occurrence of a material
breach of this Agreement by the Company, by giving written notice to the
Company specifying the nature of such default in reasonable detail;
c) by either party, upon delivery of 30 days written notice.
GOVERNING LAW
8. This Agreement shall be governed by and interpreted in accordance with the
laws of British Columbia.
ENUREMENT
9. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective successors but shall not be assignable by
either party.
REPORTING
10. The Contractor shall report to the President of the Company.
CONFLICT OF INTEREST AND CONFIDENTIAL INFORMATION
11. The Contractor recognizes and acknowledges that it has and will have
access to certain confidential information of the Company and its
affiliates that are valuable, special and unique assets and property of
the Company and such affiliates. The Contractor will not during or after
the term of this Agreement disclose without prior written consent or
authorization of the Company any of such information to any person except
to authorized representatives of the contractor or its affiliates for any
reason or purpose whatsoever. In this regard the Company agrees that such
authorization or consent to disclosure may be conditioned upon the
disclosure being made pursuant to a secrecy agreement protective order,
provision of statute, rule regulation or procedure under which the
confidentiality of the information is maintained in the hands of the
person to whom the information is to be disclosed or in compliance with
the terms of a judicial order or administrative process. The Contractor
shall be free to perform services for other persons. The Contractor shall
not perform services for any other person which could conflict with its
obligations under this Agreement or with the interests of the Company
without first providing written notice without providing written notice
to the Company. Upon receiving such notice the Company may terminate this
Agreement or consent to the Contractor's outside consulting activities.
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused these presents to be
executed as and from the date, month and year first above written.
IRC, THE INVESTOR RELATIONS COMPANY
LIMITED.
Per:
/s/ [ILLEGIBLE]
--------------------------------
Authorized Signatory
ENDLESS YOUTH PRODUCTS INC.
Per:
/s/ Neal K. Wallach
--------------------------------
Authorized Signatory
<PAGE>
EXHIBIT 10.12
STOCK WARRANT AGREEMENT
THIS AGREEMENT is made the 25th day of June, 1999.
BETWEEN:
IRC, THE INVESTOR RELATIONS GROUP LIMITED.
Suite 1450-409 Granville Street
Vancouver, B.C. V6C 1T2
CANADA
(the "Optionee")
AND: ENDLESS YOUTH PRODUCTS INC.
Suite 206-6767 West Tropicana Blvd.
Las Vegas, Nevada
USA 89103
(the "Company")
This letter confirms our understanding of today's date whereas the Company
grants the optionee the following warrants on 200,834 shares of Endless Youth
Products Inc. of Suite 206-6767 West Tropicana Blvd., Las Vegas, Nevada, USA
89103. All warrants will be issued in the form of the Company warrant
agreement as provided in attachment A.
A performance based warrant package, 200,834 warrants released in five
tranches as follows:
1. 53,334 @ US$0.75--upon signing and;
2. 22,500 @ US$1.00--within thirty days signing
3. 25,000 @ US$1.25--based on a US$1.50 stock price on or before
July 30, 1999. (NOTE 1)
4. 25,000 @ US$1.25--based on a US$1.75 stock price on or before
Aug. 30, 1999. (NOTE 2)
5. 37,500 @ US$1.75--based on a US$2.25 stock price on or before
Sept. 30, 1999. (NOTE 3)
6. 37,500 @ US$1.75--based on a US$2.50 stock price on or before
Oct. 30, 1999. (NOTE 4)
NOTE 1: The bid price (US$1.50) must be maintained for a period of (30)
thirty days before the release of the Endless Youth stock warrants.
NOTE 2: The bid price (US$1.75) must be maintained for a period of (30)
thirty days before the release of the Endless Youth stock warrants.
NOTE 3: The bid price (US$2.25) must be maintained for a period of (30)
thirty days before the release of the Endless Youth stock warrants.
NOTE 4: The bid price (US$2.50) must be maintained for a period of (30)
thirty days before the release of the Endless Youth stock warrants.
<PAGE>
IN WITNESS WHEREOF the parties hereto have hereunto executed these
presents as of the day and year first above written.
ENDLESS YOUTH PRODUCTS INC. ("the Company")
Suite 206-6767 West Tropicana Blvd.
Las Vegas, Nevada
USA 89103
Per: /s/ Neal K. Wallach
IRC, THE INVESTOR RELATIONS COMPANY LIMITED.
("the Optionee")
Suite 1450-409 Granville Street
Vancouver, BC V6C 1T2
CANADA
Per: /s/ ILLEGIBLE
<PAGE>
ATTACHMENT A
THIS WARRANT AND THE SHARES ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") OR THE SECURITIES LAWS OF ANY STATE OR FOREIGN JURISDICTION IN
RELIANCE UPON EXEMPTIONS PROVIDED UNDER THE SECURITIES ACT AND EXEMPTIONS
FROM REGISTRATION AVAILABLE UNDER THE APPLICABLE SECURITIES LAWS OF ANY
FOREIGN JURISDICTION. ACCORDINGLY, THIS WARRANT MAY NOT BE SOLD,
TRANSFERRED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
ENDLESS YOUTH PRODUCTS, INC.
WARRANT TO PURCHASE COMMON STOCK
DATED _______________
Endless Youth Products, Inc., a Nevada corporation (the "COMPANY"),
certifies that, for valuable consideration, receipt of which is hereby
acknowledged, the Holder is entitled to purchase from the Company that number
of shares of the Company's Common Stock set forth in Section 1(h) hereof (the
"SHARES") at the purchase price set forth in Section 1(e) hereof.
This Warrant and the Common Stock issuable upon exercise hereof are
subject to the terms and conditions hereinafter set forth:
1. DEFINITIONS. As used in this Warrant, the following terms shall mean:
(a) "COMMON STOCK" - Common Stock, par value $0.001 of the Company.
(b) "COMPANY" - Endless Youth Products, Inc., a Nevada corporation.
(c) "EFFECTIVE DATE" - _______________.
(d) "HOLDER" - _________________.
(e) "PURCHASE PRICE" - $________ per share.
(f) "SUBSCRIPTION FORM" - The form attached to this Warrant as
Exhibit "A."
<PAGE>
(g) "WARRANT" - This Warrant and any warrants delivered in
substitution or exchange therefor as provided herein.
(h) "SHARES" - up to ____________ Shares.
(i) "EXPIRATION DATE" - ________________.
2. EXERCISE.
(a) TIME OF EXERCISE. This Warrant may be exercised in whole or
in part (but not as to a fractional shares) at the office of the Company, at
any time or from time to time, commencing on the Effective Date, provided,
however, that this Warrant shall expire and be null and void if not exercised
in the manner herein provided, by 5:00 p.m., Las Vegas, Nevada time, on the
Expiration Date.
(b) MANNER OF EXERCISE. This Warrant is exercisable at the
Purchase Price, payable in cash or by certified check, payable to the order
of the Company, subject to adjustment as provided in Section 3 hereof. Upon
surrender of this Warrant with the annexed Subscription form duly executed,
together with payment of the Purchase Price for the Shares purchased (and any
applicable transfer taxes) at the Company's principal executive offices, the
Holder shall be entitled to receive a certificate or certificates for the
Shares so purchased.
(c) DELIVERY OF STOCK CERTIFICATES. As soon as practicable, but
not exceeding 30 days, after complete or partial exercise of this Warrant,
the Company, at its expense, shall cause to be issued in the name of the
Holder (or upon payment by the Holder of any applicable transfer taxes, the
Holder's assigns) a certificate or certificates for the number of fully paid
and non-assessable Shares to which the Holder shall be entitled upon such
exercise, together with such other stock or securities or property or
combination thereof to which the Holder shall be entitled upon such exercise,
determined in accordance with Section 3 hereof.
(d) RECORD DATE OF TRANSFER OF SHARES. Irrespective of the date
of issuance and delivery of certificates for any stock or securities issuable
upon the exercise of this Warrant, each person (including a corporation or
partnership) in whose name any such certificate is to be issued shall for all
purposes be deemed to have become the holder of record of the stock or other
securities represented thereby immediately prior to the close of business on
the date on which (i) a duly executed Subscription Form containing notice of
exercise of this Warrant, (ii) payment of the Purchase Price and (iii) the
opinion or certificate required by Section 4(a)(iii) of this Warrant is
received by the Company.
3. ADJUSTMENTS. After each adjustment of the Purchase Price pursuant
to this Section 3, the number of shares of Common Stock purchasable on the
exercise of the Warrant shall be the number derived by dividing such adjusted
pertinent Purchase Price into the original pertinent Purchase Price. The
pertinent Purchase Price shall be subject to adjustment as follows:
-2-
<PAGE>
(a) In the event, prior to the expiration of the warrant by
exercise or by its terms, the Company shall issue any shares of its Common
Stock as a share dividend or shall subdivide the number of outstanding shares
of Common Stock into a greater number of shares, then, in either of such
events, the Purchase Price per share of Common Stock purchasable pursuant to
the warrant in effect at the time of such action shall be reduced
proportionately and the number of shares purchasable pursuant to the Warrant
shall be increased proportionately. Conversely, in the event the Company
shall reduce the number of shares of its outstanding Common Stock by
combining such shares into a smaller number of shares, then, in such event,
the Purchase Price per share purchasable pursuant to the Warrant in effect at
the time of such action shall be increased proportionately and the number of
shares of Common Stock at that time purchasable pursuant to the Warrant shall
be decreased proportionately. Any dividend paid or distributed on the Common
Stock in shares of any other class of the Company or securities convertible
in to shares of Common Stock shall be treated as a dividend paid in Common
Stock to the extent that shares of Common Stock are issuable on the
conversion thereof.
(b) In the event the Company, at any time while the Warrant shall
remain unexpired and unexercised, shall sell all or substantially all of its
property, or dissolves, liquidates or winds up its affairs, prompt,
proportionate, equitable, lawful and adequate provision shall be made as part
of the terms of any such sale, dissolution, liquidation or winding up such
that the holder of a Warrant may thereafter receive, on exercise thereof, in
lieu of each share of Common Stock of the Company which he would have been
entitled to receive, the same kind and amount of any share, securities, or
assets as may be issuable, distributable or payable on any such sale,
dissolution, liquidation or winding up with respect to each share of Common
Stock of the Company; provided, however, that in the event of any such sale,
dissolution, liquidation or winding up, the right to exercise this Warrant
shall terminate on a date fixed by the Company, such date to be not earlier
than 5:00 p.m., Las Vegas, Nevada time, on the 30th day next succeeding the
date on which notice of such termination of the right to exercise the Warrant
has been given by mail to the holders thereof at such addresses as may appear
on the books of the Company.
(c) Notwithstanding the provisions of this Section 3, no
adjustment of the Purchase Price shall be made whereby such Price is adjusted
in an amount less than $.0001 or until the aggregate of such adjustments
shall equal or exceed $.0001.
(d) In the event, prior to the expiration of the Warrant by
exercise or by its terms, the Company shall determine to take a record of the
holders of its Common Stock for the purpose of determining shareholders
entitled to receive any share dividend or other right which will cause any
change or adjustment in the number, amount, price or nature of the shares of
Common Stock or other securities or assets deliverable on exercise of the
Warrant pursuant to the foregoing provisions, the Company shall give to the
Registered Holder of the Warrant at the address as may appear on the books of
the Company at least 15 days' prior written notice to the effect that it
intends to take such a record. Such notice shall specify the date as of
which such record is to be taken; the purpose for which such record is to be
taken; and the number, amount, price and nature of the Common Shares or other
shares, securities or assets which will be deliverable on exercise of the
Warrant after the action for which such record will be taken has been
completed. Without limiting the obligation of
-3-
<PAGE>
the Company to provide notice to the Registered Holder of the Warrant of any
corporate action hereunder, the failure of the Company to give notice shall
not invalidate such corporate action of the Company.
(e) Before taking any action which would cause an adjustment
reducing the Purchase Price below the then par value of the shares of Common
Stock issuable upon exercise of the Warrant, the Company will take any
corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable shares of such Common Stock at such adjusted Purchase Price.
(f) Upon any adjustment of the Purchase Price required to be made
pursuant to this Section 3, the Company within 30 days thereafter shall cause
to be mailed to each of the Registered Holder of the Warrant written notice
of such adjustment setting forth the pertinent Purchase Price after such
adjustment and setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based.
(g) The Company's Board of Directors may, at their sole
discretion, reduce the Purchase Price of the Warrant in effect at any time
either for the life of the Warrant or any shorter period of time determined
by the Company's Board of Directors. The Company shall promptly notify the
Registered Holders of any such reductions in the Purchase Price.
4. RESTRICTION ON TRANSFER.
(a) The Holder, by its acceptance hereof, represents, warrants,
covenants and agrees that:
(i) the Holder has knowledge of the business and affairs of
the Company;
(ii) this Warrant and the Shares issuable upon the exercise of
this Warrant are being acquired for investment and not with a view to the
distribution hereof and that absent an effective registration statement
under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
covering the disposition of this Warrant or the Shares issued or issuable
upon exercise of this Warrant, they will not be sold, transferred,
assigned, hypothecated or otherwise disposed of without first providing
the Company with an opinion of counsel which may be counsel for the
Company) or other evidence, reasonably acceptable to the Company, to the
effect that such sale, transfer, assignment, hypothecation or other
disposal will be exempt from the registration and prospectus delivery
requirements of the Securities Act and the registration or qualification
requirements of any applicable state or foreign securities laws; and
(iii) the Holder consents to the making of a notation in the
Company's records or giving to any transfer agent of the Warrant or the
Shares an order to implement such restrictions on transferability
described in subparagraph (ii) above.
-4-
<PAGE>
(b) This Warrant (and any successor or replacement warrant) shall
bear the legend shown on the front page hereof and the Shares issuable upon
the exercise of this Warrant shall bear the following legend or a legend of
similar import, provided, however, that such legend shall be removed, or not
placed upon the Warrant or the certificate or other instrument representing
the Shares, as the case may be, if such legend is no longer necessary to
assure compliance with the Securities Act:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
FOREIGN JURISDICTION IN RELIANCE UPON AN EXEMPTION UNDER THE SECURITIES ACT
AND EXEMPTIONS FROM REGISTRATION AVAILABLE UNDER THE APPLICABLE SECURITIES
LAWS OF ANY STATE OR FOREIGN JURISDICTION. ACCORDINGLY, SUCH SHARES MAY BE
OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO RELEVANT
PROVISIONS OF FEDERAL, STATE AND FOREIGN SECURITIES LAWS OR IF AN EXEMPTION
FROM SUCH REGISTRATION OR QUALIFICATION IS APPLICABLE.
5. PAYMENT OF TAXES. All Shares issued upon the exercise of this
Warrant shall be validly issued, fully paid and non-assessable and the
Company shall pay all taxes and other governmental charges (other than income
tax) that may be imposed in respect of the issue or delivery thereof. The
Company shall not be required however, to pay any tax or other charge imposed
in connection with any transfer involved in the issue of any certificate for
Shares in any name other than that of the Holder surrendered in connection
with the purchase of such Shares, and in such case the Company shall not be
required to issue or deliver any stock certificate until such tax or other
charge has been paid or it has been established to the Company's satisfaction
that no tax or other charge is due.
6. RESERVATION OF COMMON STOCK. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of issuance upon the exercise of this
Warrant, such number of shares of Common Stock as shall be issuable upon the
exercise hereof. The Company covenants and agrees that, upon exercise of
this Warrant and payment of the Purchase Price thereof, all Shares of Common
Stock issuable upon such exercise shall be duly and validly issued, fully
paid and non-assessable.
7. NOTICES. Nothing contained in this Warrant shall be construed as
conferring upon the Holder hereof the right to vote or to consent or to
receive notice as a shareholder in respect of any meetings of shareholders
for the election of directors or any other matter or as having any rights
whatsoever as a shareholder of the Company. All notices, requests, consents
and other communication hereunder shall be in writing and shall be deemed to
have been duly made when delivered or mailed by registered or certified mail,
postage prepaid, return receipt requested:
(a) If to the Holder, to the address of such Holder as shown on the books
of the Company; or
-5-
<PAGE>
(b) If to the Company, to its principal executive officers.
8. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and (in case of loss, theft or
destruction) upon delivery of an indemnity agreement in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender
and cancellation of the mutilated Warrant, the Company will execute and
deliver in lieu thereof, a new Warrant of like tenor.
9. SUCCESSORS. All the covenants, agreements, representations and
warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
10. CHANGE; WAIVER. Neither this Warrant nor any term hereof may be
changed, waived, discharged or terminated orally but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
11. HEADINGS. The section headings in this Warrant are inserted for
purposes of convenience only and shall have no substantive effect.
12. LAW GOVERNING. This Warrant shall for all purposes be construed
and enforced in accordance with, and governed by, the internal laws of the
State of Nevada, without giving effect to principles of conflict of laws.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer and this Warrant to be dated as of the date first
written above.
ENDLESS YOUTH PRODUCTS, INC.
By: ___________________________________
Neal K. Wallach, President
-6-
<PAGE>
SUBSCRIPTION FORM
(To be Executed by the Registered Holder
if it Desires to Exercise the Warrant)
To Endless Youth Products, Inc.:
The undersigned hereby irrevocably elects to exercise the right to
purchase _____________ of the Shares covered by this warrant according to the
conditions hereof and herewith makes payment of the Purchase Price in full.
The undersigned requests that certificates for such shares be issued in
the name of:
_____________________________
PLEASE INSERT SOCIAL SECURITY
NUMBER OR TAX ID NUMBER
_______________________________________
(Please print name and address)
_______________________________________
_______________________________________
Dated:_____________ Signature:______________
NOTICE: The above signature must correspond with the name as written within
the Warrant in every particular, without alteration or enlargement
or any change whatsoever and if the certificate representing the
shares is to be registered in a name other than that in which the
Warrant is registered, the signature of the holder hereof must be
guaranteed.
Signature Guaranteed:_______________________
SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM OF
ONE OF THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE,
PACIFIC COAST STOCK EXCHANGE, AMERICAN STOCK EXCHANGE, OR MIDWEST
STOCK EXCHANGE.
-7-
<PAGE>
EXHIBIT 10.13
[LOGO]
ENDLESS YOUTH
PRODUCTS, INC.
January 27, 1999
Brian Kelly
3307 Laurel Avenue
Manhattan Beach, CA 90266
Dear Brian,
This Letter Agreement memorializes our agreement with respect to your
assistance in securing financing for the Le Solution Derma System.
At the time Infomercial Development Services ("IDS") payment of at least
$100,000 to Monte-Brooks Productions, 5000 shares of Endless Youth Products,
Inc. stock shall be provided to you; such stock holds a May 1, 1999 sales
restriction. Additionally, you shall be provided 1 percent of net receipts
(defined as Gross Receipts, as provided in the agreement between IDS and
Endless Youth, minus the cost of product). Such percentage shall be paid 45
days after the end of each month. The 1 percent shall be paid until the
total of all payments equals $250,000; thereafter, no further moneys shall be
owed to you by Endless Youth Products.
I look forward to working with you on this project and many more.
Yours sincerely,
Endless Youth Products, Inc.
/s/ Neal K. Wallach
Neal K. Wallach
President
<PAGE>
EXHIBIT 10.14
[LOGO]
ENDLESS YOUTH
PRODUCTS, INC.
- -------------------------------------------------------------------------------
To : Lenny Sands
Company :
Facsimile No. : 818.788.9264
From : Neal K. Wallach
Telephone No. : +1.310.277.0045
Facsimile No. : +1.310.277.1477
Date : October 1, 1997 Pages: Three
This facsimile may contain certain information which is privileged,
confidential and protected from disclosure. If you are not the intended
recipient of this transmission or the person responsible for its delivery to
the addressee, please immediately notify our office on receipt.
- --------------------------------------------------------------------------------
AGREEMENT
This letter agreement shall serve as the agreement (the "Agreement") between
Endless Youth Products, Inc., 6767 Tropicana Blvd., #206, Las Vegas, NV 89103
(the "Company") and Leonard Sands, 16161 Ventura Blvd., #676, Encino, CA
91436 or his affiliated company ("Sands").
The Company is involved in the development of Le Solution Derma System (the
"System"). The Company is utilizing the industrial design services of Logica
Product Development and the electrical engineering services of Steve
Chandler. Sands has agreed to provide $50,000 with respect to the
development and prototype production costs with respect to the System. The
investment payment schedule is as follows:
1. October 9: $12,000.
2. October 26: $ 8,000.
3. November 12: $ 7,000.
4. November 24: $ 6,000. plus costs for additional prototypes.
5. December 4: $ 2,000.
[The remaining $15,000 will be available in "as needed" basis to pay for
potential extra development costs, such as electrical engineering costs,
prototypes, and expenses related to coordination with manufacturers. Such
development costs will fall within the period November 24 and December 20.]
<PAGE>
ENDLESS YOUTH PRODUCTS, INC.
Leonard Sands
October 2, 1998
Page Two
The Company shall provide a notice to Sands two days prior to the due date of
the above described payments. A check or wire transfer shall be sent to the
Company by Sands with respect to the above-described payments to be received
on the specified date; the mailing address and bank account information shall
be supplied by the Company to Sands. Following the initial October 9 payment
which is due on October 9 (no further notice shall be provided by the Company
with respect to such payment), such dates may vary slightly based on the
completion of required work by Logica Product Development; the Company's
two-day notice to Sands shall take into account any such development delays.
In consideration of Sand's payment of $50,000, as described above, the
Company will provide to Sands the following:
1. 25,000 shares of Company stock. Shares will be issued in good faith on or
about October 9, following the initial payment of $12,000. Such shares can
be traded following February 1, 1999.
2. 25,000 stock options to purchase shares of the Company at $.75 per share.
Such options must be exercised within two years of the date of issuance which
shall be on or about October 9, following the initial payment of $12,000.
3. Sands will have a 2 percent interest in all revenues received by the
Company with respect to the System and all products sold in conjunction with
the marketing of the System. The 2 percent interest shall be based on gross
revenues minus actual manufacturing cost for the System and accompanying
products. If the Company receives a gross licensing/royalty fee with respect
to the System and accompanying products or a rental fee with respect to
generated customer lists compiled from the marketing of the System, Sands
will be paid 2 percent on such gross fees. Additionally, Sands will receive
a 2 percent interest in any lump-sum sale of the rights to the System and
accompanying products to a third party.
The Company will be required to furnish Sands with weekly reports in
connection with all revenues received by the Company from System revenues.
Sands will have the unlimited right to review all records with respect to the
System and its accompanying products.
4. Sands has the right of first refusal to manufacture product for the Company
on terms and prices equal to that of a third party manufacturer as secured by
the Company.
<PAGE>
ENDLESS YOUTH PRODUCTS, INC.
Leonard Sands
October 2, 1998
Page Three
5. Sands will act as the Company's exclusive representative in connection
with negotiations for sale of the System and accompanying products on home
shopping programs.
6. Further performance bonuses and financial arrangements will be entered
into in good faith between the Company and Sands as a reflection of the
expertise that Sands provides to the development, production, and marketing
of the System.
The term of this Agreement shall be ten years and automatically renewable for
an additional ten year period.
AGREED:
ENDLESS YOUTH PRODUCTS, INC.
BY: /s/ Neal K. Wallach /s/ Leonard Sands
------------------------------ -----------------------------
Neal K. Wallach, President Leonard Sands
<PAGE>
EXHIBIT 11.1
Computation of Per Share Earnings (Loss)
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS No. 128") for the fiscal year ended June 30,
1998. This statement replaces the previously-reported primary and fully
diluted earnings per share with basic and diluted earnings per share. Basic
earnings per share is computed by dividing net income (loss) available to
common stockholders by the weighted average number of common shares
outstanding during the period. Diluted earnings per share is very similar to
the previously-reported primary earnings per share in that it includes the
effect of the additional common shares which would have been outstanding if
dilutive stock options had been exercised. Pursuant to the requirements of
Staff Accounting Bulletin ("SAB") No. 98 of the Securities and Exchange
Commission, issued in February 1998, common equivalent shares which have an
anti-dilutive effect on net earnings (loss) per share are no longer included
in computing net earnings (loss) per share for the periods presented.
The following table summarizes the calculation of basic and diluted earnings
(loss) per share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended,
March 31, March 31,
----------------------- ----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Numerator:
Basic and diluted earnings
per share -- net income (loss) 101,915 (158,855) (48,021) (433,205)
Denominator:
Basic earnings per share --
weighted average number of
common shares outstanding
during the year 2,907,759 1,984,962 2,466,095 1,953,833
Incremental common shares
attributable to assumed
exercise of outstanding
stock options 106,074 -- 106,074 --
Denominator for diluted earnings
per share 3,013,833 1,984,962 2,572,169 1,953,833
Basic earnings (loss) per share .03 (.08) (.02) (.22)
Diluted earnings (loss) per share .03 (.08) (.02) (.22)
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Registration Statement on Form 10-SB of
our report dated October 8, 1998 relating to the financial statements of
Endless Youth Products, Inc.
BECKMAN KIRKLAND & WHITNEY
June 30, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED JUNE 30, 1998 AND
1997 AND THE NINE-MONTH PERIODS ENDED MARCH 31, 1999 AND 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-1998
<PERIOD-START> JUL-01-1998 JUL-01-1997
<PERIOD-END> MAR-31-1999 JUN-30-1998
<CASH> 39,162 471
<SECURITIES> 0 0
<RECEIVABLES> 22,828 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 61,990 122,229
<PP&E> 18,058 18,058
<DEPRECIATION> 7,610 4,610
<TOTAL-ASSETS> 118,588 135,677
<CURRENT-LIABILITIES> 230,480 301,418
<BONDS> 0 0
0 0
0 0
<COMMON> 2,916 2,017
<OTHER-SE> 1,053,852 952,881
<TOTAL-LIABILITY-AND-EQUITY> 118,588 135,667
<SALES> 2,744,163 211,819
<TOTAL-REVENUES> 3,672,377 225,896
<CGS> 2,424,695 70,059
<TOTAL-COSTS> 2,424,695 70,059
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 8,392
<INCOME-PRETAX> (48,021) (547,658)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (48,021) (547,658)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (48,021) (547,658)
<EPS-BASIC> (0.02) (0.28)
<EPS-DILUTED> (0.02) (0.28)
</TABLE>
