<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 17, 1999
REGISTRATION NO. 333-85683
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SWISS NATURAL BRANDS, INC.
(Name of small business issuer in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
2080
(Primary standard industrial classification code number)
13-3762562
(I.R.S. Employer Identification No.)
1031 ROUTE 9W
UPPER GRANDVIEW, NEW YORK 10960
(914) 358-1212
(Address and telephone number of principal executive offices and principal place
of business)
------------------------
DR. RALPH M. FERRANTE
Chairman and Chief Executive Officer
Swiss Natural Brands, Inc.
1031 Route 9W
Upper Grandview, New York 10960
(914) 358-1212
(Name, address and telephone number of agent for service)
------------------------
Copy to:
HANK GRACIN, ESQ. STEVEN MORSE, ESQ.
Lehman & Eilen LLP Lester Morse P.C.
50 Charles Lindbergh Blvd. - Suite 505 111 Great Neck Road, Suite 420
Uniondale, New York 11553 Great Neck, New York 11021
Telephone: (516) 222-0888 Telephone: (516) 487-1446
Facsimile: (516) 222-0948 Facsimile: (516) 487-1452
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the registration statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
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<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE AMOUNT TO OFFERING PRICE OFFERING REGISTRATION
REGISTERED BE REGISTERED PER SHARE(1) PRICE(1) FEE(5)
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<S> <C> <C> <C> <C>
Common Stock, par value $.01 per
share (2) 1,437,500 $ 5.25 $7,546,875 $ 2,098.03
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Underwriter's Common Stock
Warrants, each to purchase one
share of Common Stock (3) 125,000 .0008 100.00 (4)
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Common Stock, par value $.01 per
share, issuable upon exercise
of the Underwriter's Common
Stock Warrants 125,000 8.66 1,082,500 300.94
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Total Registration Fee $ 2,398.97
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) promulgated under the Securities Act of 1933, as
amended.
(2) Assumes the Underwriter's over-allotment option to purchase up to 187,500
additional shares of Common Stock is exercised in full.
(3) Represents warrants to be issued by Swiss Natural to the Underwriter at the
time of delivery and acceptance of the securities to be sold by Swiss
Natural to the public hereunder.
(4) None, pursuant to Rule 457(g).
(5) Fees are calculated by multiplying the aggregate offering price by .000278.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 17, 1999
PROSPECTUS
SWISS NATURAL BRANDS, INC.
1,250,000 SHARES OF COMMON STOCK
------------------------
Swiss Natural is offering 1,250,000 shares of common stock. This is our
initial public offering and no public market currently exists for our shares.
Swiss Natural develops and sells premium beverage products utilizing the
Swiss Natural trademark and other national brand programs.
------------------------
We have applied for quotation of our common stock on the Nasdaq Smallcap
Market under the symbol "SWIS".
------------------------
AN INVESTMENT IN OUR SECURITIES INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 6.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNTS COMPANY
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Per Share.................. $ 5.25 $ .525 $ 4.725
Total...................... $6,562,500 $656,250 $5,906,250
</TABLE>
Three stockholders of Swiss Natural have granted the underwriters the right
to purchase up to an additional 187,500 shares of common stock to cover
over-allotments.
------------------------
COMPREHENSIVE CAPITAL CORPORATION
SEABOARD SECURITIES, INC.
------------------------
, 1999
<PAGE>
[Photos of the Swiss Natural product line.]
"SWISS NATURAL", "REACH FOR THE PEAK", "ULTRA PEAK", "SWISS NATURAL ICY
BERRY","SWISS NATURAL ICY CITRUS", "SWISS NATURAL ICY MELONADE" and "SWISS
NATURAL ICY COFFEE" are registered trademarks of Swiss Natural.
<PAGE>
PROSPECTUS SUMMARY
Swiss Natural develops and sells premium beverage products utilizing the
Swiss Natural brand and other national brand programs. We have developed and
currently sell vitamin-fortified flavored fruit and tea beverages, as well as a
vitamin-fortified 100% orange juice product and a 100% apple juice product,
under our registered Swiss Natural trademark. We also sell a variety of fruit
and tea beverages, an orange juice product and an apple juice product under a
private label beverage program developed for a nationwide chain of restaurants.
Our beverages are made with natural flavors and juices and do not contain any
preservatives or artificial colors. All our Swiss Natural label beverages are
fortified with our proprietary Ultra Peakt vitamin formula to provide an
enhanced nutritional value. In addition, all of our beverages are bottled in our
proprietary glass bottles.
We sell a majority of our beverages through customer-owned or
customer-designated distribution systems and, to a lesser extent, through a
network of select independent distributors. We are currently developing an
Internet distribution system which we expect will permit us to distribute our
products in new packaging directly to consumers and retailers who place orders
with us via the Swiss Natural website.
THE OFFERING
<TABLE>
<S> <C>
Securities offered....................... 1,250,000 shares of common stock.
Common stock to be outstanding after the
offering................................. 3,841,708 shares. This figure excludes an
aggregate of up to 2,001,267 shares of common
stock issuable upon:
* exercise and/or conversion of all outstanding
warrants and convertible securities and
* exercise of all underwriters' warrants to be
issued in connection with this offering.
Proposed Nasdaq Smallcap Symbol.......... Common stock -- SWIS
</TABLE>
Unless otherwise indicated, all information in this prospectus assumes that
the underwriters' overallotment option will not be exercised.
Unless otherwise indicated, all information in this prospectus, including
per share data and information relating to the number of shares issued and
outstanding, has been adjusted to reflect a
1.5 for 1 reverse split of our common and preferred stock effected on October 1,
1999.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
which is contained in this prospectus. We are offering to sell shares of common
stock and seeking offers to buy shares of common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or of any sale of the common stock.
3
<PAGE>
SUMMARY OF FINANCIAL DATA
FOR THE FISCAL YEARS ENDED
FEBRUARY 28, 1999 AND 1998 (AUDITED) AND FOR THE
SEVEN MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
The following summary financial data should be read in conjunction with
Swiss Natural's financial statements and the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations". The
statement of operations data for the years ended February 28, 1999 and February
28, 1998 are derived from the financial statements of Swiss Natural that have
been audited by Goldstein Golub Kessler LLP, independent certified public
accountants. The balance sheet data as of September 30, 1999 and the statement
of operations data for each of the seven month periods ended September 30, 1999
and 1998 are derived from the unaudited financial statements of Swiss Natural;
however, such information reflects all adjustments (consisting of only normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of financial position, and the results of operations of the
interim periods.
<TABLE>
<CAPTION>
FISCAL 2000 FISCAL 1999
FISCAL YEAR ENDED SEVEN MONTHS SEVEN MONTHS
FEBRUARY 28, ENDED ENDED
--------------------------- SEPTEMBER 30, SEPTEMBER 30,
STATEMENT OF OPERATIONS DATA: 1999 1998 1999 1998
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales.............................. $ 3,005,872 $ 2,324,189 $ 2,519,102 $ 1,736,034
Cost of sales.......................... 2,001,701 1,941,074 1,546,378 1,144,267
----------- ----------- ----------- -----------
Gross profit......................... 1,004,171 383,115 972,724 591,767
----------- ----------- ----------- -----------
Expenses:
General and administrative........... 871,057 834,679 530,414 420,001
Selling and promotional.............. 502,652 508,401 298,878 191,808
Product development.................. 30,895 12,602 1,440 24,085
----------- ----------- ----------- -----------
Total expenses......................... 1,404,604 1,355,682 830,732 635,894
----------- ----------- ----------- -----------
Income (loss) from operations.......... (400,433) (972,567) 141,992 (44,127)
Other income........................... 11,079 23,036 8,836 7,943
Interest expense....................... (50,062) (80,759) (103,919) (21,567)
----------- ----------- ----------- -----------
Net Income (loss)...................... $ (439,416) $(1,030,290) $ 46,909 $ (57,751)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Income (loss) per common share --
Basic................................ $ (0.12) $ (0.31) $ 0.01 $ (0.02)
----------- ----------- ----------- -----------
Weighted average number of common
shares outstanding -- Basic (3)...... 3,797,708 3,276,971 3,279,241(1) 3,797,708
</TABLE>
<TABLE>
<CAPTION>
FISCAL 2000 FISCAL 1999
FISCAL YEAR ENDED SEVEN MONTHS SEVEN MONTHS
FEBRUARY 28, ENDED ENDED
--------------------------- SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Gross Sales............................ $ 3,061,586 $ 2,369,599 $ 2,566,658 $ 1,764,835
Sales Returns and allowances........... (55,714) (45,410) (47,556) (28,801)
----------- ----------- ----------- -----------
Net sales............................ $ 3,005,872 $ 2,324,189 $ 2,519,102 $ 1,736,034
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
-------------------------------
BALANCE SHEET DATA: ACTUAL AS ADJUSTED(2)
----------- --------------
<S> <C> <C>
Cash and cash equivalents...................................... $ 151,788 $ 5,259,062
Working capital (deficiency)................................... (130,060) 5,326,942
Total assets................................................... 1,359,153 6,343,800
Total liabilities.............................................. 1,833,859 1,484,131
Stockholders' (deficiency) equity.............................. (474,706) 4,859,669
</TABLE>
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(1) Does not give effect to the conversion of any shares of the convertible
preferred stock which were issued on June 30, 1999 and may be converted into
1,206,000 shares of common stock. Also does not give effect to the
conversion of any convertible subordinated debentures.
(2) Gives effect to the sale of the 1,250,000 shares of common stock being
offered hereby and anticipated application of the estimated net proceeds
therefrom including the repayment of indebtedness and interest payable to a
stockholder.
(3) Gives effect to the reverse stock split effective October 1, 1999.
<TABLE>
<CAPTION>
FISCAL 2000 FISCAL 1999
SEVEN MONTHS SEVEN MONTHS
ENDED ENDED
FEBRUARY 28, FEBRUARY 28, SEPTEMBER 30, SEPTEMBER 30,
PERFORMANCE RATIOS 1999 1998 1999 1998
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Return on Equity.................... 0.84 5.81 -0.10 0.29
Return on Assets.................... -0.33 -1.44 0.03 -0.07
A/R turnover........................ *12.68 *12.22 *6.77 *7.75
Inventory Turnover.................. **7.10 **5.89 **3.93 **3.89
Profit Margin on Sales.............. 33.41% 16.48% 38.61% 34.09%
</TABLE>
- ------------------
*Average Accounts Receivable computed by using month-end amounts.
**Average Inventory computed by using month-end amounts.
5
<PAGE>
RISK FACTORS
You should carefully consider the following risks before making an
investment decision. The trading price of our common stock could decline due to
any of these risks, and you could lose all or part of your investment. You also
should refer to the other information set forth in this prospectus, including
our financial statements and the related notes thereto.
SWISS NATURAL HAS INCURRED LOSSES FROM INCEPTION AND MAY NEVER GENERATE
SUBSTANTIAL PROFITS,
IF ANY AT ALL.
For each fiscal year since our inception in April 1993, Swiss Natural has
generated net losses. We may never generate substantial profits, if any at all.
Swiss Natural had an accumulated deficit of $2,527,516 as of September 30, 1999.
We can provide no assurances that our operations will be profitable in the
future.
WE MAY NEED ADDITIONAL CAPITAL AND MAY NOT BE ABLE TO OBTAIN IT.
We believe that the proceeds from this offering together with our current
cash balances and anticipated cash to be generated from operations will be
sufficient to meet our expected operating and capital requirements for at least
one year. However, we may need to raise additional funds in order to support
further expansion, meet competitive pressures, or respond to unanticipated
requirements. We cannot assure you that additional financing will be available
if needed on terms favorable to us.
WE HAVE LIMITED WORKING CAPITAL AND MAY ENCOUNTER FUTURE LIQUIDITY PROBLEMS.
We have historically had limited working capital. We had a working capital
deficiency of $130,060 at September 30, 1999. While we expect the proceeds of
this offering to provide us with sufficient working capital, there is no
assurance that future operations will not encounter capital resource and
liquidity problems.
THE LOSS OF SBARRO, INC. AS A CUSTOMER WOULD HAVE A MATERIAL ADVERSE EFFECT ON
OUR BUSINESS.
We currently sell our private label beverages only to Sbarro, Inc., a
nationwide chain of restaurants. The loss of Sbarro, Inc. as a customer would
have a material adverse effect on our business. We also depend significantly
upon the revenue derived from the sale of our beverages to Dunkin' Donuts
franchisees and several major independent distributors and retail outlets. Our
agreements with Sbarro and Dunkin' Donuts do not require them to purchase any
specified quantity of products from us. Although we consider our relationship
with each of these customers to be good, any one of them could decide not to
purchase our beverages.
THE LOSS OF ANY OF OUR THIRD-PARTY SUPPLIERS OR SERVICE PROVIDERS COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR OPERATIONS AND FINANCIAL RESULTS.
We rely on third parties to produce our beverages, to produce our glass
bottles and to bottle our beverages. The loss of our third-party suppliers or
service providers could have a material adverse effect on our operations and
financial results.
THE LOSS OF OUR THIRD PARTY BEVERAGE DISTRIBUTORS COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR OPERATIONS AND FINANCIAL RESULTS.
We depend on customer-owned or customer-designated distributors and other
third-party distributors to distribute our Swiss Natural products. The loss of
our third party beverage distributors could have a material adverse effect on
our operations and financial results. Most of our distributors are not bound by
written agreements with us and may discontinue their relationship with us on
short notice. The loss of one or more of our distributors could have a
significant negative effect on the sales of our Swiss Natural label beverages.
6
<PAGE>
IF WE ARE UNABLE TO COMPETE EFFECTIVELY WITH OUR COMPETITORS, MANY OF WHOM HAVE
BEEN IN EXISTENCE LONGER THAN US, HAVE A MORE ESTABLISHED MARKET PRESENCE AND
HAVE SUBSTANTIALLY GREATER RESOURCES THAN US, WE WILL NOT BE ABLE TO INCREASE
REVENUES OR GENERATE PROFITS.
Our ability to increase revenues and generate profitability is directly
related to our ability to compete effectively with our competitors. Swiss
Natural faces intense competition from other beverage companies producing
similar products, including Snapple, Fruitopia, Ocean Spray, Arizona, Mistic and
various other lesser known brands. Increased competition could diminish our
ability to be profitable or result in loss of market share and damage the Swiss
Natural brand. Many of our competitors are larger, better established and have
greater financial, marketing and distribution resources than Swiss Natural.
These greater resources permit our competitors to implement extensive
advertising and promotional programs which Swiss Natural has not been, and will
not be, able to match.
IF WE ARE NOT ABLE TO RETAIN OUR CHIEF EXECUTIVE OFFICER, IT WILL BE MORE
DIFFICULT FOR US TO MANAGE OUR OPERATIONS AND OUR OPERATING PERFORMANCE WOULD
SUFFER.
The success of our business is greatly dependent upon the active
involvement of our Chief Executive Officer, Dr. Ralph Ferrante, who is
responsible for the development of the formulas used to manufacture our
products. The loss of the services of Dr. Ferrante would materially and
adversely affect our business and prospects. We have applied for $1,000,000 of
key man life insurance on Dr. Ferrante.
IF OUR COMPETITORS MISAPPROPRIATE OUR UNPATENTED PROPRIETARY KNOW-HOW, TRADE
DRESS AND TRADE SECRETS IT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.
If our competitors develop substantially equivalent proprietary information
or otherwise obtain access to Swiss Natural's know-how it could materially and
adversely affect our business. We rely primarily on unpatented proprietary
know-how in the production of our beverages, as well as on confidentiality
agreements with the companies that produce our beverages and with our employees.
We regard the protection of our trademarks, trade dress and trade secrets
as critical to our future success. We have registered our trademarks in the
United States. We also rely on a combination of laws and contractual
restrictions, such as confidentiality agreements, to establish and protect our
proprietary rights, trade dress and trade secrets. However, laws and contractual
restrictions may not be sufficient to prevent misappropriation of our
proprietary rights, trade dress or trade secrets.
THE YEAR 2000 PROBLEM COULD CAUSE US TO SUFFER BUSINESS INTERRUPTIONS, OR
SHUTDOWN, REPUTATIONAL HARM OR LEGAL LIABILITY, AND AS A RESULT, MATERIAL
FINANCIAL LOSS.
We rely on information technology supplied by third parties, and our third
party suppliers and vendors also are dependent on information technology systems
and on their own third party vendors' systems. The Year 2000 problem could cause
us to suffer business interruptions, or shutdown, reputational harm or legal
liability, and as a result, material financial loss.
We are evaluating our internal information technology systems and
contacting our information technology suppliers and third party suppliers and
vendors to ascertain their Year 2000 status. However, we cannot guarantee that
our own systems will be Year 2000 compliant in a timely manner, that any of our
third party suppliers and vendors will be Year 2000 compliant in a timely
manner, or that there will not be significant interrelated operational problems
among information technology systems.
ANY DECREASE IN THE SUPPLY OF FRUIT JUICES OR INCREASE IN THE PRICES OF FRUIT
JUICES COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND RESULTS OF
OPERATIONS.
We depend upon an uninterrupted supply of fruit juices from the fruit of
apple trees and orange trees. Any decrease in the supply of these fruit juices
or increase in the prices of these fruit juices as a result of any adverse
weather conditions, pests or fungal disease could have a material adverse effect
on our business and results of operations. Apple and orange trees may become
damaged, diseased or
7
<PAGE>
destroyed as a result of any adverse weather conditions, pests or fungal
disease. Additionally, there are types of controllable fungal diseases that can
affect fruit production although not fatal to the trees themselves. These types
of fungal diseases are generally controllable with fungicides. However, we can't
be sure that such control measures will continue to be effective.
STOCKHOLDERS MAY NOT BE ABLE TO RE-SELL THEIR STOCK OR MAY HAVE TO SELL AT
PRICES SUBSTANTIALLY LOWER THAN THE PRICE THEY PAID FOR IT.
Prior to this offering, you could not buy or sell our common stock
publicly. Although the initial public offering price was determined based on
several factors, the market price after the offering may vary from the initial
offering price. As a result, stockholders may not be able to re-sell their stock
or may have to sell at prices substantially lower than the price they paid for
it. In addition, the stock market is subject to price and volume fluctuations
affecting the market price for public companies generally, or within broad
industry groups, which fluctuations may be unrelated to the operating results or
other circumstances of a particular company. Such fluctuations may adversely
affect the liquidity of the common stock, as well as the price that holders may
achieve upon any future sale.
BECAUSE IT MAY BE DIFFICULT TO EFFECT A CHANGE IN CONTROL OF SWISS NATURAL
WITHOUT CURRENT MANAGEMENT'S CONSENT, MANAGEMENT MAY BE ENTRENCHED EVEN THOUGH
STOCKHOLDERS MAY BELIEVE OTHER MANAGEMENT MAY BE BETTER AND A POTENTIAL SUITOR
WHO OTHERWISE MIGHT BE WILLING TO PAY A PREMIUM TO ACQUIRE SWISS NATURAL MAY
DECIDE NOT TO ATTEMPT AN ACQUISITION.
Upon consummation of this offering, Dr. Ralph M. Ferrante, the Chairman and
Chief Executive Officer of Swiss Natural, and Herbert Paul, the President and
Chief Financial Officer of Swiss Natural, together with trusts owned by their
respective family members, will hold approximately 38% and 10%, respectively, of
our outstanding voting stock, including our convertible preferred stock which
carries rights to vote with the common stock on a one-vote-per-share basis. Such
concentration of ownership may have the effect of delaying, deferring or
preventing a change in control of Swiss Natural and entrenching current
management even though stockholders may believe other management may be better.
In addition, the issuance of a poison-pill or another large block of preferred
stock with voting rights could have the effect of delaying, deferring or
preventing a change in control of Swiss Natural. Potential suitors who otherwise
might be willing to pay a premium to acquire Swiss Natural may decide not to try
to acquire us because it may be difficult to effect a change in control of Swiss
Natural without current management's consent. If Messrs. Ferrante and Paul and
their family members act together, they are likely to have the ability to
control the outcome on all matters requiring stockholder approval, including the
election and removal of directors and any merger, consolidation or sale of all
or substantially all of our assets, and the ability to control our management
and affairs.
FUTURE SALES OF COMMON STOCK MAY CAUSE THE MARKET PRICE OF THE COMMON STOCK TO
DROP.
Future sales of shares of common stock by Swiss Natural and/or its
stockholders could cause the market price of the common stock to drop. After
this offering, we will have outstanding 3,841,708 shares of common stock. We
have reserved an additional 2,001,267 shares of common stock for issuance
pursuant to outstanding convertible securities, preferred stock and warrants.
All of the shares of common stock to be sold in this offering will be freely
tradeable without restriction or further registration under the federal
securities laws. Assuming the underwriters' over-allotment option is exercised
in full, the remaining shares of outstanding common stock, representing
approximately 63% of the outstanding common stock upon completion of this
offering, will be "restricted securities" under the Securities Act subject to
restrictions on the timing, manner and volume of sales of such shares.
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.
The initial public offering price is expected to be substantially higher
than the net tangible book value of each outstanding share of common stock.
Purchasers of common stock in this offering will
8
<PAGE>
suffer immediate and substantial dilution. The dilution will be $4.01 per share,
or 76%, in the net tangible book value of the common stock from the expected
initial public offering price. If the outstanding options and warrants to
purchase shares of common stock are exercised, there would be further dilution.
FORWARD LOOKING STATEMENTS
Some of the statements under "Prospectus Summary", "Risk Factors",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", "Business" and elsewhere in this prospectus constitute
forward-looking statements. These statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, levels of
activity, performance, or achievements to be materially different from any
future results, levels of activity, performance, or achievements expressed or
implied by such forward-looking statements. Such factors include, among other
things, those listed under "Risk Factors" and elsewhere in this prospectus.
In some cases, you can identify forward-looking statements by terminology
such as "may", "will", "should", "could", "expects", "plans", "anticipates",
"believes", "estimates", "predicts", "potential", or "continue" or the negative
of such terms or other comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of such
statements. We are under no duty to update any of the forward-looking statements
after the date of this prospectus.
USE OF PROCEEDS
The primary purposes of this offering are to obtain additional capital,
create a public market for the common stock, and facilitate future access to
public markets. The net proceeds to Swiss Natural from the sale of our common
stock are estimated to be approximately $5,334,375, after deducting
underwriters' compensation and other estimated offering expenses totaling
$1,228,125. Swiss Natural intends to use the net proceeds as follows:
* $822,000 for the purchase of additional inventory;
* $825,000 for the purchase of vending and refrigeration equipment;
* $500,000 for the purchase of manufacturing equipment;
* $545,000 for marketing and promotion;
* $235,000 for new product research and development;
* $135,000 for internet, distribution, computing and telecommunications
equipment;
* $235,000 for new client selling and collateral materials;
* $326,530 for the repayment of its indebtedness including accrued
interest of $4,575, to A. Donald McCulloch, Jr. and Carolyn B. McCulloch,
both of whom are stockholders of Swiss Natural, and one of whom is a
former director; and
* $1,710,845 for general corporate purposes, including working capital.
The indebtedness of Swiss Natural to A. Donald McCulloch, Jr. and Carolyn
B. McCulloch as of September 30, 1999 is evidenced by two promissory notes, one
in the principal amount of $152,500, which bears interest at the rate of 12% per
annum, and represents the outstanding principal amount of the original
obligation, and the other in the principal amount of $169,455, which represents
accrued interest on the original obligation, and is non-interest bearing. Both
promissory notes to the McCullochs mature upon the earlier to occur of:
* February 10, 2000;
* ten days after the receipt of funds by Swiss Natural of the proceeds of
an initial public offering of its common stock in an amount of at least
$10,000,000; or
* the sale of all or substantially all of the assets of Swiss Natural.
Pending the above uses, Swiss Natural intends to invest the net proceeds
from this offering in short-term, interest-bearing, investment-grade securities.
9
<PAGE>
DIVIDEND POLICY
Swiss Natural has not declared or paid any cash dividends on its common
stock since its inception and does not expect to pay any cash dividends on its
common stock in the foreseeable future. Holders of shares of Swiss Natural's
Series A Preferred Stock are entitled to receive a quarterly dividend commencing
on March 1, 2000 of two ($0.02) cents per share prior to any other class of
stock receiving any dividends, and to participate in dividends declared and paid
on the common stock, on an "as-converted" basis. Swiss Natural currently intends
to retain future earnings, if any, after paying the dividend on the preferred
stock, to finance the expansion of its business.
CAPITALIZATION
The following table sets forth the capitalization of Swiss Natural as of
September 30, 1999: (1) on an actual basis, and (2) as adjusted to reflect the
receipt by Swiss Natural of the estimated net proceeds from the sale of our
1,250,000 shares of common stock offered hereby (after deducting the estimated
offering expenses and underwriter' compensation). The information described in
the following table assumes that none of the convertible subordinated debentures
of Swiss Natural have been converted. This table should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes thereto included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
-----------------------------
AS ADJUSTED
TO REFLECT
NET PROCEEDS
ACTUAL OF OFFERING
----------- ------------
<S> <C> <C>
Convertible Subordinated Debentures..................... $ 757,500 $ 757,500
----------- ------------
Compensation Payable.................................... 101,092 101,092
----------- ------------
Preferred Stock, $.01 par value, 3,000,000 shares
authorized; Series A Convertible Preferred Stock,
1,206,000 shares issued and outstanding (actual and as
adjusted)............................................. 12,060 12,060
Common Stock, $.01 par value, 20,000,000 shares
authorized, 2,591,708 shares issued and outstanding
actual; 3,841,708 shares outstanding, as adjusted..... 25,917 38,417
Additional paid in capital.............................. 2,014,833 7,336,708
Accumulated Deficit..................................... (2,527,516) (2,527,516)
----------- ------------
Stockholders' equity (deficiency)....................... (474,706) 4,859,669
----------- ------------
Total capitalization.................................... $ 383,886 $ 5,718,261
----------- ------------
----------- ------------
</TABLE>
DILUTION
The net tangible book value of Swiss Natural as of September 30, 1999 was a
negative $690,892, or a negative $.27 per share. "Net tangible book value per
share" is determined by dividing the number of outstanding shares of common
stock into the net tangible book value of Swiss Natural (total tangible assets
less total liabilities). Assuming the sale by Swiss Natural of the 1,250,000
shares of common stock offered hereby at a price of $5.25 for one share, the net
tangible book value of Swiss Natural as of September 30, 1999 would have been
approximately $4,766,110 or $1.24 per share. This represents an immediate
increase in net tangible book value of $5,457,002 to existing stockholders and
an immediate dilution of $4.01 per share, 76%, to new investors purchasing
shares at the initial public offering price of $5.25 per share. The following
table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................. $ 5.25
Net tangible book value per share as of September 30, 1999..... $(.27)
Increase in net tangible book value per share attributable to
new investors............................................... $1.51
Net tangible book value per share after the offering............. $ 1.24
Dilution per share to new investors.............................. $ 4.01
</TABLE>
10
<PAGE>
The following table summarizes as of September 30, 1999 the number of
shares of capital stock, including Series A Preferred Stock purchased from Swiss
Natural and the average cash price per share paid by existing stockholders and
by investors purchasing shares of common stock in this offering at an initial
public offering price of $5.25 per share, before deducting the underwriters'
compensation and other estimated offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ----------------------
NUMBER PERCENT AMOUNT PERCENT
--------- ------- ---------- -------
<S> <C> <C> <C> <C>
Existing stockholders.............................. 3,797,708 75% $2,052,810 24%
New investors...................................... 1,250,000 25% $6,562,500 76%
--------- --- ---------- ---
Total.............................................. 5,047,708 100% $8,615,310 100%
--------- --- ---------- ---
--------- --- ---------- ---
</TABLE>
The sale by Messrs. Ferrante, Paul and Brescio of 187,500 shares of common
stock upon exercise in full of the underwriters' over-allotment option will
reduce the percentage of common stock held by existing stockholders to 63% of
the total number of shares of common stock to be outstanding upon consummation
of this offering and will increase the percentage of common stock held by new
investors to 37% of the total number of shares of common stock to be outstanding
upon consummation of this offering. See "Principal Stockholders."
The foregoing discussion and table exclude:
* the 125,000 shares of common stock issuable upon exercise of the 125,000
underwriters' common stock purchase warrants to be issued in connection
with this offering;
* 500,000 additional shares of common stock reserved for issuance under
the 1999 Stock Option Plan;
* 165,267 shares of common stock issuable upon exercise of outstanding
warrants at an exercise price of approximately $2.24 per share; and
* 505,000 shares of common stock issuable upon conversion of the $757,500
aggregate principal amount of convertible debentures presently
outstanding.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF SWISS NATURAL ALSO SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS AND RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS
PROSPECTUS.
FISCAL YEAR 1999 ENDED FEBRUARY 28, 1999 COMPARED TO FISCAL YEAR 1998 ENDED
FEBRUARY 28, 1998.
Swiss Natural's net loss for the year ended February 28, 1999 was
$(439,416) as compared to ($1,030,290) for the year ended February 28, 1998 and
loss from operations was ($400,433) for the year ended February 28, 1999 as
compared to ($972,567) for the year ended February 28, 1998. The decrease in net
loss and loss from operations was primarily due to an increase in net sales
which was offset by an increase in expenses. Net sales for the year ended
February 28, 1999 increased approximately 29% from those of the year ended
February 28, 1998. The increase in sales is attributable to the addition of new
customers, the sale of new products such as orange and apple juice, and
increased sales of private label beverages in new territories. Cost of sales as
a percentage of sales was approximately 67% for the year ended February 28, 1999
as compared to 84% for the year ended February 28, 1998. Included in the cost of
sales are all raw materials to produce our 16 oz. and 12 oz. products. These
costs include flavoring, glass, trays, labels, partitions, bottling and packing
fee. Also included are freight charges to ship all raw materials to our
production facility. The declining trend in cost of sales is attributable to our
change of production facilities and the increase in sales of our Swiss Natural
brand, which has a higher profit margin than our private label beverages. In
addition, we incurred a one time loss on abandonment of inventory of $185,942 in
the year ended February 28, 1998 when we changed production facilities after
determining that a majority of the raw materials on hand would not be viable at
the new facility. Gross profit as a percentage of sales was approximately
11
<PAGE>
33% for the year ended February 28, 1999 as compared to approximately 16% for
the year ended February 28, 1998. Expenses for the year ended February 28, 1999
increased approximately 4% as compared to the prior year primarily as a result
of the fact that there was an increase in wages, product development expenses,
and to a lesser extent costs associated with higher sales volume. The increase
in such expenses was partially offset by a decrease in selling and promotional
expenses. Other income decreased slightly as compared with that of the prior
year and interest expenses decreased $30,697 as compared with that of the prior
year as a result of the reduction of stockholder debt.
BALANCE SHEET DATA AS OF FEBRUARY 28, 1999 AS COMPARED TO BALANCE SHEET DATA AS
OF SEPTEMBER 30, 1999.
As of February 28, 1999, the Company had cash and cash equivalents of
$530,729 as compared to $151,788 as of September 30, 1999 and other assets of
$12,913 as of February 28, 1999 as compared to $26,478 as of September 30, 1999.
The decrease in cash and cash equivalents and the increase in other assets is
primarily attributable to deposits made to purchase certain labeling equipment
and certain prepaid costs incurred in connection with this offering.
As of February 28, 1999, the Company had accounts receivable (less an
allowance for doubtful accounts) of $227,038 as compared to $271,105 as of
September 30, 1999. This increase in accounts receivable is the result of timing
differences in the collection of outstanding bills.
As of February 28, 1999, the Company had inventory of $332,609 as compared
to $395,836 as of September 30, 1999. This increase is the result of a decision
by the Company to carry higher inventory levels throughout the year in order to
enable us to meet customer demands in a timely manner, as well as the
seasonality of its sales.
Property and Equipment increased from $76,514 as of February 28, 1999 to
$137,110 as of September 30, 1999 as a result of an increase in the number of
coolers that the Company purchased for use by customers during the seven months
ended September 30, 1999.
All other balance sheet items (other than accumulated deficit) remained
relatively constant as of September 30, 1999 as compared to February 28, 1999.
Accumulated deficit decreased as a result of the recognition of net income for
the seven months ended September 30, 1999.
SEVEN MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO SEVEN MONTHS ENDED SEPTEMBER
30, 1998.
Swiss Natural generated net income of $46,909 for the seven months ended
September 30, 1999 as compared to a net loss of $57,751 for the seven months
ended September 30, 1998. This increase is attributable to an increase in sales
which was partially offset by an increase in expenses. Net sales for the seven
months ended September 30, 1999 were $2,519,102 as compared to $1,736,034 for
the seven months ended September 30, 1998, representing an approximately 45%
increase. The increase in sales was primarily a result of an increase in the
sale of the Company's Swiss Natural brands products of $608,454 representing a
179% increase, and, to a lesser extent, an increase in the sale of our private
label beverages.
Cost of sales as a percentage of sales was approximately 61% for the seven
months ended September 30, 1999, as compared to 66% for the seven months ended
September 30, 1998. Gross profit as a percentage of sales was approximately 39%
for the seven months ended September 30, 1999, as compared to approximately 34%
for the seven months ended September 30, 1998. The increase in gross profit
reflects an increase in the overall selling price and volume of the Swiss
Natural brand. Expenses for the seven months ended September 30, 1999 increased
approximately 31% as compared to that of the seven months ended September 30,
1998, primarily as a result of an increase in promotional and marketing expenses
and an increase in compensation paid to employees and consultants.
Since our inception, we have experienced greater sales of our beverages in
the spring and summer months and reduced sales of our beverages in the winter
and fall months. We expect to continue to experience fluctuations in our
revenues resulting from such seasonal variations in sales.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES.
At February 28, 1999, Swiss Natural had cash and cash equivalents of
$530,729 as compared to $364,088 at February 28, 1998. The increase in cash and
cash equivalents during the twelve month period ended February 28, 1999 is due
to $545,532 of cash provided by financing activities which was partially offset
by $340,154 of cash used in operating activities and, to a lesser extent,
$38,737 of cash used in investing activity. Cash provided by financing
activities during the twelve month period ended February 28, 1999 consisted of
the proceeds from Swiss Natural's issuance of convertible subordinated
debentures, less amounts utilized to pay debt placement fees and to retire
certain indebtedness owed to two stockholders of Swiss Natural, one of whom is
also a former director of Swiss Natural. Cash used in investing activities
during the twelve month period ended February 28, 1999 consisted of payments
made to purchase property and equipment.
At September 30, 1999, Swiss Natural had cash and cash equivalents of
$151,788 as compared to $165,713 at September 30, 1998. The decrease in cash and
cash equivalents of $378,941 from February 28, 1999 is due to $129,680 of cash
used in financing activities, $172,392 of cash used in operating activities, and
$76,869 of cash used in investing activities. Cash used in financing activities
during the seven month period ended September 30, 1999 consisted primarily of
deferred offering costs of this offering and to a lesser extent, interest
payments made on the note payable to stockholders of Swiss Natural. Cash used in
investing activities during the seven month period ended September 30, 1999
consisted of payments made to purchase equipment. Swiss Natural invests its cash
in a money market fund.
Based upon its current operating plan, Swiss Natural anticipates that the
net proceeds of this offering, together with cash generated from operations,
will be sufficient to satisfy its future liquidity requirements for at least the
next 12 months. However, the ability of Swiss Natural to meet future liquidity
needs is directly related to its sales volume and the costs associated with the
development and marketing of its products. It is anticipated that a portion of
the proceeds of this offering will be used to purchase refrigeration equipment
and vending equipment to be used by our customers to hold and display our
products. It is anticipated that this will be an ongoing expense which will
adversely affect Swiss Natural's cash flow. Furthermore, Swiss Natural may have
the on-going expense of making interest payments to any holder of its
convertible debentures who does not convert its debenture into shares of common
stock. Since Swiss Natural does not currently have any outside sources of
financing, such as a line of credit, all of these expenses will have to be paid
for either out of the proceeds of this offering or cash generated from
operations.
BUSINESS
INDUSTRY OVERVIEW
Our business competes in the alternative beverage category of the beverage
industry.
Alternative beverages consist of fruit juices, fruit drinks that are not
100% juice, sparkling and still water, ready-to-drink teas, sports drinks and
natural soda. From 1992 to 1998, the alternative beverage market has experienced
significant growth, with volumes approximately doubling, from 480 million cases
to 1.10 billion cases, according to the Beverage Digest Fact Book. In 1998, the
Beverage Digest Fact Book indicated that the volume of the alternative beverage
market grew to approximately 1.28 billion cases. Nonetheless, alternative
beverages currently remain only a small portion of the entire beverage market,
which, in the opinion of management, provides significant opportunity for future
growth.
In general, the segments of the alternative beverage category in which
Swiss Natural competes enjoyed strong growth in 1998. According to information
published in the Beverage Digest Fact Book, the fruit juice and fruit juice
drink segment grew from 450 million cases sold in 1997 to 515 million cases sold
in 1998, and the ready to-drink tea segment grew from 310 million cases sold in
1997 to 355 million cases sold in 1998.
The alternative age beverage category generally consists of products
classified as "premium", more specialized goods, and to a lesser extent,
"non-premium", lower-margin, generic or more
13
<PAGE>
mainstream products. Premium beverage products typically command higher prices
and higher margins for the brand owner, the distributor and the retailer than
other beverages because of the following:
* Higher Quality Ingredients. Premium beverage ingredients are positioned
to be higher quality and usually do not include preservatives.
* Distribution. The primary distribution channels for premium beverages are
convenience stores and other small retail outlets. These locations
usually sell premium beverages in single refrigerated cold servings
instead of at room temperature in larger containers.
* Packaging and Marketing. Packaging is a key differentiation in the
single-serve market and critical to building a premium image. Marketing
premium beverages relies heavily on product innovation, unique
advertising and availability.
We market and distribute a variety of premium beverages, including fruit
drinks, ready-to-drink teas and 100% juice products under our Swiss Natural
brand name and under a private label program. Under the Swiss Natural brand, we
market and distribute nine flavored beverages and two 100% juice products,
including three diet beverages. Under our private label program, we sell six
flavored beverages, including one diet beverage and two 100% juice products.
Swiss Natural was incorporated under the laws of the State of Delaware in
April 1993. We changed our name from Swiss Natural Foods, Inc. to Swiss Natural
Brands, Inc. on October 1, 1999. Our principal office is located at 1031 Route
9W, Upper Grandview, New York 10960, and our telephone number at that location
is (914) 358-1212.
OUR BUSINESS STRATEGY
Our business strategy for our Swiss Natural label products and private
label beverage business is to:
* Continue to develop new products and innovative packaging: During 1998,
we redeveloped our diet line of products, Diet Icy Tea With Lemon, Diet
Icy Berry and Diet Icy Peach utilizing a new zero calorie sweetener. We
intend to continue to introduce new products and flavors. We also intend
to continue to develop proprietary and innovative packaging to attract
consumers to the Swiss Natural brand.
* Increase consumer awareness and brand imagery: We intend to develop
innovative marketing and promotions to increase the visibility and image
of our Swiss Natural brand.
* Commence distribution via the Internet: We are in the process of
developing a new system of marketing and distribution utilizing the
Internet which we expect will increase direct sales to consumers and to
retailers.
* Expand our sales to private label clients: We plan to continue to expand
our sales to private label clients for whom we develop specific private
label beverage programs.
* Expand and enhance distributor relationships: We intend to focus our
sales force to continue to improve relationships with distributors. We
intend to continue to assist our distributors in developing local
marketing promotions.
* Expand and improve distribution: We plan to continue to expand in
existing and new geographic markets and channels of trade.
* Expand and improve in-store distribution and marketing: We plan to
increase the rate at which we place cold drink equipment in stores and
other outlets.
* Control production costs: We expect to continue to control production
costs through favorable supply agreements for raw materials, flavors, and
packaging. We also plan to introduce additional production initiatives to
further reduce costs and improve freight management.
14
<PAGE>
* Minimize capital expenditures: We plan to continue to minimize capital
expenditures through the use of third party manufacturers for production
of our premium beverage products.
OUR BUSINESS
We market and sell premium beverages under both our proprietary Swiss
Natural trademark and private label brands. A significant portion of our
business consists of sales of a variety of fruit and tea beverages, orange juice
and apple juice under a private label beverage program developed by us for
Sbarro Inc. We sell vitamin-fortified flavored fruit and tea beverages, a 100%
orange juice product and a 100% apple juice product under our registered Swiss
Natural trademark. One of our larger customers for our Swiss Natural brand
products are Dunkin' Donuts franchisees. Our sales to the Dunkin' Donuts
franchisees, as well as to Sbarro Inc., each represent at least 10% of our total
overall revenues.
Prior to March 1996, our revenues were derived solely from the sale of our
Swiss Natural labeled beverages. At present we sell our beverages under a
private label in almost all Sbarro franchise restaurants including many Sbarro
restaurants located outside the United States. Our line of beverages is the only
authorized bottled soft drink of its kind to be sold in the Sbarro restaurants.
In January 1998, we renewed our agreement with Sbarro granting us a right of
first refusal to be the exclusive supplier of Sbarro private label beverages for
a three year period of time. We have agreed, as long as we are supplying
beverages to Sbarro, to refrain from developing a private label program for any
other company which sells pizza as its primary source of revenue.
Sbarro is a major customer of ours and we depend significantly upon the
sale of our beverages to Sbarro. At the request of Sbarro, we began production
of two 100% juice products to be supplied to Sbarro under the private label
program. We have been advised that the two 100% juice products supplied by Swiss
Natural have replaced all other juices currently being sold by the Sbarro
franchise restaurants and are the only authorized 100% juice products sold by
such franchise restaurants.
In February 1998, we began to supply our juice and other beverage products
on a trial basis to approximately 22 Dunkin' Donut franchisees which are
supplied from one Dunkin' Donut regional distribution center. On March 29, 1999
we executed a three year agreement with a Dunkin' Donuts regional distribution
center which designates our Swiss Natural label beverages as authorized
beverages for the region, which includes approximately 900 Dunkin' Donuts
franchisees. We currently supply approximately 200 Dunkin' Donuts franchisees
with our Swiss Natural label beverages. The Dunkin' Donut franchisees, however,
may purchase bottled beverage products from any supplier that they choose. Our
revenues have increased as a result of the sales of our beverages to the Dunkin'
Donut franchisees.
We entered into an agency agreement with Bentonville Associates Ventures
LLC effective May 5, 1998 whereby Bentonville agreed to act as the exclusive
marketing representative for us with regard to certain specified accounts which
include Walmart Stores and Sams Clubs stores, and a nonexclusive agent for other
accounts, all for a commission based upon a percentage of sales generated by
Bentonville. This agreement is cancellable by Bentonville upon 90 days notice.
We also utilize multiple independent distributors to sell our Swiss Natural
label beverages. These distributors sell Swiss Natural beverages to food service
accounts, convenience stores, delicatessens, pizza restaurants, golf courses,
hotels, schools, cafeterias, fitness clubs and a variety of other outlets which
sell beverages. In March 1997, we executed a letter of understanding with
Ritter/Sysco Food Services, Inc., a division of Sysco, a national food service
distributor for distribution of our beverages to food service customers
receiving our beverages within a 100 mile radius of Columbus Circle, New York,
New York.
During the fiscal year ended February 28, 1998, the five largest
distributors of Swiss Natural label beverages purchased approximately 85% of the
case sales of our Swiss Natural label beverages (approximately 11% of the case
sales of all of our beverages including our private label beverages), each
purchasing in excess of approximately 7% of the case sales of Swiss Natural
label beverages, with none of the distributors accounting for more than
approximately 31% of our sales of Swiss Natural
15
<PAGE>
label beverages. During the fiscal year ended February 28, 1999, the five
largest distributors of Swiss Natural label beverages purchased approximately
76% of the case sales of our Swiss Natural label beverages (approximately 14% of
the case sales of all of our beverages including our private label beverages),
each purchasing in excess of approximately 9% of the case sales of Swiss Natural
label beverages. No one distributor accounted for more than approximately 30% of
our sales of Swiss Natural label beverages sold in such fiscal year.
Swiss Natural has initiated the development of an e-commerce plan which we
expect will increase direct distribution to customers and retailers utilizing
the Internet and a company website. In connection with our Internet distribution
initiative, we are developing new packaging concepts for our products which we
believe will help to promote our sales over the Internet. We have purchased
several web-site names, are interviewing web-site developers and estimate that
the site will be operational in May 2000.
OUR PRODUCTS
We currently sell nine (9) naturally flavored beverages under the
trademarks Swiss Natural Icy Berry, Swiss Natural Diet Icy Berry, Swiss Natural
Icy Citrus, Swiss Natural Icy Melonade, Swiss Natural Lemon Icy Tea, Swiss
Natural Diet Icy Tea With Lemon, Swiss Natural Raspberry Icy Tea, Swiss Natural
Peach Icy Tea and Swiss Natural Diet Peach Icy Tea. In addition, Swiss Natural
sells a 100% orange juice product and a 100% apple juice product under the Swiss
Natural label. The Swiss Natural Diet Icy Berry, Diet Peach Icy Tea and Diet Icy
Tea With Lemon were introduced to attract customers who are calorie conscious.
We also sell six naturally flavored beverages, a 100% orange juice product and a
100% apple juice product under our private label program. All of our beverages
are made utilizing natural flavors and juices and none contain preservatives or
artificial colors. In addition, the beverages sold under the Swiss Natural label
are fortified with our "Ultrapeakt" vitamin formula, a specific combination of
vitamins. Our beverages have a shelf life of approximately nine (9) months and
typically are sold to consumers within sixty to ninety days of their production.
RAW MATERIALS
We procure our bottles, water, juice products, apple and orange juice
concentrates, high fructose corn syrup, citric acid, our vitamin formulation and
other designated ingredients used in our proprietary beverages from various
suppliers which then supply our independent bottling company. Each of these
ingredients is readily available from several alternative suppliers.
We purchase our proprietary flavor bases from an independent flavor
supplier. We are the sole owner of the service formulae used in connection with
the production and manufacture of our beverages. If for any reason our flavor
supplier were to cease to supply the flavor bases used in our proprietary
service formula to us, we believe we would be able to secure an alternate source
of supply.
PRODUCTION
All of our Swiss Natural label and private label beverages are currently
manufactured and bottled by an independent bottling company. We have recently
reached a multi-year production agreement with our current bottling facility. In
accordance with our arrangement with our current bottling facility, they are to
provide basic raw materials for our beverages such as water, while we provide a
flavor base, together with our Ultrapeakt vitamin formula. Our finished product
is then manufactured in accordance with our specifications in distinctive glass
bottles supplied by us utilizing our specified labels on such bottles. We
purchase our labels from an independent label manufacturer. We place orders for
finished goods with the bottler on a monthly basis based upon our best estimates
of our future needs prior to our receipt of orders from distributors. We monitor
the production of our beverages to assure adherence to production procedures and
quality standards. In addition, some of our suppliers have entered into
confidentiality agreements to protect our trade secrets. We have not experienced
any significant returns or incidents of product spoilage which we believe is due
to the nature of our customers and their ability to move product quickly.
16
<PAGE>
In March 1998, we entered into an arrangement with an independent storage
company for the storage of all of our finished goods inventory. Pursuant to the
terms of such arrangement, our storage company, which operates its own trucking
company, transports our finished goods from the bottling facility to its own
storage facility at a fixed charge per case. In addition, our storage company
has agreed to transport our finished goods from the storage facility to our
customers for an additional fee. Inasmuch as neither we nor a majority of our
customers own or operate any trucking companies, we utilize our storage
company's trucking services for a majority of our customers.
All of our tea and fruit beverages, including both the Swiss Natural and
the private label beverages, are currently sold in our proprietary 16 ounce and
12 ounce, single serve, wide-mouth glass container, which has a distinctive and
unique shape designed to stimulate consumer interest and create brand
recognition. We use a private mold for the production of such glass containers
and we purchase these containers from the Canadian office of an independent
third party glass manufacturer, which has production facilities located in
Canada as well as in the United States. The glass manufacturer does not have a
written supply agreement with us. We are researching and developing the use of
other packaging containers, such as plastic containers and aluminum cans, to
expand the distribution of our brand. We plan to use the new types of packaging
in additional distribution channels including electronic commerce.
TRADEMARKS AND COPYRIGHTS
We have obtained registered trademarks to protect the name "Swiss Naturalt"
and the slogan "Reach For The Peakt" used in selling our beverages. We have also
obtained registered trademarks for the marks "Swiss Natural Icy Berryt", "Swiss
Natural Icy Citrust", "Swiss Natural Icy Melonadet", "Swiss Natural Icy Coffeet"
and for "Swiss Natural Icy Teat", and "Ultra Peakt", the name of our vitamin
formula. We use a private mold for the production of our proprietary glass
container. As to our beverage formulations, we rely on the unpatented know-how
of our Chief Executive Officer and the confidentiality agreements with our
flavor manufacturer, our bottling company and our employees.
COMPETITION
Competition in the beverage industry is intense. We face competition from
other beverage companies providing similar products such as Snapple, Fruitopia,
Ocean Spray, Arizona and Mistic and various other lesser known brands. We also
face competition from other beverage companies providing other beverages. Many
of our competitors, including the dominant brands named above, are better
established and have greater financial resources than us. We believe that the
quality of our beverages, distribution strategy, private label business,
competitive prices and profit margins will enable us to compete with these
companies.
SALES AND MARKETING STRATEGY
Our marketing strategy is to create a consumer awareness of our brand in
our targeted markets as well as to increase our client base of private label
customers. The core marketing campaign theme of our Swiss Natural label
beverages has been and will be centered around our "Reach For The Peakt"
registered trademark. We also emphasize the fact that our products provide great
taste with enhanced nutritional benefits and utilize no artificial coloring or
preservatives. We also promote the fact that our products contain natural
ingredients.
To date, we have focused our marketing efforts mainly in the New York
metropolitan area. Following the consummation of this offering, we intend to
market our Swiss Natural label beverages in other regions of the United States
such as the Northeast, the Southeast, the Mid-Atlantic and the West Coast and to
increase our sales to private label customers.
Our sales strategy has been to provide a superior product at an
advantageous profit margin for both the distributor and retailer. This strategy
enables us to secure a degree of market acceptance and distribution capability
generating repeat sales with minimal expense for advertising. In addition, we
17
<PAGE>
have offered, from time to time, sales allowances and/or discounts to
distributors based upon their performance. Our sales strategy has not included
the use of consignment sales. In order to increase our sales volume, we intend
to expend additional capital for an expanded sales force and enhanced
promotional material.
GOVERNMENT REGULATION
The production and sale of our beverages are subject to the rules and
regulations of various federal, state and local food and health agencies,
including the U.S. Food and Drug Administration. The FDA also regulates the
labeling of containers including, without limitation, statements concerning
product ingredients.
We are also subject to various federal, state and local environmental laws
and regulations that limit the discharge, storage, handling and disposal of a
variety of substances and by laws and regulations relating to workplace safety
and worker health, principally the Occupational Safety and Health Administration
Act, as well as similar state laws and regulations. We believe that we comply in
all material respects with these laws or regulations, although we cannot assure
that future compliance with such laws or regulations will not have a material
adverse effect on our results of operations or financial condition. We did not
incur any significant costs in the fiscal year ended February 28, 1999 to comply
with environmental laws.
EMPLOYEES AND CONSULTANTS
Our chief executive officer and chief financial officer are also directors
and stockholders of Swiss Natural. We presently employ four other people at our
executive offices on a full time basis, none of whom has a written employment
agreement with us. Two of the other employees are engaged in sales and
marketing, one employee is a certified public accountant who performs accounting
services and the fourth is a bookkeeper/secretary. Our chief executive officer
devotes his full business time to the business of Swiss Natural, and our chief
financial officer devotes a majority of his business time to the business of
Swiss Natural. The chief financial officer of Swiss Natural, an attorney and
certified public accountant, is engaged in the practice of law. In addition,
from time to time we engage sales consultants to assist us in expanding the
sales and distribution of our products.
We do not currently have any contingent forms of compensation for our
officers and directors, including any pension, retirement, stock appreciation,
or other compensation plan other than our 1999 Stock Option Plan. However, Swiss
Natural anticipates that it will institute such other forms of compensation in
the future.
We have never had a work stoppage and our employees are not represented by
any collective bargaining unit. We consider our relations with our employees to
be good. Our future success will depend, in part, on our ability to continue to
attract, integrate, retain and motivate highly qualified sales and managerial
personnel for whom competition is intense.
SLOTTING FEES
For us to achieve placement of our products in certain supermarket chains
and individual supermarket stores, it may sometimes be necessary for us to
purchase shelf space by paying slotting fees. Typically, supermarket chains and
prominent local supermarkets impose these charges as a one time payment before
the products are permitted in the store or chain. Slotting fees are less
frequently imposed by other types of retail outlets such as individual
convenience stores and delicatessens. The fees are negotiated on an individual
basis.
MARKETING AND PROMOTION
We intend to position Swiss Natural as a brand name synonymous with
products of superior quality and nutritional benefit with great taste. To date,
we have used a limited amount of point of sale promotion material, and we
previously utilized some radio advertisements.
18
<PAGE>
We believe that increased marketing expenditures may be necessary in order
to increase sales volume. During the current fiscal year, marketing expense is
budgeted at approximately three percent (3%) of Swiss Natural label beverage net
sales. On an ongoing basis we anticipate our marketing budget to be
approximately six percent (6%) to eight percent (8%) percent of the Swiss
Natural label beverage net sales. In addition, we anticipate a continuation of
our discount policy to distributors, which may result in higher promotional
expenses.
LEGAL PROCEEDINGS
On November 20, 1997, Sterling Color Process, Inc. ("Sterling") filed a
lawsuit in Supreme Court, Rockland County, New York entitled Sterling Color
Process, Inc. v. Swiss Natural, Case Number 7670-97 (the "Sterling Action"). In
the Sterling Action, Sterling claims that it supplied labels to Swiss Natural
between June 1995 and May 1996 and that Swiss Natural did not pay for such
goods. Sterling claims it is owed a balance of $72,776.60. An answer and
counterclaim was served on behalf of Swiss Natural on February 13, 1998. In its
answer, Swiss Natural denied any liability and alleged that Sterling was fully
paid for the labels. Swiss Natural stated in its counterclaim that Sterling
failed to perform according to the agreement between the parties thereby causing
damages of $84,090.00. Swiss Natural has filed a Demand for Written Particulars.
Swiss Natural intends to vigorously pursue its counter-claim against, and defend
the claim from, Sterling.
In addition to the matters set forth above, from time to time we may be
subject to legal proceedings and claims in the ordinary course of business. Such
claims, even if not meritorious, could result in the expenditure by us of
significant financial and managerial resources. We are not aware of any legal
proceedings or claims that we believe will have individually or in the
aggregate, a material adverse effect on our business, financial condition or
results of operations.
FACILITIES
Our executive and administrative office is located in approximately 1,250
square feet of office space located at 1031 Route 9W, Upper Grandview, New York.
Swiss Natural does not pay rent for the use of this office space. The office
space is owned by Dr. Ralph M. Ferrante, our Chairman and Chief Executive
Officer. Swiss Natural is currently seeking new office space to occupy as a
primary site of executive operations. Swiss Natural has no other office
facilities.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information regarding the directors and
executive officers of Swiss Natural.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------- --- --------------------------------------------
<S> <C> <C>
Dr. Ralph M. Ferrante.................... 45 Chief Executive Officer, Chairman of the
Board and Secretary
Herbert M. Paul.......................... 64 Chief Financial Officer, President,
Assistant Secretary and Director
James P. McCann.......................... 41 Director
Kenneth D. Greenblatt.................... 53 Director -- Nominee
Donald L. Antle.......................... 60 Director -- Nominee
</TABLE>
DR. RALPH M. FERRANTE has been the Chief Executive Officer, Chairman of the
Board of Directors and Secretary of Swiss Natural since 1993. From 1982 to 1992,
he was the Executive Vice President of Ferrante Enterprises, Inc., a real estate
development company which he co-founded. From 1981 to 1985, he was a practicing
chiropractor at the Rockland Health Center. Dr. Ferrante has a Doctor of
Chiropractic degree from New York Chiropractic College and a BBA degree from
Pace University.
HERBERT M. PAUL is a certified public accountant and an attorney and has
been the Chief Financial Officer, President, Assistant Secretary and a Director
of Swiss Natural since 1993. Since 1981, Mr.
19
<PAGE>
Paul has been the managing partner of Herbert Paul, P.C., a law firm
specializing in business and tax matters. Prior to 1981, he was a senior partner
at Touche Ross & Co., an international accounting firm which was the predecessor
to Deloitte & Touche. Mr. Paul has been a trustee and a professor at New York
University as well as a member of various professional committees. Mr. Paul has
an MBA degree from the New York University Graduate School of Business, an LLM
degree from the New York University Graduate School of Law, a JD degree from
Harvard Law School and a BBA degree from Baruch College. Mr. Paul is listed in
Who's Who in Finance & Industry, Who's Who in American Law and Who's Who in
America.
JAMES P. MCCANN is a First Vice President at Prudential Securities. He had
been a First Vice President at Paine Webber since 1994, where he was directly
responsible for the management of in excess of $240 million of funds. Mr.
McCann's responsibilities include fixed income management and equity investments
for clients. Mr. McCann was employed by Paine Webber in 1981 when he graduated
from Manhattan College with a B.B.A. degree. Mr. McCann has been a director of
Swiss Natural since March 1, 1999.
KENNETH D. GREENBLATT was employed from 1968 to 1981 at Gilbert Frank
Corporation, a privately held textile company where he became President in 1976.
In 1981 Gilbert Frank Corporation was purchased by Guilford Mills Incorporated,
a public company where Mr. Greenblatt served as Chairman of the Gilbert Frank
division until 1987. In 1987 Mr. Greenblatt founded Waverly Converting Inc. a
textile company which was purchased by Missbrenner, Inc. where Mr. Greenblatt
served as President until 1997. From 1997 to the present, Mr. Greenblatt has
been Chairman of the Board of Kenneth John Productions, a Broadway production
company which has produced 17 shows winning 23 Tony awards since 1981. Mr.
Greenblatt has a BBA degree in Finance from the University of Miami. Mr.
Greenblatt is a member of the Presidents Council of the University of Miami, and
serves on the Board of Directors of the Helen Hayes Theater.
DONALD L. ANTLE has since 1987 been founder and President of Antle
Enterprises a private beverage industry consulting firm specializing in company
sales, mergers and acquisitions, corporate financing, industry expert witness,
and new product introductions. Mr. Antle began his beverage career in 1958 with
the Seven-Up Bottling Company in Colorado. In 1962 he joined the Dr Pepper
Company as a zone manager, in 1964 he became Division manager, and then in 1973
became Vice President of Franchise at the Dr. Pepper Company. In 1982 Mr. Antle
became President of Premier Beverages, which marketed the Welch's soft drink
brand. Mr. Antle has a BBA degree from the University of Colorado.
Directors are elected by the stockholders to hold office for a designated
period not to exceed one year. Officers and consultants serve at the discretion
of the Board.
BOARD OF DIRECTORS
Directors are elected at the annual meeting of Swiss Natural's stockholders
to hold office until the next annual meeting and until their successors are
elected and qualified. Officers serve at the discretion of the Board. Directors
may receive such compensation for their services as is fixed from time to time
by resolution of the Board.
DIRECTOR'S COMPENSATION
Directors of Swiss Natural currently receive no compensation for their
service as such. We anticipate granting no more than an aggregate of 20,000
options to purchase shares of common stock at the initial public offering price
to our outside directors as compensation for their services as directors. We do
reimburse directors for their reasonable expenses incurred in attending meetings
of the Board of Directors.
COMPENSATION OF OFFICERS AND KEY EMPLOYEES
Each of Swiss Natural's officers has agreed to forego payment for all
services performed by them on behalf of Swiss Natural during the period from
Swiss Natural's inception until February 28, 1995
20
<PAGE>
pursuant to agreements between Swiss Natural and each of its officers. However,
such officers, as well as two employees of Swiss Natural, one of whom is no
longer with Swiss Natural, were owed money for services performed for Swiss
Natural during the fiscal year ended February 29, 1996 and a portion of the
fiscal year ended February 28, 1997. In February, 1998, Dr. Ferrante, Mr. Paul
and Mr. Brescio canceled all indebtedness owed to them by Swiss Natural,
including all indebtedness for compensation owed to them by Swiss Natural, in
exchange for shares of common stock. At that time, Swiss Natural owed $601,737,
$152,819 and $93,419 to Dr. Ferrante, Mr. Paul and Mr. Brescio, respectively.
Accordingly, in exchange for the cancellation of indebtedness, Swiss Natural
issued 353,653, 89,815 and 54,904 additional shares of its common stock to Dr.
Ferrante, Mr. Paul and Mr. Brescio, respectively. At present, the only
indebtedness of Swiss Natural remaining for accrued and unpaid compensation is
to a former employee and stockholder of Swiss Natural in the amount of $101,092.
We have entered into an employment agreement with Dr. Ralph M. Ferrante
pursuant to which Dr. Ferrante has agreed to continue to serve as the chief
executive officer of Swiss Natural until February 28, 2002. Dr. Ferrante's
employment agreement provides that for the year ended February 29, 2000 he will
receive a base salary of $168,000 per annum, a $13,000 payment for medical
insurance, a $10,000 payment for life insurance and a $7,200 car allowance; and
that for each of the fiscal years ended February 28, 2001 and February 28, 2002
he will receive a ten percent increase from the previous year's base salary, a
$13,000 payment for medical insurance, a $12,000 payment for life insurance and
a car allowance of $9,600.
Herbert Paul has agreed to continue to serve as president and chief
financial officer of Swiss Natural. We have also entered into a consulting
agreement with Mr. Paul until February 28, 2002. Mr. Paul's consulting agreement
provides that for the year ended February 29, 2000 he will receive consulting
fees of $99,750 per annum, a $4,750 allocation for medical insurance and a
$4,750 allocation for life insurance; and that for each of the fiscal years
ended February 28, 2001 and February 28, 2002 he will receive a ten percent
increase from the previous year's consulting fees and a continuation of the
allocations for medical and life insurances.
SUMMARY OF COMPENSATION
The following Summary Compensation Table sets forth information concerning
compensation earned in the three fiscal years ended February 28, 1997, 1998 and
1999, by Swiss Natural's Chief Executive Officer and its President (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------------------
AWARDS
ANNUAL COMPENSATION ------------------------ PAYOUTS
------------------------------------------- RESTRICTED SECURITIES ---------------------
NAME AND FISCAL YEAR OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL ENDED SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
POSITION FEBRUARY 28 ($) ($) ($) ($) (#) ($) ($)
- ------------------------- ----------- ------- ------- ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dr. Ralph Ferrante....... 1999 160,000 -- 7,200 -- -- -- --
Chairman of the 1998 140,000 -- 7,200 -- -- -- --
Board and Chief 1997 132,000 -- -- -- -- -- --
Executive Officer
Herbert Paul............. 1999 -- -- 99,750 -- -- -- --
President and Chief 1998 -- -- 87,083 -- -- -- --
Financial Officer 1997 -- -- 79,000 -- -- -- --
</TABLE>
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted pursuant to the corporate law of the State of Delaware, Swiss
Natural's state of incorporation, the Certificate of Incorporation requires that
Swiss Natural indemnify its directors and officers against certain liabilities
and expenses incurred in their service in such capacities to the fullest extent
permitted by applicable law. These provisions would provide indemnification for
liabilities arising under the federal securities laws to the extent that such
indemnification is found to be
21
<PAGE>
enforceable under, and to be in accordance with applicable law. Additionally,
Swiss Natural has entered into an indemnity agreement with each director and
officer which generally provides that they are indemnified with respect to
actions taken in good faith. Furthermore, the personal liability of the
directors is limited as provided in Swiss Natural's Certificate of
Incorporation.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Swiss Natural
pursuant to the foregoing provisions, or otherwise, Swiss Natural 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.
SWISS NATURAL 1999 STOCK OPTION PLAN
The Swiss Natural 1999 Stock Option Plan was ratified and approved by the
Board of Directors of Swiss Natural as of June 30, 1999. The 1999 Stock Option
Plan is intended to promote the long term financial interests and growth of
Swiss Natural by providing employees, officers, directors, and consultants of
Swiss Natural with appropriate incentives and rewards to enter into and continue
in the employ of, or their relationship with, Swiss Natural and to acquire a
proprietary interest in the long-term success of Swiss Natural; and to reward
the performance of individual officers, other employees, consultants and
directors in fulfilling their responsibilities for long-range achievements.
GENERAL
The 1999 Stock Option Plan provides for the granting of awards to such
officers, other employees, consultants and directors of Swiss Natural and its
affiliates as the Board of Directors may select from time to time. A total of
500,000 shares of common stock has been reserved for issuance under the 1999
Stock Option Plan.
If any shares subject to an award are forfeited, canceled, exchanged or
surrendered or if an award otherwise terminates or expires without a
distribution of shares to the holder of such award, the shares of common stock
with respect to such award will, to the extent of any such forfeiture,
cancellation, exchange, surrender, termination or expiration, again be available
for the awards under the 1999 Stock Option Plan.
In the event that the compensation committee determines that any dividend
or other distribution (whether in the form of cash, common stock, or other
property), recapitalization, stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the common stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of holders of awards under 1999 Stock Option Plan, then the compensation
committee will make such equitable changes or adjustments as it deems necessary
or appropriate to any or all of (i) the number and kind of shares of common
stock or other property (including cash) that may thereafter be issued in
connection with awards, (ii) the number and kind of shares of common stock or
other property (including cash) issued or issuable in respect of outstanding
awards and (iii) the exercise price, grant price, or purchase price relating to
any award; provided that, with respect to incentive stock options, such
adjustment shall be made in accordance with Section 424(h) of the Code.
ADMINISTRATION
The 1999 Stock Option Plan will be administered by the compensation
committee. The compensation committee has the authority in its sole discretion,
subject to and not inconsistent with the express provisions of the 1999 Stock
Option Plan, to administer the 1999 Stock Option Plan and to exercise all the
powers and authorities either specifically granted to it under, or necessary or
advisable in the administration of, the 1999 Stock Option Plan, including,
without limitation, the authority to grant awards; to determine the persons to
whom and the time or times at which awards shall be granted; to determine the
type and number of awards to be granted, the number of shares of common stock to
which an award may relate and the terms, conditions, restrictions and
performance goals
22
<PAGE>
relating to any award; to determine whether, to what extent, and under what
circumstances an award may be settled, canceled, forfeited, exchanged, or
surrendered; to make adjustments in the performance goals in recognition of
unusual or non-recurring events affecting Swiss Natural or the financial
statements of Swiss Natural (to the extent not inconsistent with Section 162(m)
of the Code, if applicable), or in response to changes in applicable laws,
regulations, or accounting principles; to construe and interpret the 1999 Stock
Option Plan and any award; to prescribe, amend and rescind rules and regulations
relating to the 1999 Stock Option Plan; to determine the terms and provisions of
agreements evidencing awards; and to make all other determinations deemed
necessary or advisable for the administration of the 1999 Stock Option Plan.
AWARDS UNDER THE 1999 STOCK OPTION PLAN
No options have been granted under the 1999 Stock Option Plan. Unless
otherwise determined by the compensation committee, options granted pursuant to
the 1999 Stock Option Plan will become exercisable ratably over three years
commencing on the first anniversary of the date of grant, but in no event may an
option be exercised more than 10 years following the date of its grant. The
purchase price per share payable upon the exercise of an option will be
established by the compensation committee; provided, however, that incentive
stock options may not have an exercise price less than the fair market value of
a share of common stock on the date of the grant. In addition, Swiss Natural has
agreed that if any options are granted prior to the closing of this offering or
within 90 days after the closing, the exercise price of the options will be no
less than $5.25 per share. The option exercise price is payable by any one of
the following methods or a combination thereof:
* in cash or by personal check, certified check, bank cashier's check or
wire transfer;
* in shares of common stock owned by the participant for at least six
months prior to the date of exercise and valued at their fair market
value on the effective date of such exercise; or
* by such other method as the compensation committee may from time to time
authorize.
The compensation committee also has the authority to specify, at the time
of grant or, with respect to options that are not intended to qualify as
incentive stock options ("non-qualified stock options"), at or after the time of
grant, that a participant shall be granted a new non-qualified stock option (a
"reload option") for a number of shares of common stock equal to the number of
shares of common stock surrendered by the participant upon exercise of all or a
part of an option in the manner described above, subject to the availability of
common stock under the 1999 Stock Option Plan at the time of such exercise;
provided, however, that no reload option shall be granted to a non-employee
director. Reload options shall be subject to such conditions as may be specified
by the compensation committee in its discretion, subject to the terms of the
1999 Stock Option Plan.
EMPLOYMENT ARRANGEMENTS
Ferrante Employment Agreement. We have entered into an employment agreement
with Dr. Ralph M. Ferrante pursuant to which Dr. Ferrante has agreed to continue
to serve as the chief executive officer of Swiss Natural until February 28,
2002. Dr. Ferrante's employment agreement provides that for the year ended
February 29, 2000 he will receive a base salary of $168,000 per annum, a $13,000
payment for medical insurance, a $10,000 payment for life insurance and a $7,200
car allowance; and that for each of the fiscal years ended February 28, 2001 and
February 28, 2002 he will receive a ten percent increase from the previous
year's base salary, a $13,000 payment for medical insurance, a $12,000 payment
for life insurance and a car allowance of $9,600.
Paul Consulting Agreement. Herbert Paul has agreed to continue to serve as
president and chief financial officer of Swiss Natural. We have also entered
into a consulting agreement with Mr. Paul until February 28, 2002. Mr. Paul's
consulting agreement provides that for the year ended February 29, 2000 he will
receive consulting fees of $99,750 per annum, a $4,750 allocation for medical
insurance and a $4,750 allocation for life insurance; and that for each of the
fiscal years ended February 28, 2001 and February 28, 2002 he will receive a ten
percent increase from the previous year's consulting fees and a continuation of
the allocation for medical and life insurances.
23
<PAGE>
CERTAIN TRANSACTIONS
Swiss Natural utilizes approximately 1,250 square feet of office space for
its corporate headquarters in a facility owned by Dr. Ferrante, Swiss Natural's
Chairman of the Board, Chief Executive Officer and principal stockholder. Swiss
Natural does not pay rent for the use of its corporate headquarters. Swiss
Natural does not have any written agreement with respect to such arrangement.
As of February 1, 1999, Swiss Natural owed an aggregate amount of $455,527
to A. Donald and Carolyn B. McCulloch, Jr. for loans made by them to Swiss
Natural in order to fund Swiss Natural's operations. Mr. McCulloch is a former
director and stockholder of Swiss Natural. In February 1999, Swiss Natural paid
the McCullochs $75,000 out of the proceeds received by Swiss Natural from its
private placement of convertible debentures. In addition, two employees of Swiss
Natural paid the McCullochs $95,000 in exchange for the transfer to such
employees of 49,341 shares of common stock of Swiss Natural owned by the
McCullochs. The McCullochs also forgave $95,000 due to them by Swiss Natural and
released Swiss Natural from certain negative covenants.
The aggregate indebtedness of Swiss Natural to the McCullochs as of
September 30, 1999 is $326,530, inclusive of accrued interest. The indebtedness
is evidenced by two promissory notes, one in the principal amount of $152,500,
which bears interest at a rate of 12% per annum, and represents the outstanding
principal amount of the original obligation, plus accrued interest of $4,575 and
the other in the amount of $169,455 which represents accrued interest on the
original promissory note and is non-interest bearing. Both promissory notes to
the McCullochs mature on the earlier to occur of:
* February 10, 2000;
* ten days after the receipt by Swiss Natural of the proceeds of an
initial public offering of its common stock in an amount of at least
$10,000,000; or
* the sale of all or substantially all of the assets of Swiss Natural.
Swiss Natural will use a portion of the proceeds of this offering to repay
such amount plus all accrued interest thereon.
OTHER TRANSACTIONS
Dr. Ferrante was previously owed an aggregate of $180,888 by Swiss Natural
for compensation due to him on account of services performed for Swiss Natural.
As of February 28, 1998 Dr. Ferrante exchanged this indebtedness owed to him by
Swiss Natural for 106,311 newly issued shares of common stock.
Dr. Ferrante was previously owed an aggregate of $420,849 by Swiss Natural
for loans made by him to fund the operations of Swiss Natural. As of February
28, 1998 Dr. Ferrante exchanged this indebtedness owed to him by Swiss Natural
for 247,342 newly issued shares of common stock.
Mr. Paul was previously owed an aggregate of $102,599 by Swiss Natural for
compensation due to him on account of services performed for Swiss Natural. As
of February 28, 1998 Mr. Paul exchanged this indebtedness owed to him by Swiss
Natural for 60,299 newly issued shares of common stock.
Mr. Paul was previously owed an aggregate of $50,220 by Swiss Natural for
loans made by him to fund the operations of Swiss Natural. As of February 28,
1998 Mr. Paul exchanged this indebtedness owed to him by Swiss Natural for
29,516 newly issued shares of common stock.
Mr. Brescio was previously owed an aggregate of $93,419 by Swiss Natural
for compensation due to him on account of services performed for Swiss Natural.
As of February 28, 1998 Mr. Brescio exchanged this indebtedness owed to him by
Swiss Natural for 54,904 newly issued shares of common stock.
Effective June 30, 1999, Messrs. Ferrante, Paul and Brescio exchanged
1,206,000 shares of common stock of Swiss Natural owned by them for 1,206,000
shares of Series A Preferred Stock. See "Description of Capital Stock -Preferred
Stock" for a more detailed description of the terms of such preferred stock.
24
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to Swiss Natural with
respect to beneficial ownership of Swiss Natural's common stock as of the date
of this prospectus by
* each stockholder known by Swiss Natural to be the beneficial owner of
more than 5% of Swiss Natural's common stock;
* each director of Swiss Natural;
* the Named Executive Officers; and
* all executive officers and directors as a group.
Except as otherwise indicated, Swiss Natural believes that the beneficial
owners of common stock listed below, based on information furnished by such
owners, have sole investment and voting power with respect to such shares,
subject to community property laws where applicable. Swiss Natural assumes that
the underwriter's over-allotment option will not be exercised. In event the
underwriter's over-allotment option is exercised, Messrs. Ferrante, Paul and
Brescio will hold 745,448 shares, 145,768 shares and 101,020 shares,
respectively, after the offering. The table does not give effect to 111,667
shares of common stock purchasable by Mr. Rolls upon the exercise of warrants or
the 20,000 shares of common stock issuable upon the conversion of the
convertible debentures held by Mr. McCann.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO SHARES BENEFICIALLY
OFFERING OWNED AFTER OFFERING
NAME AND ADDRESS ---------------------- ----------------------
OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- ------------------------------------------------ --------- ------- --------- -------
<S> <C> <C> <C> <C>
Ralph M. Ferrante............................... 878,573 33.9% 878,573 22.9%
c/o Swiss Natural Brands, Inc.
1031 Route 9W
Upper Grandview, NY 10960
Herbert M. Paul................................. 179,518 6.9% 179,518 4.7%
c/o Swiss Natural Brands, Inc.
1031 Route 9W
Upper Grandview, NY 10960
A. Donald & Carolyn B. McCulloch, Jr............ 345,825 13.3% 345,825 9.0%
c/o Swiss Natural Brands, Inc.
1031 Route 9W
Upper Grandview, NY 10960
Ernest Rolls.................................... 223,334 8.6% 223,334 5.8%
c/o Swiss Natural Brands, Inc.
1031 Route 9W
Upper Grandview, NY 10960
Ronald Brescio.................................. 121,645 4.7% 121,645 3.1%
c/o Swiss Natural Brands, Inc.
1031 Route 9W
Upper Grandview, NY 10960
James P. McCann................................. 0 0% 0 0%
c/o Swiss Natural Brands, Inc.
1031 Route 9W
Upper Grandview, NY 10960
Mario V. Ferrante............................... 184,411 7.1% 184,411 4.8%
c/o Swiss Natural Brands, Inc.
1031 Route 9W
Upper Grandview, NY 10960
All directors and executive officers as a group
(3 persons)................................... 1,058,091 40.8% 1,058,091 27.6%
</TABLE>
25
<PAGE>
The following table sets forth information known to Swiss Natural with
respect to beneficial ownership of Swiss Natural's Series A Preferred Stock as
of the date of this prospectus by
* each stockholder known by Swiss Natural to be the beneficial owner of
more than 5% of Swiss Natural's Series A Preferred Stock;
* each director of Swiss Natural;
* the Named Executive Officers; and
* all executive officers and directors as a group.
Except as otherwise indicated, Swiss Natural believes that the beneficial
owners of Series A Preferred Stock listed below, based on information furnished
by such owners, have sole investment and voting power with respect to such
shares, subject to community property laws where applicable.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO SHARES BENEFICIALLY
OFFERING OWNED AFTER OFFERING
NAME AND ADDRESS ---------------------- ----------------------
OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- ------------------------------------------------ --------- ------- --------- -------
<S> <C> <C> <C> <C>
Ralph M. Ferrante............................... 849,867 70.5% 849,867 70.5%
c/o Swiss Natural Brands, Inc.
1031 Route 9W
Upper Grandview, NY 10960
Herbert M. Paul................................. 238,463 19.8% 238,463 19.8%
c/o Swiss Natural Brands, Inc.
1031 Route 9W
Upper Grandview, NY 10960
Ronald Brescio.................................. 117,670 9.7% 117,670 9.7%
c/o Swiss Natural Brands, Inc.
1031 Route 9W
Upper Grandview, NY 10960
All directors and executive officers as a group
(2 persons)................................... 1,088,330 90.3% 1,088,330 90.3%
</TABLE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized common stock of Swiss Natural consists of 20,000,000 shares,
par value $.01 per share. The authorized preferred stock of Swiss Natural
consists of 3,000,000 shares, par value $.01 per share. The 2,591,708 currently
outstanding shares of Swiss Natural common stock are owned by approximately 70
holders of record. Upon consummation of this offering, 3,841,708 shares of
common stock will be issued and outstanding. An additional 125,000 shares of
common stock will be outstanding if the 125,000 underwriter's common stock
purchase warrants are exercised in full. An additional 1,206,000 shares of
common stock will be outstanding upon conversion of all outstanding shares of
the Series A Preferred Stock. The foregoing description of the capital stock
excludes shares of common stock issuable upon exercise of the outstanding
warrants and upon exercise of the $757,500 aggregate principal amount of the
convertible debentures.
On October 1, 1999, Swiss Natural effected a 1.5-for-1 reverse stock split
of its common and preferred stock. Unless otherwise indicated, all information
in this prospectus has been adjusted to reflect this split.
COMMON STOCK
Voting Rights. Each holder of common stock outstanding is entitled to one
vote per share on all matters submitted to a vote of Swiss Natural's
stockholders, including the election of directors.
26
<PAGE>
Holders do not have cumulative voting rights in connection with the election of
directors or any other matter.
Any action that may be taken at a meeting of the stockholders may be taken
by written consent in lieu of a meeting if Swiss Natural receives consents
signed by stockholders having the minimum number of votes that would be
necessary to approve the action at a meeting at which all shares entitled to
vote on the matter were present and voted. This could permit Dr. Ferrante and
Mr. Paul to take action regarding matters without providing other stockholders
the opportunity to voice dissenting views or raise other matters.
Liquidation. In the event of any dissolution, liquidation or winding up of
the affairs of Swiss Natural, whether voluntary or involuntary, holders of the
common stock are entitled to share ratably in all assets remaining after payment
of the debts and other liabilities of Swiss Natural.
Dividends, distributions and stock splits. Each share of common stock will
have an equal and ratable right to receive dividends when, if and as declared
from time to time by the board of directors out of funds legally available
therefor. Swiss Natural does not anticipate paying cash dividends in the
foreseeable future.
Other provisions. The holders of common stock are not entitled to
preemptive rights. There are no redemption or sinking fund provisions applicable
to the common stock. Certain principal stockholders have certain rights of first
refusal with respect to the transfer and sale by other stockholders of shares of
Swiss Natural's common stock.
PREFERRED STOCK
Messrs. Ferrante, Paul and Brescio have exchanged 1,206,000 shares of
common stock owned by them for 1,206,000 shares of Series A Preferred Stock
("Series A Preferred"), a newly issued series of preferred stock. The Series A
Preferred is non-redeemable, assignable and carries rights to vote with the
common stock on a one-vote-per-share basis. The Series A Preferred is
convertible into common stock, at the option of the holder, at any time after
the earliest to occur of:
* the first fiscal year of Swiss Natural or any trailing twelve (12) month
period in which Swiss Natural's financial statements show earnings before
interest, taxes, charges resulting from stock, debenture or stock option
issuances and underwriter's consulting fees have equaled or exceeded
$750,000;
* the date on which the closing price of the common stock of Swiss Natural
as reported by the NASDAQ system or its successor, or any national
securities exchange on which such stock is listed (or if not so reported,
the average of the closing bid and asked prices as furnished by two
members of the NASD selected by Swiss Natural for that purpose) is equal
to or greater than ten dollars ($10.00) per share;
* the closing date of any acquisition of all or a portion of the equity
securities of Swiss Natural, the acquisition of all or a portion of Swiss
Natural's assets, the merger of Swiss Natural with or into another entity
regardless of whether Swiss Natural is the surviving entity, or any
additional equity financing by Swiss Natural;
* two (2) years after the closing date of this offering; or
* March 1, 2000 if the closing of this offering and the closing of the
sale of the over-allotment shares hereunder have not occurred prior to
such date.
The Series A Preferred shall pay a quarterly dividend of two cents ($0.02)
per share commencing June 1, 2000, accruing from March 1, 2000 prior to any
other class of stock receiving any dividends, and to participate in dividends
declared and paid on the common stock, on an "as-converted"basis. In addition,
the Series A Preferred will upon liquidation participate pari passu with the
common stock, on an "as-converted" basis. The holders of the Series A Preferred
shares shall be protected against dilution of their interest in the common stock
into which their shares are convertible upon the occurrence of certain events.
If the holders of the Series A Preferred do not receive their quarterly
27
<PAGE>
dividends on a timely basis, the amount of such dividend shall accrue and shall
be paid in full prior to the payment of any dividends to the holders of common
stock.
If and to the extent that the shares of common stock issuable upon
conversion of the Series A Preferred are not includable in a registration
statement on the form to be utilized by Swiss Natural, then, commencing one year
after the closing of this offering, at the request of the holders thereof,
delivered to Swiss Natural, Swiss Natural will prepare and file, at its own
expense, one (1) registration statement on such form as required, to enable such
holders to resell shares of common stock acquired upon the conversion of the
Series A Preferred.
UNDERWRITERS' WARRANTS
At the closing of this offering, Swiss Natural will sell to Comprehensive
Capital Corporation underwriters' stock warrants to purchase 125,000 shares of
common stock at an aggregate purchase price of $100. The underwriters' stock
warrants will be exercisable to purchase one share of common stock at a price
equal to $8.66 per share at any time during the four-year period commencing one
year from the effective date of this prospectus. The underwriters' stock
warrants expire on .
OTHER WARRANTS AND OPTIONS
Swiss Natural has issued 165,267 warrants to purchase 165,267 shares of
common stock at a price of $2.24 per share. Of such warrants, 111,667 are issued
to one of the principal stockholders listed in the table set forth under
Principal Stockholders.
All of the warrants previously issued by Swiss Natural are exercisable at
any time prior to the earlier to occur of (a) June 14, 2002 or (b) the date
which is ten days after the date on which Swiss Natural mails to the holder of
the warrant a copy of a preliminary prospectus included in a registration
statement which has been filed with the Securities and Exchange Commission for
the registration of Swiss Natural's common stock under the Securities Act of
1933, as amended. The warrants are exercisable at a price of $2.24 per share,
subject to adjustment to prevent dilution in certain circumstances.
For the life of the warrant, the holders thereof are given the opportunity
to profit from a rise in the market price of Swiss Natural's common stock, which
exercise at the time of such rise may result in a dilution of the interests of
other stockholders. Swiss Natural may find it more difficult to raise additional
equity capital if it should be needed for the business of Swiss Natural while
the warrants are outstanding.
CONVERTIBLE DEBENTURES
In January, 1999 Swiss Natural sold $757,500 principal amount of
convertible debentures. The convertible debentures bear interest at a rate of
12% per annum, payable annually. The convertible debentures mature in February,
2001. The holder of any convertible debenture has the right, exercisable at any
time up to the maturity of the convertible debenture, at his option, to convert
such convertible debenture at the principal amount thereof (or any portion
thereof that is an integral multiple of $1,500) into shares of the common stock
at a price of $1.50 per share (except that, in the event such convertible
debenture shall be called for redemption, such right shall terminate on the
close of business on the fifth day immediately preceding the redemption date).
INDEBTEDNESS
As of September 30, 1999, after the conversion into common stock of all the
indebtedness owed by Swiss Natural to Dr. Ferrante, Mr. Paul and Mr. Brescio,
Swiss Natural had outstanding debt, notes and interest payable to stockholders
in the aggregate amount of $326,530, all of such indebtedness is owed to A.
Donald and Carolyn B. McCulloch, Jr. for loans and accrued interest made by such
individuals to Swiss Natural in order to fund Swiss Natural's operations. The
two promissory notes evidencing such indebtedness to the McCullochs mature on
the earlier to occur of (i) February 10, 2000, (ii) ten days after the receipt
of funds by Swiss Natural from an initial public offering in any
28
<PAGE>
amount not less than $10,000,000, or (iii) the sale of all or substantially all
of the assets of Swiss Natural. Swiss Natural intends to use a portion of the
proceeds of this offering to repay such amount plus all accrued interest
thereon. See "Use of Proceeds".
CERTAIN ANTI-TAKEOVER EFFECTS OF LAW AND CERTIFICATE OF INCORPORATION
Following consummation of the offering, Swiss Natural will be subject to
the business combination provisions of Section 203 of Delaware corporation law.
In general, such provisions prohibit a publicly held Delaware corporation from
engaging in various business combination transactions with any interested
stockholder (in general, a stockholder owning 15% of a corporation's outstanding
voting securities) for a period of three years after the date of the transaction
in which the person became an interested stockholder, unless:
* the transaction is approved by the corporation's board of directors prior
to the date the stockholder became an interested stockholder;
* upon consummation of the transaction which resulted in the stockholder's
becoming an interested stockholder, the stockholder owned at least 85% of
the shares of stock entitled to vote generally in the election of
directors of the corporation outstanding at the time the transaction
commenced, excluding, for purposes of determining the number of shares
outstanding, those shares owned by (a) persons who are directors and also
officers and (b) employee stock plans in which employee participants do
not have the right to determine confidentiality whether shares held
subject to the plan will be tendered in a tender or exchange offer; or
* on or after such date, the business combination is approved by the board
of directors and authorized by the affirmative vote of at least 66 2/3%
of such outstanding voting stock not owned by the interested stockholder.
TRANSFER AGENT AND REGISTRAR
Corporate Stock Transfer, Inc. has been appointed as transfer agent and
registrar for the common stock.
LISTING
Swiss Natural has applied for listing of the common stock on the Nasdaq
SmallCap Market under the symbol "SWIS".
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the common
stock or the warrants. Swiss Natural cannot predict the effect, if any, that
sales of shares of the common stock to the public or the availability of shares
for sale to the public will have on the market price of the common stock
prevailing from time to time.
Upon consummation of this offering, Swiss Natural will have 3,841,708
shares of common stock outstanding. Of the shares outstanding after this
offering, the 1,250,000 shares of common stock sold in this offering and the
187,500 shares offered to the underwriters under the over-allotment option will
be freely tradeable without restriction under the Securities Act of 1933, except
that shares owned by an affiliate of Swiss Natural will be subject to the volume
limitations of Rule 144 under the Securities Act of 1933. As defined in Rule
144, an affiliate of an issuer is a person who, directly or indirectly, through
one or more intermediaries, controls or is controlled by, or is under common
control with, such issuer.
The remaining 2,404,208 shares of common stock will be restricted
securities (as that phrase is defined in Rule 144) and may not be resold in the
absence of registration under the Securities Act or pursuant to an exemption
from such registration, including the exemption provided by Rule 144 under the
Securities Act. Substantially all of the holders of such shares of common stock
have registration
29
<PAGE>
rights which entitle them under certain circumstances to register their shares
for resale in the event Swiss Natural proposes to register additional shares of
common stock in the future.
Subject to the foregoing and to the lock-up agreements described below,
under Rule 144 as currently in effect, a stockholder, including an affiliate,
who has beneficially owned his or her restricted shares for at least one year
from the date they were acquired from Swiss Natural or an affiliate of Swiss
Natural may sell, within any three-month period, a number of such shares that
does not exceed certain volume restrictions, provided that certain requirements
concerning availability of public information, manner of sale and notice of sale
are satisfied. In addition, under Rule 144(k), if a period of at least two years
has elapsed from the date any restricted shares were acquired from Swiss Natural
or an affiliate, a stockholder that is not an affiliate of Swiss Natural at the
time of sale and that has not been an affiliate for at least three months prior
to the sale is entitled to sell those shares without compliance with the
requirements of Rule 144 set forth above. An affiliate of Swiss Natural,
however, must comply with the volume restrictions and the other requirements
referred to above.
Except for the holders of 187,500 shares offered to the underwriter
pursuant to the over-allotment option and the holders of the 1,250,000 shares
offered to the public in this offering, the holders of all other outstanding
shares of common stock (including those shares issuable upon the exercise of
outstanding warrants and convertible debentures) are subject to the
underwriters' lockup restrictions. Pursuant to the lockup, the holders have
agreed not to sell, transfer, hypothecate or convey, without the written consent
of Comprehensive Capital Corporation, by registration or otherwise, their shares
for a period of at least one year from the effective date of this prospectus. In
addition, the holders have agreed not to sell, transfer, hypothecate or convey
their shares for any longer period as may be required by NASDAQ. Any such
stockholder may however transfer his or her stock in a transaction not involving
a public offering including a transfer to a member of his family or in the event
of death, by will or operation of law, provided that any such transferee shall
agree, as a condition to such transfer, to be bound by such restrictions. The
foregoing lock-up restrictions will not apply to grants or awards under the 1999
Stock Option Plan or to shares sold to the underwriters to cover over-
allotments. If the 187,500 over-allotment shares are not purchased from
shareholders by the underwriters, such shares will not be subject to the
underwriters' lockup restrictions.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the form
of which has been filed as an exhibit to the registration statement of which
this prospectus forms a part, the underwriters named below, acting through
Comprehensive Capital Corporation and Seaboard Securities, Inc. as
representatives, have severally agreed to purchase from Swiss Natural, and Swiss
Natural has agreed to sell, an aggregate of 1,250,000 shares of common stock.
The underwriters' obligations to pay for and accept delivery of the shares of
common stock are subject to certain conditions set forth in the underwriting
agreement, including, but not limited to, satisfactory completion of due
diligence, delivery of a comfort letter from Swiss Natural's auditors, receipt
of an opinion of Swiss Natural's counsel and other closing conditions. The
underwriters are committed to purchase all of the shares of common stock if any
securities are purchased. Under certain circumstances, the commitments of non-
defaulting underwriters may be increased.
<TABLE>
<CAPTION>
UNDERWRITERS AMOUNT
------------------------------------------------------------ ---------
<S> <C>
Comprehensive Capital Corporation...........................
Seaboard Securities, Inc....................................
---------
Total..................................................
---------
---------
</TABLE>
The underwriters propose to offer the shares of common stock to the public
at the public offering price set forth on the cover page of this prospectus and
to certain dealers, who are members of the NASD, at such price less an
underwriting discount of 10% of the public offering price, or $ per
share. The underwriting fee is equal to the difference between the initial
public offering price and the amount paid by the underwriters for the shares of
common stock in this offering. The underwriters may allow a concession of
$ per share to dealers that are members of the NASD.
30
<PAGE>
Comprehensive Capital Corporation may permit dealers to reallow to other dealers
securities and receive a reallowance of $ per share. Until completion of
this offering, the public offering price, the underwriting discount, concession
and reallowances will not be changed.
Swiss Natural has agreed to pay Comprehensive Capital Corporation a
non-accountable expense allowance of 3% of the aggregate offering price of the
securities sold in this offering (including any shares purchased pursuant to the
over-allotment option), of which $15,000 has been paid by Swiss Natural to
Comprehensive Capital Corporation to cover a portion of the due diligence
expenses and underwriting costs related to this offering.
Swiss Natural has agreed to indemnify the underwriters against liabilities
under the Securities Act of 1933 in connection with this offering.
Messrs. Ferrante, Paul and Brescio have granted to the underwriters an
option, exercisable during the 45-day period after the date of this prospectus,
to purchase up to 187,500 additional shares of the common stock owned by them at
the public offering price, less underwriting discounts and a pro rata portion of
the non-accountable expense allowance. Specifically, Mr. Ferrante has granted an
option to purchase 133,125 shares, Mr. Paul has granted an option to purchase
33,750 shares and Mr. Brescio has granted an option to purchase 20,625 shares to
the underwriter. The underwriters may exercise this option solely to cover
over-allotments, if any, made in the sale of the securities offered hereby.
Generally, to the extent that this option is exercised, each underwriter will
become obligated to purchase approximately the same percentage of such
additional securities as the percentage of securities it was originally
obligated to purchase as set forth above. If the underwriters exercise the
over-allotment option in full, the total gross public offering price will be
$ , the total underwriting discounts will be $ and the total
proceeds to Swiss Natural and the selling security holders will be $ and
$ , respectively.
Prior to this offering, there has been no public market for the common
stock. Accordingly, the public offering price for the securities was determined
by negotiation between Swiss Natural and Comprehensive Capital Corporation.
Among the factors considered in determining the public offering price were the
services, the experience of management, the economic conditions of Swiss
Natural's industry in general, the general condition of the equity securities
market and the demand for similar securities of companies considered comparable
to Swiss Natural and other relevant factors. There can be no assurance, however,
that the prices at which the common stock and warrants will sell in the public
market after this offering will not be lower than the price at which the shares
of common stock and warrants are sold by the underwriters.
The underwriting agreement also provides that Comprehensive Capital
Corporation shall have the right to designate a non-voting advisor to the Board
of Directors of Swiss Natural, which advisor shall be acceptable to Swiss
Natural, for a period of two years after the effective date of this prospectus.
Said designee shall attend meetings of the Board of Directors and shall be
entitled to receive reimbursement for all reasonable costs incurred in attending
such meetings. As of the date of this prospectus, no adviser has been
designated.
Swiss Natural has agreed to sell to Comprehensive Capital Corporation or
its designees, for nominal consideration, the underwriter's common stock
purchase warrants to purchase an aggregate of 125,000 shares of common stock at
a price of $8.66 per share. The shares of common stock will be identical to the
shares of common stock offered to the public hereby in all respects. All of the
underwriter's warrants will be exercisable for a four-year period commencing one
year after the date of this prospectus. During the period beginning on the date
of this prospectus and ending five years thereafter, Swiss Natural has agreed to
maintain a current registration statement with respect to the underwriter's
warrants and the underlying common stock. The underwriter's warrants will
contain anti-dilution provisions providing for appropriate adjustment of the
exercise price and number of securities that may be purchased upon the
occurrence of certain specified events.
Upon the closing of this offering, Swiss Natural shall enter into a
financial consulting agreement with Comprehensive Capital Corporation pursuant
to which Comprehensive Capital Corporation shall receive a consulting fee in an
amount equal to two (2%) percent of the dollar amount of the securities
31
<PAGE>
sold in this offering (including securities sold pursuant to the over-allotment
option, to the extent exercised), for consulting services which shall be
rendered by Comprehensive Capital Corporation for a period of two (2) years from
the date of this prospectus. Such consulting services shall include, but shall
not be limited to, advising Swiss Natural in connection with possible
acquisition opportunities, advising Swiss Natural regarding shareholder
relations including the preparation of the annual report and other releases,
assisting in long-term financial planning, advising Swiss Natural in connection
with corporate reorganizations, expansion and capital structure, and other
financial assistance. Such consulting fee shall be paid in full in advance at
each closing of this offering.
The underwriting agreement also provides that if Swiss Natural shall,
within two (2) years from the effective date of this prospectus, enter into any
agreement or understanding with any person or entity exclusively introduced by
Comprehensive Capital Corporation involving any of the following transactions
which were originated exclusively by Comprehensive Capital Corporation:
* the sale of all or substantially all of the assets of Swiss Natural,
* the merger or consolidation of Swiss Natural (other than a merger or
consolidation effected for the purpose of changing Swiss Natural's
domicile) with another entity, or
* the acquisition by Swiss Natural of the assets or stock of another
business entity, which agreement or understanding is thereafter
consummated, whether or not during such two (2) year period.
Swiss Natural, upon such consummation, shall pay to Comprehensive Capital
Corporation an amount equal to the following percentages of the consideration
paid by Swiss Natural in connection with such transaction: 5% of the first
$1,000,000, or portion thereof, of such consideration; 4% of the second
$1,000,000, or portion thereof, of such consideration; and 3% of such
consideration in excess of the first $2,000,000 of such consideration. The fees
payable to Comprehensive Capital Corporation will be in the same form of
consideration as that paid by or to Swiss Natural, as the case may be, in any
such transactions.
Until the distribution of securities in this offering is completed, the
rules of the SEC may limit the ability of the underwriters and certain selling
group members to bid for and purchase the securities. As an exception to these
rules, the underwriters are permitted to engage in certain transactions that
stabilize the price of the securities. Such transactions consist of bids or
purchases for the purpose of maintaining the price of the securities. If the
underwriters create a short position in the securities in connection with this
offering, i.e., if they sell more shares of common stock or warrants than are
set forth on the cover page of this prospectus, the underwriters may reduce the
short position by purchasing common stock or warrants in the open market.
Comprehensive Capital Corporation may also elect to reduce any short position by
exercising all or part of the over-allotment option described above. In
addition, Comprehensive Capital Corporation may impose a penalty bid on certain
underwriters and selling group members. This means that if Comprehensive Capital
Corporation purchases shares of common stock or warrants in the open market to
reduce the underwriters' short position or to stabilize the price of the common
stock or warrants, it may reclaim the amount of the selling concession from the
underwriters and selling group members that sold those securities as part of
this offering. In general, purchases of a security for the purpose of
stabilization or to reduce a short position could cause the price of the
security to be higher than it might be in the absence of such purchases. The
imposition of a penalty bid might also have an effect on the price of a security
to the extent that it discouraged resales of that security. Neither
Comprehensive Capital Corporation nor any of the underwriters makes any
representations or predictions as to the direction or magnitude of any effect
that the transactions described above may have on the price of the securities.
In addition, neither Comprehensive Capital Corporation nor any of the
underwriters makes any representations that Comprehensive Capital Corporation or
any such underwriter will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.
The underwriters have informed Swiss Natural that sales to any account over
which the underwriters exercise discretionary authority will not exceed 1% of
this offering.
32
<PAGE>
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered hereby
will be passed upon for Swiss Natural by Lehman & Eilen LLP, Uniondale, New
York. Lester Morse P.C., Great Neck, New York will pass upon legal matters for
the Underwriters. Hank Gracin, Esq., counsel to Lehman & Eilen, owns 1,005
shares of the common stock.
EXPERTS
The financial statements of Swiss Natural as of February 28, 1999 and for
each of the two years in the period ended February 28, 1999 included in this
Prospectus and in this Registration Statement have been included herein in
reliance upon the report of Goldstein Golub Kessler LLP, independent certified
public accountants, given upon the authority of such firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
Swiss Natural has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 under the Securities Act
with respect to the common stock and warrants offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits thereto. For further information with respect to Swiss Natural
and the common stock and warrants offered hereby, reference is made to the
Registration Statement and the exhibits thereto. Statements contained in this
Prospectus regarding the contents of any contract or any other document to which
reference is made are not necessarily complete, and, in each instance where a
copy of such contract or other document has been filed as an exhibit to the
Registration Statement, reference is made to the copy so filed, each such
statement being qualified in all respects by such reference. A copy of the
Registration Statement and the exhibits thereto may be inspected without charge
at the offices of the Commission at Judiciary Plaza, 450 Fifth Street,
Washington, D.C. 20549, and copies of all or any part of the Registration
Statement may be obtained from the Public Reference Section of the Commission,
Washington, D.C. 20549 upon the payment of the fees prescribed by the
Commission. The Commission maintains a Web site (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants, such as Swiss Natural, that file electronically with the
Commission.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
which is contained in this prospectus. We are offering to sell shares of common
stock and seeking offers to buy shares of common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or of any sale of the common stock.
33
<PAGE>
SWISS NATURAL BRANDS, INC.
(FORMERLY SWISS NATURAL FOODS, INC.)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
INDEPENDENT AUDITOR'S REPORT.................................................. F-2
FINANCIAL STATEMENTS:
Balance Sheet at February 28, 1999 and September 30, 1999 (unaudited)....... F-3
Statement of Operations for the Years Ended February 28, 1998 and 1999 and
the Seven-month Periods Ended September 30, 1998 and 1999 (unaudited).... F-4
Statement of Stockholders' Deficiency for the Years Ended February 28, 1998
and 1999 and the Seven-month Period Ended September 30, 1999
(unaudited).............................................................. F-5
Statement of Cash Flows for the Years Ended February 28, 1998 and 1999 and
the Seven-month Periods Ended September 30, 1998 and 1999 (unaudited).... F-6
Notes to Financial Statements............................................... F-7 - F-11
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders of
Swiss Natural Brands, Inc.
(Formerly Swiss Natural Foods, Inc.)
We have audited the accompanying balance sheet of Swiss Natural Brands, Inc.
(Formerly Swiss Natural Foods, Inc.) as of February 28, 1999, and the related
statements of operations, stockholders' deficiency, and cash flows for each of
the two years in the period ended February 28, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits 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 audits provide 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 Swiss Natural Brands, Inc. as
of February 28, 1999, and the results of its operations and its cash flows for
each of the two years in the period ended February 28, 1999 in conformity with
generally accepted accounting principles.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
April 7, 1999, except for Note 13, as to
which the date is August 18, 1999 and
the last paragraph of Note 1, as
to which the date is October 1, 1999
F-2
<PAGE>
SWISS NATURAL BRANDS, INC.
(FORMERLY SWISS NATURAL FOODS, INC.)
BALANCE SHEET
<TABLE>
<CAPTION>
FEBRUARY 28, SEPTEMBER 30,
1999 1999
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................................... $ 530,729 $ 151,788
Accounts receivable, less allowance for doubtful accounts of
$19,000................................................... 227,038 271,105
Inventory.................................................... 332,609 395,836
Other current assets......................................... 12,913 26,478
---------- -----------
TOTAL CURRENT ASSETS................................. 1,103,289 845,207
Property and Equipment, at cost, less accumulated depreciation
and amortization of $75,028 and $91,301, respectively 76,514 137,110
Trademarks, less accumulated amortization of $34,521 and
$36,264, respectively........................................ 3,990 2,247
Debt Placement Fees, less accumulated amortization of $5,707
and $45,656, respectively.................................... 131,261 91,312
Deferred Offering Costs........................................ -- 122,627
Deferred Income Tax Asset, net................................. -- --
Other Assets................................................... -- 160,650
---------- -----------
TOTAL ASSETS $1,315,054 $ 1,359,153
---------- -----------
---------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Accounts payable and accrued expenses........................ $ 655,169 $ 648,737
Debt and interest payable -- stockholder..................... 322,908 326,530
---------- -----------
TOTAL CURRENT LIABILITIES............................ 978,077 975,267
Convertible Subordinated Debentures............................ 757,500 757,500
Compensation Payable........................................... 101,092 101,092
---------- -----------
TOTAL LIABILITIES.................................... 1,836,669 1,833,859
---------- -----------
Commitments
Stockholders' Deficiency:
Preferred stock -- Series A, $.01 par value; authorized
3,000,000 shares, issued and outstanding 1,206,000
shares.................................................... -- 12,060
Common stock -- $.01 par value; authorized 20,000,000 shares,
issued and outstanding 3,797,708 and 2,591,708 shares,
respectively.............................................. 37,977 25,917
Additional paid-in capital................................... 2,014,833 2,014,833
Accumulated deficit.......................................... (2,574,425) (2,527,516)
---------- -----------
STOCKHOLDERS' DEFICIENCY............................. (521,615) (474,706)
---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY....... $1,315,054 $ 1,359,153
---------- -----------
---------- -----------
</TABLE>
See Notes to Financial Statements
F-3
<PAGE>
SWISS NATURAL BRANDS, INC.
(FORMERLY SWISS NATURAL FOODS, INC.)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEVEN-MONTH PERIOD ENDED
FEBRUARY 28, SEPTEMBER 30,
-------------------------- -------------------------
<S> <C> <C> <C> <C>
1998 1999 1998 1999
----------- ---------- ---------- ----------
(UNAUDITED)
Net sales.............................. $ 2,324,189 $3,005,872 $1,736,034 $2,519,102
Cost of sales.......................... 1,941,074 2,001,701 1,144,267 1,546,378
----------- ---------- ---------- ----------
Gross profit........................... 383,115 1,004,171 591,767 972,724
----------- ---------- ---------- ----------
Expenses:
General and administrative........ 834,679 871,057 420,001 530,414
Selling and promotional........... 508,401 502,652 191,808 298,878
Product development............... 12,602 30,895 24,085 1,440
----------- ---------- ---------- ----------
1,355,682 1,404,604 635,894 830,732
----------- ---------- ---------- ----------
Income (loss) from operations.......... (972,567) (400,433) (44,127) 141,992
Other income........................... 23,036 11,079 7,943 8,836
Interest expense....................... (80,759) (50,062) (21,567) (103,919)
----------- ---------- ---------- ----------
Net income (loss)...................... $(1,030,290) $ (439,416) $ (57,751) $ 46,909
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
Income (loss) per common share --
basic................................ $ (.31) $ (.12) $ (.02) $ .01
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
Weighted-average number of common
shares outstanding -- basic.......... 3,276,971 3,797,708 3,797,708 3,279,241
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
</TABLE>
See Notes to Financial Statements
F-4
<PAGE>
SWISS NATURAL BRANDS, INC.
(FORMERLY SWISS NATURAL FOODS, INC.)
STATEMENT OF STOCKHOLDERS' DEFICIENCY
YEARS ENDED FEBRUARY 28, 1998 AND 1999 AND
THE SEVEN-MONTH PERIOD ENDED SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
-------------------- --------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- -------- ---------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at February 28, 1997... -- -- 3,157,341 $ 31,573 $ 861,017 $(1,104,719) $ (212,129)
Issuance of common stock
through private placement
transaction.................. -- -- 141,996 1,420 215,825 -- 217,245
Conversion of notes and
compensation payable into
common stock................. -- -- 498,371 4,984 842,991 -- 847,975
Net loss....................... -- -- -- -- -- (1,030,290) (1,030,290)
--------- -------- ---------- -------- ----------- ----------- -----------
Balance at February 28, 1998... -- -- 3,797,708 37,977 1,919,833 (2,135,009) (177,199)
Forgiveness of debt and
interest payable --
stockholder.................. -- -- -- -- 95,000 -- 95,000
Net loss....................... -- -- -- -- -- (439,416) (439,416)
--------- -------- ---------- -------- ----------- ----------- -----------
Balance at February 28, 1999... -- -- 3,797,708 37,977 2,014,833 (2,574,425) (521,615)
Exchange of 1,206,000 common
shares for 1,206,000
preferred shares
(unaudited).................. 1,206,000 $ 12,060 (1,206,000) (12,060) -- -- --
Net income (unaudited)......... -- -- -- -- -- 46,909 46,909
--------- -------- ---------- -------- ----------- ----------- -----------
Balance at September 30, 1999
(unaudited).................. 1,206,000 $ 12,060 2,591,708 $ 25,917 $2,014,833 $(2,527,516) $ (474,706)
--------- -------- ---------- -------- ----------- ----------- -----------
--------- -------- ---------- -------- ----------- ----------- -----------
</TABLE>
See Notes to Financial Statements
F-5
<PAGE>
SWISS NATURAL BRANDS, INC.
(FORMERLY SWISS NATURAL FOODS, INC.)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEVEN-MONTH PERIOD ENDED
FEBRUARY 28, SEPTEMBER 30,
------------------------- ------------------------
1998 1999 1998 1999
----------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................... $(1,030,290) $ (439,416) $ (57,751) $ 46,909
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization............. 26,712 28,826 16,135 18,016
Amortization of debt placement fees....... -- 5,707 -- 39,949
Accrued interest.......................... 80,759 37,382 21,567 10,675
Changes in operating assets and
liabilities:
Decrease in funds held in escrow....... 919,599 -- -- --
(Increase) decrease in accounts
receivable........................... 94,090 (179,880) (142,820) (44,067)
Increase in inventory.................. (38,936) (118,819) (97,362) (63,227)
Increase in other current assets....... -- (9,512) (45,911) (13,565)
(Increase) decrease in other assets.... (15,459) 16,093 16,093 (160,650)
Increase (decrease) in accounts payable
and accrued expenses................. 226,334 319,465 128,211 (6,432)
Decrease in compensation payable....... (74,607) -- -- --
----------- ---------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES................. 188,202 (340,154) (161,838) (172,392)
----------- ---------- ---------- ----------
Cash used in investing activity -- purchases
of property and equipment................. (37,709) (38,737) (36,537) (76,869)
----------- ---------- ---------- ----------
Cash flows from financing activities:
Proceeds from issuance of convertible
subordinated debentures................ -- 757,500 -- --
Payment for debt placement fees........... -- (136,968) -- --
Deferred offering costs................... -- -- -- (122,627)
Net proceeds from issuance of common
stock.................................. 217,245 -- -- --
Payments of notes payable --
stockholders........................... (100,872) (75,000) -- (7,053)
----------- ---------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES................. 116,373 545,532 -- (129,680)
----------- ---------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents............................... 266,866 166,641 (198,375) (378,941)
Cash and cash equivalents at beginning of
period.................................... 97,222 364,088 364,088 530,729
----------- ---------- ---------- ----------
Cash and cash equivalents at end of
period.................................... $ 364,088 $ 530,729 $ 165,713 $ 151,788
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income taxes........................... $ 661 $ 1,150 $ 730 $ 380
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
Interest to stockholders.................... $ 50,874 $ -0- $ -0- $ 7,053
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING
ACTIVITIES:
Forgiveness of debt and interest payable --
stockholder............................... $ -0- $ 95,000 $ -0- $ -0-
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
</TABLE>
See Notes to Financial Statements
F-6
<PAGE>
SWISS NATURAL BRANDS, INC.
(FORMERLY SWISS NATURAL FOODS, INC.)
NOTES TO FINANCIAL STATEMENTS
(ALL INFORMATION PERTAINING TO THE SEVEN-MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
1. PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES:
Swiss Natural Brands, Inc. (formerly Swiss Natural Foods, Inc.) (the "Company")
was incorporated on April 22, 1993 in the State of Delaware. The Company's
principal business activity involves the production and sale of refreshment
drinks (the "Product"). Effective October 1, 1999 the Company changed its name
from Swiss Natural Foods, Inc. to Swiss Natural Brands, Inc.
The financial information included herein as of September 30, 1999 and for the
seven-month periods ended September 30, 1998 and 1999 is unaudited. Such
information reflects all adjustments (consisting of only normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the financial position, results of operations and cash flows of
the interim periods. The results of operations for the seven-month periods ended
September 30, 1998 and 1999 are not necessarily indicative of the results for
the full years.
The Company uses one independent outside bottler to handle all of its production
needs. The Company sells the Product directly to independent distributors who in
turn distribute the Product to the outside market, primarily in the New York,
New Jersey and Connecticut Tri-State Area. The Company also supplies the Product
under a private label program to a nationally franchised restaurant chain
comprised of approximately 750 restaurants. For the years ended February 28,
1998 and 1999, 83% and 81%, respectively, of the Company's sales, were to one
customer. For the seven-month period ended September 30, 1998, 81% of the
Company's sales were to one customer. For the seven month period ended September
30, 1999 63% and 13% of the Company's sales were to two customers.
Inventory is stated at the lower of cost, determined by the first-in, first-out
method, or market.
Depreciation of property and equipment is being provided for by the
straight-line method over the estimated useful lives of the assets.
Trademarks are being amortized by the straight-line method over a period of 60
months.
Cash equivalents consist of a money market account.
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts. The Company believes it is not exposed to any significant credit
risk on cash.
Sales are recorded as the product is shipped.
Costs incurred for advertising are expensed as incurred and included in selling
and promotional expenses in the accompanying statement of operations.
Advertising expenses amounted to $92,376 and $11,792 for the years ended
February 28, 1998 and 1999, respectively. For the seven-month periods ended
September 30, 1998 and 1999, advertising expenses amounted to $2,450 and $3,385,
respectively.
Deferred offering costs represent costs attributable to a proposed initial
public offering (the "IPO"). The Company intends to offset these costs against
the proceeds from this transaction. In the event that such offering is not
completed, these costs will be charged to operations.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates by management. Actual
results could differ from these estimates.
F-7
<PAGE>
SWISS NATURAL BRANDS, INC.
(FORMERLY SWISS NATURAL FOODS, INC.)
NOTES TO FINANCIAL STATEMENTS
(ALL INFORMATION PERTAINING TO THE SEVEN-MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
Basic income (loss) per share is computed by dividing net income (loss) by the
weighted-average number of common shares outstanding during the period. Shares
to be issued upon the conversion of the subordinated debentures, preferred stock
and warrants are not included in the computation of income (loss) per share for
the years ended February 28, 1998 and 1999 and the seven month period ended
September 30, 1998 as their effect is antidilutive. Diluted earnings per share
for the seven month period ended September 30, 1999 is not presented because it
is the same as basic earnings per share.
Management does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
On October 1, 1999 the Board of Directors authorized a 1.5-for-1 (67%) reverse
stock split of the Company's issued and outstanding common and preferred stocks.
All references to number of shares and per share amounts have been restated to
reflect the reverse stock split.
2. INVENTORY:
Inventory consists of the following:
<TABLE>
<CAPTION>
FEBRUARY 28, SEPTEMBER 30,
1999 1999
------------ -------------
(UNAUDITED)
<S> <C> <C>
Raw materials................................................ $124,570 $ 149,741
Finished goods............................................... 208,039 246,095
-------- ---------
$332,609 $ 395,836
-------- ---------
-------- ---------
</TABLE>
3. PROPERTY AND EQUIPMENT:
Property and equipment, at cost, consists of the following:
<TABLE>
<CAPTION>
FEBRUARY 28, SEPTEMBER 30, ESTIMATED
1999 1999 USEFUL LIFE
------------ ------------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Machinery and equipment........................ $116,014 $ 186,926 5 years
Office equipment............................... 20,378 26,335 5 years
Leasehold improvements......................... 10,185 10,185 5 years
Furniture and fixtures......................... 4,965 4,965 5 years
-------- --------- ---------
151,542 228,411
Less accumulated depreciation and
amortization................................. 75,028 91,301
-------- ---------
$ 76,514 $ 137,110
-------- ---------
-------- ---------
</TABLE>
Other assets include $159,500 advanced in connection with the construction of
two labeling machines. It is anticipated that these machines will be used by or
on behalf of the Company.
4. DEBT AND INTEREST PAYABLE -- STOCKHOLDER:
Debt and interest payable -- stockholder consist of two notes payable to a
stockholder, one in the principal amount of $152,500 on which interest accrues
at 12% per annum. The other is in the principal amount of $169,455 which amount
represents prior accrued interest on previous amounts due
F-8
<PAGE>
SWISS NATURAL BRANDS, INC.
(FORMERLY SWISS NATURAL FOODS, INC.)
NOTES TO FINANCIAL STATEMENTS
(ALL INFORMATION PERTAINING TO THE SEVEN-MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
to this stockholder. This amount bears no interest. Both notes payable are due
the earlier of February 10, 2000 or as defined in the agreements.
5. PRIVATE PLACEMENTS:
On January 29, 1999, the Company issued convertible subordinated debentures (the
"Debentures"), in the amount of $757,500, that mature in February 2001. Interest
is payable on the principal amount at 12% per annum, payable in arrears, on the
last day of each calendar year. The Debentures may be redeemed, at the option of
the Company, in whole or part at anytime, at a price equal to the principal
amount plus any unpaid accrued interest. The holders of the Debentures may
convert the principal amount into common stock of the Company, at any time prior
to maturity or redemption, at a price of $1.50 per share. In connection with the
issuance of these Debentures, the Company incurred debt placement fees of
$136,968 which are being amortized on the straight-line basis over the term of
the Debentures. As of February 28, 1999 and for the seven-month period ended
September 30, 1999, $5,707 and $39,949, respectively, of amortization was
recorded as interest expense in the accompanying statement of operations. The
payment of the Debentures is subordinated to any bank, financial institution
engaged in lending money, insurance company or similar institution.
During the year ended February 28, 1998, as part of a private placement, the
Company completed the sale of 141,996 shares of common stock. The Company
received net proceeds of $217,245 after incurring fees of $40,332 associated
with raising these funds. These costs have been shown as a reduction of
additional paid-in capital.
6. COMPENSATION PAYABLE:
For the year ended February 28, 1997 and prior, a former employee/stockholder of
the Company has not been paid his entire salary. The Company has accrued
compensation payable, in the amount of $101,092. The Company has an informal
arrangement whereby this individual has agreed not to demand repayment before
one year from the date of the financial statements.
7. INCOME TAXES:
At February 28, 1999, the Company had net operating loss carryforwards for both
financial reporting and income tax purposes of approximately $2,165,000, which
are available to offset future federal, state and local taxable income. The
carryforwards resulted in a deferred tax asset of approximately $736,000 at
February 28, 1999 for which the Company has provided a full valuation allowance
due to the uncertainty about future realization of this tax benefit. Utilization
of the net operating loss carryforwards may be limited based upon the ownership
changes relating to the IPO.
F-9
<PAGE>
SWISS NATURAL BRANDS, INC.
(FORMERLY SWISS NATURAL FOODS, INC.)
NOTES TO FINANCIAL STATEMENTS
(ALL INFORMATION PERTAINING TO THE SEVEN-MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
8. INTEREST EXPENSE:
Interest expense consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED SEVEN-MONTH PERIOD ENDED
FEBRUARY 28, SEPTEMBER 30,
----------------------- ------------------------
1998 1999 1998 1999
------- ------- ------- --------
<S> <C> <C> <C> <C>
(UNAUDITED)
Debentures............................. -- $ 6,973 -- $ 53,295
Stockholder............................ $80,759 37,382 $21,567 10,675
Amortization of debt placement fees.... -- 5,707 -- 39,949
------- ------- ------- --------
$80,759 $50,062 $21,567 $103,919
------- ------- ------- --------
------- ------- ------- --------
</TABLE>
9. WARRANTS:
The Company has 165,267 warrants outstanding to purchase an equal amount of the
Company's common stock at an exercise price of $2.24 per share. These warrants
are exercisable at the earlier of June 14, 2002, subject to antidilution
provisions, or 10 days after the date on which the Company mails to the
warrantholders a copy of the preliminary prospectus included in a Registration
Statement filed with the Securities and Exchange Commission under the Securities
Act of 1933.
10. COMMITMENTS:
In the normal course of business, the Company may from time to time have
commitments to purchase preprinted custom packaging materials from certain
vendors. At February 28, 1999, these commitments totaled approximately $65,000.
11. RELATED PARTY TRANSACTIONS:
Included in professional fees and costs associated with the private placements
are legal fees paid to a relative of one of the principal stockholders. For the
years ended February 28, 1998 and 1999, this amounted to approximately $30,000
and $80,000, respectively. Of the $80,000 paid during the year ended February
28, 1999, $50,000 relates to the private placements and is included in debt
placement fees on the balance sheet. For both of the seven-month periods ended
September 30, 1998 and 1999, professional fees paid to this individual amounted
to $17,000.
In addition, approximately $95,000 was paid to a stockholder for professional
services rendered during each of the years ended February 28, 1998 and 1999. For
each of the seven-month periods ended September 30, 1998 and 1999, approximately
$55,400 was paid to this stockholder for professional services.
The Company occupies office space that is owned by the principal stockholder.
There were no amounts paid as rent expense for the years ended February 28, 1998
and 1999, nor for the seven-month periods ended September 30, 1998 and 1999.
12. INITIAL PUBLIC OFFERING:
The Company is in the process of filing a registration statement on Form SB-2
under the Securities Act of 1933. The registration statement contemplates an
offering of 1,250,000 shares of common stock at an offering price of $5.25.
F-10
<PAGE>
SWISS NATURAL BRANDS, INC.
(FORMERLY SWISS NATURAL FOODS, INC.)
NOTES TO FINANCIAL STATEMENTS
(ALL INFORMATION PERTAINING TO THE SEVEN-MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
13. SUBSEQUENT EVENTS:
As of March 1, 1999, the Company entered into an employment agreement with a key
employee and a consulting agreement with a stockholder, each for a three-year
period ending February 28, 2002. The employment agreement includes a base
compensation of $168,000 per annum with additional benefits as defined in the
agreement. The consulting agreement includes compensation of $99,750 per annum
with additional compensation as defined in the agreement. Both agreements
include a 10% increase in compensation during the second and third years.
In August 1999, effective as of June 30, 1999, several major stockholders
exchanged 1,206,000 shares of common stock for the same amount of Series A
Preferred Stock (the "Preferred Stock"). The Preferred Stock is nonredeemable,
assignable and carries rights to vote with the common stock on a
one-vote-per-share basis. The Preferred Stock will, upon liquidation,
participate pari passu with the common stock on an "as converted" basis. The
holders of the Preferred Stock are entitled to receive a quarterly cumulative
dividend of $.02 per share commencing on March 1, 2000, with the first dividend
payment being June 1, 2000. If the holders of the Preferred Stock do not receive
their quarterly dividends on a timely basis, the amount of such dividends shall
accrue and be paid in full prior to the payment of any common stock dividends.
The Preferred Stock is convertible into common stock at the option of the holder
at any time if the Company meets certain earnings levels and other criteria, as
defined in the agreement, or at the earlier of two years after the date of the
IPO or March 1, 2000 if the IPO including the over-allotment is not completed.
The board of directors of the Company has approved the 1999 Stock Option Plan
(the "Plan"). All employees, officers, directors and consultants are eligible to
participate in the Plan. No options have been granted as of and for the period
ended September 30, 1999.
The board of directors has increased the number of authorized shares of common
stock from 7,500,000 to 20,000,000 shares.
F-11
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Until , 1999 (25 days after the date of this prospectus), all
dealers that buy, sell or trade in our common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This
delivery requirement is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY.................... 3
THE OFFERING.......................... 3
SUMMARY OF FINANCIAL DATA............. 4
RISK FACTORS.......................... 6
FORWARD LOOKING STATEMENTS............ 9
USE OF PROCEEDS....................... 9
DIVIDEND POLICY....................... 10
CAPITALIZATION........................ 10
DILUTION.............................. 10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 11
BUSINESS.............................. 13
MANAGEMENT............................ 19
SWISS NATURAL 1999 STOCK OPTION
PLAN................................ 22
CERTAIN TRANSACTIONS.................. 24
PRINCIPAL STOCKHOLDERS................ 25
DESCRIPTION OF CAPITAL STOCK.......... 26
SHARES ELIGIBLE FOR FUTURE SALE....... 29
UNDERWRITING.......................... 30
LEGAL MATTERS......................... 33
EXPERTS............................... 33
ADDITIONAL INFORMATION................ 33
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SWISS NATURAL
BRANDS, INC.
1,250,000 SHARES OF COMMON STOCK
------------------------
PROSPECTUS
------------------------
COMPREHENSIVE CAPITAL
CORPORATION
SEABOARD SECURITIES, INC.
NOVEMBER , 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Amended and Restated certificate of incorporation and by-laws of the
Registrant provide that the Registrant shall indemnify any person to the full
extent permitted by the Delaware General Corporation Law (the "GCL"). Section
145 of the GCL, relating to indemnification, is hereby incorporated herein by
reference.
In accordance with Section 102(a)(7) of the GCL, the certificate of
incorporation of the Registrant eliminates the personal liability of directors
to the Registrant or its stockholders for monetary damage for breach of
fiduciary duty as a director with certain limited exceptions set forth in
Section 102(a)(7) of the GCL.
The Registrant has entered into indemnification agreements with each of its
officers and directors, the form of which is filed as Exhibit 10.19, to which
reference is hereby made.
Reference is made to Section 9 of the underwriting agreement (Exhibit 1.1)
which provides for indemnification by the underwriter of the Registrant, its
officers and directors.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses (other than
underwriting discounts, consulting fees and the underwriters % non-accountable
expense allowance) payable by the Registrant in connection with the issuance and
distribution of the securities being registered. Except for the SEC and NASD
filing fees, all expenses have been estimated and are subject to future
contingencies.
<TABLE>
<S> <C>
SEC registration................................................... $ 4,831.00
NASD fee........................................................... 2,237.82
Nasdaq Listing Fees................................................ 5,000
Legal fees and expenses............................................ 125,000
Printing and engraving expenses.................................... 100,000
Accounting fees and expenses....................................... 100,000
Blue sky fees and expenses......................................... 55,000
Miscellaneous......................................................
Total.............................................................. $
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Since June 30, 1996, the Registrant has issued unregistered securities in
the transactions described below:
In February and April, 1997, the Registrant completed a private placement
offering pursuant to which it issued 437,599 and 141,996 shares respectively, of
common stock to investors. The offering raised an aggregate of approximately
$1,300,000 from such investors. The Registrant issued the common stock pursuant
to the provisions of Rule 506 promulgated under the Securities Act of 1933, as
amended and filed a Report on Form D in connection therewith. Winchester
Investment Securities, Inc. acted as the placement agent for such offering and
received a placement fee of 10% in connection with such offering. Winchester,
its designees and certain consultants also received 85,302 shares of common
stock in connection with such offering.
In February, 1998, Dr. Ferrante, Mr. Paul and Mr. Brescio canceled all
indebtedness owed to them by the Registrant, including all indebtedness for
compensation owed to them by the Registrant, in exchange for shares of common
stock. At that time, the Registrant owed $601,737, $152,819 and $93,419 to Dr.
Ferrante, Mr. Paul and Mr. Brescio, respectively. Accordingly, in exchange for
the cancellation of indebtedness, the Registrant issued 353,653, 89,815 and
54,904 additional shares of its
II-1
<PAGE>
common stock to Dr. Ferrante, Mr. Paul and Mr. Brescio, respectively. The
Registrant issued the shares in a cashless exchange pursuant to the exemption
afforded by Section 3(a)9 of the Securities Act, as amended.
In January, 1999 the Registrant issued $757,500 principal amount of
convertible debentures. The convertible debentures bear interest at a rate of
12% per annum, payable annually. The convertible debentures mature in February,
2001. The holder of any convertible debenture has the right, exercisable at any
time up to the maturity of the convertible debenture, at his option, to convert
such convertible debenture at the principal amount thereof (or any portion
thereof that is an integral multiple of $1,500) into shares of the common stock
at a price of $1.50 per share (except that, in the event such convertible
debenture shall be called for redemption, such right shall terminate on the
close of business on the fifth day immediately preceding the redemption date).
The Registrant issued the convertible debentures pursuant to the provisions of
Rule 506 promulgated under the Securities Act of 1933, as amended, and filed a
Report on Form D in connection therewith. Comprehensive Capital Corporation
acted as the placement agent for such offering and received placement fees of
$136,968 in connection with such offering.
As of June 30, 1999 the Registrant issued 1,206,000 shares of the Series A
Preferred Stock to Messrs. Ferrante, Paul and Brescio in exchange for the
delivery to the Registrant by such persons of 1,206,000 shares of common stock
held by them. The Registrant issued the Preferred Stock in a cashless exchange
pursuant to the exemption afforded by Section 3(a)9 of the Securities Act of
1933, as amended.
ITEM 27. EXHIBITS
<TABLE>
<C> <S>
*1.1 --Revised Form of Underwriting Agreement.
*1.2 --Revised Agreement Among Underwriters.
*1.3 --Revised Selected Dealer Agreement.
**3.1 --Amended and Restated Certificate of Incorporation of the Registrant
**3.2 --Amended and Restated By-Laws of the Registrant.
**3.3 --Certificate of Designations for Series A Preferred Stock.
*3.4 --Certificate of Amendment of Certificate of Incorporation of the Registrant.
*3.5 --Amendment to Certificate of Designations for Series A Preferred Stock.
*4.1 --Specimen Certificate for Registrant's Common Stock
*4.2 --Revised Form of Underwriter's Stock Warrant
*4.3 --Form of Convertible Subordinated Debenture
***5.1 --Opinion of Lehman & Eilen LLP
**10.1 --1999 Stock Option Plan of Registrant.
*10.2 --Employment Agreement dated as of March 1, 1999, as amended, between
Registrant and Ralph M. Ferrante
*10.3 --Consulting Agreement dated as of March 1, 1999, as amended, between
Registrant and Herbert M. Paul
**10.4 --Amended Agreement dated as of February 10, 1999 among the Registrant, A.
Donald McCulloch, Jr., Carolyn B. McCulloch, Ralph M. Ferrante and
Herbert M. Paul.
**10.5 --Promissory Note dated February 10, 1999 in the principal amount of $152,500
made by the Registrant in favor of A. Donald McCulloch, Jr. and Carolyn
B. McCulloch.
**10.6 --Promissory Note dated February 10, 1999 in the principal amount of $169,455
made by the Registrant in favor of A. Donald McCulloch, Jr. and Carolyn
B. McCulloch.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
*10.7 --Glass Supply Agreement between the Registrant and Consumers Packaging Inc.,
as amended.
**10.8 --Agreement of Confidentiality dated January 11, 1995 between the Registrant
and Consumers Glass Company.
**10.9 --Agreement dated August 7, 1997 between the Registrant and Comax
Manufacturing Corporation.
**10.10 --Confidentiality Agreement dated November 6, 1998 between the Registrant and
Comax Manufacturing Corporation.
**10.11 --Agreement dated October 31, 1997 by and between the Registrant and Ritter/
Sysco Foods, Inc.
**10.12 --Hold Harmless Agreement and Guaranty/Warranty of Product dated February 7,
1997 between the Registrant and Sysco Corporation.
**10.13 --Agreement dated January 30, 1998 between the Registrant and Sbarro, Inc.
*10.14 --Beverage Supply Agreement dated March 29, 1999 between the Registrant and
Dunkin' Donuts MidAtlantic DCP, Inc.
**10.15 --Agency Agreement dated May 5, 1998 between the Registrant and Bentonville
Associates Ventures, LLC, as amended.
**10.16 --Vendor Agreement between the Registrant and Wal-Mart Stores.
*10.17 --Revised Form of Financial Consulting Agreement between the Registrant and
the Underwriter.
**10.18 --Form of Indemnification Agreement between the Registrant and each officer
and director of the Registrant.
*10.19 --Agreement dated September 22, 1999 between the Registrant and Cartaret
Packaging, Inc.
*10.20 Agreement dated as of December 1, 1998 among the Registrant, A. Donald
McCulloch, Jr., Carolyn B. McCulloch, Ralph M. Ferrante and Herbert M.
Paul.
*23.1 --Consent of Goldstein Golub Kessler LLP
***23.2 --Consent of Lehman & Eilen LLP (contained in opinion of counsel set forth as
Exhibit 5).
**24.1 --Power of Attorney.
*27 --Financial Data Schedule.
</TABLE>
- ------------------
* Filed herewith.
** Previously filed.
*** To be filed by amendment
ITEM 28. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes that it will:
(a) File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act,
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20
percent change
II-3
<PAGE>
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(b) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(c) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of this offering.
(2) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
(3) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(4) The undersigned Registrant hereby undertakes that it will:
(a) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or 497(h)
under the Securities Act as part of this registration statement as of the time
it was declared effective.
(b) For determining any liability under the Securities Act, treat each post
effective amendment that contains a form of prospectus as a new registration
statement for the securities offered in the registration statement, and the
offering of such securities at that time as the initial bona fide offering of
those securities.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has authorized this registration
statement or amendment thereto to be signed on its behalf by the undersigned,
whereunto duly authorized, in the City of Upper Grandview, State of New York on
the 17th day of November, 1999.
SWISS NATURAL BRANDS, INC.
By: /s/ Ralph M. Ferrante
___________________________________
Ralph M. Ferrante
Chairman of the Board and
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement or amendment thereto has been signed by the following
persons in the capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ---------------------------- ----------------------
<C> <S> <C>
/s/ RALPH M. FERRANTE Chairman of the Board, Chief November 17, 1999
- ---------------------------------------- Executive Officer and
Ralph M. Ferrante Secretary
/s/ HERBERT PAUL President, Chief Financial November 17, 1999
- ---------------------------------------- Officer, (Principal
Herbert Paul Financial Officer
Principal Account Officer)
Assistant Secretary and
Director
/s/ JAMES P. MCCANN Director November 17, 1999
- ----------------------------------------
James P. McCann
</TABLE>
II-5
EXHIBIT 1.1
Swiss Natural Brands, Inc.
1031 Route 9W
Grandview, New York 10960
UNDERWRITING AGREEMENT
Comprehensive Capital Corporation , 1999
1600 Stewart Avenue, Suite 405
Westbury, New York 11590
Gentlemen:
Swiss Natural Brands, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to Comprehensive Capital Corporation ("Comprehensive"
or the "Representative") and to each of the other underwriters named in Schedule
I hereto (the "Underwriters"), for each of whom you are acting as Representative
1,250,000 shares of Common Stock (the "Shares") at a public offering price of
$5.25 per share.
The 1,250,000 Shares are hereinafter sometimes referred to as the "Firm
Common Stock." Upon the request of the Representative, and as provided in
Section 3 hereof, the "Selling Security Holders" named herein in Schedule II
will sell to the Underwriters up to a maximum of 187,500 shares of Common Stock
for the purpose of covering over-allotments. Such additional shares of Common
Stock are hereinafter sometimes referred to as the "Optional Common Stock." Both
the Firm Common Stock and the Optional Common Stock are sometimes collectively
referred to herein as the "Securities." All of the Securities which are the
subject of this Agreement are more fully described in the Prospectus of the
Company described below.
In the event that the Representative does not form an underwriting
group but decides to act as the sole Underwriter, then all references to
Comprehensive herein as Representative shall be deemed to be to it as such sole
Underwriter and Section 14 hereof shall be deemed deleted in its entirety.
The Company and the Selling Security Holders understand that the
Underwriters propose to make a public offering of the Securities as soon as the
Representative deems advisable after the Registration Statement hereinafter
referred to becomes effective. The Company and the Selling Security Holders
hereby each confirms its agreement with the Representative and the other
Underwriters as follows:
SECTION 1. Description of Securities. The Company's authorized and
outstanding capitalization when the public offering of the Securities
contemplated hereby is permitted to commence, under the Securities Act of 1933,
as amended (the "Act"), and
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<PAGE>
at the Closing Date (hereinafter defined) will be as set forth in the Prospectus
(hereinafter defined).
SECTION 2. Representations and Warranties of the Company and the
Selling Security Holders. The Company hereby represents and warrants to, and
agrees with, the Underwriters as follows:
(a) A Registration Statement on Form SB-2 and amendments
thereto (No. 333-85683) with respect to the Securities, including a form of
prospectus relating thereto, copies of which have been previously delivered to
you, has been prepared by the Company in conformity with the requirements of the
Act, and the rules and regulations (the "Rules and Regulations") of the
Commission thereunder, and has been filed with the Commission under the Act. The
Company, subject to the provisions of Section 6(a) hereof, may file one or more
amendments to such Registration Statement and Prospectus. The Underwriters will
receive copies of each such amendment.
The Effective Date of the Registration Statement
represents the date that the public offering of the Securities as contemplated
by this Agreement is therefore authorized to commence. The Registration
Statement and Prospectus, as finally amended and revised immediately prior to
the Effective Date, are herein called respectively the "Registration Statement"
and the "Prospectus." If, however, a prospectus is filed by the Company pursuant
to Rule 424(b) of the Rules and Regulations which differs from the Prospectus,
the term "Prospectus" shall also include the prospectus filed pursuant to Rule
424(b).
(b) The Registration Statement (and Prospectus), at the time
it becomes effective under the Act, (as thereafter amended or as supplemented if
the Company shall have filed with the Commission an amendment or supplement),
and, with respect to all such documents, on the Closing Date (hereinafter
defined), will in all material respects comply with the provisions of the Act
and the Rules and Regulations, and will not contain an untrue statement of a
material fact and will not omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that none of the representations and warranties contained in this subsection (b)
shall extend to the Underwriters in respect of any statements in or omissions
from the Registration Statement and/or the Prospectus, based upon information
furnished in writing to the Company by the Underwriters specifically for use in
connection with the preparation thereof.
(c) The Company has been duly incorporated and is now, and on
the Closing Date will be, validly existing as a corporation in good standing
under the laws of the State of Delaware, having all required corporate power and
authority to own its properties and conduct its business as described in the
Prospectus. The Company is now, and on the Closing Date will be, duly qualified
to do business as a foreign corporation in good standing in all of the
jurisdictions in which it conducts its business or the character or location of
its properties requires such qualifications except where the failure to so
qualify would not materially adversely affect the Company's business, properties
or
2
<PAGE>
financial condition. The Company has no subsidiaries, except as are set forth in
the Prospectus.
(d) The financial statements of the Company included in the
Registration Statement and Prospectus present fairly the financial position and
results of operations and changes in financial condition of the Company at the
respective dates and for the respective periods to which they apply; and such
financial statements have been prepared in conformity with generally accepted
accounting principles, consistently applied throughout the periods involved, and
are in accordance with the books and records of the Company.
(e) The Company's auditors, Goldstein,Golub & Kessler LLP, who
have given their report on certain financial statements which are included as a
part of the Registration Statement and the Prospectus, are independent public
accountants as required under the Act and the Rules and Regulations.
(f) Subsequent to the respective dates as of which information
is given in the Prospectus and prior to the Closing Date and, except as set
forth in or contemplated in the Prospectus, (i) the Company has not incurred,
nor will it incur, any material liabilities or obligations, direct or
contingent, nor has it, nor will it have entered into any material transactions,
in each case not in the ordinary course of business; (ii) there has not been,
and will not have been, any material change in the Company's certificate of
incorporation or in its capital stock or funded debt; and (iii) there has not
been, and will not have been, any material adverse change in the business, net
worth or properties or condition (financial or otherwise) of the Company whether
or not arising from transactions in the ordinary course of business.
(g) Except as otherwise set forth in the Prospectus, the real
and personal properties of the Company as shown in the Prospectus and
Registration Statement to be owned by the Company are owned by the Company by
good and marketable title free and clear of all liens and encumbrances, except
those (i) specifically referred to in the Prospectus, which do not materially
adversely affect the use or value of such assets, (ii) for current taxes not now
due, or (iii) are held by the Company by valid leases, none of which is in
default. Except as disclosed in the Prospectus and Registration Statement, the
Company in all material respects has full right and licenses, permits and
governmental authorizations required to maintain and operate its business and
properties as the same are now operated and, to its best knowledge, none of the
activities or business of the Company is in material violation of, or causes the
Company to violate any laws, ordinances and regulations applicable thereto, the
violation of which would have a material adverse impact on the condition
(financial or otherwise), business, properties or net worth of the Company.
(h) The Company has no material contingent obligations, nor
are its properties or business subject to any material risks, which may be
reasonably anticipated, which are not disclosed in the Prospectus.
3
<PAGE>
(i) Except as disclosed in the Prospectus and Registration
Statement, there are no material actions, suits or proceedings at law or in
equity of a material nature pending, or to the Company's knowledge, threatened
against the Company which are not adequately covered by insurance, which might
result in a material adverse change in the condition (financial or otherwise),
properties or net worth of the Company, and there are no proceedings pending or,
to the knowledge of the Company, threatened against the Company before or by any
federal or state commission, regulatory body, or administrative agency or other
governmental body, wherein an unfavorable ruling, decision or finding would
materially adversely affect the business, properties or net worth or financial
condition or income of the Company, which are not disclosed in the Prospectus.
(j) All of the outstanding shares of Common Stock are duly
authorized and validly issued and outstanding, fully paid, non-assessable, and
do not have any and were not issued in violation of any preemptive rights. All
of the Common Stock as described in the Prospectus when paid for shall be duly
authorized and validly issued and outstanding, fully paid, non-assessable, and
will not have any and will not be issued in violation of any preemptive rights.
The Underwriters will receive good and marketable title to the Securities
purchased by them from the Company free and clear of all liens, encumbrances,
claims, security interests, restrictions, stockholders' agreements and voting
trusts whatsoever. Except as set forth in the Prospectus, there are no
outstanding shares of preferred stock and there are no outstanding options,
warrants, or other rights or commitments, providing for the issuance of any
shares of any class of capital stock of the Company, or any security convertible
into, or exchangeable for, any shares of any class of capital stock of the
Company. All of the Securities of the Company to which this Agreement relates
conform to the statements relating to them that are contained in the
Registration Statement and Prospectus.
(k) The certificate or certificates required to be furnished
to the Underwriters pursuant to the provisions of Section 11 hereof will be true
and correct.
(l) The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action and it is a
valid and binding obligation of the Company, enforceable against it in
accordance with its terms except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws pertaining to
creditors rights generally.
(m) Except as disclosed in the Prospectus, no default exists,
and no event has occurred which, with notice or lapse of time, or both, would
constitute a default in the due performance and observance of any material term,
covenant or condition by the Company or any other party, of any material
indenture, mortgage, deed of trust, note or any other material agreement or
instrument to which the Company is a party or by which it or its business or its
properties may be bound or affected, except as disclosed in the Prospectus. The
Company has full power and lawful authority to authorize, issue and sell the
Firm Common Stock to be sold by it hereunder on the terms and conditions set
forth herein and in the Registration Statement and in the Prospectus. No
consent, approval, authorization or other order of any regulatory authority is
required for such authorization,
4
<PAGE>
issue or sale, except as may be required under the Act or state securities laws.
The execution and delivery of this Agreement, the consummation of the
transactions herein contemplated, and compliance with the terms hereof will not
conflict with, or constitute a default under any indenture, mortgage, deed of
trust, note or any other agreement or instrument to which the Company is now a
party or by which it or its business or its properties may be bound or
materially affected; the certificate of incorporation and any amendments
thereto; the by-laws of the Company, as amended; or to the best knowledge of the
Company, any law, order, rule or regulation, writ, injunction or decree of any
government, governmental instrumentality, or court, domestic or foreign, having
jurisdiction over the Company or its business or properties.
(n) No officer or director of the Company has taken, and each
officer and director has agreed that he will not take, directly or indirectly,
any action designed to stabilize or manipulate the price of the Common Stock in
the open market following the Closing Date or any other type of action designed
to, or that may reasonably be expected to cause or result in such stabilization
or manipulation, or that may reasonably be expected to facilitate the initial
sale, or resale, of any of the Securities which are the subject of this
Agreement.
(o) The Warrants to purchase Common Stock to be issued at
closing to the Representative (the "Representative's Warrants") will be, when
issued and paid for, duly and validly authorized and executed by the Company and
will constitute valid and binding obligations of the Company, legally
enforceable in accordance with their terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws pertaining to creditors rights generally), and the Company will have
duly authorized, reserved and set aside the shares of its Common Stock issuable
upon exercise of the Representative's Warrants and such stock, when issued and
paid for upon exercise of the Representative's Warrants in accordance with the
provisions of the Representative Warrants will be duly authorized and validly
issued, fully-paid and non-assessable.
(p) All of the aforesaid representations, agreements, and
warranties shall survive delivery of, and payment for, the Firm Common Stock.
The Selling Securities Holder represents and warrants to, and
agrees with the several Underwriters, as follows:
(i) There is no litigation, arbitration, claim, governmental
or other proceeding (formal or informal), or investigation before any court or
beneficiary, public body or board pending, threatened, or disclosed in the
Prospectus (or any basis therefor known to the Selling Security Holders) with
respect to the Optional Common Stock and the Selling Security Holders. The
Selling Security Holders are not in violation of, or in default with respect to,
any law, rule, regulation, order, judgment, or decree; nor are the Selling
Security Holders required to take any action in order to avoid such violation or
default.
(ii) The Selling Security Holders have all requisite power and
authority to execute, deliver, and perform this Agreement. This Agreement has
been duly executed
5
<PAGE>
and delivered by or on behalf of the Selling Security Holders, is the legal,
valid and binding obligation of the Selling Security Holders, and is enforceable
as to the Selling Security Holders in accordance with its terms. No consent,
authorization, approval, order, license, certificate, or permit of or from, or
declaration or filing with, any federal, state, local or other governmental
authority or any court or other tribunal is required by the Selling Security
Holders for the execution, delivery or performance of this Agreement (except
filings under the Act which have been made before the applicable Closing Date
and such consents consisting only of consents under "blue sky" or securities
laws which have been obtained at or prior to the date of this Agreement) by the
Selling Security Holders. No consent of any party to any contract, agreement,
instrument, lease, license, indenture, mortgage, deed of trust, note,
arrangement or understanding to which the Selling Security Holders are a party,
or to which any of the Selling Security Holders' properties or assets are
subject, is required for the execution, delivery or performance of this
Agreement; and the execution, delivery and performance of this Agreement will
not violate, result in a breach of, conflict with, or (with or without the
giving of notice of the passage of time or both) entitle any party to terminate
or call a default under such contract, agreement, instrument, lease, license,
indenture, mortgage, deed of trust, note, arrangement or understanding, or
violate, result in a breach of, or conflict with, any law, rule, regulation,
order, judgment or decree binding on the Selling Security Holders.
(iii) The Selling Security Holders have good and marketable
title to their Optional Common Stock to be sold by them pursuant to this
Agreement, free and clear or all liens, security interests, pledges,
restrictions, charges, encumbrances, stockholders' agreements and voting trusts.
(iv) Neither the Selling Security Holders nor any of the
Selling Security Holders' affiliates (as defined in the Regulations) have taken
or will take, directly or indirectly, prior to the termination of the
underwriting syndicate contemplated by this Agreement, any action designed to
stabilize or manipulate the price of the Securities of the Company, or which has
caused or resulted in, or which might in the future reasonably be expected to
cause or result in, stabilization or manipulation of the price of the securities
or to facilitate the sale or resale of any of the Optional Common Stock.
(v) All information furnished or to be furnished to the
Company by or on behalf of the Selling Security Holders for use in connection
with the preparation of the Registration Statement and the Prospectus is true in
all respects and does not and will not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
(vi) Except as may be set forth in the Prospectus, the Selling
Security Holders have not incurred any liability for a fee, commission or other
compensation on account of the employment of a broker or finder in connection
with the transactions contemplated by this Agreement.
(vii) The Selling Security Holders have no knowledge that, and
do not believe that, any representation or warranty of the Company in Section 2
is incorrect.
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<PAGE>
(viii) The Selling Security Holders have not, directly or
indirectly: used any individual or corporate funds for unlawful contributions,
gifts, entertainment, or other unlawful expenses individual or relating to
political activity; made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns
from individual or corporate funds; violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or made any bribe, rebate, payoff,
influence payment, kickback, or other unlawful payment.
(ix) Selling Security Holders Optional Common Stock that may
be sold pursuant to this Agreement are duly and validly authorized and issued,
fully paid and non-assessable, and have not been issued and are not owned or
held in violation of any preemptive right of stockholders, optionholders,
warrant holders or other persons.
(x) No transaction has occurred between the Selling Security
Holders and the Company or any third party that is required to be described in
the Registration Statement or the Prospectus.
SECTION 3. Issuance, Sale and Delivery of the Firm Common Stock, the
Optional Common Stock and the Representative's Warrants.
(a) Upon the basis of the representations, warranties,
covenants and agreements of the Company herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the several
Underwriters, and the Underwriters, severally and not jointly, agree to purchase
from the Company, the number of the Firm Common Stock set forth opposite the
respective names of the Underwriters in Schedule I hereto, plus any additional
Firm Common Stock which such Underwriter may become obligated to purchase
pursuant to the provisions of Section 14 hereof.
The purchase price of the Firm Common Stock to be
paid by the several Underwriters shall be the initial public offering price less
a ten percent discount.
In addition, and upon the same basis, subject to the
same terms and conditions, the Selling Security Holders hereby grants to you as
Representative an option to purchase, but only for the purpose of covering
over-allotments, upon not less than two days' notice from you, the Optional
Common Stock or any portion thereof, at the same price per share of Common Stock
as that set forth in the preceding paragraph. All purchases of the Optional
Common Stock shall be made for the accounts of the several underwriters as
nearly as practicable in proportion to their respective underwriting
obligations. The Optional Common Stock may be exercised by the Representative at
any time, and from time to time, thereafter within a period of 45 calendar days
following the Effective Date. The time(s) and date(s) (if any) so designated for
delivery and payment for the Optional Common Stock shall be set forth in the
notice to the Company. Such dates are herein defined as the Additional Closing
Date(s).
(b) Payment for the Firm Common Stock shall be made by
certified or official bank checks in New York Clearing House funds, payable to
the order of the
7
<PAGE>
Company, at the offices of the Representative at 1600 Stewart Avenue, Suite 405,
Westbury, NY 11590, or its clearing agent, or at such other place as shall be
agreed upon by the Representative and the Company, upon delivery of the Firm
Common Stock to the Representative for the respective accounts of the
Underwriters. In making payment to the Company, the Representative may first
deduct all sums due to it for the balance of the non-accountable expense
allowance and under the Financial Consulting Agreement (as hereinafter defined).
Such delivery and payment shall be made at 9:30 A.M., New York City Time on a T+
3 business days basis, which may be delayed by the Representative at its option
to a T+5 business days basis (unless postponed in accordance with the provisions
of Section 14 hereof) or at such other time as shall be agreed upon by the
Representative and the Company. The time and date of such delivery and payment
are hereby defined as the Closing Date. It is understood that each Underwriter
has authorized the Representative, for the account of such Underwriter, to
accept delivery of, receipt for, and make payment of the purchase price for the
Firm Common Stock which it has agreed to purchase. Subsequently, each
Underwriter shall make payment and accept delivery of the Firm Securities from
the Representative through the facilities of Depository Trust Company ("DTC");
however, the Representative may, at its option, require payment to be made
outside of the facilities of DTC as provided for in the Agreement Among
Underwriters. In the event that the Closing is not through the facilities of
DTC, you individually, and not as Representative may (but shall not be obligated
to) make payment of the purchase price for the Firm Common Stock to be purchased
by any Underwriter whose check shall not have been received by the Closing Date,
for the account of such Underwriter, but any such payment shall not relieve such
Underwriter from its obligations hereunder.
(c) Payment for the Optional Common Stock to the Selling
Security Holders shall be made at the offices of the Representative in Westbury,
New York, or its clearing agent or at such other place as shall be designated by
the Representative, in accordance with the notice delivered to the Selling
Security Holders pursuant to Section 3(a). Such closing date shall be no later
than five business days from the expiration of the forty-five day option period.
(d) Certificates for the Firm Common Stock and for the
Optional Common Stock shall be registered in such name or names and in such
authorized denominations as the Representative may request in writing at least
two business days prior to the Closing Date, and the Additional Closing Date(s)
(if any). The Company and the Selling Security Holders shall permit the
Representative to examine and package said certificates for delivery at least
one full business day prior to the Closing Date and prior to the Additional
Closing Date(s). The Company shall not be obligated to sell or deliver any of
the Firm Common Stock except upon tender of payment by the Underwriters for all
of the Firm Common Stock agreed to be purchased by them hereunder. The
Representative, however, shall have the sole discretion to determine the number
of Optional Common Stock, if any, to be purchased.
(e) At the time of making payment for the Firm Common Stock,
the Company also hereby agrees to sell to the Representative and its permitted
designees,
8
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Representative's Warrants to purchase 125,000 shares of Common Stock at any time
during a four year period commencing one year after the Effective Date at an
aggregate purchase price of $100. The Representative's Warrants will be
exercisable at a price of $8.66 per share. From the Effective Date and until one
(1) year thereafter, such Representative Warrants may not be sold, transferred,
assigned or hypothecated except to the Representative and selling group members
and their officers or partners.
SECTION 4. Public Offering. The several Underwriters agree, subject to
the terms and provisions of this Agreement, to offer the Common Stock to the
public as soon as practicable after the Effective Date, at the initial offering
price of $5.25 and upon the terms described in the Prospectus. The
Representative may, from time to time, decrease the public offering price, after
the initial public offering, to such extent as the Representative may determine,
however, such decreases will not affect the price payable to the Company
hereunder.
SECTION 5. Registration Statement and Prospectus. The Company will
furnish the Representative, without charge, two signed copies of the
Registration Statement and of each amendment thereto, including all exhibits
thereto and such amount of conformed copies of the Registration Statement and
Amendments as may be reasonably requested by the Representative for distribution
to each of the Underwriters and Selected Dealers.
The Company will furnish, at its expense, as many
printed copies of a Preliminary Prospectus and of the Prospectus as the
Representative may request for the purposes contemplated by this Agreement. If,
while the Prospectus is required to be delivered under the Act or the Rules and
Regulations, any event known to the Company relating to or affecting the Company
shall occur which should be set forth in a supplement to or an amendment of the
Prospectus in order to comply with the Act (or other applicable law) or with the
Rules and Regulations, the Company will forthwith prepare, furnish and deliver
to the Representative and to each of the other Underwriters and to others whose
names and addresses are designated by the Representative, in each case at the
Company's expense, a reasonable number of copies of such supplement or
supplements to or amendment or amendments of, the Prospectus.
The Company authorizes the Underwriters and the selected
dealers, if any, in connection with the distribution of the Securities and all
dealers to whom any of the Securities may be sold by the Underwriters, or by any
Selected Dealer, to use the Prospectus, as from time to time amended or
supplemented, in connection with the offering and sale of the Securities and in
accordance with the applicable provisions of the Act and the applicable Rules
and Regulations and applicable State Securities Laws.
SECTION 6. Covenants of the Company. The Company covenants and agrees
with each Underwriter that:
(a) After the date hereof, the Company will not at any time,
whether before or after the Effective Date, file any amendment to the
Registration Statement or the Prospectus, or any supplement to the Prospectus,
of which the Representative shall not
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previously have been advised and furnished with a copy, or to which the
Representative or the Underwriters' counsel, shall have reasonably objected in
writing on the ground that it is not in compliance with the Act or the Rules and
Regulations.
(b) The Company will use its best efforts to cause the
Registration Statement to become effective as promptly as reasonably practicable
and will advise the Representative, (i) when the Registration Statement shall
have become effective and when any amendment thereto shall have become
effective, and when any amendment of or supplement to the Prospectus shall be
filed with the Commission, (ii) when the Commission shall make request or
suggestion for any amendment to the Registration Statement or the Prospectus or
for additional information and the nature and substance thereof, and (iii) of
the issuance by the Commission of an order suspending the effectiveness of the
Registration Statement or of the initiation of any proceedings for that purpose,
and will use every reasonable effort to prevent the issuance of such an order,
or if such an order shall be issued, to obtain the withdrawal thereof at the
earliest possible moment.
(c) The Company will prepare and file with the Commission,
promptly upon the request of the Representative, such amendments, or supplements
to the Registration Statement or Prospectus, in form and substance satisfactory
to counsel to the Company, as in the reasonable opinion of Lester Morse P.C., as
counsel to the Underwriters, may be necessary or advisable in connection with
the offering or distribution of the Securities, and will use its best efforts to
cause the same to become effective as promptly as possible.
(d) The Company will, at its expense, when and as requested by
the Representative, supply all necessary documents, exhibits and information,
and execute all such applications, instruments and papers as may be required or
desirable, in the opinion of the Underwriters' counsel; to qualify the
Securities or such part thereof as the Representative may determine, for sale
under the so-called "Blue Sky" Laws of such states as the Representative shall
designate, and to continue such qualification in effect so long as required for
the purposes of the distribution of the Securities, provided, however, that the
Company shall not be required to qualify as a foreign corporation or to file a
consent to service of process in any state in any action other than one arising
out of the offering or sale of the Securities.
(e) The Company will, at its own expense, file and provide,
and continue to file and provide, such reports, financial statements and other
information as may be required by the Commission, or the proper public bodies of
the states in which the Securities may be qualified for sale, for so long as
required by applicable law, rule or regulation and will provide the
Representative with copies of all such registrations, filings and reports on a
timely basis.
(f) During the period of five years from the Effective Date,
the Company will deliver to the Underwriter a copy of each annual report of the
Company, and will deliver to the Underwriter (i) within 50 days after the end of
each of the Company's first
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three quarter-yearly fiscal periods, a balance sheet of the Company as at the
end of such quarter-yearly period, together with a statement of its income and a
statement of changes in its cash flow for such period (Form 10-QSB), all in
reasonable detail, signed by its principal financial or accounting officer, (ii)
within 105 days after the end of each fiscal year, a balance sheet of the
Company as at the end of such fiscal year, together with a statement of its
income and statement of changes in cash flow for such fiscal year (Form 10-KSB),
such balance sheet and statement of cash flow for such fiscal year to be in
complete detail and to be accompanied by a certificate or report of independent
public accountants, (who may be the regular accountants for the Company), (iii)
as soon as available a copy of every other report (financial or other) mailed to
the shareholders, and (iv) as soon as available a copy of every report and
financial statement furnished to or filed with the Commission or with any
securities exchange pursuant to requirements by or agreement with such exchange
or the Commission pursuant to the Securities Exchange Act of 1934, as amended,
or any regulations of the Commission thereunder. If the Company has one or more
active subsidiaries, the financial statements required by (i) and (ii) above
shall be furnished on a consolidated basis in respect of the Company and its
subsidiaries if required under generally accepted accounting principles. The
financial statements referred to in (ii) shall also be furnished to all of the
shareholders of the Company as soon as practicable after the 105 days referred
to therein.
(g) The Company represents that with respect to the
Securities, it will prepare and file a Registration Statement with the
Commission pursuant to Section 12(g) of the Securities Exchange Act of 1934, as
amended, prior to the Effective Date with a request that such Registration
Statement will become effective on the first day following the Effective Date.
The Company understands that, to register, it must prepare and file with the
Commission a General Form of Registration of Securities (Form 8-A or Form 10).
In addition, the Company agrees to qualify its Common Stock for listing on the
NASDAQ System as a Small-Cap Issue on the Effective Date and will take all
necessary and appropriate action so that its Common Stock continues to be listed
for trading in the NASDAQ System for at least five years from the Effective Date
provided the Company otherwise complies with the prevailing maintenance
requirements of NASDAQ System. In addition, at such time as the Company
qualifies for listing its Common Stock on the National Market System of NASDAQ,
the Company will take all steps necessary to have its Common Stock listed on the
National Market System of NASDAQ in lieu of listing as Small-Cap Issues. The
Company shall comply with all periodic reporting and proxy solicitation
requirements imposed by the Commission pursuant to the 1934 Act, and shall
promptly furnish you with copies of all material filed with the Commission
pursuant to the 1934 Act or otherwise furnished to shareholders of the Company.
(h) The Company will make generally available to its security
holders, as soon as practicable, but in no event later than 15 months after the
Effective Date, an earnings statement of the Company (which need not be audited)
in reasonable detail, covering a period of at least twelve months beginning
after the Effective Date, which earnings statement shall satisfy the provisions
of Section 11(a) of the Act.
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(i) The Company shall, on the Effective Date, apply for
listing in Standard and Poor's Corporation Records (requesting coverage in the
Daily News Supplement) and Standard & Poor's Monthly Stock Guide and shall use
its best efforts to have the Company listed in such reports for a period of not
less than five (5) years from the Closing Date.
(j) The Company shall employ the services of Goldstein, Golub
& Kessler LLP or such other auditing firm acceptable to the Representative in
connection with the preparation of the financial statements required to be
included in the Registration Statement and shall continue to appoint such
auditors or such other auditors as are reasonably acceptable to the
Representative for a period of three (3) years following the Effective Date of
the Registration Statement. The Company shall appoint Corporate Stock Transfer,
Inc. as transfer agent for the Securities.
(k) Within ninety (90) days subsequent to the Effective Date,
the Company will furnish "Key Man" Life Insurance in the amount of $1,000,000 on
the life of Dr. Ralph M. Ferrante with the Company as the beneficiary thereof
and the Company shall pay the annual premium therefor for a period of not less
than five years from the Effective Date on the Effective Date. The Company shall
employ Dr. Ralph Ferrante pursuant to an employment agreement on terms described
in the Prospectus and filed with the Commission as an exhibit to the
Registration Statement.
(l) The Company will for a period of five years at its
expense, shall cause its regularly engaged independent certified public
accountants to examine (but not audit) the Company's financial statements for
each of the first three (3) fiscal quarters prior to the announcement of
quarterly financial information, the filing of the Company's Form 10-QSB
quarterly report and the mailing of quarterly financial information to security
holders.
(m) Except for the Stock Option Plan described in the
Prospectus, for a period of two years after the date of this Prospectus, the
Company shall not file a Registration Statement on Form S-8 or any other
appropriate form to register shares underlying a stock option plan without the
prior written consent of the Representative.
(n) The Company, at its expense, shall retain the services of
Blue Sky Data Corp. or another company or legal counsel acceptable to the
Representative to provide the Underwriters with an after market blue sky survey
in those states which the Securities are eligible for sale. The Company shall
also pay the annual cost of providing updates to the Underwriters for a period
of five years or until the Company's Securities are listed on the New York Stock
Exchange, American Stock Exchange or NASDAQ National Market.
(o) As soon as practicable after the Closing Date, the Company
will deliver to the Representative and its counsel a total of three bound
volumes of copies of all documents relating to the public offering which is the
subject of this Agreement.
(p) The Company will at its cost for a period of three years
after the Effective Date, distribute an annual report to all stockholders
setting forth the results of
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operations and the financial position of the Company. The Company will, at its
cost, for a period of one year after the Effective Date furnish the
Representative at the Company's sole cost with a duplicate copy of the daily
transfer sheets prepared by the Transfer Agent and copy of the weekly sheets
prepared by Depository Trust Company and a duplicate copy of a list of
stockholders.
(q) After the Effective Date, the Company shall retain the
services of a financial public relations firm(s) reasonably satisfactory to the
Representative, and unrelated to or unassociated with the Representative. Such
firm shall be engaged no later than 30 days after the Closing of the public
offering and for a period of three years thereafter.
(r) The Company agrees that no Common or Preferred Stock with
super voting rights will be issued for a period of one year after the Effective
Date without the Representative's prior written consent.
SECTION 7. Expenses of the Company.
(a) The Company shall be responsible for and shall bear all of
its expenses directly and necessarily incurred in connection with the proposed
financing, including: (i) the preparation, printing and filing of the
Registration Statement and amendments thereto, including NASD and SEC filing
fees, preliminary and final Prospectus and the printing of the Underwriting
Agreement, the Agreement Among the Underwriters and the Selected Dealers'
Agreement, a Blue Sky Memorandum and material to be circulated to the
Underwriters by us; (ii) the issuance and delivery of certificates representing
the Securities, including original issue and transfer taxes, if any; (iii) the
qualifications of the Company's Securities (covered by the "firm commitment"
offering) under State Securities or Blue Sky Laws, including counsel fees of
Lester Morse P.C. relating thereto in the sum of Thirty-Five Thousand ($35,000)
Dollars plus disbursements relating to, but not limited to, long-distance
telephone calls, photocopying, messengers, excess postage, overnight mail and
courier services; (iv) the fees and disbursements of counsel for the Company and
the accountants for the Company; (v) costs of qualifying the Securities for
listing on NASDAQ and (vi) post closing tombstone advertisements not to exceed
$12,000. Upon the commencement of the necessary state Blue Sky filings by our
counsel, the Company shall supply him at his request, all necessary state filing
fees. In addition, the Company shall pay Lester Morse P.C. $12,500 on or before
the filing of the initial Registration Statement as an advance toward the blue
sky fees, which $12,500 has been paid.
(b) In addition, the Company shall bear each of the following
costs: (i) investigative reports (such as Bishop's Reports) of the Company's
executive officers, directors and principal stockholders, as well as travel and
other reasonable due diligence expenses not to exceed $10,000 in the aggregate,
including without limitation, informational meetings and presentations in
connection with the offering; and (ii) otherwise unreimbursed postage, including
mailing of preliminary and final prospectuses incurred by
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or on behalf of the Representative and the Underwriters in preparation for, or
in connection with the offering and sale and distribution of the Securities on
an accountable basis.
SECTION 8. Payment of Underwriters' Expenses.
On the Closing Date, the Company will pay to you an
expense allowance equal to three (3%) percent of the total gross proceeds
derived from the sale of the Firm Common Stock, $ of which has been paid in
advance to the Representative, for the fees and disbursements of counsel to the
Underwriters and for costs of otherwise unreimbursed advertising, traveling,
postage, telephone and telegraph expenses and other miscellaneous expenses
incurred by or on behalf of the Representative and the Underwriters in
preparation for, or in connection with the offering and sale and distribution of
the Securities; and you shall not be obligated to account to the Company for
such disbursements and expenses. Further, in the event that this Agreement is
terminated pursuant to Section 12 hereof, the Company will be obligated to
reimburse the Representative on an accountable basis for its reasonable
out-of-pocket expenses incurred in connection hereunder, less any amounts
previously advanced. On the Closing Date or Additional Closing Date (if any)
that the Representative completes the purchase of all or any portion of the
Optional Common Stock, the Selling Security Holders shall have deducted from the
proceeds payable to them by the Representative, an amount equal to a 10%
discount and 3% non-accountable expense allowance.
SECTION 9. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act against any
and all losses, claims, damages and liabilities, joint or several (including any
reasonable investigation, legal and other expenses incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they, or any of them, may become subject under the
Act, the Exchange Act or other Federal or state law or regulation, at common law
or otherwise, insofar as such losses, claims, damages or liabilities arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus, the Registration
Statement or the statement of a material fact contained in any preliminary
prospectus, the Registration Statement or the Prospectus or any amendment
thereof or supplement thereto, or arise out of or are based upon any omission or
alleged omission to state therein such fact required to be stated therein or
necessary to make such statements therein not misleading. The Selling Security
Holders agree to indemnify each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, against any and all losses, claims, damages and
liabilities, joint or several (including any reasonable investigation, legal and
other expenses incurred in connection with, and any amount paid in settlement
of, any action, suit or proceeding or any claim asserted), to which they, or any
of them, may become subject under the Act, the Exchange Act or other Federal or
state law or regulation, at common law or otherwise, insofar as
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<PAGE>
such losses, claims, damages or liabilities, joint or several (including any
reasonable investigation, legal and other expenses incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they, or any of them, may become subject under the
Act, the Exchange Act or other Federal or state law or regulation, at common law
or otherwise, insofar as such losses, claims, damages or liabilities arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact with respect to the Selling Security Holders contained in any
preliminary prospectus, the Registration Statement or the Prospectus or any
amendment thereof or supplement thereto (which amendments or supplements are
furnished to the Selling Security Holders), or which arise out of or are based
upon any omission or alleged omission to state therein such fact required to be
stated therein or necessary to make such statements therein not misleading, but
only with reference to information relating to the Selling Security Holders
furnished in writing to the Company by or on behalf of the Selling Security
Holders expressly for use in connection with the preparation of the Registration
Statement and Prospectus or any amendment thereof or supplement thereto (which
amendments or supplements are furnished to the Selling Security Holders), or
which arise out of or are based upon any omission or alleged omission to state
therein such fact required to be stated therein or necessary to make such
statements therein not misleading.
(b) Such indemnity shall not inure to the benefit of any
Underwriter (or any person controlling such Underwriter) on account of any
losses, claims, damages or liabilities arising from the sale of the Securities
to any person by such Underwriter if such untrue statement or alleged untrue
statement or omission was made in such preliminary prospectus, the Registration
Statement or the Prospectus, or such amendment or supplement, in reliance upon
and in conformity with information furnished in writing to the Company by the
Representatives on behalf of any Underwriter specifically for use therein. The
obligations of the Selling Security Holders, pursuant to this Section 9(a) shall
be limited to an amount not exceeding the product of the Per Security Price to
Public of the Securities as set forth on the cover page of the Prospectus and
the number of Securities being sold by each of them. In no event shall the
indemnification agreement contained in this Section 9(a) inure to the benefit of
any Underwriter on account of any losses, claims, damages, liabilities or
actions arising from the sale of the Securities upon the public offering to any
person by such Underwriter if such losses, claims, damages, liabilities or
actions arise out of, or are based upon, a statement or omission or alleged
omission in a preliminary prospectus and if, in respect to such statement,
omission or alleged omission, the Prospectus differs in a material respect from
such preliminary prospectus and a copy of the Prospectus has not been sent or
given to such person at or prior to the confirmation of such sale to such
person. This indemnity agreement will be in addition to any liability which the
Company and the Selling Security Holders may otherwise have.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, each director of the Company, and each officer of the Company who
signs the Registration Statement and the Selling Security Holders, to the same
extent as the foregoing indemnity from the Company
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<PAGE>
and the Selling Security Holders to each Underwriter, but only insofar as such
losses, claims, damages or liabilities arise out of or are based upon any untrue
statement or omission or alleged untrue statement or omission which was made in
any Preliminary Prospectus, any Rule 430A Prospectus, the Registration Statement
or the Prospectus, or any amendment thereof or supplement thereto, which were
made in reliance upon and in conformity with information furnished in writing to
the Company by the Representatives on behalf of any Underwriter for specific use
therein; provided, however, that the obligation of each Underwriter to indemnify
the Company (including any controlling person, director or officer thereof) and
the Selling Security Holders shall be limited to the net proceeds received by
the Company and the Selling Security Holders, respectively, from such
Underwriter. For all purposes of this Agreement, the amounts of the selling
concession and reallowance set forth in the Prospectus constitute the only
information furnished in writing by or on behalf of any Underwriter expressly
for inclusion in any Preliminary Prospectus, any Rule 430A Prospectus, the
Registration Statement or the Prospectus or any amendment or supplement thereto.
(d) Any party that proposes to assert the right to be
indemnified under this Section will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim is to be made against an indemnifying party or parties under this
Section, notify each such indemnifying party of the commencement of such action,
suit or proceeding, enclosing a copy of all papers served. No indemnification
provided for in Section 9(a) 9(b), or 9(c) shall be available to any party who
shall fail to give notice as provided in this Section 9(d) if the party to whom
notice was not given was unaware of the proceeding to which such notice would
have related and was prejudiced by the failure to give such notice but the
omission so to notify such indemnifying party of any such action, suit or
proceeding shall not relieve it from any liability that it may have to any
indemnified party for contribution or otherwise than under this Section. In case
any such action, suit or proceeding shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in, and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and the
approval by the indemnified party of such counsel, the indemnifying party shall
not be liable to such indemnified party for any legal or other expenses, except
as provided below and except for the reasonable costs of investigation
subsequently incurred by such indemnified party in connection with the defense
thereof. The indemnified party shall have the right to employ its counsel in any
such action, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the employment of counsel by such
indemnified party has been authorized in writing by the indemnifying parties,
(ii) the indemnified party shall have reasonably concluded that there may be a
conflict of interest between the indemnifying parties and the indemnified party
in the conduct of the defense of such action (in which case the indemnifying
parties shall not have the right to direct the defense of such action on behalf
of the indemnified party, or (iii) the indemnifying parties shall not have
employed counsel to assume the defense of such action within a reasonable time
after notice of the commencement thereof, in each of which
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cases the reasonable fees and expenses of counsel shall be at the expense of the
indemnifying parties. An indemnifying party shall not be liable for any
settlement of any action, suit, proceeding or claim effected without its written
consent.
(e) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Sections 9(a) and (b)
is due in accordance with its terms but for any reason is held to be unavailable
from the Company, the Selling Security Holders or the Underwriters, the Company,
the Selling Security Holders and the Underwriters shall contribute to the
aggregate losses, claims, damages and liabilities (including any investigation,
legal and other expenses reasonably incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claims asserted,
but after deducting any contribution received by the Company from persons other
than the Underwriters, such as the Selling Security Holders, persons who control
the company within the meaning of the Act, officers of the Company who signed
the Registration Statement and directors of the Company, who may also be liable
for contribution) to which the Company and the Selling Security Holders and one
or more of the Underwriters may be subject in such proportion as is appropriate
to reflect the relative benefits received by the Company and the Selling
Security Holders on the one hand and the Underwriters on the other from the
offering of the Securities or, if such allocation is not permitted by applicable
law or indemnification is not available as a result of the indemnifying party
not having received notice as provided herein in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Company and the Selling Security Holders on the one
hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company, the Selling Security Holders and the
Underwriters shall be deemed to be in the same proportion as (x) the total
proceeds from the Offering (net of underwriting discounts but before deducting
expenses) received by the Company or the Selling Security Holders from the sale
of the Securities, as set forth in the table on the cover page of the Prospectus
(but not taking into account the use of the proceeds of such sale of Securities
by the Company), bear to (y) the underwriting discount received by the
Underwriters, as set forth in the table on the cover page of the Prospectus. The
relative fault of the Company, the Selling Security Holders and the Underwriters
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact related to information supplied by
the Company, the Selling Security Holders or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, the Selling Security Holders
and the Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section 9 were determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
consideration referred to above. Notwithstanding the provisions of this Section
9, (i) in no case shall any Underwriter (except as may be provided in the
Agreement Among Underwriters) be liable
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or responsible for any amount in excess of the underwriting discount applicable
to the Securities purchased by such Underwriter hereunder, (ii) in no case shall
the Selling Security Holders be liable or responsible for any amount in excess
of the product of the Per Security Price to Public of the Securities as set
forth on the cover page of the Prospectus and the number of Securities being
sold by each of them subject to the limitation expressed in Section 9(a), and
(iii) the Company shall be liable and responsible for any amount in excess of
the underwriting discount and the amount referred to in clause (ii) provided,
however (i) that no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 9, each person, if any, who controls an Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act shall have
the same rights to contribution as such Underwriter, and each person, if any,
who controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, each officer of the Company who shall have signed the
Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to clauses (i), (ii)
and (iii) in the immediately preceding sentence of this Section 9. Any party
entitled to contribution will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a claim
for contribution may be made against another party or parties under this
Section, notify such party or parties from whom contribution may be sought, but
the omission so to notify such party or parties from whom contribution may be
sought shall not relieve the party or parties from whom contribution may be
sought from any other obligation it or they may have hereunder or otherwise than
under this Section. No party shall be liable for contribution with respect to
any action, suit, proceeding or claim settled without its written consent. The
Underwriters' obligations to contribute pursuant to this Section 9 are several
in proportion to their respective underwriting commitments and not joint.
SECTION 10. Effectiveness of Agreement. This Agreement shall become
effective (i) at 9:30 A.M., New York Time, on the first full business day after
the Effective Date, or (ii) at the time of the initial public offering by the
Underwriters of the Securities whichever shall first occur. The time of the
initial public offering by the Underwriters of the Securities for the purposes
of this Section 10, shall mean the time, after the Registration Statement
becomes effective, of the release by the Representative for publication of the
first newspaper advertisement which is subsequently published relating to the
Securities, or the time, after the Registration Statement becomes effective,
when the Securities are first released by the Representative for offering by the
Underwriters or dealers by letter or telegram, whichever shall first occur. The
Representative agrees to notify the Company immediately after it shall have
taken any action, by release or otherwise, whereby this Agreement shall have
become effective. This Agreement shall, nevertheless, become effective at such
time earlier than the time specified above, after the Effective Date, as the
Representative may determine by notice to the Company.
SECTION 11. Conditions of the Underwriters' Obligations. The
obligations of the several Underwriters to purchase and pay for the Securities
which the Underwriters have agreed to purchase hereunder are subject to: the
accuracy, as of the date hereof and as
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of the Closing Dates of all of the representations and warranties of the Company
and the Selling Security Holders contained in this Agreement; the Company's and
the Selling Security Holders' compliance with, or performance of, all of its
covenants, undertakings and agreements contained in this Agreement that are
required to be complied with or performed on or prior to each of the Closing
Dates and to the following additional conditions:
(a) On or prior to the Closing Date, no order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been instituted or be pending or, to the
knowledge of the Company, shall be threatened by the Commission; any request for
additional information on the part of the Commission (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the satisfaction of the Commission; and neither the Registration
Statement nor any amendment thereto shall have been filed to which counsel to
the Underwriters shall have reasonably objected, in writing.
(b) The Representative shall not have disclosed in writing to
the Company that the Registration Statement or Prospectus or any amendment or
supplement thereto contains an untrue statement of a fact which, in the opinion
of counsel to the Underwriters, is material, or omits to state a fact which, in
the opinion of such counsel, is material and is required to be stated therein,
or is necessary to make the statements therein not misleading.
(c) Between the date hereof and the Closing Date, the Company
shall not have sustained any loss on account of fire, explosion, flood,
accident, calamity or other such cause, of such character as materially
adversely affects its business or property, whether or not such loss is covered
by insurance.
(d) Between the date hereof and the Closing Date, there shall
be no litigation instituted or threatened against the Company (or the Selling
Security Holders with respect to the Optional Common Stock), and there shall be
no proceeding instituted or threatened against the Company (or the Selling
Security Holders with respect to the Optional Common Stock) before or by any
federal or state commission, regulatory body or administrative agency or other
governmental body, domestic or foreign, wherein an unfavorable ruling, decision
or finding would materially adversely affect the business, licenses, permits,
operations or financial condition or income of the Company or the right of the
Selling Security Holders to deliver unencumbered title to the Underwriters for
the Optional Common Stock.
(e) Except as contemplated herein or as set forth in the
Registration Statement and Prospectus, during the period subsequent to the
Effective Date and prior to the Closing Date, (A) the Company shall have
conducted its business in the usual and ordinary manner as the same was being
conducted on the date of the filing of the initial Registration Statement and
(B) except in the ordinary course of its business, the Company shall not have
incurred any material liabilities or obligations (direct or contingent), or
disposed of any of its assets, or entered into any material transaction, and (C)
the
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Company shall not have suffered or experienced any material adverse change in
its business, affairs or in its condition, financial or otherwise. On the
Closing Date, the capital stock and surplus accounts of the Company shall be
substantially as great as at its last financial report without considering the
proceeds from the sale of the Securities except to the extent that any decrease
is disclosed in or contemplated by the Prospectus.
(f) The authorization of the Securities, the Registration
Statement, the Prospectus and all corporate proceedings and other legal matters
incident thereto and to this Agreement, shall be reasonably satisfactory in all
respects to counsel to the Underwriters.
(g) The Company shall have furnished to the Representative the
opinions, dated the Closing Date, and Additional Closing Date(s), addressed to
you, of its counsel that:
(i) The Company has been duly incorporated and is a
validly existing corporation in good standing under the laws of the State of
Delaware with full corporate power and authority to own and operate its
properties and to carry on its business as set forth in the Registration
Statement and Prospectus; it has authorized and outstanding capital as set forth
in the Registration Statement and Prospectus; and the Company is duly licensed
or qualified as a foreign corporation in all jurisdictions in which by reason of
maintaining an office in such jurisdiction or by owning or leasing real property
in such jurisdiction it is required to be so licensed or qualified except where
failure to be so qualified or licensed would have no material adverse effect.
(ii) All of the outstanding Shares of Common Stock
are duly and validly issued and outstanding, fully paid, and non-assessable, and
do not have any, and were not issued in violation of any, preemptive rights. The
Company will have duly authorized, reserved and set aside shares of Common Stock
issuable upon exercise of the outstanding options or warrants and when issued in
accordance with such terms contained in the Prospectus, will be duly and validly
authorized and issued, fully paid and non-assessable.
(iii) All of the Securities of the Company to which
this Agreement relates conform to the statements relating to them that are
contained in the Registration Statement and Prospectus (excluding financial
statements).
(iv) The Underwriters against payment therefor, will
receive good and marketable title to the Securities purchased by them from the
Company and the Selling Security Holders in accordance with the terms and
provisions of this Agreement.
(v) To the best of the knowledge of such counsel,
except as set forth in the Prospectus, there are no outstanding options,
warrants, or other rights, providing for the issuance of, and, no commitments,
plans or arrangements to issue, any shares of any class of capital stock of the
Company, or any security convertible into, or exchangeable for, any shares of
any class of capital stock of the Company.
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(vi) To the best of such counsel's knowledge, no
consents, approvals, authorizations or orders of agencies, officers or other
regulatory authorities are necessary for the valid authorization, issuance or
sale of the Securities hereunder, except such as may be required under the Act
or state securities or blue sky laws.
(vii) The Registration Statement has become effective
under the Act and, to the best of the knowledge of such counsel, no order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending or
contemplated under the Act, and the Registration Statement and Prospectus, and
each amendment thereof and supplement thereto, comply as to form in all material
respects with the requirements of the Act and the Rules and Regulations (except
that no opinion need be expressed as to financial statements and financial data
contained in the Registration Statement or Prospectus), and in the course of the
preparation of the Registration Statement, nothing has come to the attention of
said counsel to cause them to believe that either the Registration Statement or
the Prospectus or any such amendment or supplement contains any untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and such
counsel is familiar with all contracts referred to in the Registration Statement
or in the Prospectus and such contracts are sufficiently summarized or disclosed
therein, or filed as exhibits thereto, as required, and such counsel does not
know of any other contracts required to be summarized or disclosed or filed; and
such counsel does not know of any legal or governmental proceedings pending or
threatened to which the Company is a party, or in which property of the Company
is the subject, of a character required to be disclosed in the Registration
Statement or the Prospectus which are not disclosed and properly described
therein.
(viii) The Representative's Warrants to be issued to
the Representative or its permitted designees hereunder will be, when issued
against payment therefor duly and validly authorized and executed by the Company
and will constitute valid and binding obligations of the Company, legally
enforceable in accordance with their terms (except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally), and
the Company will have duly authorized, reserved and set aside the shares of its
Common Stock issuable upon exercise of the Representative's Warrants and such
stock, when issued and paid for upon exercise of the Representative's Warrants
in accordance with the provisions thereof, will be duly and validly authorized
and issued, fully-paid and non-assessable.
(ix) The Company holds by valid lease, its properties
as shown in the Prospectus, and is in all material respects complying with all
laws, ordinances and regulations applicable thereto.
(x) This Agreement has been duly authorized and
executed by the Company and the Selling Security Holders and is a valid and
binding agreement of the Company and the Selling Security Holders enforceable in
accordance with its terms subject to bankruptcy, insolvency, reorganization,
moratorium and other laws affecting
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creditors rights generally and except that no opinion need be given with regard
to the enforceability of Section 9 hereof or the availability of equitable
relief.
(xi) To the best knowledge of such counsel: (a) no
default exists, and no event has occurred which, with notice or lapse of time,
or both, would constitute a default in the due performance and observance of any
material term, covenant or condition by the Company or the Selling Security
Holders, of any indenture, mortgage, deed of trust, note or any other agreement
or instrument to which the Company or the Selling Security Holders are a party
or by which it or its business or its properties may be bound or affected,
except where such default would not have a material adverse effect on the
business of the Company and except as disclosed in the Prospectus; (b) the
Selling Security Holders have full power and legal authority to sell the
Optional Common Stock to the Underwriters free and clear of all liens and
encumbrances; (c) the Company has full power and lawful authority to authorize,
issue and sell the Firm Common Stock on the terms and conditions set forth
herein and in the Registration Statement and in the Prospectus; (d) no consent,
approval, authorization or other order of any regulatory authority is required
for such authorization, issue or sale, except as may be required under the Act
or state securities laws, clearance with the NASD and such other consent,
approval, authorization or order as has been obtained and is in full force and
effect; and (e) the execution and delivery of this Agreement, the consummation
of the transactions herein contemplated, and compliance with the terms hereof
will not conflict with, or constitute a default under, any material indenture,
mortgage, deed of trust, note or any other agreement or instrument to which the
Company and the Selling Security Holders are now a party or by which it or its
business or its properties may be bound or affected, the Certificate of
Incorporation and any amendments thereto, the by-laws of the Company, or any
order, rule or regulation, writ, injunction or decree of any government,
governmental instrumentality, or court, domestic or foreign, having jurisdiction
over the Company or the Selling Security Holders or its business or properties.
(xii) Except as disclosed in the Registration
Statement and Prospectus, to the best knowledge of such counsel, there are no
material actions, suits or proceedings at law or in equity of a material nature
pending, or to such counsel's knowledge, threatened against the Company or the
Selling Security Holders which are not adequately covered by insurance and there
are no proceedings pending or, to the knowledge of such counsel, threatened
against the Company or the Selling Security Holder before or by any federal or
state Commission, regulatory body, or administrative agency or other
governmental body, wherein an unfavorable ruling, decision or finding would
materially and adversely affect the business, operation or condition (financial
or otherwise) of the Company or the ability of Selling Security Holders to
deliver unencumbered title of the Optional Common Stock to the Underwriters,
which are not disclosed in the Prospectus.
Such opinion shall also cover such other matters incident to
the transactions contemplated by this Agreement as the Representative shall
reasonably request. In rendering such opinion, such counsel may rely upon
certificates of any officer of the Company or public officials as to matters of
fact.
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(h) The Company shall have furnished to the Representative
certificates of the President or Chairman of the Board and the Secretary of the
Company, dated as of the Closing Date, and Additional Closing Date(s), to the
effect that:
(i) Each of the representations and warranties of the
Company contained in Section 2 hereof are true and correct in all material
respects at and as of such Closing Date, and the Company has performed or
complied with all of its agreements, covenants and undertakings contained in
this Agreement and has performed or satisfied all the conditions contained in
this Agreement on its part to be performed or satisfied at the Closing Date;
(ii) The Registration Statement has become effective
and no order suspending the effectiveness of the Registration Statement has been
issued, and, to the best of the knowledge of the respective signers, no
proceeding for that purpose has been initiated or is threatened by the
Commission;
(iii) The respective signers have each carefully
examined the Registration Statement and the Prospectus and any amendments and
supplements thereto, and to the best of their knowledge the Registration
Statement and the Prospectus and any amendments and supplements thereto and all
statements contained therein are true and correct in all material respects, and
neither the Registration Statement nor the Prospectus nor any amendment or
supplement thereto includes any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading and, since the effective date of the
Registration Statement, there has occurred no event required to be set forth in
an amended or supplemented Prospectus which has not been so set forth except
changes which the Registration Statement and Prospectus indicate might occur.
(iv) Except as set forth or contemplated in the
Registration Statement and Prospectus, since the respective dates as of which,
or periods for which, information is given in the Registration Statement and
Prospectus and prior to the date of such certificate (A) there has not been any
material adverse change, financial or otherwise, in the business, business
prospects, earnings, general affairs or condition (financial or otherwise), of
the Company (in each case whether or not arising in the ordinary course of
business), and (B) the Company has not incurred any liabilities, direct or
contingent, or entered into any transactions, otherwise than in the ordinary
course of business other than as referred to in the Registration Statement or
Prospectus and except changes which the Registration Statement and Prospectus
indicate might occur.
(i) The Company and the Selling Security Holders shall have
furnished to the Representative on the Closing Date, such other certificates,
additional to those specifically mentioned herein, as the Representative may
have reasonably requested, as to: the accuracy and completeness of any statement
in the Registration Statement or the Prospectus, or in any amendment or
supplement thereto; the representations and warranties of the Company and the
Selling Security Holders herein; the performance by the Company and the Selling
Security Holders of its obligations hereunder; or the
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fulfillment of the conditions concurrent and precedent to the obligations of the
Underwriters hereunder, which are required to be performed or fulfilled on or
prior to the Closing Date.
(j) At the time this Agreement is executed, and on the Closing
Date you shall have received a letter from Goldstein, Golub & Kessler, addressed
to the Representative, as Representative of the Underwriters, and dated,
respectively, as of the date of this Agreement and as of the Closing Date and
Additional Closing Date as the case may be (based upon information not more than
five business days prior to such Effective Date, Closing Date and Additional
Closing Date as the case may be), in form and substance reasonably satisfactory
to the Representative, to the effect that:
(i) They are independent public accountants with
respect to the Company within the meaning of the Act and the applicable
published Rules and Regulations of the Commission;
(ii) In their opinion, the financial statements and
related schedules of the Company included in the Registration Statement and
Prospectus and covered by their reports comply as to form in all material
respects with the applicable accounting requirements of the Act and the
published Rules and Regulations of the Commission issued thereunder;
(iii) On the basis of limited procedures, not
constituting an audit, including a review of the latest interim unaudited
financial statements of the Company on the basis specified by the American
Institute of Certified Public Accountants for a review of interim financial
information, a reading of the minutes of meetings of the boards of directors,
and stockholders of the Company, inquiries of officials of the Company
responsible for financial and accounting matters and such other inquiries and
procedures as may be specified in such letter, nothing came to their attention
which caused them to believe:
(A) that at the date of the latest balance sheet read
by them and at a subsequent specified date not more than five business days
prior to the date of such letter, there was any change in the capital stock or
increase in long-term debt of the Company as compared with amounts shown in the
most recent balance sheet included in the Prospectus, except for changes which
the Prospectus discloses have occurred or may occur or which are described in
such letter;
(B) that at the date of the latest balance sheet read
by them and at a subsequent specified date not more than five business days
prior to the date of such letter, there were any decreases, as compared with
amounts shown in the most recent balance sheet included in the Prospectus, in
total assets, net current assets or stockholder's equity of the Company except
for decreases which the Prospectus discloses have occurred or may occur or which
are described in such letter; or
(C) that for the period from the date of the most
recent financial statements in the Registration Statement to a subsequent
specified date not more than five
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business days prior to the date of such letter, there were any decreases, as
compared with the corresponding period of the preceding year, in gross profit or
the total or per share amounts of net income of the Company except for decreases
which the Prospectus discloses have occurred or may occur or which are described
in such letter.
(iv) In addition to the audit referred to in their
report included in the Registration Statement and the Prospectus and the limited
procedures referred to in clause (iii) above, they have carried out certain
specified procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information which are derived from the
general accounting records of the Company which appear in the Prospectus under
the captions "Summary of Financial Data," "Capitalization", "Management",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", "Certain Transactions", Summary of Financial Data", "Dilution" and
"Risk Factors," as well as such other financial information as may be specified
by the Representative, and that they have compared such amounts, percentages and
financial information with the accounting records of the Company and have found
them to be in agreement.
(k) Selling Security Holders shall furnish to the
Representative on the Closing Date and the Additional Closing Date(s), if any,
insofar as it applies to the Selling Security Holders, such other certificates,
additional to those specifically mentioned herein, as the Representative may
have reasonably requested, as to: the accuracy and completeness of any statement
in the Registration Statement or the Prospectus, or in any amendment or
supplement thereto; the representations and warranties of the Selling Security
Holders herein; the performance by the Selling Security Holders of its
obligations hereunder; or the fulfillment of the conditions concurrent and
precedent to the obligations of the Underwriters hereunder, which are required
to be performed or fulfilled on or prior to the Closing Date.
All the opinions, letters, certificates and evidence
mentioned above or elsewhere in this Agreement shall be deemed to be in
compliance with the provisions hereof only if they are in form and substance
reasonably satisfactory to counsel to the Representative, whose approval shall
not be unreasonably withheld, conditioned or delayed.
If any of the conditions specified in this section
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, this Agreement and all obligations of the Underwriters hereunder may
be terminated and canceled by the Representative by notifying the Company and
the Selling Security Holders of such termination and cancellation in writing or
by telegram at any time prior to, or on, the Closing Date and any such
termination and cancellation shall be without liability of any party hereto to
any other party, except with respect to the provisions of Sections 7 and 8
hereof. The Representative may, of course, waive, in writing, any conditions
which have not been fulfilled or extend the time for their fulfillment.
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SECTION 12. Termination.
(a) This Agreement may be terminated by the Representative by
written or telegraphic notice to the Company and the Selling Security Holders at
any time before it becomes effective pursuant to Section 10.
(b) This Agreement may be terminated by the Representative by
written or telegraphic notice to the Company and the Selling Security Holders,
at any time after it becomes effective, in the event that the Company, after
notice from the Representative and an opportunity to cure, shall have failed or
been unable to comply in material respects with any of the material terms,
conditions or provisions of this Agreement on the part of the Company to be
performed, complied with or fulfilled within the respective times herein
provided for, including without limitation Section 6(g) hereof, unless
compliance therewith or performance or satisfaction thereof shall have been
expressly waived by the Representative in writing. This Agreement may also be
terminated if there is any action, suit or proceeding, threatened or pending, at
law or equity against the Company, or by any federal, state or other commission,
board or agency wherein any unfavorable result or decision could materially
adversely affect the business, property, or financial condition of the Company
which was not disclosed in the Prospectus.
(c) This Agreement may be terminated by the Representative by
written or telegraphic notice to the Company at any time after it becomes
effective, if the offering of, or the sale of, or the payment for, or the
delivery of, the Securities is rendered impracticable because (i) additional
material governmental restriction, not in force and effect on the date hereof,
shall have been imposed upon trading in securities generally or minimum or
maximum prices shall have been generally established on the New York Stock
Exchange or trading in securities generally on such exchange shall have been
suspended or a general banking moratorium shall have been established by Federal
or New York State authorities or (ii) a war or other national calamity shall
have occurred involving the United States or (iii) the condition of the market
for securities in general shall have materially and adversely changed, or (iv)
the Company or its business or business prospects is materially adversely
affected so that it would be impractical to proceed with, or consummate, this
Agreement or the public offering of the Securities.
(d) Any termination of this Agreement pursuant to this Section
12 shall be without liability of any character (including, but not limited to,
loss of anticipated profits or consequential damages) on the part of any party
hereto, except that the Company shall remain obligated to pay the costs and
expenses provided to be paid by it specified in Sections 6, 7 and 8, to the
extent therein provided. In the event that this offering is terminated by the
Company, the Representative shall be entitled to receive reimbursement of its
out of pocket expenses on an accountable basis after giving credit to the
Company for any advances received toward the Representative's non-accountable
expense allowance. The Representative shall account to the Company for any
advance and shall reimburse the Company for any portion of the advance not
expended for actual out-of-pocket expenses.
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SECTION 13. Finder. The Company and the Underwriters mutually represent
that they know of no person who rendered any service in connection with the
introduction of the Company to the Underwriters and that they know of no claim
by anyone for a "finder's fee" or similar type of fee, in connection with the
public offering which is the subject of this Agreement. Each party hereby
indemnifies the other against any such claims by any person known to it, and not
known to the other party hereto, who shall claim to have rendered services in
connection with the introduction of the Company to the Underwriters and/or to
have such a claim.
SECTION 14. Substitution of Underwriters.
(a) If one or more Underwriters default in its or their
obligations to purchase and pay for Securities hereunder and if the aggregate
amount of such Securities which all Underwriters so defaulting have agreed to
purchase does not exceed 10% of the aggregate number of Securities constituting
the Securities, the non-defaulting Underwriters shall have the right and shall
be obligated severally to purchase and pay for (in addition to the Securities
set forth opposite their names in Schedule I) the full amount of the Securities
agreed to be purchased by all such defaulting Underwriters and not so purchased,
in proportion to their respective commitments hereunder. In such event the
Representative, for the accounts of the several non-defaulting Underwriters, may
take up and pay for all or any part of such additional Securities to be
purchased by each such Underwriter under this subsection (a), and may postpone
the Closing Date to a time not exceeding seven full business days; or
(b) If one or more Underwriters (other than the
Representative) default in its or their obligations to purchase and pay for the
Securities hereunder and if the aggregate amount of such Securities which all
Underwriters so defaulting shall have agreed to purchase shall exceed 10% of the
aggregate number of Securities or if one or more Underwriters for any reason
permitted hereunder cancel its or their obligations to purchase and pay for
Securities hereunder, the non-canceling and non-defaulting Underwriters
(hereinafter called the "Remaining Underwriters") shall have the right, but
shall not be obligated to purchase such Securities in such proportion as may be
agreed among them, at the Closing Date. If the Remaining Underwriters do not
purchase and pay for such Securities at such Closing Date, the Closing Date
shall be postponed for 24 hours and the remaining Underwriters shall have the
right to purchase such Securities, or to substitute another person or persons to
purchase the same or both, at such postponed Closing Date. If purchasers shall
not have been found for such Securities by such postponed Closing Date, the
Closing Date shall be postponed for a further 24 hours and the Company shall
have the right to substitute another person or persons, satisfactory to you to
purchase such Securities at such second postponed Closing Date. If the Company
shall not have found such purchasers for such Securities by such second
postponed Closing Date, then this Agreement shall automatically terminate and
neither the Company, the Selling Security Holders nor the remaining Underwriters
(including the Representative) shall be under any obligation under this
Agreement (except that the Company shall remain liable to the extent provided in
Paragraph 7 hereof). As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section 14.
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Nothing in this subparagraph (b) will relieve a defaulting Underwriter from its
liability, if any, to the other Underwriters for damages occasioned by its
default hereunder (and such damages shall be deemed to include, without
limitation, all expenses reasonably incurred by each Underwriter in connection
with the proposed purchase and sale of the Securities) or obligate any
Underwriter to purchase or find purchasers for any Securities in excess of those
agreed to be purchased by such Underwriter under the terms of Sections 3 and 14
hereof.
Notwithstanding anything contained herein to the contrary, no
provisions of this Section 14 or any other section of this Underwriting
Agreement are intended to permit an Underwriter to terminate its obligation to
purchase the Firm Securities (as such term is defined in this Underwriting
Agreement) from the Company based upon: (i) the occurrence of non-material
events affecting the Company or the securities market or (ii) the inability to
market the securities.
SECTION 15. Registration of the Representative's Warrants and/or the
Underlying Securities. The Registration Statement filed with the Commission
shall register the Representative's Warrants and underlying securities. The
Company agrees to maintain a current Registration Statement with respect to the
Representative's Warrants and the underlying securities at the sole cost of the
Company until five years after the Effective Date. The Company may satisfy this
requirement by one or more post-effective amendments to the Registration
Statement or through the filing of a new Registration Statement.
SECTION 16. Other Agreements.
(a) Consulting Agreement. On the Effective Date, the Company will enter
into an agreement retaining the Representative as a financial consultant
pursuant to which the Representative shall receive a consulting fee in an amount
equal to two(2%) of the gross proceeds of this offering (including the
Over-Allotment Option) for services for two (2) years from the Effective Date,
payable in full in advance on the Closing Date, which shall include, but not be
limited to, advising the Company in connection with possible acquisition
opportunities, advising the Company regarding shareholder relations including
the preparation of the annual report and other releases, assisting in long-term
financial planning, advice in connection with corporate re-organizations and
expansion and capital structure, and other financial assistance.
(b) Finder's Fee: The Company agrees that if it shall within two (2)
years from the Effective Date, enter into any agreement of understanding with
any person or entity introduced by the Representative involving the following
originated by Representative (i) the sale of all or substantially all of the
assets and properties of the Company, (ii) the merger or consolidation of the
Company (other than a merger or consolidation effected for the purpose of
changing the Company's domicile) or (iii) the acquisition by the Company of the
assets or stock of another business entity, which agreement or understanding
thereafter consummated, whether or not during such two (2) year period, the
Company, upon such consummation, shall pay to the Representative an amount equal
to the
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following percentages of the consideration paid by the Company in connection
with such transaction:
5% of the first $1,000,000 or portion thereof, of such
consideration; 4% of the second $1,000,000 or portion thereof,
of such consideration; and 3% of such consideration in excess
of the first $2,000,000 of such consideration.
The fees payable to the Representative will be in the same
form of consideration as that paid by or to the Company, as the case may be, in
any such transactions.
(c) Designation of Non-voting Advisor to the Board: The Company agrees
that unless waived by us, that the Representative shall have the right to
designate a non-voting advisor to the Board acceptable to the Company who
resides in the New York metropolitan area for a period of two years after the
Effective Date. Said designee shall attend meetings of the Board and shall be
entitled to receive reimbursement for all approved reasonable costs incurred in
attending such meetings, including but not limited to, food, lodging and
transportation. In the event the Company maintains a liability insurance policy
affording coverage for the act of its officers and/or directors, it will agree,
to the extent permitted under such policy, to include each of the Representative
and its designee as an insured under such policy.
SECTION 17. Lock-Up Agreement
Except for the 187,500 shares subject to the Optional Common Stock
which are held by Selling Security Holders, the pre-offering holders of 100% of
the outstanding shares of Common Stock and warrants/options/notes exercisable or
convertible into Capital Stock have agreed to enter into certain lock-up
agreements as described in the Prospectus.
SECTION 18. Notice. Except as otherwise expressly provided in
this Agreement, (A) whenever notice is required by the provisions hereof to be
given to the Company, such notice shall be given in writing, by certified mail,
return receipt requested, addressed to the Company at the address set forth
herein on the first page, copy to Lehman & Eilen LLP, Suite 505, 50 Charles
Lindberg Boulevard, Uniondale, NY 11553; (B) whenever notice is required by the
provisions hereof to be given to the Underwriters, such notice shall be in
writing addressed to the Representative at Comprehensive Capital Corporation;
and (C) whenever notice is required by the provisions hereof to be given to the
Selling Security Holders, such notice shall be given in writing, by certified
mail, return receipt requested, addressed to the Selling Security Holders at the
addresses set forth in Schedule II. forth herein on the first page copy to
Steven Morse, Esq., Lester Morse P.C., Suite 420, 111 Great Neck Road, Great
Neck, NY 11021. Any party may change the address for notices to be sent by
giving written notice to the other persons.
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SECTION 19. Representations and Agreements to Survive
Delivery. Except as the context otherwise requires, all representations,
warranties, covenants, and agreements contained in this Agreement shall be
deemed to be representations, warranties, covenants, and agreements as at the
date hereof and as at the Closing Date and the Additional Closing Date(s), and
all representations, warranties, covenants, and agreements of the Selling
Security Holders, the several Underwriters and the Company, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any of the Underwriters or any of their controlling persons, and
shall survive any termination of this Agreement (whensoever made) and/or
delivery of the Firm Shares and the Optional Shares to the several Underwriters.
SECTION 20. Miscellaneous. This Agreement is made solely for the
benefit of the Selling Security Holders, the Underwriters and the Company and
their respective successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successor" or the
term "successors and assigns" as used in this Agreement shall not include any
purchaser, as such, of any of the Shares.
This Agreement shall not be assignable by any party without
the other party's prior written consent. This Agreement shall be binding upon,
and shall inure to the benefit of, our respective successors and permitted
assigns. The foregoing represents the sole and entire agreement between us with
respect to the subject matter hereof and supersedes any prior agreements between
us with respect thereto. This Agreement may not be modified, amended or waived
except by a written instrument signed by the party to be charged. The validity,
interpretation and construction of this Agreement, and of each part hereof,
shall be governed by the internal laws of the State of New York, without giving
effect to the conflict of laws provisions thereof.
This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall be deemed to be one and the same instrument.
If a party signs this Agreement and transmits an electronic
facsimile of the signature page to the other party, the party who receives the
transmission may rely upon the electronic facsimile as a signed original of this
Agreement.
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If the foregoing is in accordance with your understanding
of our agreement, kindly sign and return to us a counterpart hereof, whereupon
this instrument along with all counterparts will become a binding agreement
between the Selling Security Holders, the Company and the Underwriters in
accordance with its terms.
Very truly yours,
SWISS NATURAL BRANDS, INC.
By:
Herbert Paul, President
SELLING SECURITY HOLDERS:
Ronald Brescia
Dr. Ralph Ferrante
Herbert Paul
CONFIRMED AND ACCEPTED, as of the date first above written:
COMPREHENSIVE CAPITAL CORPORATION
By________________________________
Olga Scoppa, President
For itself and as the Representative of the other Underwriters named in
Schedule I hereto.
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SCHEDULE I
Underwriter Firm
Securities to
be
Purchased
Number of
Common
Shares
Comprehensive Capital Corporation
Seaboard Securities, Inc.
Total 1,250,000
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SCHEDULE II
Name and Address of Amount of
Selling Security Holders Optional
Common Stock
Ralph Ferrante 133,125
Ronald Brescio 20,625
Herbert Paul 33,750
Total 187,500
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EXHIBIT 1.2
Swiss Natural Brands, Inc.
1,250,000 Shares of Common Stock
AGREEMENT AMONG UNDERWRITERS
__________, 1999
To each of the Underwriters named in Schedule I
to the attached Underwriting Agreement
Dear Sirs:
1. Underwriting Agreement. Swiss Natural Brands, Inc. (the "Company"),
proposes to enter into an underwriting agreement in the form of the Underwriting
Agreement attached hereto as Exhibit "A" (the "Underwriting Agreement") with the
underwriters named in Schedule I to the Underwriting Agreement (the
"Underwriters"), acting severally and not jointly, with respect to the purchase
from the Company of 1,250,000 Shares of Common Stock. Such Shares are
hereinafter sometimes referred to as the "Firm Common Stock." Upon our request,
and as provided in Section 3 of the Underwriting Agreement, the Selling Security
Holders named in Schedule II of the Underwriting Agreement will sell to the
Underwriters up to a maximum of 187,500 Shares of Common Stock., Such additional
Securities are hereinafter sometimes referred to as the "Optional Common Stock."
Both the Firm Common Stock and the Optional Common Stock are sometimes
collectively referred to herein as the "Securities." All of the Securities which
are the subject of this Agreement are more fully described in the Prospectus of
the Company described below. Under the terms of the Underwriting Agreement, each
of the Underwriters will agree, in accordance with the terms thereof to purchase
the aggregate number of Common Stock set forth opposite its name in said
Schedule I, subject to adjustment pursuant to Section 12 hereof and Section 14
of the Underwriting Agreement.
2. Registration Statement and Prospectus. The Securities are described
in a registration statement and related prospectus which have been filed with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Act"). An amendment to such registration statement
has been or will be filed in which you have been or will be named as one of the
Underwriters of the Securities. Copies of the registration statement as filed
and as amended have been delivered to you, and you hereby authorize us to
approve on your behalf any further amendments or supplements which may be
necessary or appropriate. The registration statement, as amended at the time it
becomes effective, is called the "Registration Statement" and the final
prospectus relating to the Securities as filed by the Company with the
Commission pursuant to Rule 424(b) under the Act is referred to as the
"Prospectus."
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3. Authority of Representative. You authorize us as your Representative
to execute the Underwriting Agreement with the Company in the form attached with
such insertions, deletions or other changes as we may approve (but not as to the
number of, and price of, the Securities to be purchased by you except as
provided herein and therein) and to take such action as in our discretion we may
deem advisable in respect of all matters pertaining to the Underwriting
Agreement, this Agreement, the transactions for the accounts of the several
Underwriters contemplated thereby and hereby, and the purchase, carrying, sale
and distribution of the Securities.
4. Public Offering. In connection with the public offering of the
Securities, you authorize us, in our discretion:
(a) To determine the time and manner of the initial public
offering (after the Registration Statement become effective), the initial public
offering price, and the concessions and reallowances to dealers, to change the
public offering price and such concessions and reallowances after the initial
public offering, to furnish the Company with the information to be included in
the Registration Statement and the Prospectus (and any amendment or supplement
thereto) with respect to the terms of the public offering, and to determine all
matters relating to the public advertisement of the Securities and any
communications with dealers or others;
(b) To reserve all or any part of your Securities for sale to
retail purchasers (including institutions) and to dealers selected by us
("Selected Dealers") among which may be included any Underwriter (including
ourselves) and each of which shall be a member of the National Association of
Securities Dealers, Inc., and each of which shall agree that in making sales to
purchasers in the United States it will conform to the Rules of Fair Practice of
said Association (or, in the case of a foreign dealer not eligible for
membership in such Association, which shall agree not to reoffer, resell or
deliver Securities in the United States, its territories or its possessions, or
to persons whom it has reason to believe are citizens thereof or residents
therein), such reservations for sales to retail purchasers to be as nearly as
practicable in proportion to the respective underwriting obligations of the
Underwriters and such reservations for sales to Selected Dealers to be in such
proportion as we determine, and from time to time to add to the reserved
Securities such Securities retained by you remaining unsold and to release to
you any of your Securities reserved but not sold;
(c) To sell reserved Securities as nearly as practicable in
proportion to the respective reservations to retail purchasers at the public
offering price, and to Selected Dealers at the public offering price less the
Selected Dealer's concession pursuant to the Selected Dealers Agreement in
substantially the form attached; and
(d) To buy Securities for your account from Selected Dealers
at the public offering price less such amount not in excess of the Selected
Dealer's concession as we may determine.
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After advice from us that the Securities are released for public
offering, you will offer to the public in conformity with the terms of offering
set forth in the Prospectus, or any amendment or supplement, such of your
Securities as we advise you are not reserved.
You recognize the importance of a broad distribution of the Securities
among bona fide investors and you agree to use your best efforts to obtain such
broad distribution and to that end, to the extent you deem practicable, to give
priority to small orders. In offering the Securities to Selected Dealers we will
take such action as we deem appropriate to effect a broad distribution.
5. Repurchase of Securities Not Effectively Placed for Investment. You
are requested to place for investment those of your Securities which are not
reserved as aforesaid. Any Securities sold by you (otherwise than through us)
which may be delivered to us against a purchase contract made by us for the
account of any Underwriter prior to termination of the provisions referred to in
Section 11 of this Agreement, shall be purchased by you upon demand from us at
the cost of such purchase plus brokerage commissions and transfer taxes on
redelivery. Securities delivered on such repurchase need not be identical to
those purchased by you. In lieu of demand repurchase by you we may in our
discretion (i) sell for your account the Securities so purchased by us, at such
price and upon such terms as we may determine, and debit or credit your account
with the loss and expense or net profit resulting from such sale, or (ii) charge
your account with an amount not in excess of the Selected Dealer's concession
with respect to such Securities plus brokerage commissions and transfer taxes
paid in connection with such purchase.
6. Payment and Delivery. We shall give you at least 24 hours prior
notice of the Closing Date. You agree to deliver payment and receive securities
through the facilities of the Depository Trust Company ("DTC") or, at our
option, to deliver to us at or before 9:00 a.m. New York City Time, on such
Closing Date at the office of Comprehensive Capital Corporation, 1600 Stewart
Avenue, Suite 405, Westbury, NY 11590 (or such other office as we may direct), a
certified check or bank cashier's check payable in New York Clearing House funds
to the order of Comprehensive Capital Corporation, as Representative, for the
full purchase price of the Securities which you shall have agreed to purchase
from the Company less the concession to selected dealers. The proceeds to the
Company shall be delivered by us in the amount required in payment of the full
purchase price to the Company against delivery of the Securities to us for your
account. We are authorized to accept that delivery and to give a receipt
therefor. You authorize us, as your custodian, to take delivery of your
Securities, registered as we may direct in order to facilitate deliveries. You
also authorize us to hold for your account such of your Securities as we have
reserved for sale to retail purchasers and to Selected Dealers, and to deliver
your reserved Securities against such sales. We will deliver your unreserved
Securities to you promptly and, after we receive payment for reserved Securities
sold by us for your account, we will remit to you, as promptly as practicable,
an amount equal to the price paid by you for such Securities. As soon as
practicable after termination of Sections 4, 5 and 9 and the first and
penultimate sentences of Section 8 of this Agreement
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(pursuant to Section 11 hereof) we will deliver to you any of your Securities
reserved but not sold. All Securities delivered to you pursuant to this Section
will be evidenced by certificates in such denominations as you shall direct by
written notice received by us not later than the second full business day
preceding the Closing Date.
7. Authority to Borrow. In connection with the purchase or carrying of
any Securities purchased hereunder for your account, you authorize us, in our
discretion, to advance funds for your account, charging current interest rates,
or to arrange loans for your account, and in connection therewith to execute and
deliver any notes or other instruments and hold or pledge as security any of
your Securities. Any lender may rely on our instructions in all matters relating
to any such loan. Any of your Securities held by us for your account may be
delivered to you for carrying purposes only, and subject to our further
direction.
8. Stabilization and Over-Allotment. To facilitate the distribution of
the Securities, you authorize us during the term of this Agreement, or for such
longer period as may be necessary in our discretion, to make purchases and sales
of the Securities for your account in the open market or otherwise, for long or
short account, on such terms as we deem advisable and, in arranging sales, to
over-allot. You also authorize us to cover any short position incurred pursuant
to this Section on such terms as we deem advisable. Included in the authority
granted to us by you is the authority to exercise the over-allotment option for
you to purchase the Optional Securities granted by Section 3 of the Underwriting
Agreement. All such purchases and sales shall be made for the accounts of the
several Underwriters as nearly as practicable in proportion to their respective
underwriting obligations. Your net commitment under this Section shall not, at
the end of any business day, exceed 15% of your maximum underwriting obligation.
You will on our demand take up at cost or deliver against payment any Securities
purchased or sold for your account and, if any such other Underwriter defaults
in its corresponding obligation, you will assume your proportionate share of
such obligation without relieving the defaulting Underwriter from liability. You
will be obligated in respect to purchases and sales made for your account
hereunder whether or not the proposed purchase of the Securities is consummated.
Upon request you will advise us of Securities retained by you and unsold and
will sell to us for the account of one or more of the Underwriters such of your
unsold Securities as we may designate, at the public offering price thereof less
such amount as we may determine, but not in excess of the Selected Dealer's
concession with respect thereto. Until the termination of this Agreement
pursuant to Section 11 hereof, or prior notification by us, we shall have the
sole right to effect stabilizing transactions in the Securities. You agree that
until such time you will not make any purchases or sales of any of such
securities except as provided in Section 9 hereof. You also agree to timely
provide us with the information required by Rule 17a-2(d) under the Securities
Exchange Act of 1934, as amended (the "1934 Act").
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9. Open Market Transactions. You agree not to bid for, purchase,
attempt to induce others to purchase, or sell, directly or indirectly, any
Securities, except as brokers pursuant to unsolicited orders and as otherwise
provided in this Agreement or in the Underwriting Agreement. You further agree
not to offer the Securities for sale until notified by us, as the Representative
of the Underwriters, that they are released for that purpose.
10. Expenses and Settlement. We may charge your account with Selected
Dealer's concessions and all transfer taxes on sales made by us for your account
and with your proportionate share (based upon your underwriting obligation) of
all other expenses incurred by us under the terms of this Agreement or the
Underwriting Agreement, in excess of those reimbursed by the Company pursuant to
Section 8 of the Underwriting Agreement, or in connection with the purchase,
carrying, sale or distribution of the Securities. Our determination of the
amount and allocation of expenses shall be conclusive. As soon as practicable
after termination of the provisions referred to in Section 11, the accounts
hereunder will be settled, but we may reserve from distribution such amount as
we deem advisable to cover possible additional expenses. We may at any time make
partial distribution of credit balances or call for payment of debit balances.
Any of your funds in our hands may be held with our general funds without
accountability for interest. Notwithstanding any settlement, you will pay (i)
your proportionate share (based upon your underwriting obligation) of any
liability which may be incurred by the Underwriters, or any of them, based on
the claim that the Underwriters constitute an association, partnership,
unincorporated business or other separate entity, and of any expenses incurred
by us, or by any other Underwriter with our approval, in contesting any such
liability, and (ii) any transfer taxes which may be assessed and paid after such
settlement on account of any sale or transfer for your account.
11. Termination and Settlement. This Agreement will terminate (a) at
the close of business on the 30th day after the date of the Underwriting
Agreement; or (b) on such earlier or later date, not more than 30 days after the
date specified in (a), as we may determine; or (c) on the date of termination of
the Underwriting Agreement, if the same shall be terminated as provided by its
terms.
Upon termination of this Agreement, all authorizations, rights and
obligations hereunder will cease, except (a) the mutual obligation to settle
accounts hereunder, (b) your obligation to pay any claims referred to in the
last paragraph of this Section, (c) the obligations with respect to indemnity
set forth in Section 15 hereof (all obligations of which will continue until
fully discharged), and (d) your obligation with respect to purchases which may
be made by us from time to time thereafter to cover any short position with
respect to the offering, all of which will continue until fully discharged, and
except our authority with respect to matters to be determined by us, or by us
and the Company, pursuant to the terms of the Underwriting Agreement, which will
survive the termination of this Agreement.
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The accounts arising pursuant to this Agreement will be settled and
paid as soon as practicable after termination. The determination by us of the
amounts to be paid to or by you will be final and conclusive.
Notwithstanding any settlement upon the termination of this Agreement,
you will pay your proportionate share of any amount asserted against and
discharged by the Underwriters, or any of them, based upon the claim that the
Underwriters constitute an association, unincorporated business or other
separate entity, or based upon or arising out of a claim that this Agreement or
the Underwriting Agreement is invalid or illegal for any reason, including any
expense incurred in defending against such claim, and will pay any transfer
taxes which may be assessed thereafter on account of any sale or transfer of
Securities for our account.
12. Default by Underwriters. Default by one or more Underwriters
hereunder or under the Underwriting Agreement shall not release the other
Underwriters from their obligations or affect the liability of any defaulting
Underwriter to the other Underwriters for damages resulting from such default.
In case of default under the Underwriting Agreement by one or more Underwriters,
we may arrange for the purchase by others, including non-defaulting
Underwriters, of Securities not taken up by such defaulting Underwriter and you
will, at our request, increase pro rata with the other non-defaulting
Underwriters the aggregate principal amount of Securities which you are to
purchase, or both, by an amount not exceeding one-ninth of your original
underwriting obligations. In the event any such arrangements are made, the
respective Securities to be purchased by non-defaulting Underwriters and by such
others shall be taken as the basis for the underwriting obligations under this
Agreement.
In the event of default by one or more Underwriters in respect of their
obligations under this Agreement, each non-defaulting Underwriter shall assume
its proportionate share of the obligations under this Agreement of each such
defaulting Underwriter (other than, to the extent stated in the first paragraph
of this Section, the purchase obligation of such defaulting Underwriter).
13. Position of Representative. We shall be under no liability to you
for any act or omission except for obligations expressly assumed by us in this
Agreement, but no obligation on our part shall be implied or inferred. Nothing
shall constitute the Underwriters, or any of them, an association, partnership,
unincorporated business or other separate entity and the rights and liability of
ourselves and each of the Underwriters are several and not joint.
14. Compensation to Representative. As compensation for our services as
Representative, you agree to pay us $___ per share of Common Stock out of the
aggregate underwriting discount attributable to Securities which you agree to
purchase
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from the Company and/or the Selling Security Holders pursuant to the
Underwriting Agreement. We are authorized to charge your account with such an
amount.
15. Indemnification. You will indemnify and hold harmless each other
Underwriter and each person, if any, who controls such Underwriter within the
meaning of Section 15 of the Act to the extent and upon the terms by which each
Underwriter agrees to indemnify the Company in the Underwriting Agreement. Such
indemnity agreement shall survive the termination of any of the provisions of
this Agreement.
In the event that at any time any claim shall be asserted against us as
or as a result of our having acted as Representative, or otherwise involving the
Underwriters generally, relating to the Registration Statement or any
preliminary prospectus or the Prospectus, as from time to time amended or
supplemented, the public offering of the Securities or any of the transactions
contemplated by this Agreement, you authorize us to make such investigation, to
retain such counsel and to take such other action as we shall deem necessary or
desirable under the circumstances, including settlement of any claim or claims
if such course of action shall be recommended by counsel retained by us. You
agree to pay to us, on request, your proportionate share (based upon your
underwriting obligation) of all expenses incurred by us (including, but not
limited to, the disbursements and fees of counsel so retained) in investigating
and defending against such claim or claims, and your proportionate share (based
upon your underwriting obligation) of any liability incurred by us in respect of
such claim or claims, whether such liability shall be the result of a judgment
against us or as a result of any such settlement.
16. Blue Sky Matters. We shall not have any responsibility with respect
to the right of any Underwriter or other person to sell Securities in any
jurisdiction, notwithstanding any information we may furnish in that connection.
You hereby authorize us to take such action as may be necessary or advisable to
qualify the Securities for offering and sale in any jurisdiction. We have caused
to be filed Further State Notices respecting the Securities to be offered to the
public in New York in the form required by, and pursuant to, the provisions of
Article 23A of the General Business Law of the State of New York.
17. Title to Securities. The Securities purchased for the respective
accounts of the several Underwriters shall remain the property of those
Underwriters until sold; and no title to such securities shall in any event pass
to us, as Representative, by virtue of any of the provisions of this Agreement.
18. Capital Requirements. Unless the provisions of clause (b) of the
second sentence of the last paragraph of this Agreement are applicable to you,
you confirm that your commitment hereunder will not result in any violation of
Section 8(b) or 15(c) of the 1934 Act or in any violation of any of the rules
and regulations promulgated under the 1934 Act, including, without limitation,
Rule 15c3-1, or any provision of any applicable
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rules of any securities exchange to which you are subject or of any restriction
imposed upon you by such exchange.
19. Notices and Governing Laws. Any notice from you to us shall be
mailed or transmitted by any standard form of written telecommunication to us at
1600 Stewart Avenue, Suite 405, Westbury, New York 11590. Any notice from us to
you shall be mailed or transmitted by any standard from of written
telecommunication to you at your address as set forth in your Underwriter's
Questionnaire. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
We represent that we are a member in good standing of the National
Association of Securities Dealers, Inc. You represent that you are (a) a member
in good standing of such Association or (b) a foreign dealer which is not
eligible for membership in such Association, in which event you will make sales
of any Securities only outside the United States and its territories and
possessions to persons who are not citizens or residents of the United States or
its territories or possessions, and that in making any such sales, you will
comply with such Association's Interpretation with respect to Free-Riding and
Withholding. You further represent that: (i) you will notify each of your
customers with respect to whose account you have investment discretion and to
whose account you intend to sell any Securities that you propose to sell
Securities to such account as a principal and you will obtain the customer's
written consent to such sale; and (ii) you will comply with the requirements of
Rule 15c2-8 under the 1934 Act and have distributed or are distributing copies
of a Preliminary Prospectus to all persons to whom you then expected to mail
confirmations of sale, not less than 48 hours prior to the time it is expected
to mail such confirmations.
Very truly yours,
COMPREHENSIVE CAPITAL CORPORATION
By:_________________________________
As Representative of the several
Underwriters
Confirmed and accepted as of
the date first above written.
- -------------------------------
Attorney-in-fact for the several
Underwriters named in Schedule I
to the Underwriting Agreement
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EXHIBIT 1.3
Comprehensive Capital Corporation
1600 Stewart Avenue
Suite 405
Westbury, NY 11590
Swiss Natural Brands, Inc.
1,250,000 Shares of Common Stock
SELECTED DEALER AGREEMENT
Dear Sirs: ____________, 1999
We, as the Underwriter named in the Prospectus dated , 1999 have
agreed, subject to the terms and conditions of the Underwriting Agreement dated
this date (the "Underwriting Agreement") to purchase from Swiss Natural Brands,
Inc. (the "Company"), at the prices set forth on the cover of such Prospectus,
the above referred to 1,250,000 Shares of Common Stock and, at our option, from
the Selling Security Holders named in Schedule II of the Underwriting Agreement,
up to an additional 187,500 shares of Common Stock to cover over-allotments
(collectively being called the "Securities"). The Securities and certain of the
terms on which they are being purchased and offered are more fully described in
the enclosed Prospectus. Additional copies of the Prospectus will be supplied to
you in reasonable quantities upon request.
We, as the Underwriter, are offering to certain dealers ("Selected
Dealers"), among whom we are pleased to include you, part of the Securities, at
the public offering price less a concession of $.___ per Share of Common Stock.
The offering to Selected Dealers is made subject to the issuance and delivery of
the Securities to us and their acceptance by us, to the approval of legal
matters by our counsel, and to the terms and conditions hereof, and may be made
by us on the basis of the reservation of Securities or an allotment against
subscription, or otherwise in our discretion.
The initial public offering prices of the Securities are as set forth
in the Prospectus. With our consent, Selected Dealers may allow a re-allowance
of not in excess of $ -0- per Share of Common Stock in selling the Shares of
Common Stock to other dealers meeting the requirements of the specifications set
forth in the affirmation of dealers contained in the attached Acceptance and
Order. Upon our request, you will notify us of the identity of any dealer to
whom you allow such a reallowance and any Selected Dealer from whom you receive
such a re-allowance.
All orders will be strictly subject to confirmation and we reserve the
right in our uncontrolled discretion to reject any order in whole or in part, to
accept or reject orders in the order of their receipt or otherwise, and to
allot. You are not authorized to give any information or make any representation
other than as set forth in the Prospectus in connection with the sale of any of
the Securities. No dealer is authorized to act as agent
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for the Underwriter, or for the Company, when offering any of the Securities.
Nothing contained herein shall constitute the Selected Dealers partners with us
or with one another.
Upon release by us, you may offer the Securities at the public offering
price, subject to the terms and conditions hereof. We may, and the Selected
Dealers may, with our consent, purchase Securities from and sell Securities to
each other at the public offering price less a concession not in excess of the
concession to Selected Dealers.
Payment for Securities purchased by you is to be made at our office (or
at such other place as instructed) at the public offering price, on such date as
we may advise, on one day's notice to you, by certified or official bank check
in New York Clearing House funds payable to our order. Delivery to you of
certificates for the Securities will be made as soon as is practicable
thereafter. Unless specifically authorized by us, payment by you may not be
deferred until delivery of certificates to you. The concession payable to you
will be paid as soon as practicable after the closing.
This Agreement shall terminate at the close of business on the 30th day
after the effective date of the Registration Statement. We may terminate this
Agreement at any time prior thereto by notice to you. Notwithstanding the
termination of this Agreement, you shall remain liable for your proportionate
share of any transfer tax or any liability which may be asserted or assessed
against us or Selected Dealers based upon the claim that the Underwriter and the
Selected Dealers, or any of them, constitute a partnership, association,
unincorporated business or other entity, including in each case your
proportionate share of expenses incurred in defending against any such claim or
liability.
In the event that, prior to the termination of this Agreement we
purchase in the open market or otherwise any Securities delivered to you, you
agree to repay to us for the account of the Underwriter the amount of the above
concession to Selected Dealers plus brokerage commissions and any transfer taxes
paid in connection with such purchase; which amounts can be withheld from the
concession otherwise payable to you hereunder. Certificates for Securities
delivered on any such purchase need not be the identical certificates originally
issued to you.
At any time prior to the termination of this Agreement, you will, upon
our request, report to us the number of Securities purchased by you under this
Agreement which then remain unsold and will, upon our request, sell to us for
the account of the Underwriter the number of such unsold Securities that we may
designate, at the public offering price less an amount to be determined by us
not in excess of the concession allowed you.
We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the offering, including,
without limitation, stabilization and over-allotment. We shall be under no
liability to you except for our lack of good faith and for obligations assumed
by us in this Agreement, except that you do not waive any rights that you may
have under the Securities Act of 1933 (the "1933 Act") or the rules and
regulations thereunder.
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Upon application to us, we will inform you of the states and other
jurisdictions of the United States in which it is believed that the Securities
are qualified for sale under, or are exempt from the requirements of, their
respective securities laws, but we assume no responsibility with respect to your
right to sell Securities in any jurisdiction. We have filed a Further State
Notice with respect to the Securities with the Department of State of the State
of New York.
You confirm that you are familiar with Rule 15c2-8 under the Securities
Exchange Act of 1934 (the "1934 Act"), relating to the distribution of
preliminary and final prospectuses, and confirm that you have complied and will
comply therewith (whether or not the Company is subject to the reporting
requirements of Section 13 or 15(d) of the 1934 Act). We will make available to
you, to the extent made available to us by the Company such number of copies of
the Prospectus as you may reasonably request for purposes contemplated by the
1933 Act, the 1934 Act, and the rules and regulations thereunder.
Your attention is directed to Regulation M under the 1934 Act, which
contains certain prohibitions against trading by a person interested in a
distribution until such person has completed its participation in the
distribution. You confirm that you will at all times comply with the provisions
of such Regulation M in connection with this offering.
Any notice from us shall be deemed to have been duly given if
telephoned, and subsequently mailed or transmitted by any standard form of
written tele-communication to you at the address to which this Agreement is
mailed, or if so mailed or transmitted in the first instance.
Please advise us promptly by telephone or any standard form of written
telecommunication of the principal amount of Securities ordered by you and
confirm your agreement hereto by signing the Acceptance and Order on the
enclosed duplicate hereof and returning promptly such signed duplicate copy to
Comprehensive Capital Corporation 1600 Stewart Avenue, Suite 405, Westbury, NY
11590.
Upon receipt thereof, this instrument and such signed duplicate copy
will evidence the agreement between us.
Very truly yours,
Comprehensive Capital Corporation
By:_________________________________
Olga Scoppa, President
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Comprehensive Capital Corporation
1600 Stewart Avenue
Suite 405
Westbury, NY 11590
Dear Sirs:
We hereby enter our order for ______ Shares of Common Stock of Swiss
Natural Brands, Inc. under the terms and conditions of the foregoing Agreement.
We agree to all the terms and conditions stated in the foregoing
Agreement. We acknowledge receipt of the Prospectus relating to the above
Securities and we further state that in entering this order we have relied upon
said Prospectus and no other statements whatsoever, written or oral. We affirm
that we are either (i) a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD") or (ii) a dealer with its principal place
of business located outside the United States, its territories, or possessions
and not registered under the Securities Exchange Act of 1934 and not eligible
for membership in the NASD, who hereby agrees to make no sales within the United
States, its territories or its possessions or to persons who are nationals
thereof or residents therein, and in making any sales, to comply with the NASD's
interpretation with respect to free-riding and withholding, as well as all other
pertinent interpretations of the NASD that may be applicable to us. We also
affirm and agree that we will promptly re- offer any Securities purchased by us
in conformity with the terms of the offering and in conformity with Rules 2730,
2740, 2420 and 2750 of the NASD Conduct Rules and all applicable Rules and
Regulations promulgated under the Securities Exchange Act of 1934.
Date: ___________, 1999 _________________________________
(Name of Selected Dealer)
By: _____________________________
(Authorized Signature)
Address: ________________________
_________________________________
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EXHIBIT 3.4
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
SWISS NATURAL FOODS, INC.
Swiss Natural Foods, Inc., a corporation organized and existing under
the laws of the State of Delaware hereby certifies as follows:
1. The name of the Corporation is Swiss Natural Foods, Inc. The date of filing
of its original Certificate of Incorporation with the Secretary of State
was April 22, 1993, under the name of Nature's Best Food Products, Inc.
2. The Certificate of Incorporation is hereby amended by striking out Article
First thereof and by substituting in lieu of said Article the following new
Article First:
FIRST: The name of the Corporation is Swiss Natural Brands, Inc.
3. The Certificate of Incorporation is further hereby amended by striking out
Article Fourth and by substituting in lieu of said Article the following
new Article Fourth.
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is twenty million (20,000,000)
shares of common stock (the "Common Stock") and three million (3,000,000)
shares of preferred stock (the "Preferred Stock").
The Preferred Stock of the Corporation shall be issued by the Board of
Directors of the Corporation in one or more classes or one or more series
<PAGE>
within any class, and such classes or series shall have such voting powers,
full or limited, or no voting powers, and such designations, preferences,
limitations or restrictions as the Board of Directors of the Corporation
may determine from time to time.
Simultaneously, with the effective date of the filing of this amendment to
the Corporation's Certificate of Incorporation (the "Effective Date") each
1.5 shares of outstanding common stock shall be automatically combined into
1 share of stock (the "Reverse Stock Split"), with the number of shares of
common stock held by each stockholder being rounded up to the next whole
number of shares in any cases where the operation of the Reverse Stock
Split otherwise would result in the holding of a fractional share.
4. This Amendment to the Certificate of Incorporation of the Corporation was
duly adopted by the written consent of the stockholders of the Corporation,
in accordance with the applicable provision of Section 228 and 242 of the
General Corporation Law of the State of Delaware and written notice of the
adoption of this amendment to Certification of Incorporation has been given
as provided by Section 228 of the General Corporation Law of the State of
Delaware to every stockholder entitled to such notice.
5.
6. The effective date of this filing shall be October 1, 1999.
Signed as of October 1, 1999
SWISS NATURAL FOODS, INC.
BY:
/s/ Ralph M. Ferrante
Ralph M. Ferrante
Chief Executive Officer
<PAGE>
EXHIBIT 3.5
AMENDMENT TO CERTIFICATE OF DESIGNATIONS, RIGHTS AND PREFERENCES OF A
SERIES OF PREFERRED STOCK (THE "ORIGINAL CERTIFICATE OF DESIGNATIONS") BY
RESOLUTION OF THE BOARD OF DIRECTORS PROVIDING FOR AN ISSUE OF 1,800,000 SHARES
OF SERIES OF PREFERRED STOCK, $.01
PAR VALUE, DESIGNATED AS THE "SERIES A CONVERTIBLE PREFERRED STOCK".
We, Ralph M. Ferrante, Chairman of the Board and Secretary, and Herbert
Paul, President and Assistant Secretary, of Swiss Natural Brands, Inc.
(formerly, Swiss Natural Foods, Inc., hereinafter called the "Corporation"),
pursuant to the provision of Section 151 of the General Corporation Law of the
State of Delaware, do hereby make this Amendment to the Original Certificate of
Designations under the corporate seal of the Corporation and do hereby state and
certify that pursuant to the authority expressly vested in the Board of
Directors of the Corporation by the Certificate of Incorporation, the Board of
Directors, with the consent of all holders of outstanding shares of the Series A
Convertible Preferred Stock, duly adopt the following resolutions:
RESOLVED, that certain of the preferences and rights, qualifications,
limitations and restrictions of the Series A Convertible Preferred Stock be
amended as follows:
1. Number of Shares. In accordance with the Corporation's 1.5 for 1
reverse stock split, effective October 1, 1999, and in lieu of any
adjustment arising therefrom under Section 8 of the Original Certificate of
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<PAGE>
Designations, the number of shares constituting the Series A
Convertible Preferred Stock shall be reduced from 1,800,000 as stated in
the Original Certificate of Designations to 1,206,000 shares and Section 1
of the Original Certificate of Designations shall be amended to read as
follow
"1. Number of Shares. The number of shares constituting the Series A
Convertible Preferred stock shall be and the same is hereby fixed as 1,206,000."
2. Dividends. Section 4 of the Original Certificate of Designations
shall be amended to read as follows:
"4. Dividends. The holders of outstanding Series A Convertible
Preferred Stock, in preference to the holders of shares of the Common Stock
and any other capital stock of the Corporation ranking junior to the Series
A Convertible Preferred Stock as to the payment of dividends, shall be
entitled to receive out of funds legally available for the purpose,
cumulative cash dividends at the annual rate of $.08 per share in equal
quarterly payments on the first day of March, June, September, and December
of each year (each, a "Quarterly Dividend Payment Date"), with payments
commencing on June 1, 2000.
Dividends payable pursuant to this Section 4 shall begin to accrue and
be cumulative from March 1, 2000. Accrued but unpaid dividends shall not
bear interest and shall be paid in full prior to the payment of any
dividends to the holders of Common Stock. Dividends paid on the shares of
Series A Convertible Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such shares
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<PAGE>
at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Convertible Preferred
Stock entitled to receive payment of dividends, which record date shall be
not less than ten days and not more than sixty days prior to the date fixed
for the payment thereof. Thereafter, the Series A Convertible Preferred
Stock will participate in any dividends declared on the Common Stock, on an
as converted basis."
3. Registration Rights. Section 11 of the Original Certificate of
Designations is amended to read as follows:
"11. Registration Rights. If and to the extent that the shares of the
Common Stock issuable upon conversion of the Series A Preferred Shares are
not includable in a registration statement filed by the Corporation, the
Corporation will prepare and file one year after the closing date of its
initial public offering, at the request of the holders of 40% of the
outstanding shares of Series A Convertible Preferred Stock, at its own
expense, a shelf registration statement on Form S-3 (or such other
available form if Form S-3 shall not be available to the Corporation) to
enable the holders thereof to resell shares of Common Stock acquired upon
conversion of the Series A Preferred Shares."
4. Conversion Rights. Section 7 of the Original Certificate of
Designations is hereby amended to read as follows:
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<PAGE>
"7. Conversion Rights. (a) The Series A Preferred Shares shall be
convertible upon the earliest to occur of (i) March 1, 2000, if the closing
of the Corporation's initial public offering of securities and the closing
of the sale of the over-allotment shares thereunder have not occurred prior
to such date; (ii) two (2) years after the closing date of the
Corporation's initial public offering of securities; (iii) the first fiscal
year of the Corporation or any trailing 12 (twelve) month period in which
the Corporation's financial statement shows earnings before interest,
taxes, charges resulting from stock, debenture, or stock option issuances
and underwriters' consulting fees have equaled or exceeded $750,000; (iv)
the closing date of any acquisition of all or a portion of the equity
securities of the Corporation, the acquisition of all or a portion of its
assets, the merger of the Corporation with or into another entity not
related to the Corporation or any of its officers or directors, regardless
of whether the Corporation is the surviving entity, or any additional
equity financing by the Corporation; or (v) the date on which the closing
price of the Common Stock as reported by the NASDAQ system or its
successor, or any national securities exchange on which such Common Stock
is listed (or if not so reported, the average of the closing bid and asked
prices as furnished by two members of the NASD selected by the Corporation
for that purpose) is equal to or greater than ten dollars ($10.00) per
share."
RESOLVED, that all preferences, rights, qualifications, limitations
and restrictions of the Series A Convertible Preferred Stock, other than
those set forth in paragraphs 1,2, 3, and 4 above, shall remain in full
force and effect, as set forth in the Original Certificate of Designations.
4
<PAGE>
IN WITNESS WHEREOF, said SWISS NATURAL BRANDS, INC., has caused this
Certificate of Designation to be signed by Ralph M. Ferrante, its Chairman
of the Board and attested to by Herbert M. Paul, its Assistant Secretary as
of the 1st day of October 1999.
SWISS NATURAL BRANDS, INC.
BY: /s/Ralph M. Ferrante
Ralph M. Ferrante
Chairman of the Board
CORPORATE SEAL ATTEST:
BY: /s/Herbert M. Paul
Herbert M. Paul
Assistant Secretary
5
<PAGE>
place shall be termed the "Conversion Date" for such shares. The conversion of
Series A Preferred Shares shall be on the basis of one share of Common Stock for
one Series A Preferred Share; provided, however, that such one for one
conversion rate shall be subject to adjustment from time to time in certain
instances as provided in Section 9 below (the conversion rate in effect at any
given time shall be termed the "Conversion Rate").
(b) As promptly as practicable after the Conversion Date, the
Corporation shall issue and deliver to the holders at the Office of
the Corporate for the Series A Convertible Preferred Stock, a
certificate or certificates for the number of full shares of Common
Stock to which such holders are entitled and a check or cash with
respect to any fractional interest in a share of Common Stock as
provided in Subsection 4 (d) below. Each holder shall be deemed to
have become a stockholder of record of the Common Stock on the
Conversion Date.
(c) No fractional shares of Common Stock or script shall be
issued upon conversion of Series A Convertible Preferred Stock. The
number of full shares of Common Stock issuable upon conversion of such
Series A Preferred Share shall be computed on the basis of the
aggregate number of Series Preferred Shares so surrendered. Instead of
any fractional shares of Common Stock which otherwise would be
issuable upon conversion of any shares of Series A Convertible
Preferred Stock, the Corporation shall pay a cash adjustment in
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<PAGE>
respect to such fractional interest based upon the Market Price (as
defined in Subsection 12 (a)) of the Common Stock at the close of
business on the last business day prior to the Conversion Date.
(d) (If any shares of Common Stock to be reserved for the purpose
of conversion of Series A Convertible Preferred Stock require
registration or listing with or approval of nay governmental
authority, stock exchange or other regulatory body under any federal
or state law or regulation or otherwise before such shares may be
validly issued or delivered upon conversion, the corporation shall at
its sole cost and expenses in good faith and as expeditiously as
possible endeavor to secure such registration, listing or approval, as
the case may be.
(e) All shares of Common Stock which may be issued upon
conversion of Series A Convertible Preferred Stock upon issuance will
be validly issued, fully paid and nonassessable. The Corporation will
pay any and all documentary taxes that may be payable in respect of
any issue or delivery of shares of Common stock on conversion of
Series Preferred Shares pursuant hereto. The Corporation shall not be
required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock
in a name other than that in which Series A Preferred Shares so
converted are registered, and no such issue or delivery shall be made
7
<PAGE>
unless and until the person requesting such transfer has paid to the
Corporation the amount of any such tax or has established to the
satisfaction of the Corporation that such tax has been paid. If and to
the extent the Corporation is required to withhold taxes in connection
with the conversion of Series A Preferred Shares, the holders thereof
may, at their option (subject to compliance with federal securities
laws), effect such withholding by causing the Corporation to retain a
portion of the Common Stock issuable upon such conversion (valued at
Market Price).
(f) All certificates representing Series A Preferred Shares
surrendered for conversion shall be appropriately canceled on the
books of the Corporation and the shares so converted represented by
such certificates shall be restored to the status of authorized but
unissued shares of Preferred Stock of the Corporation.
8
EXHIBIT 4.1
SWISS NATURAL BRANDS, INC.
S
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
CUSIP 870885 10 0
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF THE PAR VALUE OF $.01
PER SHARE OF
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized Attorney, upon surrender of this Certificate, properly
endorsed.
This Certificate is not valid until countersigned and registered by the
Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
SECRETARY [seal] PRESIDENT
BANK TO COME
<PAGE>
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER, WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND
THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR
RIGHTS. ANY SUCH REQUEST SHOULD BE ADDRESSED TO THE SECRETARY OF THE
CORPORATION.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT -______CUSTODIAN________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right under Uniform Gifts to Minors
of survivorship and not as Act____________________
tenants in common (State)
</TABLE>
For value received,_______________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAXPAYER IDENTIFICATION NUMBER OF ASSIGNEE
- ------------------------------------------
- ------------------------------------------
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________attorney
to transfer the said stock on the books of the within named Company with full
power of substitution in the premises.
Dated:______________________________
________________________________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
________________________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM) PURSUANT TO
S.E.C. RULE 17Ad-15
<PAGE>
EXHIBIT 4.2
No sale, offer to sell or transfer of the securities represented by this
certificate or any interest therein shall be made unless a registration
statement under the Securities Act of 1933, as amended, with respect to such
transaction is then in effect, or the issuer has received an opinion of counsel
satisfactory to it that such transfer does not require registration under that
Act.
This Warrant will be void after 5:00 p.m. New York time on
, 2004 (i.e. five years from the effective date of the Registration Statement).
REPRESENTATIVE'S WARRANT
WARRANT NO. 1
To Subscribe for and Purchase Shares of
Swiss Natural Brands, Inc.
(Transferability Restricted as Provided in Paragraph 8 Below)
THIS CERTIFIES THAT, for value received, or registered
assigns, is entitled to subscribe for and purchase from SWISS NATURAL BRANDS,
INC., incorporated under the laws of the State of Delaware (the "Company") up to
fully paid and non-assessable shares of Common Stock (the "Shares") of the
Company, as hereinafter defined, at the "Purchase Price" and during the period
hereinafter set forth, subject, however, to the provisions and upon the terms
and conditions hereinafter set forth. This Warrant is one of an issue of the
Company's Common Stock Purchase Warrants (herein called the "Warrants"),
identical in all respects except as to the names of the holders thereof and the
number of Shares purchasable thereunder, representing on the original issue
thereof rights to purchase up to 125,000 Shares.
1. As used herein:
(a) "Common Stock" or "Common Shares" shall initially refer to
the Company's Common Stock, $.01 par value, per share as more fully set forth in
Section 5 hereof.
(b) "Purchase Price" shall be $8.66 per share (165% of the
public offering price per share) which is subject to adjustment pursuant to
Section 4 hereof.
(c) "Underwriter" or "Representative" shall refer to
Comprehensive Capital Corporation.
(d) "Underwriting Agreement" shall refer to the Underwriting
Agreement dated as of , 1999 between the Company and the Underwriter.
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<PAGE>
(e) "Warrants" or "Representative's Warrants" shall refer to
Warrants to purchase an aggregate of up to 125,000 Shares issued to the
Underwriter or its designees by the Company pursuant to the Underwriting
Agreement, as such may be adjusted from time to time pursuant to the terms of
Section 4 and including any Warrants represented by any certificate issued from
time to time in connection with the transfer, partial exercise, exchange of any
Warrants or in connection with a lost, stolen, mutilated or destroyed Warrant
certificate, if any, or to reflect an adjusted number of Shares.
(f) "Underlying Securities" shall refer to and include the
Common Shares issuable or issued upon exercise of the Representative's Warrants.
(g) "Holders" shall mean the registered holder of such
Representative's Warrants or any issued Underlying Securities.
(h) "Effective Date" shall refer to the effective date of the
Form SB-2 Registration Statement File No. 333-85683 with the Securities and
Exchange Commission.
(i) "Transfer Agent shall mean Corporate Stock Transfer, Inc.
2. The purchase rights represented by this Warrant may be exercised by
the holder hereof, in whole or in part at any time, and from time to time,
during the period commencing on the Effective Date until , 2004 (the "Expiration
Date"), by the presentation of this Warrant, with the purchase form attached
duly executed, at the Company's office (or such office or agency of the Company
as it may designate in writing to the Holder hereof by notice pursuant to
Section 14 hereof), and upon payment by the Holder to the Company in cash, or by
certified check or bank draft of the Purchase Price for such Shares of Common
Stock. The Company agrees that the Holder hereof shall be deemed the record
owner of such Underlying Securities as of the close of business on the date on
which this Warrant together with payment of the exercise price shall have been
presented to the Company. Certificates for the Underlying Securities so
purchased shall be delivered to the Holder hereof by the Transfer Agent within a
reasonable time, not exceeding five (5) days, after the rights represented by
this Warrant shall have been so exercised. If this Warrant shall be exercised in
part only, the Company shall, upon surrender of this Warrant for cancellation,
deliver a new Representative's Warrant evidencing the rights of the Holder
hereof to purchase the balance of the Shares which such Holder is entitled to
purchase hereunder. Exercise in full of the rights represented by this Warrant
shall not extinguish the rights granted under Section 9 hereof.
3. Subject to the provisions of Section 8 hereof, (i) this Warrant is
exchangeable at the option of the Holder at the aforesaid office of the Company
for other Representative's Warrants of different denominations entitling the
Holder thereof to purchase in the aggregate the same number of Shares of Common
Stock as are purchasable hereunder; and (ii) this Warrant may be divided or
combined with other Representative's Warrants which carry the same rights, in
either case, upon presentation hereof at the aforesaid office of the Company
together with a written notice, signed by the Holder hereof, specifying the
names and denominations in which new Representative's
2
<PAGE>
Warrants are to be issued, and the payment of any transfer tax due in connection
therewith.
4. Subject and pursuant to the provisions of this Section 4, the
Purchase Price and number of Common Shares subject to this Warrant shall be
subject to adjustment from time to time as set forth hereinafter.
(A) If the Company shall, at any time, subdivide its
outstanding Common Shares by recapitalization, reclassification, split up
thereof, or other such issuance without additional consideration, the
appropriate Purchase Price immediately prior to such subdivision shall be
proportionately decreased, and if the Company shall at any time combine the
outstanding Common Shares by recapitalization, reclassification or combination
thereof, the Purchase Price immediately prior to such combination shall be
proportionately increased. Any such adjustment to the Purchase Price or the
corresponding adjustment to the Purchase Price shall become effective at the
close of business on the record date for such subdivision or combination. No
adjustment to the Purchase Price and the number of shares issuable upon exercise
of this Warrant shall be required if such adjustment provides the holders of
this Warrant with disproportionate rights, privileges and economic benefits
which are not provided to the public shareholders.
(B) In the event that prior to the Representative's Warrant's
expiration date the Company adopts a resolution to merge, consolidate, or sell
percentages in all of its assets, each Warrant holder upon the exercise of his
Representative's Warrant will be entitled to receive the same treatment as a
holder of any other share of Common Stock. In the event the Company adopts a
resolution for the liquidation, dissolution, or winding up of the Company's
business, the Company will give written notice of such adoption of a resolution
to the registered holders of the Representative's Warrants. Thereupon all
liquidation and dissolution rights under this Warrant will terminate at the end
of thirty (30) days from the date of the notice to the extent not exercised
within those thirty (30) days.
(C) If any capital reorganization or reclassification of the
capital stock of the Company or consolidation or merger of the Company with
another corporation, shall be effected in such a way that holders of Common
Stock shall be entitled to receive stock, securities, cash or assets with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, the Company or
such successor or purchasing corporation, as the case may be, shall be obligated
to provide for and notify each registered holder of the Representative's Warrant
that such holder shall have the right thereafter and until the expiration date
to exercise such Warrant for the kind and amount of stock, securities, cash or
assets receivable upon such reorganization, reclassification, consolidation,
merger or sale by a holder of the number of shares of Common Stock for the
purchase of which such Warrant might have been exercised immediately prior to
such reorganization, reclassification, consolidation, merger or sale, subject to
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 4.
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<PAGE>
(D) In case at any time the Company shall declare a dividend
or make any other distribution upon any stock of the Company payable in Common
Stock, then such Common Stock issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.
(E) Upon any adjustment of the appropriate respective Purchase
Price as hereinabove provided, the number of Common Shares issuable upon
exercise of each class of Warrant shall be changed to the number of shares
determined by dividing (i) the aggregate Purchase Price payable for the purchase
of all shares issuable upon exercise of that class of Warrant immediately prior
to such adjustment by (ii) the appropriate Purchase Price per share in effect
immediately after such adjustment.
(F) No adjustment in the Purchase Price shall be required
under Section 4 hereof unless such adjustment would require an increase or
decrease in such price of at least 1% provided, however, that any adjustments
which by reason of the foregoing are not required at the time to be made shall
be carried forward and taken into account and included in determining the amount
of any subsequent adjustment, and provided further, however, that in case the
Company shall at any time subdivide or combine the outstanding Common Shares as
a dividend, said amount of 1% per share shall forthwith be proportionately
increased in the case of a combination or decreased in the case of a subdivision
or stock dividend so as to appropriately reflect the same.
(G) On the effective date of any new Purchase Price the number
of shares as to which this Warrant may be exercised shall be increased or
decreased so that the total sum payable to the Company on the exercise of this
Warrant shall remain constant.
(H) The form of Representative's Warrant need not be changed
because of any change pursuant to this Article, and Representative's Warrants
issued after such change may state the Purchase Price and the same number of
shares as is stated in the Representative's Warrants initially issued pursuant
to this Warrant. However, the Company may at any time in its sole discretion
(which shall be conclusive) make any change in the form of Representative's
Warrant that the Company may deem appropriate and that does not affect the
substance thereof, and any Representative's Warrant thereafter issued or
countersigned, whether in exchange or substitution for an outstanding Warrant or
otherwise, may be in the form as so changed.
5. For the purposes of this Warrant, the terms "Common Shares" or
"Common Stock" shall mean (i) the class of stock designated as the Common Stock,
$.01 par value, of the Company on the date set forth on the first page hereof or
(ii) any other class of stock resulting from successive changes or
re-classifications of such Common Stock consisting solely of changes in par
value, or from no par value to par value, or from par value to no par value. If
at any time, as a result of an adjustment made pursuant to Section 4, the
securities or other property obtainable upon exercise of this Warrant shall
include shares or other securities of the Company other than Common Shares or
securities of another corporation or other property, thereafter, the number of
such other shares or other securities or property so obtainable shall be subject
to adjustment from time to time in a
4
<PAGE>
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Shares contained in Section 4 and all other provisions of
this Warrant with respect to Common Shares shall apply on like terms to any such
other shares or other securities or property. Subject to the foregoing, and
unless the context requires otherwise, all references herein to Common Shares
shall, in the event of an adjustment pursuant to Section 4, be deemed to refer
also to any other securities or property then obtainable as a result of such
adjustments.
6. The Company covenants and agrees that:
(a) During the period within which the rights represented by
the Representative's Warrant may be exercised, the Company shall, at all times,
reserve and keep available out of its authorized capital stock, solely for the
purposes of issuance upon exercise of this Warrant, such number of its Common
Shares as shall be issuable upon the exercise of this Warrant and at its expense
will obtain the listing thereof on all national securities exchanges on which
the Common Shares are then listed; and if at any time the number of authorized
Common Shares shall not be sufficient to effect the exercise of this Warrant,
the Company will take such corporate action as may be necessary to increase its
authorized but unissued Common Shares to such number of shares as shall be
sufficient for such purpose; the Company shall have analogous obligations with
respect to any other securities or property issuable upon exercise of this
Warrant.
(b) All Common Shares which may be issued upon exercise of the
rights represented by this Warrant will, upon issuance be validly issued, fully
paid, nonassessable and free from all taxes, liens and charges with respect to
the issuance thereof.
(c) All original issue taxes payable in respect of the
issuance of Common Shares upon the exercise of the rights represented by this
Warrant shall be borne by the Company but in no event shall the Company be
responsible or liable for income taxes or transfer taxes upon the transfer of
any Representative's Warrants.
7. Until exercised, this Warrant shall not entitle the Holder hereof to
any voting rights or other rights as a shareholder of the Company, except that
the Holder of this Warrant shall be deemed to be a shareholder of this Company
for the purpose of bringing suit on the ground that the issuance of shares of
stock of the Company is improper under the New York Corporation Law.
8. This Warrant and the Underlying Securities shall not be sold,
transferred, assigned or hypothecated for a period of twelve (12) months from
the Effective Date, except to officers or partners of the Representative, and/or
the other underwriters and/or selected dealers who participated in such
offering, or the officers or partners of such underwriters and/or selected
dealers. In no event shall this Warrant and the Underlying Securities be sold,
transferred, assigned or hypothecated except in conformity with the applicable
provisions of the Securities Act of 1933, as then in force (the "Act"), or any
similar Federal statute then in force, and all applicable "Blue Sky" laws.
5
<PAGE>
9. The Holder of this Warrant, by acceptance hereof, agrees that, prior
to the disposition of this Warrant or of any Underlying Securities theretofore
purchased upon the exercise hereof, under circumstances that might require
registration of such securities under the Act, or any similar federal statute
then in force, such Holder will give written notice to the Company expressing
such Holder's intention of effecting such disposition, and describing briefly
such Holder's intention as to the disposition to be made of this Warrant and/or
the Underlying Securities theretofore issued upon exercise hereof. Promptly upon
receiving such notice, the Company shall present copies thereof to its counsel
and the provisions of the following subdivisions shall apply:
(a) If, in the opinion of such counsel, the proposed
disposition does not require registration under the Act, or any similar federal
statute then in force, of this Warrant and/or the securities issuable or issued
upon the exercise of this Warrant, the Company shall, as promptly as
practicable, notify the Holder hereof of such opinion, whereupon such holder
shall be entitled to dispose of this Warrant and/or such Underlying Securities
theretofore issued upon the exercise hereof, all in accordance with the terms of
the notice delivered by such Holder to the Company.
(b) If, in the opinion of such counsel, such proposed
disposition requires such registration under the Act, or similar federal statute
then in effect, of this Warrant and/or the Underlying Securities issuable or
issued upon the exercise of this Warrant, the Company shall promptly give
written notice of such opinion to the Holder hereof and to the then holders of
the securities theretofore issued upon the exercise of this Warrant at the
respective addresses thereof shown on the books of the Company. The registration
rights contained in Section 15 of the Underwriting Agreement are incorporated by
reference as if set forth in their entirety herein.
10. The Company agrees to indemnify and hold harmless the holder of
this Warrant, or of securities issuable or issued upon the exercise hereof, from
and against any claims and liabilities caused by any untrue statement of a
material fact, or omission to state a material fact required to be stated, in
any such registration statement or prospectus except insofar as such claims or
liabilities are caused by any such untrue statement or omission based on
information furnished in writing to the Company by such holder, or by any other
such holder affiliated with the holder who seeks indemnification, as to which
the holder hereof, by acceptance hereof, agrees to indemnify and hold harmless
the Company.
11. If this Warrant, or any of the securities issuable pursuant hereto,
require qualification or registration with, or approval of, any governmental
official or authority (other than registration under the Act, or any similar
federal statute at the time in force), before such securities may be issued on
the exercise hereof, the Company, at its expense, will take all requisite action
in connection with such qualification, and will use its best efforts to cause
such securities and/or this Warrant to be duly registered or approved, as may be
required.
12. This Warrant is exchangeable, upon its surrender by the registered
holder at such office or agency of the Company as may be designated by the
Company, for new
6
<PAGE>
Representative's Warrants of like tenor, representing, in the aggregate, the
right to subscribe for and purchase the number of Common Shares that may be
subscribed for and purchased hereunder, each of such new Representative's
Warrants to represent the right to subscribe for and purchase such number of
Common Shares as shall be designated by the registered holder at the time of
such surrender. Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction or mutilation of this Warrant, and, in the case of any
such loss, theft or destruction, upon delivery of a bond of indemnity
satisfactory to the Company, or in the case of such mutilation, upon surrender
or cancellation of this Warrant, the Company will issue to the registered holder
a new Representative's Warrant of like tenor, in lieu of this Warrant,
representing the right to subscribe for and purchase the number of Common Shares
that may be subscribed for and purchased hereunder. Nothing herein is intended
to authorize the transfer of this Warrant except as permitted under Paragraph 8.
13. Every holder hereof, by accepting the same, agrees with any
subsequent holder hereof and with the Company that this Warrant and all rights
hereunder are issued and shall be held subject to all of the terms, conditions,
limitations and provisions set forth in this Warrant, and further agrees that
the Company and its transfer agent may deem and treat the registered holder of
this Warrant as the absolute owner hereof for all purposes and shall not be
affected by any notice to the contrary.
14. All notices required hereunder shall be given by first-class mail,
postage prepaid; if given by the holder hereof, addressed to the Company at 1031
Route 9W, Grandview, New York 10960 or such other address as the Company may
designate in writing to the holder hereof; and if given by the Company,
addressed to the holder at the address of the holder shown on the books of the
Company. The validity, construction and enforcement of this Warrant shall be
governed by the laws of the State of New York and jurisdiction is hereby vested
in the Courts of said State in the event of the institution of any legal action
under this Warrant.
IN WITNESS WHEREOF, SWISS NATURAL BRANDS, INC. has caused this Warrant
to be signed by its duly authorized officers under its corporate seal, to be
dated as of , 1999.
Swiss Natural Brands, Inc.
(Corporate Seal)
By:
Herbert Paul, President
Attest:
Ralph M. Ferrante, Chief Executive Officer
7
<PAGE>
PURCHASE FORM
To Be Executed
Upon Exercise of Warrant
The undersigned hereby exercises the right to purchase Common Shares evidenced
by the within Warrant, according to the terms and conditions thereof, and
herewith makes payment of the purchase price in full. The undersigned requests
that certificates for such shares shall be issued in the name set forth below.
Dated: , 200
Signature
Print Name of Signatory
Name to whom certificates are to
be issued if different from above
Address:
Social Security No. or other
identifying number
If said number of shares shall not be all the shares purchasable under
the within Warrant, the undersigned requests that a new Warrant for the
unexercised portion shall be registered in the name of :
(Please Print)
Address:
Social Security No. or other
identifying number: ____________
Signature
8
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED , hereby
sells assigns and transfers to , Soc. Sec. No.
[ ] the within Warrant, together with all rights, title and interest therein,
and does hereby irrevocably constitute and appoint attorney to transfer such
Warrant on the register of the within named Company, with full power of
substitution.
Signature
Dated: , 2000
Signature Guaranteed:
9
<PAGE>
EXHIBIT 4.3
THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES
ONLY AND MAY NOT BE TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") SHALL HAVE BECOME EFFECTIVE WITH
RESPECT THERETO OR (ii) RECEIPT BY THE ISSUER OF AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT
REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER AND THAT SUCH TRANSFER IS NOT
IN VIOLATION OF ANY APPLICABLE FEDERAL, STATE OR FOREIGN SECURITIES LAWS. THIS
LEGEND SHALL BE ENDORSED UPON ANY SECURITIES ISSUED IN EXCHANGE FOR THESE
SECURITIES.
12% Convertible Subordinated Debenture of
SWISS NATURAL FOODS, INC.
Number Dollars $
SWISS NATURAL FOODS, INC., a Delaware corporation (the
"Company"), for value received, hereby issues this Debenture (the "Security")
and promises to pay to or registered assigns, the "Payee" or "Holder") in
accordance with the provisions herein at the offices of the Company, the
principal sum of
Dollars on the last day of the 24th month following the issue
date (the "Maturity") and to pay interest thereon as provided herein, until the
principal hereof is paid or duly provided for.
1. Interest. The Company, promises to pay interest on the
principal amount of this Security at the rate of 12% per annum, payable in
arrears. The Company will pay interest annually on December 31 of each year
commencing December 31, 1999. Interest on the Security will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of original issuance of the Security set forth in this Security.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
<PAGE>
2. Method of Payment. The Company will pay interest on the
Security (except defaulted interest) to the persons who are registered Holders
of the Security at the close of business on the fifteenth day prior to the
applicable interest payment date. Holders must surrender the Security to the
Company to collect principal payments. The Company will pay principal, premium,
if any, and interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts. However, the Company
may pay principal, premium, if any, and interest by check payable in such money.
The Company may mail an interest check to a Holders's registered address.
3. Optional Redemption. The Security may be redeemed by the
Company on at least 15 days' notice at the option of the Company, in whole at
any time or in part from time to time, at a price equal to 100% of the principal
amount of the Security together with interest accrued thereon and unpaid from
the later of (a) the date of issuance of the Security or (b) the last interest
payment date to the redemption date.
4. Notice of Redemption. Notice of redemption will be mailed
at least 15 days before the redemption date to each Holder of Security to be
redeemed at his registered address. On and after the redemption date interest
ceases to accrue on a Security or the portion of such Security called for
redemption.
5. Prepayment. The Company may at any time and from time to
time make optional prepayments of all or any portion of the then unpaid
principal amount and accrued interest owed on a Security, without premium or
penalty of any kind.
6. Conversion. A Holder of a Security may convert the
principal amount of this Security into Common Stock of the Company at any time
prior to the maturity of the Security, or, if the Security is called for
redemption, the Holder may convert it at any time before the close of business
on the day which is five days before the date fixed for redemption. The
conversion price is $1.50 per share. To determine the number of shares issuable
upon conversion of a Security, divide the principal amount to be converted by
$1.50 and round the result to the nearest 1/100th share. The Company will
deliver a check equal to the cash value of a fractional share in lieu of
delivering any fractional shares. On conversion no payment or adjustment for
interest accrued on the Security or dividends will be made. If any Security not
called for redemption is converted between a record date for the payment of
interest and the next succeeding interest payment date, such Security must be
accompanied by funds equal to the interest payable to the registered Holder on
such interest payment date on the principal amount so converted.
<PAGE>
To convert a Security a Holder must (a) complete and sign the
conversion notice at the end of the Security, (b) surrender the Security to the
Company, (c) furnish appropriate endorsements and transfer documents if required
by the Company and (d) pay any transfer or similar tax if required. A Holder may
convert a portion of a Security if the portion is $1,000 or a whole multiple of
$1,000. In case of a partial conversion, the Company upon surrender hereof, will
deliver to the Holder a new Security representing the principal face value which
has not been converted.
The Holder of this Security shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or in
equity; provided, however, that in the event any stock certificate representing
a converted Security is issued to the Holder hereof upon conversion of this
Security, such Holder, shall be deemed to have become, a holder of record of
such shares on the date on which all of the provisions of the prior paragraph
are met.
Each share of Common Stock into which this Security is
converted shall have imprinted on it the following legend:
THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES
ONLY AND MAY NOT BE TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") SHALL HAVE BECOME EFFECTIVE WITH
RESPECT THERETO OR (ii) RECEIPT BY THE ISSUER OF AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT
REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER AND THAT SUCH TRANSFER IS NOT
IN VIOLATION OF ANY APPLICABLE FEDERAL, STATE OR FOREIGN SECURITIES LAWS.
6. Denominations, Transfer, Exchange. The Securities are in
denominations of $1,000 and whole multiples of $1,000. The transfer of
Securities may be registered with the Company and made provided that the Holder
furnishes appropriate endorsement and transfer documents. The Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection with any transfer. The Company need not exchange or
register the transfer of any Security selected for redemption in whole or in
part. Also it need not exchange or register the transfer of any Security for a
period of 15 days before a selection of Securities to be redeemed.
<PAGE>
7. Persons Deemed Owners. The Holder of a Security registered
in the books and records of the Company shall be treated as its owner for all
purposes.
8. Defaults. If any of the following occurs, the entire unpaid
principal amount and all accrued and unpaid interest thereon, shall be
immediately due and payable, without presentment, demand, protest or notice:
(1) The Company defaults in the payment of interest on this
Security when the same becomes due and payable and the default continues for a
period of 30 days, or
(2) the Company defaults in the payment of the principal of
this Security when the same becomes due and payable at maturity, or
(3) the Company pursuant to or within the meaning of Title II,
U.S. Code or any similar federal or state law for the relief of debtors (the
"Bankruptcy Law"):
(a) commences a voluntary case, or
(b) consents to the entry of an order for relief against it
in an involuntary case, or
(c) consents to the appointment of a receiver, trustee,
assignee, liquidator or similar official under any
Bankruptcy Law (a "Custodian") of it or for all or
substantially all of its property, or
(d) makes a general assignment for the benefit of its
creditors; or
(4) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(a) is for relief against the Company in an involuntary
case
(b) appoints a Custodian of the Company for all or
substantially all of its property, or
(c) orders the liquidation of the Company, and the order or
decree remains unstayed and in effect for 60 days.
<PAGE>
9. No Recourse Against Others. No director, officer, employee
or stockholder, as such, past, present or future, of the Company or any
successor corporation, shall have any liability for any obligations of the
Company under this Security or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Securityholder by accepting a
Security waives and releases all such liability. The waiver and release are part
of the consideration for the issue of the Security.
10. Subordination of Other Indebtedness.
(1) The Company, for itself, its successors and assigns,
covenants and agrees, and each Holder of this Debenture, by his acceptance
thereof, likewise covenants and agrees, that the payment of the principal of and
interest on, each and all of the Debentures is hereby expressly subordinated in
right of payment, to the prior payment in full of any indebtedness now
outstanding or hereinafter incurred, to a bank, financial institution engaged in
lending money, insurance company or other similar institutional lender ("Senior
Indebtedness"). Each Holder of this Debenture shall, upon the Maker's reasonable
request, execute and deliver to the Maker such documents as may be necessary or
appropriate to evidence or confirm the foregoing subordination.
(2) Notwithstanding the subordination described in Section
10(1) above, until: (i) the occurrence of an event of default by the Company
under any document evidencing Senior Indebtedness; or (ii) the Company makes any
assignment for the benefit of creditors; or (iii) any bankruptcy proceedings are
instituted by or against the Company; or (iv) any receiver for the Company's
business or assets is appointed; or (v) there is any dissolution or winding up
of the affairs of the Company, whichever of the foregoing occurs earliest, the
Company may make and the Holders of this Debenture may receive any and all
payments due under this Debenture.
(3) In the event of any default in payment of any principal of
or any interest on any Senior Indebtedness and during the continuance of any
such default, the Holder of this Debenture shall not be entitled to receive any
amount, in respect of the principal of or interest on the Debenture.
<PAGE>
11. Additional Provisions.
(1) Neither this Debenture nor any term hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
terminations sought.
(2) All notices, requests, demands and other communications to
the Company hereunder shall be in writing and shall be deemed given if delivered
personally or mailed by certified or registered mail, postage prepaid, return
receipt requested or via facsimile, addressed to Swiss Natural Foods, Inc., 1031
Route 9W, Upper Grandview, NY 10960, Attention: Dr. Ralph Ferrante or to such
other addresses as the Company may designate in writing to the holder hereof:
(3) This Debenture shall be construed and enforced in
accordance with the internal laws of the State of New York, without regard to
such State's principles respecting the conflicts of law.
(4) This Security has been issued subject to investment
representations of the original purchaser hereof and may be transferred,
assigned or exchanged only in compliance with the Securities Act of 1933, as
amended (the "Act"), any applicable state Securities laws and any applicable
securities laws of any other jurisdiction. The Holder of this Security, by
acceptance hereof, agrees that this Security is being acquired for investment
and that such Holder will not offer, sell or otherwise dispose of this Security
or any shares of Common Stock into which this Security is converted until (i) a
registration statement under the Act shall have become effective with respect
thereto; or (ii) receipt by the Company of an opinion of counsel reasonably
satisfactory to the Company to the effect that registration under the Act is not
required in connection with such proposed transfer and that such transfer is not
in violation of any applicable state or foreign securities laws. Each
certificate evidencing conversion shares shall be imprinted with the following
legend:
THESE SECURITIES MAY NOT BE TRANSFERRED UNTIL:
(i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT") SHALL HAVE BECOME EFFECTIVE WITH
RESPECT THERETO; OR (II) RECEIPT BY THE ISSUER OF AN OPINION
OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH
SUCH PROPOSED TRANSFER AND THAT SUCH TRANSFER IS NOT IN
VIOLATION OF ANY APPLICABLE STATE, FEDERAL OR FOREIGN
SECURITIES LAWS.
<PAGE>
IN WITNESS WHEREOF, SWISS NATURAL FOODS, INC. has caused this
instrument to be duly signed in its name by the undersigned.
Dated: January 29, 1999 SWISS NATURAL FOODS
By:
President
(Title)
<PAGE>
ASSIGNMENT FORM CONVERSION NOTICE
To assign this Security, To convert this Security
fill in the form below: into Common Stock of the Company,
check the box
I or we assign and transfer this
Security to:
________________________________ To convert only part of this
(Insert assignee's Social Security, state the amount
Security or Tax ID No.) (must be in multiples of $1,000):
________________________________ $________________________________
________________________________ If you want the stock
certificate made out in
another person's
name, fill in ________________
the form below:
________________________________
(Print or type assignee's
name, address and zip code)
________________________________
(Insert other person's Social
and irrevocably appoint Security or Tax ID No.)
_________________ agent to
transfer this Security on
the books of the Company.
The agent may substitute
another to act for him.
________________________________
________________________________
________________________________
(Print or type other person's
name, address and zip code)
Date:____________________ Your signature:_________________
(Sign exactly as your name
appears in this Security)
Signature Guarantee:
EXHIBIT 10.2
Agreement made as of March 1, 1999, between SWISS
NATURAL FOODS, INC., a Delaware corporation (the "Company") and Ralph Ferrante
(the "Executive") superseding prior agreement dated as of March 1, 1999.
1. EMPLOYMENT
The Company hereby employs Executive and Executive accepts employment
as an executive. Executive will travel as reasonably necessary and has
heretofore been his practice for the performance of his duties. Executive will
devote his skills and best efforts, as required, to advance the interests of the
Company.
2. TERM
2.1 The term of this Agreement will begin on March 1, 1999 and will
continue until February 28, 2002 unless sooner terminated.
3. COMPENSATION
3.1 The Company will pay Executive a base salary at the rate of one
hundred sixty-eight thousand ($168,000) dollars per annum and during the period
March 1, 1999 through February 29, 2000 ($80,000 of which is to be paid March 1,
1999 through August 31, 1999); a base salary of one hundred eighty-five thousand
($185,000) dollars during the period March 1, 2000 through
February 28, 2001 and a base salary of two hundred four thousand ($204,000)
dollars during the period March 1, 2001 through February 28, 2002. Said base
salary is to be paid no less frequently than monthly. Notwithstanding any
provision of this Agreement to the contrary, the Company may at any time or from
time to time, increase the base salary, provide for a bonus, or otherwise
increase or add to the benefits receivable by the Executive. In the event that
such base salary or benefit shall be so increased, then, from and after the date
of such increase, each base salary or benefit shall be so increased.
4. BENEFITS
4.1 Executive shall be eligible to participate in any plan adopted in
the future for the benefit of any employee of the Company, such as pension
plans, profit sharing plans, stock option or stock purchase plans, bonus,
investment funds, and group or other insurance or hospitalization plans and
benefits. In lieu of participating in a medical or life insurance program, the
Executive shall receive an allowance for medical insurance of thirteen thousand
($13,000) dollars for each of the periods March 1, 1999 through February 29,
2000 ($1,500 of which is to be paid March 1, 1999 through August 31, 1999),
March 1, 2000 through February 28, 2001 and March 1, 2001 and March 1, 2001
through February 28, 2002. The Executive shall receive an allowance for
<PAGE>
life insurance of ten thousand ($10,000) dollars for the period March 1, 1999
through February 29, 2000 (to be paid January 1, 2000 through February 29, 2000)
and twelve thousand ($12,000) dollars for the periods March 1, 2000 through
February 28, 2001 and March 1, 2001 through February 28, 2002.
4.2 The Executive shall be given a car allowance of seventy-two hundred
($7,200) dollars for the period March 1, 1999 through February 29, 2000 (6,000
of which is to be paid March 1, 1999 through December 31, 1999 and $1,200 to be
paid January 1, 2000 through February 29, 2000; ninety-six hundred ($9,600)
dollars for the periods March 1, 2000 through February 28, 2001 and March 1,
2001 through February 28, 2002.
4.3 Executive shall be entitled to the equivalent of four weeks
vacation in each 12 month period.
4.4 The Company shall reimburse Executive for all reasonable business
expenses incurred in connection with the performance of his duties under this
Agreement or paid by Executive on behalf of the Company in accordance with the
Company's general policies regarding accounting for expenses.
4.5 All base salary payable under this Agreement will be subject to
applicable tax withholding if any.
5. TERMINATION
5.1 The Executive's employment hereunder shall terminate upon the
Executive's death, in which event the Company shall pay to the designee of the
Executive, or if there be no designee, to his estate, the salary to which he
would be entitled pursuant hereto through the date of his death and for a period
of one hundred eighty (180) days thereafter.
5.2 Disability. The Company may terminate the Executive's employment
hereunder by written notice to the executive if (i) as a result of the
executive's permanent incapacity due to physical or mental disability or illness
as determined by a physician mutually agreed upon by the Executive and the
Company and the Executive shall have been unable to perform a substantial
portion of his duties hereunder for a period of 180 consecutive days in any 12
consecutive months and (ii) within fifteen (15) days after written notice of
termination hereunder is given by the Company (which may be given at any time
after the end of such 180 days of absence) the Executive shall not have returned
to the substantial performance of his duties hereunder. During any period that
the Executive fails to perform his duties hereunder as a result of incapacity
due to physical or mental disability or illness (a "Disability Period"), the
Executive shall continue to receive his full base salary
<PAGE>
hereunder until his employment is terminated pursuant to this Section provided
that payments so made to the Executive shall be reduced by the sum of the
amounts, if any, payable to the Executive for the Disability Period under any
disability benefit plans obtained by the Company.
5.3 Termination by Company. The Company may, pursuant to the procedure
prescribed in Section 6.5 below, terminate the Executive's employment hereunder
for "Cause." "Cause" shall mean any of the following:
(i) Executive is convicted of a felony including conviction under state
or federal laws of any embezzlement, theft relating to the Company or any of its
subsidiaries or affiliated entities;
(ii) Executive becomes an alcoholic or addicted to drugs;
(iii) Executive is convicted of a felony; and
(iv) Cause shall not include death or disability of the Executive.
<PAGE>
5.4 Termination by Executive. The Executive may, pursuant to the
procedure prescribed in Section 6.5. below, terminate his employment hereunder
at any time, if with "Good Reason." "Good Reason" shall mean any of the
following (without Executive's express written consent):
(i) a material change or reduction in the position, duties,
status or reporting responsibilities; a removal from or failure to be elected to
a previously held position or failure to comply with Section 1 above, except in
connection with the termination of his employment for Cause, as a result of the
Executive's disability or death or termination by the Executive other than for
Good Reason;
(ii) a reduction in the Executive's compensation or benefits
provided in Sections 3 and 4; and
(iii) any material breach by Company of its material
obligations hereunder which breach is not cured within thirty (30) days after
written demand for performance which identifies the manner in which the
Executive believes that the Company has not performed its obligations hereunder
is delivered to the Company by the Executive.
5.5 Procedure to Terminate for Cause or With Good Reason. In the event
that (i) the Company proposes to terminate the Executive's employment for Cause
or (ii) the Executive proposes to terminate his employment with Good Reason,
then the Company or the Executive, as the case may be, shall give written notice
of such proposed termination to the other party, specifying such alleged Cause
or Good Reason, and the other party, shall have thirty (30) days from the time
of receipt of such notice to cure the alleged deficiency. In the event that the
Cause or Good Reason for termination, as the case may be, is not subject to cure
or is not, if subject to cure, acknowledged by the party proposing to terminate
to have been cured within thirty (30) days thereafter, then notice of such
proposed termination may be given by the party proposing termination to an
arbitrator or arbitrators, to be chosen pursuant to Section 13 hereof, who shall
determine if such proposed termination is in fact for Cause or with Good Reason,
as the case may be, and if curable, if any attempt at cure was successful.
If, in the case of a proposed termination by the Company for
Cause the arbitrator(s) shall determine that Cause for termination existed and,
if curable, was not cured, then the Company, acting through its Board of
Directors, may proceed to give notice of such termination to the Executive and
this Agreement shall be terminated without any further liability of
<PAGE>
the Company to the Executive other than for unpaid compensation and benefits to
the date of termination. If the arbitrator(s) shall determine that such proposed
termination by the Company was either without Cause, or that the Cause thereof
was appropriately cured as aforesaid, then the notices of proposed termination
theretofore given by the Company shall be deemed withdrawn and of no further
force or effect. Despite such adverse determination, the Company, acting through
its Board of Directors, may give notice to the Executive electing to terminate
the Executive's employment without Cause. In the event the Company nevertheless
after such adverse determination elects to terminate without Cause, the Company
shall continue to provide the Executive the compensation and benefits provided
in Section 3, 4 and 5 hereof for the remaining term of this Agreement.
If such notice of proposed termination shall have been given
by the Executive and the arbitrator shall determine that Good Reason for such
termination existed and, if curable, was not cured, then the Executive may
proceed to give notice of termination to the Company and the Company shall
continue to provide the Executive the compensation and benefits provided in
Section 3, 4 and 5 hereof for the remaining term of this Agreement. If the
arbitrator shall determine that Good Reason did not exist or that Good Reason
existed but was cured, then the notice of proposed termination theretofore given
by the Executive
<PAGE>
shall be deemed withdrawn. Despite such adverse determination, the Executive may
give notice to the Company of his election to terminate his employment without
Good Reason, in which later event the Executive shall be entitled to receive his
unpaid compensation to the date of termination and to no further compensation
hereunder.
5.6 Leave of Absence. If the Executive is indicted or otherwise charged
by a governmental agency with having committed a felony or otherwise commit
misconduct which materially adversely affects the reputation of the Company, the
Company shall have the right to require the Executive to take a leave of absence
until such indictment or charge is satisfactorily resolved, or this Agreement
otherwise terminates in accordance with its terms or the Board of Directors
determines that no such material adverse effect persists. During any such leave
of absence, the Executive shall continue to receive all compensation and
benefits provided for to the same extent as if he had not taken a leave of
absence.
5.7 Mitigation. Executive shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking employment or
otherwise.
5.8 Effect of Termination. The termination of this Agreement shall not
result in a waiver or other termination of the liabilities of any party for a
breach of this Agreement or of any liabilities which, by their express terms or
by implication, survive the termination of this Agreement or Executive's
employment hereunder.
6. NON-COMPETITION.
6.1 Restrictive Covenant. If this Agreement is (i) terminated by the
Company pursuant to Section 6.3 or if the Agreement is terminated by the
Executive without Good Reason or by the Company with Cause, then for a period of
two (2) years following such termination date or (ii) if this Agreement expires
according to its terms then for a period of one (1) year following such
termination date, the Executive or any member of his family or any entity
controlled by Executive will not, directly or indirectly, in the geographic area
in which the Company does business as of the date of termination without the
prior written consent of the Company, directly or indirectly, act as an officer,
director, employee or stockholder of, or as a partner or principal in, any
business in which the Company is then participating, provided, however, that
nothing contained in this clause shall be deemed to prohibit the Executive from,
directly or indirectly, owning, as an investment, individually
<PAGE>
not more than a 10% equity interest in any such operation or enterprise.
7. NOTICE. Any notice or other communication hereunder shall be in writing and
shall be personally delivered or sent by registered or certified mail, return
receipt requested, to the respective parties hereto as follows:
(a) If to the Company:
Swiss Natural Foods, Inc.
1031 Route 9W
Upper Grandview, NY 10960
(b) If to the Executive:
Dr. Ralph Ferrante
1031 Route 9W
Upper Grandview, NY 10960
The address of either party hereto above specified may be changed by
written notice to the other party.
8. INDEMNIFICATION. The Company will indemnify the Employee (and his legal
representative or other successors) to the fullest extent permitted by the laws
of the State of Delaware and its existing certificate of incorporation and
by-laws, and the Employee shall be entitled to the protection of any insurance
policies the Company may elect to maintain generally for the benefit of its
officers and employees, against all costs, charges
and expenses whatsoever incurred or sustained by him (or his legal
representatives or other successors) in connection with any action, suit or
proceeding to which he (or his legal representatives or other successors) may be
made a party by reason of his being or having been a director, employee or
consultant of the Company or its subsidiaries and affiliates.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding between
the parties with respect to the subject matter hereof, superseding all prior or
contemporaneous negotiations, discussions and agreements (written or oral).
10. BENEFIT AND BINDING EFFECT. This Agreement shall inure to the benefit of and
be binding upon the successors and assigns of the Company but shall be personal
to and not assignable by the Executive. The Company may assign its rights and/or
obligations hereunder only with the prior written consent of the Executive.
11. AMENDMENT; WAIVER. This Agreement may be amended, superseded, cancelled,
renewed, extended or otherwise modified, and the terms or covenants hereof may
be waived, only by, and only to the extent provided in, a written instrument
executed by the party against whom such modification or waiver is sought to be
enforced, and no conduct, behavior or pattern of conduct or behavior shall
constitute, or be deemed to constitute, any such
<PAGE>
modification or waiver. The failure of either party at any time or times to
require performance of any provision hereof shall in no manner affect the right
at a later time to enforce the same. No waiver by either party of the breach of
any term or covenant contained in this Agreement, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing waiver of any
such breach, or a waiver of the breach of any other term or covenant contained
in this Agreement.
12. ARBITRATION. Any determination of whether any proposed termination is for
"Cause" or with "Good Reason" and any other dispute arising under this Agreement
shall be determined by arbitration in the City of New York in accordance with
the then prevailing rules of the American Arbitration Association, before an
arbitrator or arbitrators appointed pursuant to such rules, and the
determination of such arbitrator or arbitrators shall be final, binding and
conclusive on the parties. The prevailing party shall be entitled to recover
reasonable attorneys' fees and the costs of initiating the arbitration
proceeding.
13. HEADINGS. Any headings preceding the text of any of the Sections or
Subsections of this Agreement are inserted for convenience of reference only,
and shall neither constitute a part of this Agreement nor effect its
construction, meaning or effect.
14. SEVERABILITY. If any provision of this Agreement is invalid, illegal or
unenforceable, the balance of this Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If any provision of
this Agreement is too broad, in scope or duration or otherwise, as to be
unenforceable, such provision shall be interpreted to be only so broad as is
enforceable.
15. GOVERNING LAW. This Agreement shall be deemed to be a contract made under,
and shall be governed by, the laws of the State of New York and for all purposes
shall be construed in accordance with the laws of the State of New York.
16. ATTORNEYS' FEES. If any action at law or in equity, including an action for
declaratory relief, is brought to enforce or interpret the provisions of this
Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees from the other party, which fees may be set by the court in the
trial of such action or may be enforced in a separate action
<PAGE>
brought for that purpose, and which fees shall be in addition to any other
relief which may be awarded.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day of effective as of March 1, 1999.
SWISS NATURAL FOODS, INC.
By:
Ralph Ferrante
<PAGE>
EXHIBIT 10.3
Consulting Agreement made as of March 1, 1999, between SWISS
NATURAL FOODS, INC., a Delaware corporation (the "Company") and Herbert Paul,
(the "Consultant") superseding prior agreement dated as of March 1, 1999.
1. ENGAGEMENT
The Company hereby engages Consultant and Consultant accepts engagement
as a business consultant. Consultant will travel as reasonably necessary and has
heretofore been its practice in the past for the Company.
2. TERM
2.1 The term of this Agreement will begin on March 1, 1999 and will
continue until February 28, 2002 unless sooner terminated as herein provided.
3. FEE
3.1 The Company will pay Consultant a fee at the rate of ninety-nine
thousand seven hundred-fifty ($99,750) dollars during the period March 1, 1999
through February 29, 2000 ($79,167 of which is to be paid March 1, 1999 through
December 31, 1999 and $20,583 to be paid January 1, 2000 through February 29,
2000), a fee to be paid of one hundred ten thousand ($110,000) dollars for the
period March 1, 2000 through February 28, 2001 and a fee of one hundred
twenty-one thousand ($121,000) dollars during the period March 1, 2001 through
February 28, 2002. Such fees to be paid no less frequently than monthly. As an
additional fee, Consultant shall receive a payment of forty-seven hundred fifty
($4,750) towards medical insurance and forty-seven hundred fifty ($4,750)
towards other insurance dollars for the period March 1, 1999 through February
29, 2000 (to be paid January 1, 2000 through February 28, 2000); forty-seven
hundred fifty ($4,750) dollars for each insurance for the period March 1, 2000
through February 28, 2001 and March 1, 2001 through March 1, 2002.
Notwithstanding any provision of this Agreement to the contrary the Company may
at any time or from time to time, provide for additional fees or bonus to be
received by the Consultant. In the event such fees are increased, then, from and
after the date of such increase, each fee shall be so increased.
4.1 The Company shall reimburse Consultant for all reasonable business
expenses incurred in connection with the performance of his services under this
Agreement or paid by Consultant on behalf of the Company.
4.2 Termination by Company. The Company may, pursuant to the procedure
prescribed in Section 5.5 below, terminate the Consultant's engagement hereunder
for "Cause." "Cause" shall mean any of the following:
<PAGE>
(i) Consultant is convicted under state or federal laws of any
embezzlement, theft relating to the Company or any of its subsidiaries or
affiliated entities;
(ii) Consultant becomes an alcoholic or addicted to drugs;
(iii) Consultant is convicted of a felony; and
(iv) Cause shall not include death or disability of Consultant.
4.3 Termination by Consultant. The Consultant may, pursuant to the
procedure prescribed in Section 5.5. below, terminate his engagement hereunder
at any time, if with "Good Reason." "Good Reason" shall mean any of the
following (without Consultant's express written consent):
(i) Failure to comply with Section 1 above, except in connection with
the termination of his engagement for Cause;
(ii) a reduction in the Consultant's fees;
(iii) any material breach by Company of its material obligations
hereunder which breach is not cured within thirty (30) days after written demand
for performance which identifies the manner in which the Consultant believes
that the Company has not performed its obligations hereunder is delivered to the
Company by the Consultant.
4.4 Procedure to Terminate for Cause or With Good Reason. In the event
that (i) the Company proposes to terminate the Consultant's engagement for Cause
or (ii) the Consultant proposes to terminate his engagement with Good Reason,
then the Company or the Consultant, as the case may be, shall give written
notice of such proposed termination to the other party, specifying such alleged
Cause or Good Reason, and the other party, shall have thirty (30) days from the
time of receipt of such notice to cure the alleged deficiency. In the event that
the Cause or Good Reason for termination, as the case may be, is not subject to
cure or is not, if subject to cure, acknowledged by the party proposing to
terminate to have been cured within thirty (30) days thereafter, then notice of
such proposed termination may be given by the party proposing termination to an
arbitrator or arbitrators, to be chosen pursuant to Section 11 hereof, who shall
determine if such proposed termination is in fact for Cause or with Good Reason,
as the case may be, and if curable, if any attempt at cure was successful.
<PAGE>
If, in the case of a proposed termination by the Company for Cause the
arbitrator(s) shall determine that Cause for termination existed and, if
curable, was not cured, then the Company, acting through its Board of Directors,
may proceed to give notice of such termination to the Consultant and this
Agreement shall be terminated without any further liability of the Company to
the Consultant other than for unpaid fees and benefits to the date of
termination. If the arbitrator(s) shall determine that such proposed termination
by the Company was either without Cause, or that the Cause thereof was
appropriately cured as aforesaid, then the notices of proposed termination
theretofore given by the Company shall be deemed withdrawn and of no further
force or effect. Despite such adverse determination, the Company, acting through
its Board of Directors, may give notice to the Consultant electing to terminate
the Consultant's engagement without Cause. In the event the Company nevertheless
after such adverse determination elects to terminate without Cause, the Company
shall continue to provide the Consultant the fees and benefits provided in
Section 3 hereof for the remaining term of this Agreement.
If such notice of proposed termination shall have been given by the
Consultant and the arbitrator shall determine that Good Reason for such
termination existed and, if curable, was not cured, then the Consultant may
proceed to give notice of termination to the Company and the Company shall
continue to provide the Consultant the fees and benefits provided in Section 3
hereof for the remaining term of this Agreement. If the arbitrator shall
determine that Good Reason did not exist or that Good Reason existed but was
cured, then the notice of proposed termination theretofore given by the
Consultant shall be deemed withdrawn. Despite such adverse determination, the
Consultant may give notice to the Company of his election to terminate his
engagement without Good Reason, in which later event the Consultant shall be
entitled to receive his unpaid fees to the date of termination and to no further
fees hereunder.
4.5 Mitigation. Consultant shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking other engagements or
otherwise.
4.6 Effect of Termination. The termination of this Agreement shall not
result in a waiver or other termination of the liabilities of any party for a
breach of this Agreement or of any liabilities which, by their express terms or
by implication, survive the termination of this Agreement or Consultant's
engagement hereunder.
<PAGE>
4.7 The Consultant's engagement hereunder shall terminate upon the
Consultant's death, in which event the Company shall pay to the designee of the
Consultant, or if there be no designee, to his estate, the payments to which he
would be entitled pursuant hereto through the date of his death and for a period
of one hundred eighty (180) days thereafter.
4.8 The Company may terminate the Consultant's engagement hereunder by
written notice to the Consultant if (i) as a result of the Consultant's
permanent incapacity due to physical or mental disability or illness, which is
determined by a physician mutually agreed upon by the Consultant and the
Company, the Consultant shall have been unable to perform a substantial portion
of his services hereunder for a period of 180 consecutive days in any 12
consecutive months and (ii) within fifteen (15) days after written notice of
termination hereunder is given by the Company (which may be given at any time
after the end of such 180 days of absence) the Consultant shall not have
returned to the substantial performance of his services hereunder. During any
period that the Consultant fails to perform his services hereunder as a result
of incapacity due to physical or mental disability or illness (a "Disability
Period"), the Consultant shall continue to receive his full fee hereunder until
his engagement is terminated pursuant to this Section.
5. NON-COMPETITION.
5.1 Restrictive Covenant. If this Agreement is (i) terminated by the
Company pursuant to Section 4.2 or if the Agreement is terminated by the
Consultant without Good Reason or by the Company with Cause, then for a period
of two (2) years following such termination date or (ii) if this Agreement
expires according to its terms then for a period of one (1) year following such
termination date, the Consultant will not, directly or indirectly, in the
geographic area in which the Company does business as of the date of termination
without the prior written consent of the Company, directly or indirectly, act as
a consultant to any business in which the Company is then participating.
<PAGE>
6. NOTICE. Any notice or other communication hereunder shall be in writing and
shall be personally delivered or sent by registered or certified mail, return
receipt requested, to the respective parties hereto as follows:
(a) If to the Company:
Swiss Natural Foods, Inc.
1031 Route 9W
Upper Grandview, NY 10960
(b) If to the Consultant:
Mr. Herbert Paul
775 Oakleigh Rd.
N. Woodmere, NY 11581
The address of either party hereto above specified may be changed by
written notice to the other party.
7. INDEMNIFICATION. The Company will indemnify the Consultant to the fullest
extent permitted by the laws of the State of Delaware and its existing
certificate of incorporation and by-laws, and the Consultant shall be entitled
to the protection of any insurance policies the Company may elect to maintain
generally for the benefit of its officers, employees, consultants, and others,
against all costs, charges and expenses whatsoever incurred or sustained by him
(or his legal representatives or other successors) in connection with any
action, suit or proceeding to which he (or his legal representatives or other
successors) may be made a party by reason of his being or having been a
consultant of the Company or its subsidiaries and affiliates.
8. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding between
the parties with respect to the subject matter hereof, superseding all prior or
contemporaneous negotiations, discussions and agreements (written or oral).
<PAGE>
9. BENEFIT AND BINDING EFFECT. This Agreement shall inure to the benefit of and
be binding upon the successors and assigns of the Company but shall not be
assignable by the Consultant. The Company may assign its rights and/or
obligations hereunder only with the prior written consent of the Consultant.
10. AMENDMENT; WAIVER. This Agreement may be amended, superseded, cancelled,
renewed, extended or otherwise modified, and the terms or covenants hereof may
be waived, only by, and only to the extent provided in, a written instrument
executed by the party against whom such modification or waiver is sought to be
enforced, and no conduct, behavior or pattern of conduct or behavior shall
constitute, or be deemed to constitute, any such modification or waiver. The
failure of either party at any time or times to require performance of any
provision hereof shall in no manner affect the right at a later time to enforce
the same. No waiver by either party of the breach of any term or covenant
contained in this Agreement, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such breach, or a
waiver of the breach of any other term or covenant contained in this Agreement.
11. ARBITRATION. Any determination of whether any proposed termination is for
"Cause" or with "Good Reason" and any other dispute arising under this Agreement
shall be determined by arbitration in the City of New York in accordance with
the then prevailing rules of the American Arbitration Association, before an
arbitrator or arbitrators appointed pursuant to such rules, and the
determination of such arbitrator or arbitrators shall be final, binding and
conclusive on the parties. The prevailing party shall be entitled to recover
reasonable attorneys' fees and the costs of initiating the arbitration
proceeding.
12. HEADINGS. Any headings preceding the text of any of the Sections or
Subsections of this Agreement are inserted for convenience of reference only,
and shall neither constitute a part of this Agreement nor effect its
construction, meaning or effect.
13. SEVERABILITY. If any provision of this Agreement is invalid, illegal or
unenforceable, the balance of this Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If any provision of
this Agreement is too broad, in scope or duration or otherwise, as to be
unenforceable, such provision shall be interpreted to be only so broad as is
enforceable.
<PAGE>
14. GOVERNING LAW. This Agreement shall be deemed to be a contract made under,
and shall be governed by, the laws of the State of New York and for all purposes
shall be construed in accordance with the laws of the State of New York.
15. ATTORNEYS' FEES. If any arbitration action is brought to enforce or
interpret the provisions of this Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees from the other party, which fees
may be set by the arbitrators, and such fees shall be in addition to any other
relief which may be awarded.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day of effective as of March 1, 1999.
Swiss Natural Foods, Inc.
By:
Herbert Paul
<PAGE>
EXHIBIT 10.7
CONSUMERS GLASS
[Logo]
Consumers Packaging Inc.
------------------------
777 Kipling Avenue
Etobicoke, Ontario M8Z 5Z4
Sales Office (416) 232-3088
Fax (416) 232-3020
March 30, 1995
Mr. Ralph M. Ferrante,
Chief Executive Officer,
Swiss Natural Foods, Inc.
1031 Route 9W,
Grandview, N.Y. 10960
RE: GLASS SUPPLY AGREEMENT -- REVISED
- -------------------------------------
Dear Ralph:
I would like to thank you for this opportunity, and look forward to growing the
Swiss Natural brand with you.
Below please find glass prices for both your 16 oz. Private bottle and the 16
oz. Industry bottle, mould 0322.
This supply proposal is based on a three-year commitment by both of our
organizations. The proposal is effective July 1, 1995 through July 1, 1998.
Consumers Glass has also committed to duplicate your 16 oz. Swiss Natural bottle
currently supplied by Owens-Brockway at no cost to Swiss Natural. In order to
get a return on our investment for the equipment, we need a minimum volume of
150,000 gross over a three-year period.
The cost of the equipment will go on a memo account and will be reviewed at the
end of the two years.
Prices are for bulk glass only, and are delivered prices to co-packer of your
choice in the Toronto area.
GLASS PRICES
* 16 oz. Swiss Natural - $12.60 U.S./gross
($2.10 U.S./case)
* 16 oz. Industry (0362) - $12.60 U.S./gross
($2.10 U.S./case)
The above prices are firm from July 1, 1995 - July 1, 1996. Pricing is subject
to increase after July 1, 1996 upon announcement of a U.S. industry increase.
<PAGE>
MOULD COST - 16 OZ. SWISS NATURAL
* Memo Account - Rebateable $48,880.00 Cdn.
- Non-Rebateable 5,740.00
------------------
Total $54,628.00 Cdn.
TARGET VOLUMES
* 16 OZ. SWISS NATURAL
Year 1 - 50,000 gross (300,000 cases)
Year 2 - 100,000 gross (600,000 cases)
* 16 OZ. INDUSTRY (0362)
Year 1 - 35,000 gross (210,000 cases)
Test Market
Year 2 - Natural Roll Out
250,000 gross (1.5 million cases).
Consumers Glass is committed to provide Swiss Natural the quality and service
you require to continue to grow your business. If there is anything I can do at
any time, please do not hesitate to contact me directly.
Signature: Dated: Signature: Dated:
/s/ John B. Zanini 30.3.95 /s/ Ralph M. Ferrante April 10,1995
- ------------------------------- ----------------------------------------
John B. Zanini Ralph M. Ferrante
on behalf of CONSUMERS GLASS on behalf of SWISS NATURAL
<PAGE>
CONSUMERS PACKAGING INC.
[Logo]
EMBALLAGES CONSUMERS INC.
777 Kipling Avenue
Etobicoke, Ontario M8Z 5Z4
Telephone (416) 232-3000
November 13, 1998
Mr. Ralph M. Ferrante,
Swiss Natural Foods, Inc.
1031 Route 9W,
Upper Grandview NY 10960
Via Fax: 914-358-2828
RE: November 12, 1998 Meeting Follow-up
- ---------------------------------------
Dear Ralph,
Thank you again for your time and hospitality on November 12, 1998.
As promised, I have gathered details on the issues we discussed and have
outlined them below. You were concerned about the following issues:
* 1999 Glass Production
* Mould Rebate for 16oz glass
* Overpayment of moulds for 16oz Glass.
1. GLASS PRODUCTION
In discussion with Anchor Glass, both your 12oz and 16oz containers are shop
loaded in our Salem plant in the U.S.A. for 1999.
Swiss Natural must evaluate our current inventory position on both containers
and advise when new glass production is required in 1999 based on your sales
forecast. These requirements need to also be firmed up with purchase orders.
2. 16OZ. GLASS SUPPLY AGREEMENT
On March 30, 1995, I confirmed in a letter to you the details of your pricing
for both glass and moulds. That information is as follows:
Glass prices
* 16oz. Private Swiss Natural container (Mould 0561)
* $12.60 U.S./gross
Note: This price has been firm for 3 years.
<PAGE>
Mr. Ralph Ferrante
Page 2
November 13, 1998
3. MOULD COST
Consumers Packaging Inc. did not charge Swiss Natural for the cost of moulds up
front, nor did we amortize the cost of moulds in our glass price.
We charged on a memo account (Invoice #942854), $58,451.96 CDN$, over a 2 year
period. This invoice clearly stated "MEMO ACCOUNT" for which payment was not
expected. We also forward to you credit notes as you reach rebate plateaus.
These rebate plateaus are evaluated in 1/3 increments. The credit notes are
strictly a paper trail indicating your position towards full amortization of the
mould.
4. 12OZ MOULD COST
We have recently invoiced you incorrectly for the above moulds. That invoice has
been cancelled and a new invoice "MEMO ACCOUNT" has been issued.
This invoice, again, is on a "MEMO ACCOUNT" and payment is NOT expected, nor
has the cost of the 12oz mould been amortized in the glass container price.
The rebate volume for the 12oz mould is 80,000 gross over 2 years.
Ralph, I hope this clarifies the issues we discussed. Should you have further
questions, please contact me directly.
Kind Regards,
/s/ John B. Zanini
- --------------------------------------
John B. Zanini
Regional Director, Ontario & Western Sales
JBZ:dw
cc: Gordon Love, Anchor Glass
John Robichaud, Anchor Glass
Bill Higginson Robichaud, Anchor Glass
Greg Sinatro Robichaud, Anchor Glass
Marsha Van Wagner Robichaud, Consumers Glass
Denis Tisdel, Consumers Glass
<PAGE>
GENERAL INFORMATION
PAGE 1
DATE: January 4, 1999
- ------------------------------------------------------------------------------
Information set out herein is general and subject to exceptions.
EASTERN CANADA - comprises all points from and including Newfoundland to and
including Thunder Bay.
WESTERN CANADA - comprises all points West of Thunder Bay to the Pacific Ocean.
TERMS
SALES TAX - extra, at rate effective at time of shipment, unless otherwise
indicated.
TERMS OF SALES - Net 30 days (on approval of Credit Department).
LATE PAYMENT PENALTY - 1 1/2% PER MONTH WILL BE CHARGED ON OVERDUE ACCOUNTS.
CASH DISCOUNT - 1% 10 days, calculated on the invoice value of glass, ACL, and
cartons, including GST and Provincial Sales Tax, if applicable, but not
including freight charges. Cash discount applicable to C.O.D. as well as net
terms.
PALLETS, NEW MOULDS AND ALTERATIONS, ART & SCREEN CHARGES - No cash discount
applicable.
Orders for other than standard stock ware will be made up as closely as possible
to quantity ordered, but Purchaser agrees to accept quantities under or over,
within reasonable limits, as complete fulfillment of the order.
THE STANDARD ORDER TERM is four months. The terms for Liquors and selected SSL
containers is six months. These terms will be printed on Purchase Order
confirmations. For orders less than the minimum run, terms and pricing are to be
defined by PRICING.
MAKE & SHIP DISCOUNT is offered at a 4% discount off published book prices.
Glass is to be shipped within forty-eight hours of manufacture, weekends and
holidays excluded. Orders are to be clearly identified and booked at least
forty-five days in advance. This discount does not apply to Distributors.
<PAGE>
GENERAL INFORMATION
PAGE 2
DATE: January 4, 1999
- ------------------------------------------------------------------------------
PRE-INVOICE POLICY - CHARGE UP
ANY WARE LEFT ON HAND AT THE END OF THE TERM IS OVERDUE, AND IS SUBJECT TO
PRE-INVOICING. Charge-up invoices are to be issued for full value of ware on
hand immediately order becomes overdue, coincidental with which monthly storage
will be applicable.
EXPIRY DATE, calculated in calendar months, shall be from date of first
requirement, or first manufacture, whichever is later.
The manufacturer shall not be responsible for loss or damage to goods, including
cartons, resultant from inability to deliver overdue goods which have been in
inventory eight months or more, due to packaging deterioration, handling loss,
etc. Subject to the foregoing, the adjustment billings/credits following final
shipment of charged-up ware must have an invoice value of a minimum of $50 for
processing.
STORAGE CHARGES - are $15/pallet. They will be assessed on a prepaid monthly
basis with first full month's storage chargeable coincidental with charge up for
quantity remaining in stock at close of business day of charge up. Charges will
be on an item basis with a minimum of $50 per item. Ware remaining in stock
three months after charge up will be subject to storage at $30/pallet. Following
30 days' notice to our customers, all ware in inventory for at least seven
months will be subject to disposal instructions. Ware will be shipped or
scrapped during the eighth month with cost of disposal to customer's account.
Cullet values where applicable will be credited to customer's account.
It may be to the customer's advantage to take title to pre-invoiced inventory
and store at offsite locations. Consumers Glass will assist in this transfer.
Details available at regional offices.
PACKAGING POLICY
CUSTOMER'S PACKAGING - Where customers supply their own packaging, it is a
requirement that full quantity be available for release from carton manufacturer
at time of our initial production. An exception is wehre quantity available for
release for each production is not less than quantity shown for the price at
which order is booked. If quantity available for release is less than that
required for quantity at which order is priced, order must be priced according
to quantity of each package release. Packaging will be released from
manufacturer by Consumers Glass in such quantities as not to penalize customer
cost-wise.
<PAGE>
GENERAL INFORMATION
PAGE 3
DATE: January 4, 1999
- ------------------------------------------------------------------------------
Consumers Glass reserves the right to approve packaging suppliers, ISO approved
suppliers are preferred.
Storage will be charged at $15.00 per month per pallet for customer owned empty
packaging where there is no purchase order for glass on hand to fill the
cartons.
Policy covers normal or standard type packaging suitable for assembly on
automatic sealing machines. If packaging that is to be supplied is of double
wall construction or requires special operation for set up or assembly, a sample
must be submitted to PACKAGING SERVICES for costing and report to PRICING for
possible handling surcharge.
Packaging while in our possession is insured against fire and theft. However,
due to hazards connected with handling, we shall only be responsible for losses
shown below for quantities delivered to Consumers Glass.
In excess of 1% of packaging, including components, when outers are not over
No. 30 brightness;
In excess of 2% of packaging, including components, when outers are over No.
30 brightness;
In excess of 3% of take-home carriers;
If the customer requests production to be cut, resulting in empty customer
packaging remaining on hand, the Account Manager will arrange to send them to
the customer.
Claims for carton loss in excess of these allowances must be sent to Consumers
Glass within a reasonable time after the loss is incurred. There shall be no
responsibility for unused packaging remaining on hand eight months.
Packaging is to be delivered to our factory free of cost to us and only upon our
release.
Where we are requested to supply interior packing for customer's own packaging
refer to PRICING.
Requests for short-height trays and trays with collapsible score lines, will be
reviewed by PACKAGING SERVICES in conjunction with SALES.
<PAGE>
GENERAL INFORMATION
PAGE 4
DATE: January 4, 1999
- ------------------------------------------------------------------------------
Where acceptable and subject to safety aspects, extended storage and/or distant
shipping conditions, pallets may be restricted to half heights (double decked)
at time of shipment.
REDUCED HEIGHT PALLETS WILL ATTRACT A 1% SURCHARGE FOR EACH TIER LESS THAN
OPTIMUM, TO A MAXIMUM OF 5%. WHEN IT IS TO CONSUMERS GLASS' ADVANTAGE, THERE IS
NO SURCHARGE FOR HALF PALLETS THAT ARE DOUBLE-DECKED.
UNASSEMBLED "U" SHAPE PARTITIONS
- - 1/2 dozen pack 2-part partition will attract handling charge 8(cent)/carton.
- - 1 dozen pack 4-part partition will attract handling charge for
22(cent)/carton.
MADE-UP CARTONS - will not be accepted.
USED PACKAGING - We do not accept the return of used packaging, either
customer's own or Consumers Glass' packaging for reuse.
KD PACKAGING - Enquiries for small lots up to 2000 of stock or package deal KD
reshipper packaging (where available) will price at published selling price plus
25% converted to nearest cent per unit. Small pack handling charge, if any, or
machine charge for package deal items not to be included, including COCs,
minimum shipment of full pallet or unitized loads only. The customer is
responsible for freight costs. On prepaid shipments to Toronto or Montreal,
there is a charge of $15.75 per pallet.
PACKAGE DEALS - We will supply packaging on the basis of specifications and
printing. Upon request, PACKAGING SERVICES will develop specifications, and
PURCHASING will negotiate competitive costs for quotation. All package deals are
to be made on the basis of cost at time of purchase plus the following standard
financing/service charges (which are applicable to the outer as well as the
inner components according to the brightness of the outer package board).
KRAFT BOARDS - (not over #30 brightness) 8%
PEARL BOARD - (over #30 brightness) 9%
TAKE-HOME CARRIERS 10%
PRICE WILL BE NEGOTIATED AT TIME OF CORRUGATED INDUSTRY PRICE INCREASE.
<PAGE>
GENERAL INFORMATION
PAGE 5
DATE: January 4, 1999
- ------------------------------------------------------------------------------
PRINTING AND STEEL RULE DIES - Where required and customer does not supply, we
will arrange for same, charging customer at cost PLUS AN ADMINISTRATION CHARGE
OF 20%.
MULTIPLE PACKS - Where more than one pack is involved for packing of any one
item, either by size, type, or printing etc., total quantity will govern price.
Any pack that is less than 50% of the minimum list quantity for capacity
involved will be subject to a one-month term. Policy applies to packaging
supplied by customer or by Consumers Glass.
MULTIPLE PACKS INVOLVING TAKE-HOME CARRIERS - May be pooled to earn a quantity
glass price. Minimum order for any single pack is 500 gross. Orders for lesser
quantities will be subject to a 3% surcharge on the glass price and be a
one-month term.
TAKE-HOME CARRIERS - A set-up charge will apply where customer uses carry-home
packs of standard one-piece design, quick snap assembly to be set up and
inserted in customer's or Consumers Glass' outer packing. All take-home carriers
must be new material.
4(cent)/carrier, to and including 16 oz. size, and not over 8 pack;
8(cent)/carrier, over 16 oz. size; or over 8 pack, 16 oz. size and under.
If Consumers Glass is requested to develop outer package, samples of customer's
take-home carriers must be submitted to PACKAGING SERVICES in order to
facilitate outer package design.
TABLOCK CARTONS - This feature involves retention tabs, made in the slotting
operation, which lock top flaps down at diagonal corners (manufacturers joint
and opposite) creating an open top when set up. Handling charge of
4(cent)/carton applies.
MINIMUM PACKS - are indicated on price screens. For lesser packs refer to
PRICING.
PALLET STABILIZATION WRAP (PSW)
PSW will be supplied on all tray packs
PSW can be supplied on cartons at customer's request
PSW to be charged where supplied, EXCEPT;
Ref./NR Beers/Sodas in tray or tablock cartons packs
Items in service trays at service carton prices
Pallet piling stability problem items
<PAGE>
GENERAL INFORMATION
PAGE 6
DATE: January 4, 1999
- ------------------------------------------------------------------------------
Charges for PSW applied at time of manufacturing are:
43 x 57 pallet - 4.26/pallet
46 x 53 slip sheet - 4.26/pallet
40 x 48 pallet/slip sheet - 3.76/pallet
UNSHRUNK POLYETHYLENE BAGS OR HOODS AS DUST PROTECTORS:
On request, we will supply unshrunk hoods extending downward 36" from top of
pallet, at following charges per pallet:
HOOD
43 x 57 pallet .90
46 x 53 slip sheet .84
40 x 48 pallet/slip sheet .77
PRICING
Prices are per gross of glass, unless otherwise noted, and are determined by
the following basic specifications, in accordance with appropriate price list.
1. Shape 5. Diameter/width
2. Nominal/brimful design capacity 6. Finish size/type
3. Overall height 7. Order quantity/item
4. Mean design weight 8. Packaging
GLASS FINISHES - List prices are essentially for ware made with standard GPI
finishes. Enquiries for other finish types, or finishes subject to other than
standard tolerances, to be referred to PRICING.
FINISHES OR BOTTOM PLATES - Where two different finishes and/or bottom plates
are required on one item, total quantity ordered will govern price, providing
quantity of either finish and/or bottom plate is not less than equivalent
one-day run. Any individual SKU for equivalent two manufacturing days or less -
term to be defined by PRICING.
Where an item is SSL, with one finish and/or bottom plate, and is required with
another finish and/or bottom plate, it will be priced as MTO.
GLASS COLOUR - List prices apply for Flint, Amber or Emerald Green.
<PAGE>
GENERAL INFORMATION
PAGE 7
DATE: January 4, 1999
- ------------------------------------------------------------------------------
Special colours are available as shown. The surcharges are applied to the base
price. The minimum production for a given colour on the colour feeder is two
weeks. Orders can be accumulated to achieve the minimum requirements. Shorter
runs will attract a surcharge.
COLOUR SALES CLASS/COLOUR CODE
Georgia Green Xx7 5%
Champagne Green Xx9 15%
Light Olive Green 418 15%
Topaz 428 15%
Light Emerald Green 448 15%
Antique Green 458 25%
Reflex Blue 718 15%
Light Blue 728 10%
Ice Blue 738 15%
Dead Leaf Green 748 15%
Cobalt Blue 768 15%
Ice Blue Juice 778 15%
Arizona Cobalt 788 30%
Dumont Blue 798 15%
Smoke 808 15%
F.O.B. - Where customer requests two destinations be combined for pricing
purposes, customer is to choose one F.O.B. point. A separate order should be
entered and cross-referenced.
SPECIFICATIONS - Capacity must qualify in correct capacity group, but where
height, weight, diameter or width fall between two listed maximum
specifications, price applicable to higher specification will apply.
WEIGHT - Mean design weight will be used for pricing purposes. There will be no
reduction in price for bottles made at lighter weight than lightest weight shown
for capacity. Bottles designed at intermediate weights will price at next higher
weight.
OVER SPECIFICATION CHARGES - When height and/or weight and/or diameter or width
exceed maximum specification shown, price from highest group within proper
capacity and add surcharge as follows:
Overheight - $2.55/gross each 1/2 inch or fraction
Overnight - $2.55/gross each ounce or fraction
Overdiameter/Overwidth - $2.55/gross each 1/4 inch or fraction.
However, where an item exceeds a particular specification, but that
specification is constant to the highest group within the capacity, price at
lowest group where other specifications are met and add surcharge.
<PAGE>
GENERAL INFORMATION
PAGE 8
DATE: January 4, 1999
- ------------------------------------------------------------------------------
GLASS HANDLES - Price lists for Glass Handle jugs (GH-01) and Narrow Mouth foods
(NM-03) include glass handles. For all other lists, items with glass handles
will price from appropriate list with surcharges as follows:
Neck Ring Shoulder/Body
Glass Handle Glass Handle
------------ ------------
up to and including
40 oz. capacity $3.31/gross $ 9.26/gross
Over 40 oz. capacity $6.62 gross $17.64 gross
STANDARDS STOCK LINE (SSL) - Such items have fixed specifications such as
colour, finish, type of packing, and quantity per carton.
MADE TO ORDER (MTO) - Includes private moulds and stock moulds not included
under SSL.
SHORT RUN ORDERS - All manufacturing orders for less than the lowest quantity
shown for a specific mould are to be approved by PRICING.
Orders for less than minimum production are to be referred to Pricing for price
determination.
REPACKING - Cartons/Trays - Charges as shown are for standard type one-tier
packaging. For other types, refer to PRICING. Disposal instructions for
customer's packaging must be available. Add appropriate PACK FROM charge to
appropriate PACK TO charge for total repacking charge. The price of the
discarded packaging is added to the repacking charge.
PER GROSS OF GLASS
MINIMUM
DOZEN PACK FROM PACK TO
- ------ --------- -------
2 $5.00 $ 5.00
1 7.72 8.82
1/2 15.23 17.33
1/3 24.15 27.30
GLASS SAMPLING - Customer requested samples, run at Consumers Glass'
convenience, are chargeable as follows: - $8,000 flat charge
including maximum 1 gross of samples.
- Quantities in excess of 1 gross, refer to PRICING.
- For special coloured glass samples, refer to PRICING.
- Samples shipped in service cartons or trays at above charges.
<PAGE>
GENERAL INFORMATION
PAGE 9
DATE: January 4, 1999
- ------------------------------------------------------------------------------
CUSTOMER CLAIMS - QUALITY - SERVICE
FOR CLAIMS CONSIDERATION, THE FOLLOWING CONDITIONS MUST BE MET:
1. Immediate notification by the customer of the problem and intention to claim.
2. Full co-operation with Consumers Glass to mitigate the claim - adopt the
most cost-effective approach to resolve the problem.
3. Submission of qualitative and quantitative evidence of losses incurred.
4. Claims limited to direct out-of-pocket costs proven to be a result of a
quality or service deficiency.
BLOW MOULD CHANGE PRICING (DESIGN PLUS)
This concept is defined as pricing based on the total quantity of two or more
containers produced sequentially and requiring blow mould and bottom plate
changes only.
Standardization of blow mould and blank designs is required within the following
parameters:
1. Common neck diameters.
2. Common weight
3. Common finish
4. Height could vary +1/16"
5. Body profiles/diameters or combination could vary +3/64"
For containers falling within these parameters and ordered to be produced
sequentially, we offer Blow Mould Change pricing, provided that the order for
each container is a minimum of one-half of published minimum production runs.
The price for the container with the greatest volume is based on the combined
quantity of the orders. The other containers will have a 10% surcharge. The
order period will be the same for all orders.
<PAGE>
GENERAL INFORMATION
PAGE 10
DATE: January 4, 1999
- ------------------------------------------------------------------------------
SERVICES
PRESSURE SENSITIVE FILM LABEL (PSFL) ROUND BOTTLES ONLY
Price of labels and application is dependent on:
- number of labels
- size of labels
- printing process and number of colours
- film type
- quantity per design
- ease of operation
Label Development Costs are to be handled between the customer and label
supplier. No costs will be incurred by Consumers Glass.
The customer is responsible for label obsolescence.
Dependent on the container and label, additional labelling equipment may be
needed. This influences the minimum quantity required and pricing.
PLASTI-SHIELD - Items for which no lists are published should be referred to
PRICING.
PLSS LABEL DEVELOPMENT CHARGE - For customer's account and should be between the
customer and the label supplier.
Please consult with PRICING for details.
BULK PALLETIZATION - On round, straight-sided ware, the following will apply:
Refer other shapes to PRICING.
MINIMUM
QUANTITY EAST/WEST
- -------- ---------
3-Day Production Glass only
2-Day Production Glass only plus 40(cent)/gross
1-Day Production Glass only plus 80(cent)/gross
For lesser quantities, refer to PRICING.
STRAPPING of pallet loads will be free of charge, as well as PSW applied at our
option for stability purposes.
TIER SHEETS are to be returned to Consumers Glass.
PICTURE/TOP FRAMES - subject to deposit of $6 each.
FREIGHT involved in return of re-usable material will be for customer's account.
<PAGE>
GENERAL INFORMATION
PAGE 11
DATE: January 4, 1999
- ------------------------------------------------------------------------------
FREIGHT POLICIES
MINIMUM SHIPPING RELEASE is a full load on AT LEAST A 53' VAN. On shipments for
less than full loads, a charge of $1,000 will be assessed. No release for less
than eight pallets will be acceptable. In addition, there will be no part
pallets on combined loads.
REFUSED/RETURNED LOADS - Will be assessed the cost to cover outbound and inbound
freight on prepaid accounts; when freight out and returned is for customer's
account, there is an administration charge of $120.
DEMURRAGE - A daily demurrage charge of $65 applies where customers hold
trailers. (Trailer dropped - no tractor or driver).
DETENTION - Detention occurs when Consumers Glass' drive or agent is detained at
the customer two hours beyond the scheduled appointment time. There will be a
$65/hour charge commencing with the third hour of detention. Detention will not
be accepted by Consumers Glass or charged by Consumers Glass unless there is
written proof of arrival and departure time with which to verify the detention
charge to the customer.
DETENTION AND DEMURRAGE CHARGES can be assessed concurrently with the same load.
THE BILLING OF DEMURRAGE AND DETENTION WILL BE DONE BY DIRECTOR CUSTOMER SERVICE
BASED ON INFORMATION SUPPLIED BY THE LOAD DISPATCH.
F.O.B. POINTS
Prices are F.O.B. factory Montreal, Toronto, Bramalea, and Lavington in minimum
truckload quantities.
Prices are F.O.B. Scoudouc, except WISPA wines.
FREIGHT EQUALIZATION
ATLANTIC PROVINCES & EASTERN QUEBEC
Shipments ex Scoudouc are collect. Shipments to Newfoundland may be prepaid with
a charge for actual freight.
Shipments ex-Montreal of minimum truckload quantity to be prepaid with freight
charge as indicated F.O.B. field to read "F.O.B. Scoudouc."
<PAGE>
GENERAL INFORMATION
PAGE 12
DATE: January 4, 1999
- ------------------------------------------------------------------------------
FREIGHT CHARGES FOR EX MONTREAL
SHIPMENTS TO EQUALIZE ON SCOUDOUC
TRUCK RATES SUBJECT TO FUEL SURCHARGE IN EFFECT AT TIME OF SHIPMENT.
EASTERN CANADA - MARITIMES - Equalized Scoudouc.
On direct customer shipments from Central Canada, we prepay and charge the
indicated rates. Shipments from Scoudouc are collect.
TO: MTL. EQ.
NOVA SCOTIA POINTS SCOUDOUC
------------------ --------
Coldbrook $676.00
Dartmouth 567.00
Halifax 567.00
Kentville/Berwick 654.00
Malagash 385.00
Truro 425.00
TO: NEW BRUNSWICK POINTS
--------------------
Campbellton $638.00
Chatham 365.00
Grand Falls 722.00
Moncton 157.00
Okomocto 428.00
Saint John 370.00
Scoudouc ----
Woodstock 565.00
Sussex 235.00
TO: PRINCE EDWARD ISLAND
--------------------
Charlottetown $470.00
<PAGE>
GENERAL INFORMATION
PAGE 13
DATE: January 4, 1999
- ------------------------------------------------------------------------------
PALLET REGULATIONS
Any freight charges assessed by transportation companies for carrying of pallets
will be for customer's account. This applies to both outbound loaded shipments
and return of empty pallets to our factory/warehouse location. We will, however,
deliver on pallets subject to conditions of standard services. Empty pallets may
be returned to nearest Consumers Glass factory/warehouse at customer's option.
PALLET DEPOSIT - $18.00
A DEPOSIT OF $18 will be charged on each pallet left with customer, including
those used as stabilizers or dunnage. Credit computed on same basis will be
issued upon return of pallets in good condition.
MOULD POLICY
MOULD EQUIPMENT AND MOULD ACCESSORY CHARGES - reflect a cost-sharing policy and
are applicable when supported by initial glass order to minimum base quantity.
For lesser glass quantities refer to PRICING.
A signed purchase order from the customer must accompany a mould requisition.
TERMS - Net 30 days.
MOULD CHARGES - Charges do not constitute purchase of moulds. Moulds must remain
in our possession, but we will be responsible for storage, repair as may be
necessary, and maintenance in proper operating condition as long as the item
remains active. Moulds are considered to be inactive when not operated for a
period of two years.
REPLACEMENT OF MOULD EQUIPMENT for containers that carry a four-year volume less
than the rebate quantity shown on the Mould Charge Schedule will be invoiced
rebatable charges with payment based on Memo Account. The balance remaining in
this account at the completion of this term will be due.
REPLACEMENT MOULD EQUIPMENT for containers that carry a four-year volume less
than the rebate quantity shown on the Mould Charge Schedule will be invoiced
rebatable charges upon completion. Any rebates earned will be credited.
DUPLICATION OF COMPETITIVE MOULDS - Consumers Glass will duplicate competitor's
moulds and charge rebatable amount only, provided duplication is exact in all
respects.
<PAGE>
GENERAL INFORMATION
PAGE 14
DATE: January 4, 1999
- ------------------------------------------------------------------------------
MOULD WORD HELD, CHANGED OR CANCELED - When customer places a "hold" during
mould manufacture, a charge on basis of full cost plus an administration charge
will be made, if release is not given within 60 days of notification.
A revision to the original mould order may attract further charges for mould
equipment. Refer these instances to PRICING for resolution.
ALTERATIONS to existing mould equipment, which are required by customer, will be
chargeable at cost plus an administration charge. Where cost exceeds
non-rebatable amount, the difference will be rebatable as per the policy.
MOULD OBSOLESCENCE - when a customer discontinues using or replaces a mould with
an unearned rebate, the rebate will be forfeited and any unpaid rebatable charge
will immediately become due for payment.
BLOW MOULD CHANGE MOULD CHARGES WITHIN CUSTOMER GROUP - The primary mould
(highest volume) is priced according to the price book for the appropriate mould
group. The remaining moulds are priced at 60% of the mould charge for the
appropriate mould group. This amount is fully rebatable upon shipment/billing of
the published rebatable quantity. The applicable non-rebatable engineering
applies for each subsequent mould.
UNIT MOULDS developed at customer's request will be subject to unit mould charge
of $25,600 for round moulds or $30,800 for other shapes, plain or decorated. If
unit mould is approved and order placed for a full set of equipment at full
mould charges, unit mould charge will be fully refunded. Sampling charges as
published will apply to all customer requested glass sampling.
WITH A GLASS HANDLE in the neck, shoulder or body (other than in the finish) the
appropriate non-rebatable mould charge - group 3 or 6 will be increased by
$8,400 without change to the listed rebatable amount. If other than round or if
the handle area is cut away so as to alter the true round shape, group #6
applies.
THE SHARP HIGH COLLAR (SHC) FEATURE will increase the non-rebatable mould charge
by $7,000 without change to listed rebatable amount.
NEW BOTTOM PLATES (non-rebatable)
Regular - $3,100/set. Fancy design decoration - $4,400/set.
Plus $13.00/letter or numeral - Consumers Glass identification excepted.
Requests for additional lettering on existing plates treated as alteration at
cost.
<PAGE>
GENERAL INFORMATION
PAGE 15
DATE: January 4, 1999
- ------------------------------------------------------------------------------
NEW NECK RINGS
To and including 38 mm but not including glass handles - $16,500
Over 38 mm and including all mm sizes with glass handles - $25,600.
Only amount in excess of appropriate mould group number non-rebatable charge is
rebatable on regular basis.
MOULD STORAGE COSTS to charge customers for moulds that remain inactive over two
years, in order to ensure that these storage costs are recovered.
In September of each year, the Mould Controller issues scrap requests for all
items inactive for at least two years. There are three options available to the
customer:
a) Mould to be scrapped. No charge applicable.
b) Moulds to be crated and shipped to customer. Charge to be applied.
c) Moulds to remain at Consumers Glass. Storage charges to be applied.
In order to ensure these charges are raised, a form will be attached to the
scrap requests. If option "B or C" is selected, the Account Manager should route
a copy of this form to the appropriate CSR, who will then be alerted to raise an
invoice to the customer for either mould storage or creating charges. The CSR
will not need to follow up the following year, as the Mould Controller will
again raise another scrap request and the whole charge of $1,500 per year until
the fifth year at which time the moulds are scrapped. If the customer elects to
have the moulds shipped to his location, a charge of $500 for crating is
applicable. In addition, customer should be aware that if moulds are returned to
Consumers Glass for future production, a refurbishing charge will be assessed
for the customer's account.
If option "A" (Mould to be Scrapped) is chosen, the form is to be returned to
PRICING for approval.
Under extenuating circumstances, approval may be obtained from PRICING to waive
Mould Storage charges.
A NEW DESIGN SERVICE is offered for hand outline drawings and/or dimensional
drawings free of charge for new or altered mould designs.
MODELS will be charged, and one wood and plastic will be permitted per
engineered drawing. A wood model is required to make a plastic. When an invoice
has been received from the model maker, the regional office will be advised, so
the customer may be invoiced.
MODELS at creative stages will be allowed at the discretion of SALES MANAGEMENT.
<PAGE>
GENERAL INFORMATION
PAGE 16
DATE: January 4, 1999
- ------------------------------------------------------------------------------
WHERE REGISTRATION DRAWINGS are required by customer for design registration
purposes refer to PRICING.
A NON-CONTAINER DESIGN WORK charge to apply to all Creative Design work that is
not directly related to the glass container design will be priced on an
individual basis. This covers such work as labels, exterior packaging, logo
medallion, etc.
<PAGE>
GENERAL INFORMATION
PAGE 17
DATE: January 4, 1999
- ------------------------------------------------------------------------------
MOULD GROUPINGS
PLAIN - GROUPS 1 AND 4
Applies to perfectly plain straight-sided moulds (rounds may be straight taper
but other than rounds cannot be tapered). Includes moulds on which there is
minimum amount of lettering, e.g., simple trade mark, monogram, content
lettering, product or trade name on body, and/or lettered bottom plates. Label
panel of maximum .030" depth is permitted in group 1 rounds only provided panel
is of same depth completely around the item (panel may be tapered but not
greater than .030" depth at top or bottom).
SEMI-DECORATED - GROUPS 2 AND 5
Applies to plain moulds other than straight sided, (including plain tapered
other than round) and/or straight-sided moulds on which there is considerable
lettering. Includes decorated moulds on which decoration is of simple horizontal
or vertical design only, but no combination of the two. Includes plain fluted
moulds and plain moulds with indented or raised finger grip or label space
(except as noted in plain group above). Decorationis restricted to horizontal
design that can be turned on a lathe or vertical design that can be cut on a
shaper. Does not include decorations which require extensive bench work.
Lettering must be high in glass/deep in metal.
HIGHLY-DECORATED - GROUP 3 AND 6
Applies to moulds of fancy shape or with fancy designs, and/or fancy
decorations. Includes all moulds with glass handle in finish or neck ring only.
Generally these charges will apply to any design which requires extensive
benchwork. Also includes moulds with angular parting line.
Stippling is not considered a decoration.
REBATE QUANTITY - represents the total quantity required to be shipped/billed
within twenty-four month period from date of first shipment to acquire full
rebate of the rebatable amount. Rebates on one-third shipment/billing of rebate
quantity - no rebate being applicable to shipment/billing of intermediate
quantities. Total rebate will not exceed rebatable amount indicated and
shipment/billings in excess of quantity required for full rebate on one item
cannot be used towards rebate for any other items.
<PAGE>
<TABLE>
<CAPTION>
SECTION STOCK MOULDS PAGE 1
REGION - EAST
- ------------------------------------------------------------------------------------------------------------------------------------
STOCK NO BASIS CAP WGT DIAM FINISH WGT/GR GRS/P DOZ CARTON MIN RUN
NO. DE STOCK SOURCE CAP POIDS DIAM FINI DOUZ CARTON DAYS
- ------------------------------------------------------------------------------------------------------------------------------------
X-STOCK NO. TO BE DISCONTINUED Y-MOULD OR FINISH TO BECOME MTO Z-ITEM TO BE DISCONTINUED JAN. 4, 1999
PRODUCT GROUP - D/C/C
METRIC ROUNDS/RONDES METRIQUES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
500 ml 512/0132/002 SSL/ACS PP-01-18.00-A 18.84 9.250 3.006 28-400-405 91.06 16.00 4.00 7328A 4
MISCELLANEOUS
JUGS/CRUCHES
X 4L 632/6055/128 SSL/ACSGH-01-140.00-A1 42.33 47.000 6.625 38-400-405 543.43 1.75 0.33 6989A
NM FOODS
JUICES/(NARROW & WIDE MOUTH)
* Y 300 ml 321/0317/005 SSL/ACS SPECIAL 11.24 5.250 2.565 38-20001 51.77 38.79 BULK 28
* 300 ml 321/0764/002 SSL/ACS SPECIAL 11.24 5.250 2.565 38-20001 49.47 38.79 BULK 28
* 300 ml 321/0764/001 SSL/ACS SPECIAL 11.24 5.250 2.565 38-20001 49.47 38.79 BULK 28
* 16 US oz 321/0362/002 SSL/ACS SPECIAL 17.59 7.500 2.880 38-20001 74.06 26.25 BULK 28
* 16 US oz 321/0362/026 SSL/ACS SPECIAL 17.59 7.500 2.880 38-20001 74.06 26.25 BULK 28
* 16 US oz 321/0765/001 SSL/ACS SPECIAL 17.59 7.500 2.880 38-20001 69.49 26.25 BULK 28
* 1L 321/0258/019 SSL/ACS WM-05-32.00-A 36.81 14.250 3.900 38-20001 149.22 8.33 1.00 7507A 7
* 1L 321/0258/002 SSL/ACS WM-05-32.00-A 36.81 14.250 3.900 38-20001 134.00 9.00 BULK 7
* 321/0258/002 38-20001 142.31 11.25 BULK 7
* 48OZ 321/0245/019 SSL/ACS WM-05-46.00-A 50.24 19.000 4.392 38-20001 197.50 6.00 1.00 3116A 7
* 48OZ 321/0245/002 SSL/ACS WM-05-46.00-A 50.24 19.000 4.392 38-20001 197.50 8.25 BULK 7
LIQUID DRESSING
* 8OZ U.S. 371/8709/009 SSL/ACS SPECIAL 9.35 9.00 3.562 38-400 92.91 18.75 1.00 2266B 10
NOTE: ALL CONTRACT TERMS ARE FOR 6 MONTHS EXCEPT ITEMS WITH * WHICH ARE 4 MONTH CONTRACT TERMS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SECTION STOCK MOULDS PAGE 2
REGION - EAST
- ------------------------------------------------------------------------------------------------------------------------------------
STOCK NO BASIS CAP WGT DIAM FINISH WGT/GR GRS/P DOZ CARTON MIN RUN
NO. DE STOCK SOURCE CAP POIDS DIAM FINI DOUZ CARTON DAYS
- ------------------------------------------------------------------------------------------------------------------------------------
X-STOCK NO. TO BE DISCONTINUED Y-MOULD OR FINISH TO BECOME MTO Z-ITEMTO BE DISCONTINUED JAN. 4, 1999
PRODUCT GROUP - DC/C/C
METRIC GRAND LINE/SERIE GRANDE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1L 381/627/012 AL/xa nm-01-35.50- B 36.92 17.500 3.511 28-400-405 181.72 7.33 1.00 6567A 4
WM FOODS
BARRELS/BARILS
500ML 101/6446/009 SSL/ACS WM-01-18.25-A 18.48 7.500 3.338 70-2030 110-74 15.17 1.00 7518A 4
750ml 101/0067/004 SSL/ACS WM-01-27-25-A 27.72 11.000 3.631 70-2030 138.00 10.08 1.00 6649A 5
1L 101/0417/004 SSL/ACS SM-01-35.00-B 36.96 13.500 4.051 82-2040 140.36 8.25 1.00 7500B 5
1.5L 101/6441/010 SSL/ACS WM-01-53.00-B 55.44 20.500 4.650 82-2040 227.43 5.25 0.50 6651A 4
PEANUT BUTTER/BEURRES D'ARACHIDE
500g 101/7166/023 SSL/ACS SPECIAL 17.64 9.000 3.281 83-400-405 93.74 15.17 1.00 7686A 4
500g 101/7166/024 SSL/ACS SPECIAL 18.19 9.000 3.281 83-2040 93.74 15.17 1.00 7571A 4
ROUND SPICE/EPICE ROND
100 ml 361/0069/005 SSL/ACS SPECIAL 3.52 3.270 1.768 43-485-405 31.88 58.50 6.00 7552B 4
SALAD DRESSING
16U.S. o 101/0402/002 SSL/ACS SPECIAL 17.44 7.500 3.162 70-450 80.13 15.00 1.00 7464A 4
32U.S. o 101/0413/001 SSL/ACS SPECIAL 34.36 12.500 3.937 70-470 131.33 8.33 1.00 7465A 5
355ml 371/0759/001 SSL/ACSSPECIAL 13.35 8.75 2.510 38-400-405 90.73 18.33 1.00 7725A 3
355ml 371/0759/001 SSL/ACSSPECIAL 13.35 8.75 2.510 38-2000 1 90.73 18.33 1.00 7725A 3
NOTE: ALL CONTRACT TERMS ARE FOR 6 MONTHS EXCEPT ITEMS WITH * WHICH ARE 4 MONTH CONTRACT TERMS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SECTION STOCK MOULDS PAGE 3
REGION - EAST
- ------------------------------------------------------------------------------------------------------------------------------------
STOCK NO BASIS CAP WGT DIAM FINISH WGT/GR GRS/P DOZ CARTON MIN RUN
NO. DE STOCK SOURCE CAP POIDS DIAM FINI DOUZ CARTON DAYS
- ------------------------------------------------------------------------------------------------------------------------------------
X-STOCK NO. TO BE DISCONTINUED Y-MOULD OR FINISH TO BECOME MTO Z-ITEMTO BE DISCONTINUED JAN. 4, 1999
PRODUCT GROUP - D/C/C
SAUCES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
700ml 101-0591-004 SSL/ACS SPECIAL 27.06 13 3.455 70-450-405 133.82 11.00 1.00 7729A 3
SHORT CYLINDERS
250ml 101/8880/007 SSL/ACS SPECIAL 9.50 4.750 2.900 70-2030 62.48 28.33 1.00 6903A 5
250ml 101/8880/008 SSL/ACS SPECIAL 9.50 4.750 2.900 70-400-405 70.86 29.75 1.00 6903A 5
375ml 101/8532/017 SSL/ACS SPECIAL 14.13 7.000 3.049 70-2000030 70.45 20.00 1.00 6670A 5
WM-01-14.25-A
500ml 101/8883/009 SSL/ACS SPECIAL 18.74 10.000 3.445 82-2040 106.38 16.00 1.00 7337A 4
WM-01-18.25-C
740ml 101/8882/006 SSL/ACS SPECIAL 27.96 11.500 3.580 160.36 11.00 1.00 6671A 4
TALL CYLINDERS/GRANDS CYLINDRES
* 250ml 101/6980/028 SSL/ACS SPECIAL 9.25 5.500 2.360 53-2020 57.79 28.17 1.00 6626A 10
* 250ml 101/6980/029 SSL/ACS SPECIAL 9.25 5.500 2.360 53-485-405 57.79 28.17 1.00 6626A 10
* 375ml 101/6980/041 SSL/ACS SPECIAL 13.75 6.750 2.664 58-2020 70.90 21.00 1.00 7483A 10
* 375ml 101/6980/043 SSL/ACS SPECIAL 13.75 6.750 2.664 58-400-405 70.90 21.00 1.00 7483A 10
500ml 101/7207/006 SSL/ACS SPECIAL 18.15 9.000 2.861 63-2030 93.39 16.5 1.00 7549A 10
WM-01-27.25B
750ml 101/0033/006 SSL/ACS SPECIAL 27.72 11.250 3.440 70-2030 144.04 12.83 1.00 6687A 10
WM-27.25.25B
NOTE: ALL CONTRACT TERMS ARE FOR 6 MONTHS EXCEPT ITEMS WITH * WHICH ARE 4 MONTH CONTRACT TERMS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SECTION STOCK MOULDS PAGE 4
REGION - EAST
- ------------------------------------------------------------------------------------------------------------------------------------
STOCK NO BASIS CAP WGT DIAM FINISH WGT/GR GRS/P DOZ CARTON MIN RUN
NO. DE STOCK SOURCE CAP POIDS DIAM FINI DOUZ CARTON DAYS
- ------------------------------------------------------------------------------------------------------------------------------------
X-STOCK NO. TO BE DISCONTINUED Y-MOULD OR FINISH TO BECOME MTO Z-ITEMTO BE DISCONTINUED JAN. 4, 1999
PRODUCT GROUP - D/C/C
UNIVERSALS/UNIVERSELS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
125ml 101/7071/027 SSL/ACS SPECIAL 4.67 2.880 2.094 48-2010 46.31 48.00 1.00 7504A 4
125ml 101/7071/025 SSL/ACS SPECIAL 4.67 2.880 2.094 48-2010 35.96 48.00 2.00 6595A 4
125ml 101/7071/026 SSL/ACS SPECIAL 4.67 2.880 2.094 48-400-405 45.29 48.00 2.00 6595A 4
250ml 101/6366/027 SSL/ACS WM-01-9.00-A 9.22 4.750 2.609 58-400-405 48.74 26.67 2.00 6998A 3
250ml 101/6366/028 SSL/ACS WM-01-9.00-A 9.22 4.850 2.609 58-2020 48.74 26.67 2.00 6998A 3
500ml 101/6336/040 SSL/ACS SPECIAL 18.44 7.500 3.300 63-400-405 83.83 16.33 1.00 6598A 3
500ml 101/6336/040 SSL/ACS SPECIAL 18.44 7.500 3.300 63-2030 83.83 16.33 1.00 6598A 3
750ml 101/6340/010 SSL/ACS WM-01-27.25-A 27.72 10.500 3.711 63-400-405 120.36 11.00 1.00 7531A 4
1L 101/7176/013 SSL/ACS WM-01-35.00-B 36.89 13.000 3.984 70-2030 135.01 9.17 1.00 7602A 5
1L 101/7176/014 SSL/ACS WM-01-35.00-B 36.89 13.000 3.984 70-400-405 135.01 9.17 1.00 7602A 5
X2L 101/7293/006 SSL/ACS WM-01-70.00-A 73.78 23.000 5.063 83-400-405 252.44 4.50 0.50 7548A
* 4L 131/6326/069 SSL/ACS WM-01-147.00- 147.13 46.000 6.420 10-2070 533.71 1.75 0.33 6601A 10
* 4L 131/6326/070 SSL/ACS WM-01-147.00- 147.13 46.000 6.420 10-2070 605.14 1.75 0.16 7455A 10
* 4L 131/6326/042 SSL/ACS WM-01-147.00- 147.00 41.000 6.666 89-2050 488.57 1.75 0.33 6724A 10
* 4L 131/6326/043 SSL/ACS WM-01-147.00- 147.00 41.000 6.666 89-2050 557.22 1.94 0.16 7456A 10
NOTE: ALL CONTRACT TERMS ARE FOR 6 MONTHS EXCEPT ITEMS WITH * WHICH ARE 4 MONTH CONTRACT TERMS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SECTION STOCK MOULDS PAGE 1
REGION - WEST
- ------------------------------------------------------------------------------------------------------------------------------------
STOCK NO BASIS CAP WGT DIAM FINISH WGT/GR GRS/P DOZ CARTON MIN RUN
NO. DE STOCK SOURCE CAP POIDS DIAM FINI DOUZ CARTON DAYS
- ------------------------------------------------------------------------------------------------------------------------------------
X-STOCK NO. TO BE DISCONTINUED Y-MOULD OR FINISH TO BECOME MTO Z-ITEM TO BE DISCONTINUED JAN. 4, 1999
NM FOODS
JUICES (NARROW & WIDE MOUTH)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
* Y 300ml 321/0317/013 SSL SPECIAL 11.24 5.250 2.565 38-2000 I 51.77 38.79 BULK 10
* 300ml 321/0764/001 SSL SPECIAL 11.24 5.000 2.565 38-2000 I 49.47 38.79 BULK 10
* 300ml 321/0764/002 SSL SPECIAL 11.24 5.000 2.565 38-2000 I 49.47 38.79 BULK 10
* 16U.S.oz 321/0362/002 SSL SPECIAL 17.59 7.500 2.880 36-2000 I 74.06 26.25 BULK 10
* 16U.S.oz 321/0362/026 SSL SPECIAL 17.59 7.500 2.880 36-2000 I 74.06 26.25 BULK 10
LIQUID DRESSINGS
8oz U.S. 321/8709/009 SSL/AC SPECIAL 9.35 9.000 3.562 38-400 92.91 18.75 1.00 2266B 5
WM FOODS
SAUCES
700ml 101-0591-004 SSL SPECIAL 27.06 13.000 3.455 70-450-40 133.82 11.00 1.00 7729A 3
SHORT CYLINDERS
700ml 101/8882/006 SSL WM-01-27.25- 27.96 11.500 3.580 82-2040 160.38 11.00 1.00 6671A 4
NOTE: ALL CONTRACT TERMS ARE FOR 6 MONTHS EXCEPT ITEMS WITH * WHICH ARE 4 MONTH CONTRACT TERMS
</TABLE>
<PAGE>
EXHIBIT 10.14
BEVERAGE SUPPLY AGREEMENT
DATED: March 29, 1999
BETWEEN: SWISS NATURAL Foods, Inc. (hereinafter referred to as "SWISS
NATURAL"), a Delaware corporation with offices located in
Grandview, New York,
AND: DUNKIN' DONUTS MIDATLANTIC DCP, Inc. (hereinafter referred to as
the "DCP") a New Jersey corporation with its principal offices
located in Swedesboro, New Jersey.
WHEREAS, SWISS NATURAL agrees to supply to the DCP tea, fruit and juice drinks
(such products being hereinafter referred to as set forth in exhibit A attached
hereto as the "PRODUCTS'; and the DCP desires that SWISS NATURAL be designated
an authorized DCP supplier of tea, fruit, and juice drinks and SWISS NATURAL is
the owner of various proprietary glass container(s), trademarks, and proprietary
formula for the manufacture of various soft drink concentrates and finished
products and shall hereby develop, produce, and supply products under the
trademark of SWISS NATURAL to the DCP.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, SWISS NATURAL and the
DCP hereby agree as follows:
1. DCP hereby grants to SWISS NATURAL the right to be an authorized DCP
supplier of the PRODUCTS. During the term of this Agreement, the DCP shall
purchase from SWISS NATURAL the PRODUCTS for supply to all Mid-Atlantic
Dunkin Donut FRANCHISES (the "FRANCHISES") to whom the DCP shall distribute
such PRODUCTS. It is understood and agreed that the DCP has the right to
resell PRODUCTS purchased from SWISS NATURAL only to the Dunkin Donut
FRANCHISES.
2. This Agreement shall be effective on the date hereof and shall terminate at
the expiration of thirty-six (36) months from the date hereof unless
terminated earlier pursuant to the provisions of paragraph II hereof. This
agreement shall be extended beyond the termination date for an additional
period of time as mutually agreed to by both parties, no later than 90 days
prior to the termination of this agreement.
3. The DCP shall submit to SWISS NATURAL purchase orders for all PRODUCTS in a
form agreed to by the DCP and SWISS NATURAL. All orders shall be placed no
less than fourteen (14) days prior to the expected delivery date of the
PRODUCTS ordered. All orders shall be paid in US dollars in accordance with
the terms as set forth on Exhibit A and D.
<PAGE>
4. The price for PRODUCTS supplied by SWISS NATURAL shall be as set forth in
exhibit A. Each delivery of PRODUCTS shall be made FOB the DCP warehouse
facility at Swedesboro, New Jersey or FOB the SWISS NATURAL warehouse
facility at Carteret, New Jersey. In either case upon the delivery of any
PRODUCTS, the DCP shall become responsible for all charges, expenses, loss
or damage to such PRODUCTS.
5. SWISS NATURAL may make available to the FRANCHISES serviced by the DCP,
beverage coolers owned by SWISS NATURAL, its affiliate or associate upon
certain terms and conditions. During the term of this agreement each
FRANCHISES, approved by the DCP, shall be granted the opportunity to have
SWISS NATURAL provide, and the DCP deliver such cooler, at no initial cost,
other than the standard DCP $1.55 unit delivery charge, either a single
door or countertop cooler (the size of the cooler to be determined by both
SWISS NATURAL and the FRANCHISES based upon account needs). All FRANCHISES
shall be required by SWISS NATURAL to store in such coolers only PRODUCTS,
and milk based products which are determined by SWISS NATURAL not to be
competitive with the PRODUCTS and which milk based products shall only be
merchandised on the bottom two shelves of a single door cooler and bottom
shelf of a countertop cooler.
A. Cooler Inception Schedule: Immediately following the execution of this
agreement each franchise shall be offered an initial introductory period of
90 days in which to enroll in the beverage program and thereby receive a
beverage cooler as mutually agreed to by SWISS NATURAL and the franchisee.
Any FRANCHISES which enroll in this beverage program after the initial
period shall be provided a pro rata Cooler Termination schedule from SWISS
NATURAL based on the enclosed Cooler Termination schedule B and C.
B. Cooler Termination: The following cooler termination structure shall be
offered to FRANCHISES:
I. If any FRANCHISES (a) does not purchase a minimum amount of sixty cases
of PRODUCTS for a single door cooler and or thirty nine cases of product
for a counter top cooler within each consecutive three month period from
receipt of a cooler or (b) does not purchase the minimum annual amount of
two-hundred and forty cases of PRODUCTS for a single door cooler and or
one-hundred and fifty-six cases of PRODUCTS for a counter top cooler within
each three consecutive twelve month period from receipt of a cooler or (c)
notifies SWISS NATURAL of their intent not to participate in the SWISS
NATURAL beverage program offered by the DCP or (d) SWISS NATURAL, at its
sole discretion notifies the FRANCHISES that the cooler is to be removed,
then in each case the cooler(s) may be removed at the discretion of SWISS
NATURAL.
II. Provided FRANCHISES implements this program and during a 36 month
period from and after the receipt of a cooler complies with the minimum
purchase requirements then the following cooler provisions shall be
applicable:
<PAGE>
a. Each single door cooler shall have an initial cost value of $1,200.00
which shall be reduced by $400.00 per year for each consecutive year
commencing with the delivery date of such cooler to the FRANCHISES. In
consideration of SWISS NATURAL providing the cooler the FRANCHISES
agrees to purchase a minimum of two hundred and forty (240) cases of
PRODUCTS each consecutive year for a three year period from the DCP,
commencing with the delivery date of the cooler to the FRANCHISES.
Within thirty (30) days after a maximum of 36 consecutive months the
cooler may be purchased directly by the FRANCHISES for $1.00 or the
cooler at the discretion of SWISS NATURAL, will remain the property of
SWISS NATURAL, or
b. Each counter top cooler shall have an initial cost value of $800.00
which shall be reduced by $266.67 per year for each consecutive year
commencing with the delivery date of the FRANCHISES. In consideration
of SWISS NATURAL providing the cooler the FRANCHISES agrees to
purchase a minimum of one hundred and fifty six (156) cases of
PRODUCTS each consecutive year for a three year period from the DCP
commencing with the delivery date of such cooler to the FRANCHISES.
Within thirty (30) days after a maximum of 36 consecutive months the
cooler may be purchased directly by the FRANCHISES for $1.00 or the
cooler will at the discretion of SWISS NATURAL, remain the property of
SWISS NATURAL.
III. Provided however the FRANCHISES does not comply with the minimum
purchase requirements and SWISS NATURAL executes its right to remove the
cooler, the cooler may be offered for purchase to the FRANCHISES at the
option of SWISS NATURAL for the amount due to the nearest calculated
applicable numbered month such month to be determined by dividing the total
amount of PRODUCT in cases purchased by the specific FRANCHISES, by twenty
(20), thereby indicating the applicable numbered month and the
corresponding payment required as stipulated in Exhibit B applicable to a
single door cooler and Exhibit C applicable to a counter top cooler both
schedules titled Cooler Termination Cost.
6. The DCP and FRANCHISES selling any PRODUCTS shall have the right to use the
name SWISS NATURAL and any trademark of SWISS NATURAL solely in connection
with selling the PRODUCTS provided that (1) SWISS NATURAL shall have
approved any such use in writing each time the DCP or any Dunkin Donut
FRANCHISES proposes to use such trademarks; (2) the DCP and each Dunkin
Donut FRANCHISES agrees that the name SWISS NATURAL and the trademarks
shall remain the sole property of SWISS NATURAL; and (3) upon termination
of this Agreement, the DCP and each Dunkin Donut FRANCHISES shall
immediately cease and desist from any further use of the name SWISS NATURAL
and any trademark of SWISS NATURAL. The DCP agrees that neither it nor any
FRANCHISES shall alter or remove any trademarks on any PRODUCTS received
pursuant to this Agreement or do anything which might impair SWISS NATURAL
right, title or interest in any trademark and that neither will attempt to
acquire any right, title or interest thereto.
<PAGE>
7. The DCP and SWISS NATURAL acknowledge that any information or data
disclosed to the DCP by SWISS NATURAL concerning the PRODUCTS or general
business policies of SWISS NATURAL which is not generally available in the
public domain constitutes valuable trade secrets of Swiss Natural. DCP
agrees to hold such information in trust and confidence, and not to
disclose such information to any third party and the DCP further agrees to
take all additional steps necessary to protect such information and only
disclose such information to those of its employees required to have such
knowledge in order to fulfill their obligations hereunder and subject to
agreement with each such person to maintain the confidentiality of such
information. DCP acknowledges that the use of such information in a matter
contrary to the provisions hereof would cause irreparable harm to SWISS
NATURAL for which monetary damages would be inadequate and, therefore, the
DCP agrees that, in addition to damages and reasonable attorney's fees,
SWISS NATURAL shall be entitled to enjoin any such breach in a competent
court. Upon expiration of this Agreement, DCP shall deliver to SWISS
NATURAL all copies of any such confidential information furnished to it.
The DCP and SWISS NATURAL acknowledge that any information or data
disclosed to SWISS NATURAL by the DCP concerning the DCP or general
business policies of the DCP which is not generally available in the public
domain constitutes valuable trade secrets of the DCP. SWISS NATURAL agrees
to hold such information in trust and confidence, and not to disclose such
information to any third party and SWISS NATURAL further agrees to take all
additional steps necessary to protect such information and only disclose
such information to those of its employees required to have such knowledge
in order to fulfill their obligations hereunder and subject to agreement
with each such person to maintain the confidentiality of such information.
SWISS NATURAL acknowledges that the use of such information in a matter
contrary to the provisions hereof would cause irreparable harm to DCP for
which monetary damages would be inadequate and, therefore, SWISS NATURAL
agrees that, in addition to damages and reasonable attorney's fees, DCP
shall be entitled to enjoin any such breach in a competent court. Upon
expiration of this Agreement, SWISS NATURAL shall deliver to DCP all copies
of any such confidential information furnished to it.
8. Neither party hereto shall be liable to the other party hereto, except by
reason of acts or omissions in contravention of this Agreement or due to
gross negligence. Each party hereto shall defend, indemnify and hold the
other party hereto harmless from and against any and all losses,
liabilities, damages, costs and expenses (including, but not limited to,
reasonable attorney's fees) to which such entity could be subject, arising
out of or in connection with any acts or omissions by the other party
hereto in contravention of this Agreement or due to the other party's gross
negligence.
9. SWISS NATURAL shall not be liable for any delay or failure on its part to
perform hereunder, in whole or in part, if such delay or failure is caused
by the occurrence of any contingency beyond the control of SWISS NATURAL
including, by the way of illustration, but not limitation, war, sabotage,
insurrection, riot or other act of disobedience, act of public enemy,
failure or delay in transportation, act of any government or any agency of
subdivision thereof, judicial action, labor dispute, accident, fire, flood,
explosion, storm or other act of God or shortage of labor, raw material,
fuel or machinery.
<PAGE>
10. The relationship of the parties hereto during the term of this Agreement
shall be that of separate legal parties and neither is the agent or
employee of the other. The DCP shall not have, and shall not represent that
it has, any right or authority to bind SWISS NATURAL, or to assume or
create any obligation or responsibility, express or implied on behalf of
SWISS NATURAL.
11. SWISS NATURAL may terminate this Agreement, (a) at will upon notification
(b) immediately without notice to DCP if (1) DCP fails to perform any of
its duties under this Agreement or (2) DCP becomes bankrupt or insolvent or
commences or suffers the commencement of a reorganization or insolvency
proceeding. If this Agreement terminates pursuant to the provisions of this
paragraph, SWISS NATURAL may, in its sole discretion, exercise any or all
of its remedies under law including, but not limited to, acceleration of
all outstanding invoices due to SWISS NATURAL, stoppage of shipments in
transit and repossession of Products not paid for which are in the
possession of DCP.
12. All statements made herein by the party's hereto, and their respective
obligations to be performed pursuant to the terms hereof, shall survive the
date hereof, notwithstanding any examination by or on behalf of any party
hereto, notwithstanding any notice of a breach or a failure to perform not
waived in writing and notwithstanding the consummation of the transactions
hereby contemplated with knowledge of such breach or failure.
13. All communications hereunder shall be in writing and shall be sent by
registered or certified mail, return receipt required, if intended for
SWISS NATURAL shall be addressed to SWISS NATURAL, attention Herbert Paul
at 1031 Route 9W, Grandview, New York 10960 or such address which SWISS
NATURAL shall have given to the DCP. And if intended for the DCP, shall be
addressed to the DCP, attention General Manager at Swedesboro, New Jersey
or such other address which the DCP shall have given to Swiss Natural for
the purpose of notice to SWISS NATURAL. All notices shall be considered
given as of the date received.
14. This Agreement constitutes the entire understanding as to the subject
matter hereof among the parties hereto and no waiver or modification of the
terms hereof shall be valid unless in writing signed by the party to be
charged.
15. This Agreement shall be binding upon and inure to the benefit of the
parties hereto, their respective successors and permitted assigns.
16. This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which taken together shall
constitute a single agreement.
<PAGE>
17. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts made and to be
performed solely within said state without giving effect to conflict of law
or principles thereof.
18. In the event that any one or more of the provisions contained herein or the
application thereof in circumstances, is held to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality, and
enforceability of any such provision in every other respect and the
remaining provisions of this agreement shall not be in any way impaired or
affected.
19. The failure of any PARTY to exercise any of its rights under this Agreement
or to require performance of any term or provision of this Agreement, or
the waiver by any party of such breach of this Agreement, shall not prevent
a subsequent exercise or enforcement of such rights or be deemed a waiver
of any subsequent breach of the same or any other term or provision of this
Agreement. Any waiver of performance of any of the terms or conditions of
this Agreement shall be effective only if in writing and signed by the
party against which such waiver is to be enforced.
IN WITNESS WHEREOF, each of the undersigned have executed this Agreement on the
date first written above.
Accepted and agreed this 29 day of Accepted and agreed this 31 day of
March,1999 March, 1999
MIDATLANTIC DCP SWISS NATURAL, FOODS INC.
/s/ Craig V. Sitter /s/ Ralph M. Ferrante
- -------------------------------- --------------------------------
By: Craig V. Sitter By: Ralph M. Ferrante
Title: Vice President/General
Manager Title: CEO
<PAGE>
EXHIBIT A
PRODUCTS AND PRICING
Item Container Size Case Size Pallet Size
SWISS NATURAL TEAS
ICY Tea w Lemon Glass 160z. 24 54
ICY Tea w Peach Glass 16Oz. 24 54
ICY Tea w Raspberry Glass 160z. 24 54
ICY Diet Tea w Peach Glass 160z. 24 54
ICY Diet Tea w Lemon Glass 160z. 24 54
SWISS NATURAL FRUIT DRINKS
ICY Berry Glass 160z. 24 54
ICY Citrus Glass 160z. 24 54
ICY Melonade Glass 160z. 24 54
SWISS NATURAL 100% JUICES
100% Orange Glass 120z. 24 70
100% Apple Glass 120z. 24 70
Pricing notes:
1. All Pricing as stipulated in this exhibit for the teas and fruit drinks is
for twelve months from the date of execution of this agreement. All
Pricing as stipulated in this exhibit for the 100% juice drinks is for six
months from the date of execution of this agreement. Thereafter pricing
may be changed at the sole discretion of Swiss Natural.
2. Price does not include pallets. Grade A pallets shall be returned with each
delivery or pickup or paid for at $6.75 per pallet upon invoice. The DCP
shall have 30 days subsequent to notice by Swiss Natural to cure any pallet
deficiencies. If such deficiency is not cured within the 30 day period,
Swiss Natural reserves the right to increase the pricing per case to cover
the cost of pallets and eliminate the return pallet policy.
3. Pricing terms 1% provided receipt within 10 days. Net 20 days.
*Exhibit A: May exclude items from the above list or include future items,
developed, produced or supplied to the DCP.
<PAGE>
EXHIBIT 10.17
Swiss Natural Brands, Inc.
1031 Route 9W
Grandview, New York 10960
Comprehensive Capital Corporation ______________ , 1999
1600 Stewart Avenue, Suite 405
Westbury, New York 11590
Gentlemen:
In connection with an initial public offering ("IPO") of Swiss Natural
Brands, Inc. (the "Company"), which offering is being underwritten by
Comprehensive Capital Corporation ("Comprehensive") the following sets forth our
understanding with respect to Comprehensive providing financial advisory
services for the Company.
1. For a period of two (2) years commencing on the date hereof,
Comprehensive will render financial consulting services to the Company as such
services shall be required but in no event shall such services require more than
two business days per month. Your services shall include the following:
(a) to advise and assist in matters pertaining to the
financial requirements of our corporation and to assist, as and when required,
in formulating plans and methods of financing;
(b) to prepare and present financial reports required by us
and to analyze proposals relating to obtaining funds for our business, mergers
and/or acquisitions;
(c) to assist in our general relationship with the financial
community including brokers, stockholders, financial analysts, investment
bankers, and institutions; and
(d) to assist in obtaining financial management, and technical
and advisory services, and financial and corporate public relations, as may be
requested or advisable.
2. All services required to be performed hereunder shall be requested
by the Company in writing and upon not less than seven business days notice,
unless such notice is waived by you. Such notice shall be to the address
specified above or to such other place as you shall designate to us in writing.
3. For Comprehensive's services to be performed hereunder, and for
Comprehensive's continued availability to perform such services, the Company
will pay Comprehensive a fee in an amount equal to two (2%) percent of the gross
proceeds of this offering (including the Over-Allotment Option) for services for
two (2) years from the date hereof which sum is payable in full in advance at
each closing date of the IPO.
<PAGE>
Further, we will reimburse Comprehensive for such reasonable out-of-pocket
expenses as may be incurred by Comprehensive on the Company's behalf, but only
to the extent authorized by the Company.
4. This Agreement has been duly approved by the Company's Board of
Directors.
5. Comprehensive shall have no authority to bind the Company to any
contract or commitment, inasmuch as Comprehensive's services hereunder are
advisory in nature.
6. Comprehensive will maintain in confidence all proprietary,
non-published information obtained by you with respect to the Company during the
course of the performance of your services hereunder and Comprehensive shall not
use any of the same for your own benefit or disclose any of the same to any
third party, without the Company's prior written consent, both during and after
the term of this Agreement.
7. This Agreement shall not be assignable by either party without the
other party's prior written consent.
8. This Agreement shall be binding upon, and shall inure to the benefit
of the Company's and Comprehensive's respective successors and permitted
assigns.
9. The foregoing represents the sole and entire agreement between us
with respect to the subject matter hereof and supersedes any prior agreements
between us with respect thereto. This Agreement may not be modified, amended or
waived except by a written instrument signed by the party to be charged. This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York, without regard to the principles of conflicts of
laws of such State.
Please signify your agreement to the foregoing by signing and returning
to us the enclosed copy of this Agreement which will thereupon constitute an
agreement between us.
Very truly yours,
SWISS NATURAL BRANDS, INC.
BY__________________________
Herbert Paul, President
Agreed and Consented to:
COMPREHENSIVE CAPITAL CORPORATION
BY____________________________________
Olga Scoppa, President
<PAGE>
EXHIBIT 10.19
CARTERET PACKAGING, Inc.
1200 Milik Street; Carteret, N.J. 07008
tel: (732) 969 - 1600 fax: (732) 969 - 9590
www.carteretpackaging.com
FOOD MANUFACTURING AND CUSTOM PACKAGING
AGREEMENT
September 22, 1999
Between:
Carteret Packaging, Inc. (hereinafter referred to as "CPI" and
Swiss Natural Foods, Inc. (hereinafter referred to as "SNFI")
WHEREBY:
CPI agrees to manufacture and bottle for SNFI assorted beverage products in
glass containers, (the `Products"),
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledge, SNFI and the CPI hereby
agree as follows:
1. SUPPLY OF INGREDIENTS:
a. SNFI agrees to supply CPI with an adequate quantity of ingredients,
as listed below, suitable for the manufacture, mixing and preparation,
together with all necessary packaging components, required to maintain
and produce the Products at the production levels defined herein. Such
components shall include:
1. 12 and 16 oz. glass bottles.
2. 38mm caps
3. Labels
4. Trays
5. Dividers
6. SNFI Product Concentrate
7. SNFI Formula Ingredients
8. Pallets
b. CPI agrees to supply SNFI with an adequate quantity of ingredients
specified by SNFI, suitable for the manufacturing, mixing and
preparation, together with all necessary packaging components,
required to maintain and produce the Products at the production levels
specified herein. Such components shall include: 1. Filtered water 2.
High Fructose 55 3. Citric Acid (Kosher) 4. Shrink Wrap 5. Stretch
Film 6. Glue for labels 7. Pallet labels
FOOD MANUFACTURING AND CUSTOM PACKAGING
<PAGE>
AGREEMENT/cont...
3. DELIVERY OF INGREDIENTS. SNFI shall deliver all ingredients and packaging
components on pallets to CPI's facilities located at 1200 Milk Street;
Carteret, New Jersey 07008 in accordance with the production needs as
stipulated herein.
4. ACCEPTANCE OF INGREDIENTS. SNFI shall have available for delivery all
necessary production ingredients and packaging components supplied by SNFI,
within one week in advance of any scheduled production. CPI will schedule
with the suppliers for the materials to be delivered as needed to meet
production requirements.
5. STORAGE. CPI shall store all the ingredients and packaging components
provided by SNFI in CPI's existing facilities. SNFI shall provide outside
cold storage (refrigeration or freezer) for all ingredients that require
cold storage. In the event that certain ingredients are not marked or
specified for cold storage, SNFI agrees to hold CPI harmless and agrees to
indemnify CPI for any damages and liability that may result from the lack
of cold storage.
SNFI will arrange for all finished goods to be transferred to their outside
storage facility as they are produced.
6. PACKAGING/BOTTLING, CPI shall manufacture, bottle, label, code and package
the ingredients provided by SNFI along with the ingredients that CPI will
supply and manufacture beverages in accordance with instructions from SNFI
and all Federal, State and local regulations and in accordance with
generally accepted manufacturing procedures and pursuant to the following
terms:
a. CPI agrees to manufacture Products in compliance with all required
sanitation standards and to comply with all applicable State and
Federal laws, rules and regulations respecting food products and food
plant sanitation. CPI shall be responsible for bottling in a sanitary
manner to eliminate possibility of problems from yeast, mold, bacteria
or any extraneous matter.
b. Quality control. CPI shall maintain production controls, as mutually
agreed upon, item-by-item. Production controls shall be checked at
thirty (30) minute intervals.
c. Weight. CPI shall exercise its best effort to maintain the target
weights, as mutually agreed upon, item-by-item. CPI shall check
weights at thirty (30) minute intervals.
d. Cap Tightness. CPI shall monitor cap tightness and assure the
manufacture of all products in accordance with the equipment
manufacturers specifications.
e. Code Dating. CPI shall effect code dating on a Julian Date basis, e.g.
9244 or 1J9 = September 1, 1999. Such code dating shall be stamped on
each bottle and each shipping carton.
f. Daily Retained Production Samples. CPI shall retain daily production
samples of bottled beverages for a minimum of one year from the date
of production. CPI shall immediately send to SNFI, via United Parcel
Service, one retained finished product sample of each batch and
specific product label produced.
7. PRODUCT. CPI shall not be responsible or liable for the quality,
condition, merchantability or fitness of the ingredients, packaging
components or related materials when supplied by SNFI to CPI except to any
extent as caused by or as a result of CPI or due to negligence on the part
of CPI. CPI and SNFI agrees to hold each other harmless and indemnify each
other, except as stated above, for any damages and liability that may
result therefrom. CPI and SNFI shall at all times have in full force
product liability insurance, with mutually acceptable insurance carriers,
for a minimum of $10,000,000 whereby CPI and SNFI name each other as the
loss payee.
FOOD MANUFACTURING AND CUSTOM PACKAGING
<PAGE>
AGREEMENT/cont...
8. PRODUCT TESTING. Unless specifically requested in writing by SNFI, CPI
will undertake no microbiological or similar testing of the incoming
ingredients. CPI shall not be responsible or liable for the quality,
condition, merchantability or fitness of any such untested product or
material except to the extent caused by or as a result of CPI or due to
negligence on the part of CPI. In the event SNFI requests such testing,
all such testing shall be performed at SNFI's cost and expense, Unless
SNFI believes such testing to be necessary due to CPI on account of any
action or lack of action on the part of CPI, by a certified laboratory
selected by SNFI. CPI and SNFI shall have the right to rely on the
certification and report of such laboratory.
9. SHORTAGES. CPI shall not be responsible or liable for any shortages in
ingredients or packaging components, shipped to CPI in sealed or closed
containers, cartons, boxes or palletized glass except to any extent such
shortage is caused by or as a result of CPI or due to negligence on the
part of CPI.
10. DEFECTIVE PACKAGING. In the event that defective packaging is caused by the
packaging components supplied by SNFI to CPI, CPI assumes no responsibility
or liability for defective packaging. In the event that defective product
is caused by the process procedures utilized by CPI, CPI shall be
responsible and liable for additional costs involved in re-packaging the
products using acceptable packaging procedures.
11. SHIPMENT OF PRODUCT. SNFI will be responsible for all freight to and from
CPI. CPI will notify SNFI when product is ready for release pursuant to the
following terms:
a. All finished goods will be palletized on SNFI provided pallets and
stretch-wrapped for shipment.
b. All pallets received from SNFI by CPI shall be returned to SNFI at the
completion of each production run.
12. FREIGHT COSTS. SNFI shall be responsible and shall be billed directly for
the payment of all delivery, shipping, and freight costs incurred in
connection with the shipment of all ingredients, packaging components, and
materials supplied by SNFI.
13. PACKAGING PRICES. The current and ongoing packaging prices to be charged by
CPI to SNFI are represented in Attachment `A'. The price for each case
reflects labor and utilities. The labor costs shall be adjusted to reflect
changes in the Consumer Price Index Adjustment effective January 1 of each
contract year. See Schedule "A". Utility costs will be adjusted quarterly.
See Schedule "B.
The packaging prices herein are subject to increase in the event there is
an increase in the minimum wage payment and/or an increase in employee
compensation arising out of the enactment of federal and/or state
legislation with respect to compulsory employee health insurance or an
extraordinary increase in the operating overhead that is beyond our
control. In the event there is such an increase in either of the above
items, the packaging prices herein shall increase proportionately with such
respective increase.
14. TERMS of PAYMENT. CPI shall invoice SNFI at the end of each production run
for work produced during that time. Invoices shall be due and payable net
10 days.
15. ADDITIONAL CHARGES. A failure to provide CPI with at least seventy-two (72)
hours notice of a shortage of any ingredients or packaging components to be
supplied by SNFI which renders CPI unable to produce SNFI products as
scheduled, shall be chargeable to SNFI at the rate of $0.50 per case for
each case scheduled but not produced
FOOD MANUFACTURING AND CUSTOM PACKAGING
<PAGE>
AGREEMENT/cont...
16. PURCHASE & PRODUCTION. Beginning with the 1st of the month following the
completion of the installation of the additional equipment as specified in
item 19, and continuing each consecutive month thereafter CPI shall produce
as requested by SNFI a minimum monthly quantity of seventy-five thousand
(75,000) cases per month for SNFI or any entity as designated by SNFI. Any
production requested by SNFI and not produced by CPI will be payable or
credited by CPI to SNFI monthly on a cumulative basis at $ 0.50/case for
each case produced less than the quantity requested. Any amount greater
than the 75,000 cases, if requested by SNFI, shall only be produced upon
mutual consent of both parties.
17. ACTS BEYOND CONTROL. Neither CPI nor SNFI shall be responsible or liable
for delays in production, delivery, or shipping, or loss, damage, or
destruction, of goods, or raw materials, resulting from civil insurrection,
or acts of God.
18. TECHNICAL ASSISTANCE. SNFI shall provide CPI with technical assistance
regarding SNFI products as reasonably required by CPI to carry out its
obligations under this agreement, at no additional cost to CPI.
19. ADDITIONAL MACHINERY & EQUIPMENT. SNFI will provide and have installed,
with all necessary conveyors and controls, at CPI's facility two new or
rebuilt Krones Solomatic labelers with all necessary change parts and
required spare parts. If the equipment is rebuilt it must be rebuilt by
either Krones, Inc Or Multi-Tech systems. CPI shall be responsible for the,
normal maintenance and repairs of any and all such specific equipment from
the date of delivery to CPI to the termination of this agreement.
20. TERM. This agreement shall commence on the first day of the month following
the completion of the installation by SNFI of the equipment referenced in
section 19, and shall continue in full force and effect for 60 months
thereafter..
21. TERMINATION. This agreement may be terminated by either party prior to the
expiration date, upon written notice of termination by certified or
registered mail to the respective principal addresses of each party. In the
event either party sends a written notice of termination, the effective
date of termination shall be one-hundred-eighty (180) days after receipt of
such written notice of termination, unless due to bankruptcy, then the
termination is effective immediately upon the filing of any bankruptcy
petition. In the event of termination, CPI and SNFI shall settle all
accounts and monies due each respective party within thirty (30) days after
the effective date of termination.
a. In the event SNFI terminates or is unable to perform any obligation
under the terms of this agreement SNFI will remove at SNFI's expense
all equipment and machinery owned by SNFI pursuant to section 19, of
this agreement, within thirty (30) days of termination.
b. In the event CPI terminates this agreement at the option of SNFI, CPI
shall be obligated to have SNFI released from any guarantee pertaining
to the lease of any such equipment and if SNFI is not released from
any guarantee pertaining to the lease of any such equipment then:
(a) At the option of SNFI, CPI shall retire all lease payments, as of
the effective date of termination, and take title of the
machinery and equipment thereof, for any equipment and machinery
leased by CPI pursuant to section 19, of this agreement, and;
(b) immediately reimburse SNFI for all costs incurred as of the
effective date of termination including but not limited to, all
fees and costs associated with any machinery and equipment leased
by CPI pursuant to section 19.
FOOD MANUFACTURING AND CUSTOM PACKAGING
<PAGE>
AGREEMENT/cont...
22. ENTIRE AGREEMENT. This letter constitutes the entire agreement between CPI
and SNFI and supersedes any previous agreements other than the agreement of
confidentiality dated November 6, 1998. This agreement may not be extended,
terminated, amended, altered, modified, or changed in any way, except by a
written instrument signed by both CPI and SNFI.
23. Any dispute over this Agreement shall be submitted to binding arbitration
conducted in the State of New York in accordance with the rules of the
American Arbitration Association. The decision of such arbitration shall be
final and shall be governed and enforceable under the laws of the State of
New Jersey.
24. CONFIDENTIALITY. SNFI agrees to furnish CPI in writing with the
formulations, process descriptions, special packaging specifications and
related technical information necessary for the fulfillment of this
Agreement under the confidentiality agreement dated November 6, 1998
between SNFI and CPI. This information as well as all sales and bottling
information specific to SNFI is considered to be trade secrets of SNFI and
shall remain the exclusive property of SNFI. CPI agrees to keep this
information confidential, and to restrict the disclosure thereof to those
of its employees directly and necessarily concerned with the production of
the Products. All such confidential information and agreements shall
survive the expiration of the Agreement. It is understood that CPI shall
have no obligation with respect to information known by CPI which is public
information, or which becomes public knowledge thereafter.
If this agreement correctly reflects our understanding, kindly so indicate by
signing and dating below, and returning an executed copy to our office.
Very truly yours, AGREED & ACCEPTED:
CARTERET PACKAGING, Inc. SWISS NATURAL FOODS, Inc.
by: by:
Wayne Simon, Executive V.P. Herbert Paul, CFO
FOOD MANUFACTURING AND CUSTOM PACKAGING
<PAGE>
AGREEMENT/cont...
Schedule "A"
Consumer Price Index Adjustment
(A) Definitions: For the purpose of this agreement, the following definitions
shall apply:
(i) The term "Base Month" shall mean the month of November 1993.
(ii) The term "Price Index" shall mean the "Consumer Price Index"
published by the Bureau of Labor Statistics of the United States Department of
Labor, All Items, New York, NY --Northeastern New Jersey (1982-84 = 100) for
Urban Wage Earners and Clerical Workers, or a successor or substitute index
appropriately adjusted.
(iii) The term "Price Index for the Base Month" shall mean the Price
Index for the month of November 1996.
(B) Effective as of each January, there shall be made an adjustment to the Labor
Costs as follows:
(i) In the event that the Price Index for the month of November in any
calendar year during the term of this Agreement reflects an increase over the
Price Index for the Base Month, then the original Labor Costs set forth in the
Agreement shall be multiplied by the percentage difference between the Price
Index for such November and the Price Index for the Base Month and the resulting
sum shall be added to the Labor Costs as of the January 1st immediately
following such November. Said adjusted Labor Costs shall thereafter be used in
calculating the price to be paid by SNFI pursuant to paragraph 13.
FOOD MANUFACTURING AND CUSTOM PACKAGING
<PAGE>
EXHIBIT 10.20
AGREEMENT, dated as of the 1st day of December, 1998 by and among SWISS
NATURAL FOODS, Inc., a Delaware corporation (the "Company"), A. Donald
McCulloch, Jr. and Carolyn B. McCulloch, as tenants by the entirety
(collectively, the "McCullochs"), Ralph Ferrante ("Ferrante") and Herbert Paul
("Paul").
WHEREAS, the McCullochs loaned the Company money in the aggregate
principal amount of $322,500 (the "Debt").
WHEREAS, the McCullochs have agreed to amend the repayment terms of the
Debt all upon the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
First: A. The Closing (the "Closing") of each of the transactions
described in Parts B and C of this Article FIRST shall take place at 370
Lexington Avenue, Suite 1001, New York, New York at 10:00 A.M. New York City
time on a date designated in advance by the Company with at least five (5) days
notice to the McCullochs (and otherwise within the time requirements of such
Parts B and C) or at such other place, and at such time and on such date, as the
parties hereto may agree.
<PAGE>
B. 1. Within ten business days of the date on which the
Company receives the proceeds of the private placement of its 12% Convertible
Debentures (the "Private Placement") for which it is currently soliciting
financing in the minimum amount of $750,000 (i) the Company shall pay the
McCullochs Seventy Five Thousand Dollars ($75,000), which amount shall be funded
from the proceeds of the Private Placement and (ii) the Company will cause
certain employees of the Company or individuals designated by the Company or the
Company itself to pay the McCullochs an additional aggregate principal amount of
One Hundred Thousand Dollars ($100,000), which together shall reduce the
outstanding principal amount of the Debt by $175,000. All payments shall be made
by wire transfer of immediately available funds into an account designated by
the McCullochs.
2. Concurrently with the payments referred to in paragraph 1
of this Part B
(a) the McCullochs shall deliver to the Company for
cancellation the originally executed promissory notes (the "Notes"),
representing the Debt and the Company shall issue to the McCullochs two new
promissory notes, substantially in the forms of Exhibit A and B hereto, one of
which shall be non-interest bearing and be in the principal amount of the
accrued interest on the Debt remaining unpaid on the date of Closing (the
"Interest Note"), and the other of which shall bear interest at a rate of 12%
per annum payable quarterly and be in the principal amount of $147,500 (the
"Principal Note") representing the remaining unpaid principal balance of the
Debt. The Interest Note and the Principal Note shall mature on the earliest to
occur of (a) the date which is one year from the date of Closing (b) ten days
after the Company's receipt of the proceeds of an initial public offering of the
common stock of the Company registered under the Securities Act of 1933, as
amended, for the account of the Company and declared effective by the Securities
and Exchange Commission in an aggregate amount of not less then $10,000,000, or
(c) a sale of all or substantially all of the assets of the Company.
(b) (i) the McCullochs shall deliver to the Company the stock
certificate held by the McCullochs representing 589,800 shares of the Company's
common stock, fully endorsed for transfer or accompanied by duly executed stock
transfer powers and with all requisite stock transfer taxes affixed thereto paid
thereon (the cost of such taxes affixed thereto paid by the Company); and (ii)
the Company shall deliver to (x) the individuals from whom the payments referred
to in paragraphs B (1)(ii) of this Article First were received new stock
certificates registered in such individuals names representing an aggregate of
77,519 shares of the common stock of the Company and (y) the McCullochs a new
stock certificate registered in the McCullochs' name representing 512,281 shares
of the common stock of the Company.
<PAGE>
3. From and after the receipt by the McCullochs of the funds
referred to in paragraph 1 of this part B (the "Receipt Date"), all prior
agreements between the McCullochs and any of the Company, Ralph Ferrante and
Herbert Paul, individually, or collectively as a group, (other than (x) any
confidentiality or non-compete agreements and (y) consents, acknowledgments and
corporate minutes) including: without limitation, the following agreements shall
be deemed to be null and void and of no further force and effect and the
McCullochs hereby waive all rights they may have under said agreements and all
of the provisions of such agreements, including, without limitation, all
negative covenants therein, shall be null and void and of no further force and
effect and the McCullochs hereby waive any rights they may have to enforce any
of such provisions:
(i) the Purchase Agreement dated May 31, 1994 and all
amendments thereto, by and between the Company and the McCullochs;
(ii) the Stockholders Agreement dated May 31, 1994 by and
among the Company, the McCullochs, Ferrante and Paul (the "Stockholders
Agreement");
(iii) the Subordination Agreement dated May 31, 1994 by and
among the McCullochs, Ferrante and Paul;
(iv) the Promissory Note dated May 31, 1994 made by the
Company to the McCullochs and the attached Surety Agreement dated May 31, 1994
executed by Ferrante and Paul;
(v) the Demand Note dated October 10, 1995 made by the Company
to the McCullochs; and
(vi) the Agreements dated as of February 1, 1998 between the
McCullochs, the Company, Ferrante and Paul;
<PAGE>
From and after the Receipt Date, Sections 3 and 4 of the
Registration Letter dated May 31, 1994 from the Company to the McCullochs shall
be amended such that the following sentence shall be added to the end of each
such section: "Notwithstanding anything to the contrary contained herein,
neither the McCullochs nor any other holder of stock of the Corporation shall
have registration rights with respect to the stock of the Corporation owned by
them regardless of whether any other holder of shares of stock of the
Corporation has such rights and the Corporation shall have no obligation to
register or include in any registration statement filed by the Corporation any
shares of stock of the Corporation owned by the McCullochs or any other holder
of stock of the Corporation until Ralph Ferrante, Herbert Paul and Ronald
Brescio have each or any one of them has registered such number of shares of the
common stock of the Company owed by them equal to the number of shares in the
aggregate that the three received when they converted the debt of the Company
owed to them to shares of common stock of the Company."
C. Within ten business days of the date on which the Company
receives the proceeds of an additional private placement of its securities in
the minimum amount of $750,000 or an additional $750,000 is received from the
sale of convertible debentures in the Private Placement, the Company shall pay
the McCullochs an additional Seventy Five Thousand Dollars ($75,000), which
amount shall represent a reduction in the outstanding principal amount of the
debt of the Company owed to the McCullochs under the Principal Note.
Second: Representations and Warranties.
A. The McCullochs represent and warrant that the shares of
common stock of the Company owned by them are owned beneficially and of record
by them, free and clear of all mortgages, pledges, liens, security interests,
conditional sale agreements, charges, encumbrances, claims and restrictions of
every kind and nature whatsoever and that the individuals acquiring such
stock(s) will acquire, pursuant to the terms of this Agreement, good and valid
title to the shares being assigned to it and/or them pursuant to this Agreement,
free and clear of all mortgages, pledges, liens, security interests, conditional
sale agreements, charges, encumbrances, claims and restrictions of any kind and
nature whatsoever except as set forth in the Stockholders Agreement.
B. The McCullochs represent and warrant that neither of them
has assigned, pledged or otherwise encumbered the Notes representing the Debt.
<PAGE>
C. The McCullochs represent and warrant that they have the
power, authority and legal capacity to execute and deliver this Agreement, to
consummate the transactions hereby contemplated and to take all other actions
required to be taken by them pursuant to the provisions hereof. The McCullochs
represent and warrant that neither the execution and delivery of this Agreement
nor the consummation of the transactions hereby contemplated will constitute any
violation or breach of any provision of any contract or other instrument to
which either of them is a party.
D. The Company represents and warrants that the Board of
Directors of the Company has authorized the execution and delivery of this
Agreement and the transactions hereby contemplated. The Company represents and
warrants that it has the power and authority to execute and deliver this
Agreement, to consummate the transactions hereby contemplated and to take all
other actions required to be taken by it pursuant to the provisions hereof. The
Company represents and warrants that neither the execution and delivery of this
Agreement nor the consummation of the transactions hereby contemplated will
constitute any violation or breach of any provision of any contract or other
instrument to which the Company is a party.
Third: Covenants.
A. None of the parties hereto will take any action which would
cause or constitute a breach, or would, if it had been taken immediately prior
to the date hereof, have caused or constituted a breach, of any of the
representations and warranties set forth in Article SECOND hereof;
B. Each of the parties hereto will use his or her or its best
efforts to (i) effectuate the transactions hereby contemplated and (ii) fulfill
the conditions to the Company's obligations under this Agreement.
Fourth: Miscellaneous.
A. All statements, certifications, representations and
warranties made herein by the parties hereto, and their respective obligations
to be performed pursuant to the terms hereof, shall survive the date hereof,
notwithstanding any examination by or on behalf of any party hereto,
notwithstanding any notice of a breach or of a failure to perform not waived in
writing and notwithstanding the consummation of the transactions hereby
contemplated with knowledge of such breach or failure.
<PAGE>
B. All communications hereunder shall be in writing and shall
be sent by registered or certified mail, return receipt requested, if intended
for Ferrante or the Company shall be addressed to the Company, attention Ralph
Ferrante at 1031 Route 9W, Upper Grandview, NY 10960 or at such other address of
which the Company shall have given notice to the other parties hereto in the
manner herein provided; if intended for the McCullochs, shall be addressed to
the McCullochs at MPS Capital, Inc., Five Radnor Corporate Center, Suite 520,
Radnor, PA 19087 or at such other address of which the McCullochs shall have
given notice to the other parties hereto in the manner herein provided; and if
intended for Paul, shall be addressed to Paul at 370 Lexington Avenue, New York,
New York 10037 or at such other address of which Paul shall have given notice to
the other parties hereto in the manner herein provided.
C. This Agreement constitutes the entire understanding as to
the subject matter hereof among the parties and no waiver or modification of the
terms hereof shall be valid unless in writing signed by the party to be charged.
D. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their respective heirs, administrators,
executors, successors and permitted assigns.
E. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which taken together shall
constitute a single agreement.
F. The captions appearing in this Agreement are inserted only
as a matter of convenience and for reference and in no way define, limit or
describe the scope and intent of this Agreement or any provisions hereof.
G. This Agreement shall be governed by, and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed wholly within said state without giving effect to conflict
of laws or principles thereof, except to the extent that the provisions hereof
relating to the corporate matters of the Company are
governed by the Delaware General Corporate law.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned have executed this
agreement on the date first written above.
SWISS NATURAL FOODS, INC.
By:
--------------------------
A. Donald McCulloch, Jr.
--------------------------
Carolyn B. McCulloch
--------------------------
Ralph M. Ferrante
--------------------------
Herbert M. Paul
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
To the Stockholders of
Swiss Natural Brands, Inc.
(formerly Swiss Natural Foods, Inc.)
We hereby consent to the use in the Prospectus constituting part of the
Registration Statement on Form SB-2 of our report dated April 7, 1999, except
for Note 13 as to which the date is August 18, 1999, and the last paragraph of
Note 1, as to which the date is October 1, 1999, on the financial statements of
Swiss Natural Brands, Inc. (formerly Swiss Natural Foods, Inc.), which appear in
such Prospectus. We also consent to the reference to our Firm under the captions
"Experts" and "Summary of Financial Data" in such Prospectus.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
November 16, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> FEB-28-1999
<CASH> 530,729
<SECURITIES> 0
<RECEIVABLES> 246,038
<ALLOWANCES> 19,000
<INVENTORY> 332,609
<CURRENT-ASSETS> 1,103,289
<PP&E> 151,542
<DEPRECIATION> 75,028
<TOTAL-ASSETS> 1,315,054
<CURRENT-LIABILITIES> 978,077
<BONDS> 0
0
0
<COMMON> 56,682
<OTHER-SE> (578,297)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 3,005,872
<TOTAL-REVENUES> 3,016,951
<CGS> 2,001,701
<TOTAL-COSTS> 1,404,604
<OTHER-EXPENSES> 50,062
<LOSS-PROVISION> 19,000
<INTEREST-EXPENSE> 50,052
<INCOME-PRETAX> (400,433)
<INCOME-TAX> 0
<INCOME-CONTINUING> (400,433)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (439,416)
<EPS-BASIC> (.08)
<EPS-DILUTED> 0
</TABLE>
